timone NetMarketing
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Marketing in the Internet - as seen from Italy

by Giancarlo Livraghi


No. 28 - November 2, 1998

  1. Editorial: Branding on line
  2. The pitfalls of hype
  3. Uncomfortable with dialogue
  4. Uncomfortable with content
  5. Uncomfortable with price
  6. More banner blues

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1. Editorial: Branding online
I hear the question quite often: "are brands important online?" The answer is yes, of course. But I guess the how and why deserve a bit of discussion.

Brands have been in troubled waters in the mainstream marketplace. Everyone agrees that they are important. Large amounts are paid in mergers and acquisitions for the value of brands. But many companies are not managing those valuable properties as well as they should. We see a lot of irrelevant advertising – or superficial public relations and merchandising. I wonder why so many manufacturers seem ashamed of their products or services and do all they can to cover them up with heavy cosmetics or "borrowed interest", often hiding behind the looks of an attractive woman, or some pretty pictures, or the unrelated identity of some popular personality.

What’s worse, far too often companies fail to deliver on their promises or live up to the standards set by the (claimed or perceived) identity of their brands. That can be quite unwise even in the mainstream marketplace; but it’s very dangerous in the interactive online environment.

In my opinion, before we think about "brand awareness" online we should seriously consider which promises we shall be able to keep and which identity we can live up to. We should also have a very clear idea of what can make us unique in an environment where we are facing instant and direct comparison with our competitors. There is a limit to how many brands in the same category can be on the shelf of a supermarket, or how many car dealers a person is prepared to visit; but there is no limit to online browsing and comparing.

All of this, of course, is quite obvious. But it’s surprising to notice how often these basic principles are forgotten, or ignored.

That said... I think we should make a simple distinction before we discuss brands online. Is our brand already well known, or are we starting online with a totally new venture or a little-known brand name?

In the first case, I don’t think any money or energy should be wasted in using the internet for the sake of brand awareness. Mainstream media are much more effective for that purpose. What we do online is much more important than what we say. Do we have a clear idea of how we will manage dialogue and relationships? Are we prepared to live up, with facts and behavior, to our promises and to what people expect? If not... I honestly think it’s better to stay away and think a little more carefully. I know of large companies that, quite wisely, are experimenting online with minor brands or small market segments, to understand and learn before they bring their core business to play.

In the second case, we do have a need to establish brand awareness (more importantly, to build a bind of trust with our potential customers). But the crucial question is: who should be aware of us? If the answer is "everyone or anyone", our strategy is to vague and could backfire. In most cases, wide awareness in the beginning is unnecessary and may be undesirable. The great advantage of the net is the opportunity it offers to manage small groups, test as we go, grow gradually, avoid the problem of making expensive commitments before we’ve had a chance to measure results and learn from experience.

And... no matter what online ad salesmen say, the best way of building awareness may not be using the net for that purpose. We should first consider the tools that our company already has. Are we using all of them as thoroughly as we should? Is our online activity effectively presented in our letterhead, in our brochures, catalogs, annual report, etcetera, as well as in all our press releases and advertising? More importantly, is it fully understood by all our staff and closest business relations? I know companies that have invested heavily in information technology and networks (including the internet) where even managers don’t understand what it’s all about. You call their phone number, ask for their online address, and some kind operator says "Well... let me see... I shall have to ask the department and call you back".

The initial stage, when too much awareness can be a nuisance, may last a few months or over a year, depending on the situation and the nature of the project. Once we have gained a good understanding of the environment and practical experience in handling relationships, and leant how to develop a distinct and unique identity and behavior, we shall have a better understanding on how to expand brand awareness. We shall be able to do so without wasting money and effort, because we can check, step by step, the return on our investment. Is this a slow process? Not necessarily. If the nature of our project leads to fast growth, facts and relationships will encourage us to accelerate, and experience will tell us how. If not, it may be unwise to "force" fast expansion before we are ready for it. It’s no coincidence that the inventor of publishing, Aldo Manuzio (a pioneer in an environment that was as new as the net is today) used a tagline that said festina lente – hurry slowly.

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2. The pitfalls of hype
There seems to be no end to "hype". In spite of the contrary evidence, we continue to read and hear unrealistic statements and projections   about the growth of the internet and "electronic commerce". In my country two major companies joined in a promotional offer to bring more business users online: Telecom Italia (the national telephone company, which is also the largest ISP) and Il Sole 24 Ore (Italy’s leading financial newspaper). Their brochure promised "a billion customers". Is this just a silly advertising overclaim? Alas, no. The same misleading statements are heard in conventions, read in articles by supposedly "serious" newspapers, etcetera. This is still the Millions myth that Jerry McGovern so brilliantly exposed in February, or the Train to Mars  that I discussed in an article in April.

In a few recent seminars and conventions, I had a chance to meet several people who are working in the day-by-day reality of the marketplace. It’s refreshing to see how clearly they understand the situation; and frustrating to notice how wide the gap is between the real world and the pompous nonsense being preached by the self-appointed "experts" teaching in universities and training programs, writing in the mainstream press or preaching to large audiences of bewildered businessmen and managers who can’ understand why millions don’t knock on their door if they set up a website. It must be something – they think – that works in every market except the one I know.

I could quote dozens of very candid statements by people with real experience of the marketplace, that all point in the same direction. I know perfectly well – they say – that what I’m doing for most of my clients is not what they really need. But many companies are misled by the hype and flatly refuse to get into complicated things like providing service and building relationships. They set up a website and wait; then nothing happens, so they say: "See? It doesn’t work". I know I shouldn’t be doing this, but I have to make a living; and for every disappointed client that drops out there are three or four new ones that want the same silly routine.

Most of the people with real experience are uncomfortable with hype. A few are more lenient. Of course – they say – it’s nonsense, but it helps to build awareness; sooner or later people and companies will learn from their mistakes, and a real market will develop. That is not totally unreasonable; but I still think we should find a more direct route from ignorance to reality. We don’t need Icarus wings to learn how to walk; and if we fly too high the impact with solid ground can be quite traumatic. A cold shower could be quite invigorating – and could give us a fresh start, leaving behind the frustrations and dead-end experiences of the past.

I don’t think hype is a good medicine. And there is still too much of it, so we need some vigorous doses of antidotes. Of course we need enthusiasm, a willingness to experiment and take risks, and a genuine openness to innovation. But if we want practical results we should forget dreams and overpromises; we should not imitate what other people are doing, but learn from their mistakes; we should take a hard look at realities – and start from scratch.


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3. Uncomfortable with dialogue
We’ve discussed several times the reasons why most companies are uncomfortable  with interactive communication. I would like to take a closer look at three things that make them uneasy.

The first is interactivity itself: the need for dialogue. We see countless websites that don’t offer a mailbox; or, if they do, don’t answer.

The reason is simple. Most companies have no real experience of dialogue with "consumers" or with any extended number of people. As we know from many years of experience with telephone services, that rarely provide good customer assistance.

I think we should start with a tough question. Is it realistic to believe that a company, all of a sudden, can be able to establish an effective dialogue with "everyone"? In most cases, the answer is no. Dealing with a large number of people may be unbearably expensive, inefficient and quite undesirable. If a company has millions of consumers, does it really want to be dealing individually with each one of them?

The solution, as I see it, is in the basic definition of the communication plan. We should ask ourselves, before we start: who do we want to be in an ongoing dialogue with us? If the answer is "everyone", there is something wrong with our strategy. If the answer is "nobody", we should re-consider: why do we want to be on the internet in the first place?

If we look before we leap, we shall probably find that there is a very clear answer. Probably the people that we want to be in touch with us online are, to begin with, those that we already know well. Dealing with them doesn’t make us uncomfortable; by adding another communication tool we may improve the relationship while we (and they) save time and money.

There is a simple fact that is quite obvious (but blurred by the hype). Not all companies and in all circumstances need to deal directly with the "final consumer". Important results can be achieved by improving relations with distributors, suppliers, etc. There is no set rule that effective e-business must be managed by setting up a website; for some types of relationships it’s quite unnecessary. That, of course, is true in business to business – but it may be an option to be considered seriously also in some consumer markets.

We could also find that, if what we need to do is simply provide information, that can, to some extent, be done automatically. Setting up such services is not as easy as it seems. It needs a lot of practical testing, perennial update, and can never be left entirely to automatic devices. But if the system is set up well the investment in human resources can be kept at a manageable (and affordable) level.

Another option, of course, is lead generation.   This, too, needs to be managed very carefully; it won’t work unless the community (the relationships with dealers, technical support, assistance, or other organizations that are in touch with customers) is very well organized and working smoothly together. But that is necessary in any case. Venturing into e-business without effective online management of those relationships would be like sailing in the ocean on a raft with no compass, no water and no food.

The key to all this is testing at every step. We should start with what we know best and expand gradually, feeling our way as we go, learning from experience. We should not, as too may people do, "set up a site and see what happens". Probably nothing will happen; or, if it does, it will find us unprepared and make us uncomfortable. Elementary? Yes. But one quick glance at what is going on will tell us that such basic common sense is ignored by many companies online, as well as by peddlers of software or other services promising miracle solutions that are simply a waste of money – or, even worse, lead to disappointment and embarrassment.

All of this, of course, is quite normal in a new and fast-changing environment. But there are some very real opportunities that will be missed if we don’t learn to plan more realistically.

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4. Uncomfortable with content
Why do we still see so many websites crammed with cosmetics and without valuable content? Or not updated for an incredibly long time?

The answer is simple. Setting up a few pretty pictures or decorative tricks is easy. Does it clutter up bandwidth, slow down the net, disappoint visitors? Oh, well.... so does everybody else... that’s the way it works, isn’t it? Those "navigators" are maniacs, they must have lots of time to waste. I’ve done my bit, I have a "presence" online... as long as it doesn’t take up valuable time or cost me a lot of money, let it be... I’m busy enough as I am... why should I worry?

W know that a good website must offer good content. Provide interesting information and service – and be updated frequently, so readers will come back. That is not easy. How do we produce interesting material, organize it effectively, add and update all the time? Do we know how to do that? If we don’t, who does? It’s complex, time-consuming and expensive.

But is it so?

If the purpose of a site is to offer information (i.e. if it’s an editorial site) there is an obvious need to provide original content and update it constantly. But in that case the owner of the site is in the publishing business, so what’s new? No organization can survive in publishing (online or not) unless it knows how to provide and manage information.

But if it’s a commercial site, why should it get into publishing or show business? Why should it go after a broad audience or try to generate "general" traffic?

When we go to a shoe store, do we expect to find the news of the day? If we walk into a drugstore, do we expect an art exhibition? When we consult an insurance broker, do we expect him to sing a song or read poetry? Why should any company turn into a supplier of news or entertainment when it goes online?

If a company goes online to do what it’s supposed to do, it doesn’t need to "invent" new content. It already has all of the information. The need is to organize existing information so that it can be found easily and it’s interesting for visitors. That can be quite a task, especially in the beginning; but it’s much less difficult, and far more important, than dreaming up unrelated "content". If the company doesn’t have anything interesting to say about itself and its products or services... no corporate culture... no distinctive identity or style... nothing to offer that makes it different from (and better than) its competitors... why should it expose its weaknesses by going online? I guess it should concentrate on some much more basic issues, such as how does it expect to survive even in mainstream marketing.

There are stores that are set up as traps. You can’t get to what you are looking for without walking by shelves with all sorts of merchandise. That may work in the physical world, if there is no nearby better alternative. But anyone online can leap out of the trap with a simple click. Yes, there are "surfers" (especially new users) that may enjoy, for a while, just looking around and being led here and there. But most of them will soon get bored, learn from experience and lock themselves up in set patterns – or learn how to browse much more effectively and choose the sites where they can find real content without messing around. They will become more and more impatient with anyone wasting their time. And quite angry if they discover that they have been conned into doing something they didn’t want to do. I wouldn’t like to be a bullfighter dealing with a new generation of bulls that have learnt the tricks.

There is also another problem. A company trying to offer "general" content is competing for attention not just with its competitors, but with every other site online. Including strong companies that specialize in content. How can a nuts and bolts company compete with the New York Times or CNN, or a bicycle dealer with Walt Disney?

The whole problem of "content" looks quite different if we tackle it from the right angle. A company should go online with its basic strengths and qualities. Offer content that is strictly related to what it knows best. The log on its website may not add up very large statistics, but is that a problem? Quality, not quantity, is what counts. Net marketing is not about large numbers. It’s about small numbers of strong and valuable relationships; and gradual growth.

The more precise our online strategy, the smaller the problem of providing good content: what is needed is mostly knowledge that the company already has, or can easily find in a familiar environment. There is still a fair amount of work to be done, to translate existing content into the proper online language, to organize it effectively, to make it interesting end easily manageable by readers. But that is much less complicated, and much more effective, than dreaming up unrelated and indifferent content that may perhaps intrigue for a while casual visitors but will not attract real customers.

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5. Uncomfortable with price
There is a lot said and written about selling on the internet. Not enough about the other side of the coin: online buying.

We hear interesting stories. Such as a lady who wanted to buy a car but wasn’t happy with the price. She went patiently looking around in the net until she found 49 other people that wanted the same model. Then she went to dealers and asked: "What price do I get if I buy fifty cars?"

Even without doing anything as elaborate as that, there are already many people who use the net to compare prices, then buy sometimes online, more often in an ordinary store. Said Vint Cerf, in an interview  that I quoted in the last issue:

I expect the next development in electronic commerce in the consumer space will concern the rise of intelligent agents. The web can still be a confusing place, and comparison-shopping is probably the next big step in increasing the web’s utility to consumers. ...... Look for more developments in this area over the next few months. In fact, I think there’s an MBA project waiting to be undertaken predicting what long-term effect intelligent agents will have on pricing.

In one way or another, it seems quite likely that "comparison shopping" will continue to increase on the net. That could sound quite worrying... will it lead to all-out price and discount wars, at the expense of quality, service and brand identity? Could it lead to the growth of a new breed of actors in the marketplace, price-comparison services that could gain as much leverage as distributors have in many consumer markets?

We shall see what the business schools will have to say on this subject. I don’t think quality and value factors can be obliterated by any comparison system. But just staying away from the problem and "hoping it won’t happen" could lead to some unpleasant surprises.

Companies that offer real value should begin to learn how to hold their ground (or do even better) in the "network economy". Of course higher prices can be charged if genuine quality and service are proivided. But superior service and strong relationships will be needed to maintain (or gain) customer loyalty in a more directly competitive environment.

General "awareness", even for a well-known and long-establish brand, will no longer be enough to sustain price. Distribution leverage will not be as strong as it is now. This is a serious risk for companies selling their goods for more than they are really worth; and even more so for intermediaries that have been enjoying the benefits of sitting comfortably as an unavoidable in-between but not offering any real service to their customers. An opportunity for companies that can offer real value but were not able, in mainstream marketing, to reach as many customers as they deserve. Potential winners, as well as potential losers, should learn the ways of the net as soon as possible: so they can understand how to exploit new opportunities or get ready for upcoming problems.


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6. More banner blues
I shall get back, sooner or later, to the confusing subject of banner ads; or, more broadly, of online advertising. Not because I find it particularly interesting, but because there is so much talk about it that it can’t be ignored. As I have said  several times, I have no basic prejudice about advertising on the internet. But I am quite unhappy with the way it’s discussed – and done. Here are two more articles that help to shed some light on this messy situation.

I discovered only lately, thanks to a friend, an article that was published by the Chicago Tribune on June 30: The death of banner ads by David Strom. I think it’s still worth reading. This is what it said:

Other than Web site owners who collect revenues from advertising on their sites, I don’t know very many people who like banner advertisements. And the latest reports are an encouraging sign that their death might be imminent. It couldn’t happen fast enough for me. Here are some reasons why I dislike them:

  • Banner ads waste bandwidth

Many of us turn off images on our dial-up accounts just so we can get to the meat of the pages without wasting time. There are also programs such as WRQ’s @Guard  that can selectively filter out banners.

  • Banner ads aren’t memorable

My own informal polls on the effectiveness of banner ads show little or no recognition of them. Web users have ever-changing surfing patterns. Banners might be more memorable for new users as they tend to visit new sites and spend time in them out of curiosity. But as users gain experience, they tend to surf less and become more impatient with trying to find information.

  • Banner ads often take you places you don’t want to go

Clicking on a banner takes you out of a site and away from its content. Imagine what a big disaster it would be for broadcasters if viewers had to change channels on the TV to view a commercial. Several vendors such as Narrative and First Virtual Holdings solve this problem by placing the entire purchasing information directly inside the banner, so you never leave the page you’re on. The only problem is that these banners take even more bandwidth to load.

  • Revenue from banner ads is dependent on how many users go to them

Recent studies have shown clickthrough rates plummeting, and in some cases, to half of what they were a year ago. A combination of using the back button in a browser and technologies such as caching and proxy servers confound these logs even more. There is a bright spot, though: the purchase-enabled banners mentioned above tend to increase clickthrough rates.

  • Banner ads are only useful on pages that are visited

Many sites have little-seen pages, or have traffic patterns that are hard to predict. This often results in pages without banners on them – "unsold inventory," as the industry calls them. Placing banners on sites should require having a solid understanding of traffic patterns by a media buyer; this is wishful thinking, as many media buyers are young and have little technical background.

Taken together, these trends could mean tough times ahead for banner ads. I predict that in another year we’ll see fewer and fewer of them on pages. According to the Internet Advertising Bureau, Web advertising is a billion-dollar business, yet it is also a slippery slope. Add a dollar for an ad that Microsoft bought on Netscape’s site to a dollar for an ad that Netscape placed on Microsoft’s site? Did any money actually change hands?

If banner ads die, where will all the money currently invested in them go? We could always put it toward sponsoring better sites. Maybe it’s just wishful thinking, but we’d save on bandwidth, improve content and deliver goodwill and customers to sponsors.

Have things changed in four months? No; in fact they are getting worse. Just as this issue of NetMarketing was going online, an article by Jerry McGovern was published on November 2: Ad banners are signposts.
It says:

On the internet, ad banners act as signposts.

The advertising industry yearns for what it knows best. Those wonderful 30-second television ads that reached huge numbers of people. Those short and snappy radio ads; those full-page colour mega-statements; those billboards that made their screaming point to busy motorists as they flashed by.

Yes, the advertising industry has been wonderful at getting attention. But as Esther Dyson said at a recent conference, "On the Internet, don’t get attention, give attention." Giving attention is a whole different ball game, one that the advertising industry is inherently not suited to playing. You see, advertisers are brilliant at getting attention but then they feel their job is done. Driven by the adrenaline urge of condensing every message into simple soundbytes, they feel lost and bored when it comes to dealing with the customer whose attention they have got.

"Ad banners aren’t working," we now hear on a regular basis. Before I examine the validity of that statement, let’s first examine the proposed remedy. The essential remedy, as proposed by advertisers, almost always involves eating up more bandwidth, as we race back to the old school of flood the eyeballs with fancy imagery tactics. Some advertisers eagerly propose that if we place a full-screen ad in front of someone we will definitely get more of their attention.

Well, I absolutely agree. It’s just like spitting in someone’s face. You really do get their attention. I can guarantee you that if you place a full screen ad in front of me before I visit your siteI will immediately hit the back button and never visit you again. But you will have got my attention, though, because I will remember to tell other people to avoid you like a plague.

Okay, ad banners are small, and clickthroughs on these banners have been dropping. However, maybe they are small because that’s the size they need to be in the environment they operate within. It can also be argued that, with so many more people getting onto the Internet and with the general demographic of users expanding, clickthrough rates will inevitably drop.

In fact, a recent survey by NetRatings found that banner ads significantly increase the audience reach of a product, regardless of whether or not the consumer clicks on them. Other surveys and reports during 1998 have, however, indicated that clickthrough rates are now on average less than 2 percent for banner ads. (For most direct mail, it’s less than 1 percent.) In April, AdKnowledge reported that the cost per thousand impressions of banner ads had declined 6 percent over the previous year to US$ 36.

But, as I said at the beginning of this piece, the ad banner is just a signpost on the internet, sending those who want to go to your website in the right direction. The real job for the Internet marketer is to be done at the website. This is the place where you give attention to the customer. This is the place where you provide relevant, up-to-date information, where you invite feedback and dialogue. This is the place where you stop being fancy and start being useful.

In a marketing and advertising industry, so often intoxicated by that which shimmers, shooting the ad banner masks an inability to come to terms with a new world with new rules.

It’s quite clear that there are many more problems with banner ads than ad brokers and salesmen are prepared to admit. And there are several others that aren’t mentioned in these two articles. I guess it will be necessary, at some point, to dig up a few more facts and add a few more comments; though I remain convinced that this is not the most important subject in online marketing and communication.



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