In the old days – you know, the mid-1990s – direct response marketing was essentially confined to print or broadcast media. Today, it’s electronic mail, Web banners and interactive television. A solo direct mail package, by comparison, seems almost quaint.
While traditional direct marketing is still a linchpin in the quest for targeting, acquiring and keeping customers, interactive marketing is growing exponentially – a fact borne out by a slew of recent announcements that show Canadian consumers and businesses don’t mind doing business on the Web or over the phone.
For instance, Ernst & Young’s Toronto-based Internet Retail report, issued last month, confirms that Canadian Web retailers can look forward to ‘substantial growth’ in online sales as homegrown shoppers get more comfortable buying online.
According to the report, Canadian online shoppers spent an average of $770 in 1999 and 18% of Canadian online purchases were made on impulse.
With that in mind, the question of how to connect with these wired consumers naturally arises. The first step, according to experts, is coming to grips with the fact that consumers don’t act the same way online as they do in the terrestrial world.
As Miles Faulkner, senior vice-president at Ernst & Young’s eBusiness team, explains, online shopping behaviour differs greatly from traditional browsing and buying. For example, nearly one-third of Internet buyers make their choice not at an electronic storefront, but at an online auction.
‘Online shoppers are spending their money in new and different ways,’ he says. ‘The popularity of online auctions indicates that entertainment and value are key to these customers. Bricks-and-mortar retailers must understand that new business models are potentially the greatest threat to current retailing operations.’
Faulkner’s research shows that online shoppers value full customer support services through voice, as well as more sophisticated personalization technologies.
‘Dot-coms are measuring their business with new measures,’ he says. ‘They are challenging traditional bricks-and-mortar operations. This is partly reflective of the hyper growth they are experiencing to date.’
E-commerce experts across Canada say companies are using a wide variety of techniques to attract customers to their sites – both business-to-consumer and business-to-business. But the varied approaches mean companies are still grappling with what, exactly, works best. A consensus, however, is slowly starting to emerge.
Chantal Payette, president of Toronto-based Flux Media and one of the chairpeople for Strategy’s Online to Profit conference being held in Toronto Mar. 6 and 7, says ‘affiliate marketing’ is moving to the fore, as more companies recognize the inherent advantages of partnering with other companies on the Web.
The way affiliate programs work is that one Web site agrees to promote another by including links and other inducements. If the visitor goes to the other site and subsequently completes a desired action – for example, clicking on a specific link, filling out a form or making a purchase, the affiliate is compensated.
Chapters.ca has one of the better-known Web affiliate programs in Canada, but there are many others. And the numbers are growing all the time.
Affiliates provide added value to their sites by partnering with Web merchants who may be of interest to their site visitors, while merchants benefit because they gain distribution for their goods and services at a lower cost than traditional banner advertising, says Payette.
According to Cambridge, Mass.-based Forrester Research, the performance-based affiliate model now represents 15% of all Internet advertising and is expected to equal CPM-based ads by 2003.
‘Amazon.com and Chapters do it a lot,’ Payette continues. ‘It works well and gets them repositioned on (affiliate) sites, so it creates that added value.’
Joe Racanelli, marketing director with Toronto-based consulting firm Ecommerce+, also points to affiliate marketing as a strategy that works well.
‘Amazon was one of the first to do it well,’ he says, echoing Payette. ‘For example, if you go to the Association for the Advancement of Relationship Marketing Web site (www.aarm.org), you’ll see the Amazon.com logo (in AARM’s ‘bookstore’ area).
‘It’s a good affiliation for Amazon.com. Amazon keeps track of where you are coming from, and at the end of the month sends a small commission (to AARM).’
For its report New Affiliate Marketing Models, Forrester interviewed 50 retailers with active affiliate programs that have been in place for at least three months. On average, these retailers have more than 10,270 affiliates that currently generate 13% of total online revenues. Merchants expect affiliate programs to power ahead, driving 21% of revenue in 2003.
‘It does drive traffic,’ agrees Racanelli. ‘Especially for small companies that need to be as creative as they can possibly be.’
Ernst & Young’s study does suggest, however, that companies have not yet found the most effective promotional methods. Online ads are used by 28% of respondents to drive traffic to the site; television, radio, and print advertisements are each used by 22% of respondents as well. Consumers were not as responsive to banner ads, with only 19% of shoppers visiting sites via a banner.
‘I’m not surprised,’ says Payette. ‘I remember back in 1994-95, when I was creating Web sites for MuchMusic, Bravo! and Citytv, everything was free. Suddenly, banner ads started to show up on the Net and people freaked out. There were site boycotts and developers started to realize you had to be delicate. People did not want to be inundated with advertising.’
Another concern surrounding banner ads is the surfer’s fear – real or perceived – that by clicking on the banner, they’ll ‘lose their way,’ continues Payette.
Racanelli agrees. ‘It’s not always the best approach, but in their defence, they are truly measurable,’ he says. ‘Numbers may not be high, but they can provide very specific results.’
Companies are also discovering the potential of permission-based e-mail marketing. Toronto-based Internet portal Canada.com recently launched an opt-in e-mail newsletter that now goes out to more than 32,000 Canada.com subscribers on a monthly basis.
‘For us, it’s another means of letting our customers know what is happening,’ says marketing director Marlise Nishikihama. ‘We can let them know about our latest activities, contests, services – everything that is going on at Canada.com. Because it’s opt-in, it’s a way of communicating that is not spamming.’
Nishikihama says Internet portals rely on this type of marketing to create ‘virtual communities,’ and this can help boost the number of people who visit the site. This, in turn, attracts the interest of advertisers. However, she adds that they are only now starting to use this marketing medium to its full potential.
‘It is a fairly new initiative for us and we’re trying to build up a database,’ she says. ‘Right now, Communiqué is totally text-based, but we can move to a flashier newsletter with animation and graphics. We’re weighing the pros and cons.’
Canada.com is currently running the program in-house.
‘With our numbers, we can handle it internally, but if and when we move to a more flashy version, [using a service provider] is a possibility,’ says Nishikihama.
It’s evident that marketing executives must understand and leverage the potential of a new generation of targeted, interactive direct marketing strategies to successfully anticipate and influence purchasing patterns. Even so, there are quite a few holdouts, mostly small and medium-sized businesses that don’t have an e-business strategy and that haven’t allocated marketing resources for targeted, personalized interactive marketing plans.
‘Lots of people still don’t get it,’ says Payette. ‘The technology is there, but it’s still not exploited to its full potential.’
Canadian E-Commerce at a Glance:
Per cent of households owning a PC 56
Per cent of households connected to the Internet 39
Per cent of households buying items online 9
Per cent of total shopping dollars spent via online shopping 6
Per cent of projected online shopping in 2002 24
Number of purchases made last year 7
Number of sites shoppers purchased from last year 5
Per cent of online shoppers that have purchased through an auction site 32
Per cent of purchases made online which would not have been made elsewhere (incremental) 45
Per cent of online purchases unplanned (impulse) 18
Per cent of online shopping trips resulting in an online purchase 38
Per cent of online shopping trips resulting in a store purchase 27
Source: Ernst & Young
Also in this special report:
– Without infrastructure, you’re courting disaster p.D19
– Integration can break online shopping barrier p.D20
– Future’s bright for online newspapers p.D22
– Solutions offer Web marketers customer data boost p.D25
