The Internet throws a wrench into conventional marketing departments. Effective Internet marketing requires different thinking and approaches than conventional marketing.
As a management consultant, I work with businesses to help them understand the impact the Internet could have on their success. In addition to the usual sharing of new paradigm thinking about the wired consumer, I talk about how the Internet will impact on the way their business goes to market. At some point in our dialogue I say, "conventional marketing processes do not work on the Internet or, at the very least, do not allow for maximum effectiveness to be achieved." Understanding this point is critical to optimizing success in Internet marketing.
To frame why this is important, we must first realize the Internet provides two, and only two, business advantages.
The first is cost reduction. This is straightforward. The Internet is simply a less expensive, often more effective, way to distribute information and to interact electronically. Everything from making product information available on-line, to allowing employees access to business systems from outside the office, to allowing customers to place orders, check delivery status and perform self-service functions fall into the cost-reduction category. There are many more examples.
The second business advantage is more interesting. It is one-to-one marketing, also known as mass customization. This is the ability to systematically interact with large numbers of customers on a highly personalized basis. This has always been the Holy Grail of marketing but has not previously been achievable at reasonable costs. Then comes the Internet -- a one-to-one marketer's dream come true.
Previous to the arrival of the Internet, businesses with large customer bases, such as airlines and banks, were unable to deal with their customers on a one-to-one basis. They had too many customers and too little information.
Before the Internet, these businesses relied on segment marketing where they recognized that groups of customers with similar attributes often act in the same way. For example, a bank might segment recent university graduates into a group and offer them a small line of credit through the mail. Their reasoning is that many recent graduates (the segment) need access to credit to begin their working lives.
The great downfall to segment marketing is that it presupposes that more than one person will have exactly the same needs at exactly the same time. This simply isn't so. But for years, there was no cost-effective way to address each customer as an individual with individual needs and wants, different from everyone else's.
Then came the Internet and this all changed. Savvy Internet sellers promised confidentiality if their customers would give them permission to use information on their on-line interactions to formulate custom offers. Most customers agreed to this request where they were interested in the potential offers and they trusted the retailer to keep their information confidential.
Internet sellers used the information they gathered to understand their customers' needs, and wants. They developed a capability to interact on-line with each individual customer in a highly customized manner. They started with simple things. Internet booksellers would send an e-mail to the customer advising that a new book was about to be released by an author that customer liked. They knew this because the customer had either previously bought books by this author, or they noticed that the customer attended on-line discussions (at the retailer's Web site) about books by the author, or they just asked the customer who his or her favourite authors were and stored the information. They now have a piece of data that tells them which of their on-line customers reacted to the e-mail offer and bought the book. And so on. The knowledge base continues to build with every new interaction.
Along with customized e-mails comes a customized home page. This is a Web page customized for each individual customer that helps him or her get right to the information he or she cares most about. After that, related offers are linked.
The customer buys a book on parenting and the e-retailer sends out information or offers on non-book items related to parenting. The system tracks acceptance or rejection of these new offers and the information base grows. With more information comes more highly customized communication. This is how to win in the Internet world.
Tom Atkins is a Certified Management Consultant and is Director, e-Commerce Strategy, in the Toronto office of Sierra Systems Group Inc. He can be reached via e-mail at TomAtkins@SierraSystems.com.