Hot com - Online and Offline Direct Marketing Strategies That Deliver

To hustle traffic to a Web site, most companies, especially those born-on-the-Web, must view traditional media outlets as vital to any advertising campaign. Even in an age when time and space have disappeared, the basic truths in marketing still apply and people - at home and at work -- expect more than ever before to be spoken to as individuals.

Current offline direct marketing data selection and analysis tools coupled with online strategies truly introduce the era of true individual marketing. Refining and targeting your message is more important than ever."

"If you're going to be productive, you need to talk to individuals about what they're interested in," says Regina Brady, vice president of strategy and partnership with FloNetwork Inc. in Coscob, CT (http://www.flonetwork.com).

Even the savviest person wants to be sold to, but merely being louder than the rest of the noise won't win anyone over. The trick is to be smarter and faster and friendlier. Successful campaigns include time-tested database selection strategies and analysis/processing techniques to drive new business, retain existing customers, and enhance a company's overall communication with its chosen universe. Sales and long-term repeat customers are the still the goal, especially with the Internet.

Hand delivered

"Based on our experience, offline direct marketing is key for dot-coms in terms of sales and customer retention," says Michael Peterman, national account executive for AccuData America (http://www.accudata-america.com/). "People like stuff - they like to hold things in their hands. It's much easier to delete e-mail than to throw away a direct mail piece that's interesting."

Or a piece that was expected. The top two online apparel retailers are long term cataloguers Land's End and L.L. Bean -- with no new born-on-the-Web companies even making the top ten, according to Forrester Research (http://www.forrester.com/), a leading Internet research firm based in Cambridge, MA. The rest of the list had familiar retailers or catalogers, mainly because of company cultures that knew their customers and what they wanted. Land's End leads the pack with virtual models and the ability to shop with a friend. L.L. Bean offers an efficient search engine and a speedy first-time buying process. The basic model of customer service still applies.

"Very few apparel sites offer basic features like order history or first-rate search engines," explains Tom Rhinelander, senior analyst at Forrester. "If a born-on-the-Web company like Amazon teams up with a respectable brand, today's winning apparel sites had better watch out." True integration of online and offline operations are a recent occurrence and a lot of traditional companies are exploiting that tandem to gain an edge.

People Magazine (http://www.people.com/) absolutely depends on a physical product but posts substantial articles on its Web site for free. The site pushes several free issues for a quick registration and the company gets fresh, permission-based "netizen" data in exchange for some printing and postage.

The 100 million people online in the United States is a significant number but focusing only on them leaves a lot of customers out of the loop. And those people aren't just Luddites and the disenfranchised, but a valuable audience that depend on traditional venues. Besides, there is no single source that provides more than a small fraction of the available e-mail addresses.

Companies are spending significant resources to be ready for the day when the promise of electronic commerce is fulfilled.

"I think electronic communication will inevitably be one of the primary means for companies to contact consumers," says Peterman. "Electronic media will prevail once we work out all of the bugs."

Flowing along

One area where this is already taking place is customer service. FloNetwork, founded in 1993, started offering e-mail services to its clients in 1998, helping companies such as Barnes & Noble and Omaha Steaks keep in touch with customers while acquiring new ones. Special offers, announcements and links are sent in bulk and tracked for Internet traffic and sales, both online and off. Barnes & Noble, who used to send a long list of events to addresses sorted only by ZIP code, now depends more on permission-based e-mail to get people to leave their computers and visit the store.

"One important part of their strategy is driving store traffic," says Brady. "There's a tight linking between the e-mail and retail sales."

The tracking of sales is easier with e-mail provided that the quality of data is maintained and customer needs are continually met, needs such as relevance, convenience and privacy. The latter is playing a significant role in shaping Internet strategies, but many are using it as an opportunity to build that all important sense of community online. People seem to treat unsolicited e-mail, or Spam, with as much derision as a telemarketer calling during dinner.

While it's infinitely easier to delete a Spam e-mail than discard a direct mail piece, polls continue to show that people are irritated and even suspicious of e-mail they didn't knowingly invite. Brady says that any good online marketer will include a prominently placed option to be removed from the list.

"But marketers are using that as an opportunity," she explains. "Think of it as a way to allow the customer to have control and still have that dialogue with you."

Consumers know the score and are willing to assist companies with targeting, simply because the consumer wants to reduce their clutter and receive relevant material. When customers click on the "Remove" link, they can be asked about their preferences for communication,

interests in other products and, by the way, would you like to receive a coupon just for clicking on this Web site? Instead of losing customers, data is enhanced and brand loyalty is established.

In fact, online users often prefer this channel to other direct marketing avenues. A recent survey of online users by FloNetwork showed that 73% of the respondents opt for permission-based e-mail, versus 21% for direct mail; Spam, telemarketing and in-person sales calls were the least favorite methods by far. The most seasoned online users have displayed an increasing desire to communicate electronically. "The longer somebody's been on the Internet, the more they want targeted messages," says Beth Ghiloni, director of corporate communications for FloNetwork.

Dollars In vs. Dollars Out

All of this online activity is immensely profitable when applied to customers who have some familiarity with the solicitation. According to FloNetwork, the cost of customer retention per sale via e-mail is $2; via direct mail is $18.

However, the ratio is somewhat reversed when it comes to customer acquisition: cost of getting a new customer is $286 via e-mail, $100 via banners and $71 via direct mail. Traditional avenues are the most cost effective.

"The tried and true channels are not going to go away," says Brady, adding that the quality of e-mail lists is still very uneven. "It's nothing like the state of traditional direct marketing lists."

A recent client, CareerPath.com used a combination e-mail, direct mail and radio advertising campaign for its Win a Year's Salary promotion. It was a major homerun, turning the worst month of the year (December) into their best month ever. The integrated campaign ensured a unified message that clearly communicated the incentive and spiked Web traffic during a traditionally slow period for human resources. The company, launched in 1995 and based in Los Angeles, was the first career management site to make such a significant ($50,000) offer, borrowing another page from the direct marketers handbook.

"Incentives have always been a way to drive traffic," says Jacqueline Meaney, vice president of marketing for CareerPath. Despite the rapid growth in the popularity of incentives, she is unconcerned about a new bidding war. "I don't think you will see an escalation, but probably in four to six months I can tell you about the next big strategy."

For now, incentives are very effective. They drive referrals and create buzz among the media. When CNET wanted to boost its subscription base for its information technology newsletter, it offered a catered party to a lucky egghead who was babysitting computers last New Year's Eve. The company added 32,000 subscribers.

"It's a tactic, but you have to use it strategically," says Brady of FloNetwork. CareerPath's current campaign is called The Ultimate Bribe, with a $10,000 online shopping spree at Flooz.com as the big prize. Clients who get friends to visit CareerPath's Web site get a $5 gift certificate at Beenz.com for every friend that registers. So far, four out of five recipients are responding, a rate unheard of in direct mail. These referrals, or viral marketing, are sweeping through the Internet because they are so successful. "The consumers are extraordinarily responsive to viral marketing," says Meaney. "This has a life of its own. The more interactive the viral marketing, the greater the response."

This ultimate word-of-mouth strategy depends upon a strong sense of community that compels the users to do your acquisitions for you. Again, incentives are the name of the game, and a good concept reveals itself very quickly.

Meaney can tell within an hour if her latest viral marketing strategy is working.

Spree-mail

E-mail systems are also getting sophisticated enough to support "radical mail," e-mail that has motion and sound or streamlines communication with the company. The popularity of e-mail has one company predicting a massive increase in traffic and that's not necessarily a good thing for online marketers. Jupiter Communications, an Internet consulting firm, predicts that spending for commercial e-mail will soar from $164 million in 1999 to $7.3 billion in 2005. Consumers who got 40 commercial e-mails last year can expect 1,600 by 2005. By then, some feel that the golden age of viral marketing will have past.

"Businesses are beginning to perceive e-mail marketing as the silver bullet for acquisition and retention strategies; it's fast, cost-effective, and provides immediate feedback," Michelle Slack, senior analyst with Jupiter. "As a result, the volume of opt-in commercial e-mail continues to rise at a furious pace. Businesses must focus on delivering value from the first e-mail contact, because opt-out is just a click away."

Upset someone and you're tainted forever, if there is such a thing on the Web. First impressions are everything so marketers must take their best shot and anticipate the needs and desires of visitors.

Content needs to be compelling and useful to maintain the interest of a very fickle audience. Graphics now take a back seat to features like news, advice, support, data and other teasers for users to enjoy. Yet the most important service that Web sites and e-mail can offer is privacy.

Private line

"Most consumers don't want to be sent anything that they haven't given their permission to receive,"says Brigid Berry, national account executive for AccuData America.

Berry works only with permission-based e-mail databases. But a chilling factor, Berry added, on the horizon could be viruses. Berry said that response to direct e-mail was noticeably down during the Melissa and Iloveyou virus outbreak. That kind of concern in the market makes privacy all the more important.

"Consumers are being much more careful about what they opt for," says Peterman of AccuData. "It's a big privacy issue. They're looking at e-mail like telemarketing."

There's a fine line between consumer desire and consumer ire, and that line moves as fast as the pop-up window. Customers can change their minds about products, become quickly jaded with new features, forget what they registered for or simply indict whole categories of Internet businesses because of one bad experience. Then the opposite of viral marketing begins as messages of dissatisfaction spread with equal vigor.

Data Analysis often saves the day

Once again, data modeling comes to the rescue. One tool that Peterman often employs is regression analysis - also called modeling and scoring -- where a sampling of a client's customer base is profiled with some 300 data elements, everything from income to hobbies to subscriptions. A national model is built and he can target the best 10,000 or the best 10 million prospects in the country with a campaign that zeros in on the most likely customers. A deselecting model can also be used to weed out those with the least potential.

In the meantime, Internet companies must make sales right now. Investors are getting impatient with the corporate hemorrhaging and most Web sites go offline to get their customers. Few companies currently spend more than 5 percent of their marketing budget on e-mail so media buyers can breath easy for now.

Party line

One hot new trend in business to business marketing combines telemarketing and Web presentation. With a representative on the phone, a client can walk through a Web site's features, a truly interactive exchange in real time that is very effective.

"It's tremendously helpful," says Peterman. "Letting them see how fast and effective a Web site is in real time will close more sales."

The strictly price-based purchases (CDs, books, airline tickets) are all spoke for so companies are using interactive strategies for products that are geared towards consultation. The Internet was built for tracking, such as tagging hits to a landing page as hot prospects because they're responding to some call to action. Web sites can also discern patterns of visitors so sales consultation is easy to facilitate, but the "old" Internet model of completely relying on automation is not suited for personal and big ticket purchases. According to Virginia Richmond, vice president of marketing for NewChannel.com in Redwood City, CA, many Web sites are the equivalent of building fabulous stores, promoting them to death and then not staffing the cash registers.

"The people come to the Web site and nothing happens," she explains. "What we're finding is that people still need help in the sales process." Her company, founded in 1996, uses something called targeted entanglement technology whereby a sales consultant is alerted to a visitor's interest.

After several minutes of surfing a company's site, an instant message box pops up with a relevant offer like, "Hi, I'm Courtney with Dell Computers. Would you like to see today's special on sound cards?" The unobtrusive windows usually have no sound, offer Yes/No/Maybe buttons, and are accompanied by a photo of the consultant. One of NewChannel's clients sells expensive equipment and half of its online conversations go to the phone line during the initial engagement. But expense is not the determining factor. "The real threshold is 'Does this take consultation to sell?'" says Richmond.

"You can get a leg up on anybody else in the industry by facilitating the purchase." The latest wrinkle is the explosion is wireless portals. Just when companies have finalized their Web designs, now they have to figure out how to condense the information so that the tiny screens on cellular phones can interface.

First is not everything in the Internet, but a strong start is crucial because effective techniques spread like a virus and the race to the bottom is on. This rapid pace is tempered only by the caution of consumers as they enter brave new worlds with a familiar face leading the way. More innovations simply raise the bar for the next development on this never ending treadmill. The principles from Marketing 101 20 years ago still apply, but the execution is quicker than ever as consumers and companies call to each other through the screeching noise of the modem.

The Rebirth of Direct Mail

Far from dooming the direct mail business, the Internet has created something of a renaissance. Direct marketers are taking advantage of their superior data and experience to drive traffic to the Web and there are some phenomenal success stories.

Structural Graphics (http://www.structuralgraphics.com/), a specialty direct mail piece provider found in 1976 in Essex, CT, uses the tactile nature of direct mail to its fullest potential. According to President Mike Maguire, a recent campaign garnered a 7.5 percent response rate, tripling traffic to its own Web site.

"A lot of our packages are used to motivate a trade channel, use the CD to go to a Web site," he explains.

The campaign can only work if the package, program, offer and site are well integrated. Research has shown that targeted campaigns not only create hits, but visitors spend more time on the site. Whether it's pop ups or sound chips or flashing lights, a compelling and relevant piece that comes across the desk can bring out the child in even the most cynical direct marketer.

"How do you measure a kid's face when he opens a pop-up book for the first time?" asks Maguire. "It's a very different experience when you open a piece and it talks to you or pops up."