Monday, December 4, 2000

Online Retailers Being Cautious With Marketing

Sixty-four percent of Internet retailers plan to spend the bulk of their ad dollars online vs. offline this holiday shopping season, according to an executive survey by Jupiter Research, the worldwide authority on Internet commerce. Conversely, only 21 percent of online retailers plan to advertise in print media and a mere 12 percent will advertise on radio, television and cable TV this holiday season.

According to Jupiter, online retailers who over-spent on holiday advertising last year are taking a far more conservative approach this year, with only 11 percent planning to spend more than half of their ad budget on this year's holiday season -- compared to nearly one-third (29%) last year. To further reduce expenditures, Jupiter advises online retailers not to focus on price promotion and discounting to lure customers, but to base marketing on what is most important to consumers who are buying gifts online this holiday season: service, convenience and selection.

"Marketers have learned from last year's experience and this year have redistributed their online holiday budget and developed much more targeted and efficient marketing campaigns using more measurable media channels," according to Marissa Gluck, senior analyst, Jupiter Research. "However merchants must savor the opportunity that the holiday season is one of the few occasions where they can compete on service, and not on price. Although Internet shoppers have been spoiled by discounts in the past, during the holiday season they are more concerned with receiving their orders before the holiday, saving time, and avoiding crowds than they are with saving on price."

Why Online Retailers Should Not Offer Discounts
Based on the findings of a Jupiter Consumer Survey -- showing that saving time (53 percent) and avoiding crowds (47 percent) are top online consumer motivators -- Jupiter advises retailers to focus marketing campaigns on service, convenience, and selection versus price promotions. Online retailers should also offer shoppers gift suggestions via retention-based e-mail and banner campaigns that can help speed and simplify customers' purchasing decisions.

Merchants that insist on offering discounts should focus on free or discounted shipping emphasizing service and value without compromising list price. According to Jupiter's Consumer Survey, 83 percent of online shoppers say they would use a particular Web site if it offered free or discounted shipping, versus 53 percent who said merchandise discounts are important.

Email Marketing a Long-standing Favorite
Email marketing, a low-cost, high-return solution, remains the most widely used online channel, with 79 percent of retailers utilizing both retention-based and sponsored e-mail this year, up from 72 percent last year. Portal advertising among online retailers, in contrast, has declined from 72 to 58 percent since the 1999 holiday shopping season. Further evidence of this year's increase in online retailer advertising is provided by AdRelevance, a Jupiter Media Metrix company, which revealed an increase of 250 percent since last year. In a separate announcement today, AdRelevance, the innovator in Internet advertising tracking, reported that the number of retailers advertising online increased from 657 to 2,313 nearly quadrupling since 1999.

Portals Remain Important Advertising Vehicle
Based on its consumer survey findings -- which revealed that 72 percent of consumers plan to use portals to find merchants this holiday season -- Jupiter advises online retailers not to neglect portals and search engines as key advertising channels. Jupiter advises online retailers who are doubtful about portals to focus on developing campaigns that highlight specific product categories and popular individual products to help consumers solve specific problems in gift giving. The holiday season, when consumers are shopping for others, is not the ideal time for general branding campaigns, says Jupiter.

Online User Sophistication High
Jupiter also found the level of Internet users' sophistication to be relatively high, based on it's findings which showed that sixty-eight percent of consumers find merchants by entering the retailer's name in their browser's URL field. Based on this, Jupiter analysts advise online retailers to build strong customer relationships throughout the year to increase consumer loyalty.

eBusiness Measurement is "Broken"
eBusiness measurement as it exists today is broken. According to a new Report from Forrester Research, Inc., firms will not achieve growth and success in the emerging eBusiness marketplace using traditional statistics like ROI as eBusiness measurements. Instead, firms need to fund and measure eBusiness based on three classes of externally oriented objectives: end-customer success, hyperpartnering efficiency, and multicompany financial performance across a company.

"Just as businesses develop specialized organizational characteristics when they move online, they must also employ nontraditional methods to fund and track eBusiness projects," said Bobby Cameron, principal analyst at Forrester Research. "Firms that lack the flexibility or foresight to implement an eBusiness plan risk both financial and qualitative losses."

Forrester recommends that firms implement an eBusiness platform based on end-customer success, hyperpartnering efficiency, and multicompany financial performance. First, because instant diffusion of information over the Internet puts customers in the driver's seat, end-customer success is crucial to business survival and must be central to all of a firm's eBusiness projects. To ensure end-customer success, internal factors like efficiency and responsiveness -- in combination with external factors like customer satisfaction and profitability -- should be gauged based on their impact on end customers.

Second, firms must practice hyperpartnering efficiency: the ability to form, reconfigure, and disband partnerships quickly and efficiently. As interdependence explodes among firms online, Forrester predicts that firms must increasingly focus on partner satisfaction and success, as well as cost, responsiveness, and quality.

Finally, to reflect their increasing interdependence, firms must look at multicompany financial performance, objectives that address only inward-looking metrics don't capture the full impact of eBusiness investments. Instead of focusing on a single firm's profitability, a multicompany approach takes into account the relevant costs, revenues, and ROI from internal business units as well as external entities.

"Firms will suffer from lost customers, limited partnerships, and missed eBusiness opportunities if they make eBusiness decisions based on measurements that ignore the impact on external constituents like end customers and trading partners," said Cameron. "The firms that we see succeeding in eBusiness take conscious and deliberate steps to break away from traditional metrics and create measurements that address the unique interdependencies of the new business landscape."

For the Report "Measuring eBusiness Success," Forrester interviewed eBusiness leaders from 50 Global 2,500 companies. Of those interviewed, 43% complained that a lack of objective data and eBusiness hype forces them to make investment decisions based on soft, qualitative information.

News Tidbits (appears every day on front page)
- The FTC is trying to stop Internet companies that try to sell personal consumer information once they go out of business. To try and get around this, some companies are changing their privacy policies to state it is okay to sell personal customer information should the company ever close down. According to the New York Times, Amazon.com has changed its privacy policy to allow it to transfer customer information anytime one of its assets are sold or transferred.

- In a defiant move against the U.S. and U.S. based registry organizations like VeriSign, China has announced that it is selling its own domain name extensions, including .cn. Since opening the service a few weeks ago, China claims it has registered over 850,000 domain names with its new extensions. In making the move, China stated that it should be responsible for its domain extensions, not some company in the United States.