A common issue unites all companies, regardless of size and industry: there is never enough money to throw at every opportunity or threat. That fixed budget means investments in one area of the business come at the expense of others.

For Small and Medium Sized Businesses (SMBs), those budgetary decisions are especially difficult and visible. By definition, there’s fewer dollars available than in large corporations. And when there’s less than 100 employees and a relatively small customer base, it’s very apparent where resources are going and where they aren’t.

As result, investments are made in the areas that offer the most obvious return, and for many SMBs that is not perceived to be their website. Research indicates that 57% of SMBs are making money from their websites, either online or via offline sales. While it’s a growing percentage of revenue, it’s not yet reached the level where every SMB can quantify the benefits of investing in their website.

Every company can calculate the benefits of adding salepeople or investing in improved supply chain management systems, however, so it’s easy to understand why the website can lose out to other areas of the business.

This question of how to justify website investments was an important part of a seminar we presented to a group of business owners this week. Their companies ranged across a variety of sectors. Their websites, in turn, varied widely in functionality, content quality and visual appeal.

We reviewed ROI models that quantify the company-wide benefits created by a site that strongly links to organizational objectives. While each company worked with numbers that were unique to their business, there was one measure they all factored into their plans: 1/20^th of a second.

That’s the amount of time in which viewers judge your site, according to researchers in Carleton University’s Human-Oriented Technology Lab. They reached their conclusion by flashing websites for 50 milliseconds and asking study participants to rate them for visual appeal.

“Unless the first impression is favorable, visitors will be out of your site before they even know that you might be offering more than your competitors,” says Carleton’s Dr. Gitte Lindgaard. The research, which is reported in E-Commerce Times, suggests that the first impression forms an initital bias that dictates long-term opinions.

A positive first impression carries over to other features of the site, such as content. Since people like to be right, Lindgaard reasoned, they will continue to use a website that made a good first impression.

It’s an eye-catching stat, and one that certainly captured the attention of the business owners. While the benefits of a well designed site are difficult to quantify, the risk of creating a negative impression in a fraction of a second can be quickly understood.

And with that understanding comes an obvious justification for improving the design of a website.

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Design I: Making your site pretty can get ugly

If you’re a marketer and want to antagonize a salesperson, just tell them that Peter Drucker says: “The aim of marketing is to make selling superfluous.” Why would you want to antagonize a sales person? Because you can, and they antagonize real good.

Properly understood, Drucker’s point is that marketing’s job is to make the salesperson more efficient, not redundant. The antagonism can contribute to healthy competition between sales and marketing: sales challenges marketing to develop great programs, and marketing challenges sales to close deals.

By defining the target audience, creating a clear value proposition unique to that audience and then communicating that value in advance of a sales call, marketing makes the salesperson’s job easier. But marketing doesn’t close the deal. A focused, knowledgeable, professional sales person does, especially when the product is software designed to increase the effectiveness of complex websites.

A colleague recently experienced what happens when a salesperson who lacks the qualities mentioned above fulfills a request created by effective marketing.

But before learning from his story, let’s get a refresher on how to create effective marketing programs. In a recent article in CMO called “Going Guerrilla”, Michael W. McLaughlin provides five guerrilla marketing rules that will assist marketers in professional services to boost sales.

1.    Stress how your firm solves specific problems. That will get the attention of the right clients.

2.    The best companies are able to create evangelists of their people. Use low-cost, high-return marketing tactics like nonsponsored speaking opportunities, e-newsletters, blogs, webinars and surveys to make your experts a part of your marketing and sales processes.

3.    In professional services, clients are the richest source of new business and referrals. For that reason, focus roughly 60 percent of marketing resources on cultivating those relationships. Use 30 percent of your marketing efforts to reach prospects in your target market(s). Save the final 10 percent for building visibility in the business community.

4.    The needs of professional-service clients vary too widely for generic marketing. So a critical guerrilla marketing principle applies: One size fits none. Tailor marketing to meet the precise needs of clients and your market.

5.    Answer the tough questions. Before using resources for any marketing program, ask these questions: Why do we need this program? Is it aligned with client needs? What are the desired results? How will we measure effectiveness? How will the company be involved in rolling it out? Is there a better way to use these resources?

Great suggestions. Now let’s see what happens when the sales rep doesn’t follow the script.

My colleague was sourcing web software in a crowded space in which there were little opportunities for differentiation. The situation called for due diligence, so he prepared a detailed RFP and then contacted key vendors.

One company had managed to stand out by securing a high rating in a respected industry study, and my colleague was suitably impressed by the focused, marketing explanation featured on the vendor’s website regarding how the product would solve his specific problems. Textbook marketing up this point, with a rep receiving: a highly qualified lead complete with champion, timeframe and budget; decision-criteria set favoring the vendor’s solution; positive brand awareness.

Here’s what happened when my colleague contacted the salesperson:

·      The salesperson refused to respond to the RFP: the product’s features would sell themselves in a demo and the product was priced to “own the market” (yes, he put that in an e-mail). In other words, even a minimum level of sales effort was superfluous.

·      A refusal to allocate a development resource for the requested demo. Because the rep judged the sales value to be too low, he thought it best to utilize a service technician instead (yes again on the e-mail communiqué).

·       Following an impressive demo, in which the technician suggested to my colleague that a brief conversation with a developer would be beneficial, the sales rep prevented that conversation from taking place because the sales value was too low (written in an e-mail? Oh yeah.)

·       After this antagonism, my colleague still saw enough value in the software to schedule a conference call between the six-person purchasing team and the sales rep to finalize a price. The rep issued an electronic invitation for a time that suited him… and then missed the call.

Guess who didn’t get the sale.

Unfortunately, the experience has left my colleague wishing the sales role was superfluous. Or non-existent.

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Spamming is killing us. Well, death may be overstating the problem, but spamming is frustrating users and marketers alike and its financial impact on legitimate marketing can’t be understated.

Read rates of marketing e-mail is in serious decline. More and more users hit delete before they even glance. DoubleClick reports a 24 percent year-over-year decrease for all mail in its Q2 2005 E-mail Trend Report. That means a dramatic downturn in average campaign revenue and an industry loss of tens-of-millions of dollars compared to previous years.

The problem is spam. Spammers give all marketers a bad name. The good news is that the law is now starting to hammer some of these e-mail bandits. An Iowa judge pounded a Florida spammer, awarding $11.2 billion in damages to an Iowa ISP after it received millions of unsolicited e-mail. Yes, billion. You probably received some of the wicked e-mails from the notorious hood in question advertising mortgage and debt consolidation. Damages were calculated at $10 per illegal e-mail.

An increasing challenge, compliments of the trend wrought by spammers, is that more and more users are turning-on image blockers that turn-off images in an HTML e-mail. While spam e-mail images are turned-off, so are legitimate e-mail images.

To overcome these challenges you have to build trust with your readers which requires their permission and a transparent relationship with synchronous (two-way) communications.

Here are a few tips for overcoming these challenges:

• Get their permission.
• Double opt-in is strongly recommended.
• Opt-out option on all correspondence.
•  Privacy Policy is a must .
• Write succinct, punchy subject lines.
• Strong opening body text (non-image) emphasizing the buyer benefit.
• Third-party lists are strongly discouraged; ditto for sharing.
• Provide links to back issues and related information.
• Ensure a strong offer in every e-mail.
• Call to action should have short deadlines.
• Measure response to e-mail offers; tailor campaigns based on response.

Ultimately your e-mail success will depend largely on how well you know and understand your readers and how well you tailor your efforts based on their needs and expectations. As such, don’t be afraid to ask for feedback and to undertake surveys. Heck, try phoning a few with a polite telephone survey – you might just further strengthen a valuable relationship.

‘Tis the season for Christmas shopping hype. The ads are everywhere, so are the lights, the endless music, and daily wave of hype numbers about how great the web is for online shopping. Unfortunately, it’s a fountain of hype with almost no explanation.

Black Friday records.... blah, blah. Holiday shopping up dramatically... blah, blah.

In case you missed it...

• Online retailers saw market share of Thanksgiving Day traffic grow by around 18.8% from 2004, while the proportion of visits to those sites on Black Friday grew by 20.9% year-over-year (Hitwise)
• Online shoppers will spend $19 billion in November and December, a 24% rise over last year, (comScore forecast)
• The online ad market is set to hit at least $55 billion globally by 2010 (Piper Jaffray)

Am I the only one who is noticing these announcements have almost zero substance? Little analysis, and almost no discussion as to why or what the average guy can do to help reap some of the reward.

I did however come across one meaningful announcement... lost in the shuffle of press releases waves from dueling analysts offering almost no analysis but lots of numbers. Yahoo! and Aegis Group, a Connecticut marketing company, are working on a new metric – a metric that links online advertising with store sales.

Yahoo! is using Aegis Group for their savvy measurement and their expertise with econometrics analysis. Aegis likens econometrics to a branch of economics that “uses complicated mathematical calculations to measure the relationship between different events.” Aegis claims to “weigh myriad factors such as weather, price cuts and advertising quality in determining how sales are affected.”

Under the partnership, Yahoo! advertisers will pay extra for the service. Ah ha, another way for Yahoo! to boost its hungry revenue to satisfy the even hungrier analysts who demand more growth, more margin, more earnings!

Of course we have many, many different metrics for measuring online effectiveness (click through rates, conversion rates, cost per click, etc.) but this is the first one I’ve seen linking online efforts to offline sales. Though apparently comScore has something that few rely on.

Yahoo! and Aegis’s plan builds on an existing model to include data from Yahoo! showing users' exposure to online graphical and search advertising. This new model provides a focused assessment of online programs on Yahoo!, measured next to programs on other media, and gives insights and recommendations to marketers on both online and offline marketing spend. Marketers can choose to provide Aegis with data from other online sites, including direct marketing campaigns and Web site data, to get a broader view of their total marketing programs.

"Marketers need to be able to measure and make decisions about online and offline marketing campaigns with a holistic view," said Wenda Harris Millard, chief sales officer, Yahoo!.  "Providing this new service with MMA (Aegis) is a key step in Yahoo!'s continued commitment to providing marketers with leading tools to enhance and optimize their marketing spend."

"In many ways, online marketing can be more accountable than many offline marketing tactics, but there is still a real need to understand the total sales impact of online and offline programs on a common ROI basis so that optimal budget allocations can be made," said John Nardone, MMA Chief Client Officer. "Clients are shifting more and more of their total spend online, and need to move beyond measurement of clicks and page views to understand what is really working to drive sales."

Anyone come across a credible model for linking real world advertising with online use and sales?

INTRANETBLOG:

’Tis the season for retail to be to top of mind, whether it’s because you’re making your list and checking it twice, fighting crowds or anxiously watching sales data to gauge the health of consumer spending, the main driver of our economy.

In the Internet world, retail is particularly fascinating now because analysts are trying to gauge on-line versus bricks-and-mortar purchases in the wake of U.S. Thanksgiving, the accepted start date in the frenzied race to acquire goodies to cram under the tree. This year, the story has been about how “Cyber Monday” would compare to “Black Friday.”

The latter phrase was coined to capture the importance of Thanksgiving Friday, the biggest shopping day of the year in the U.S., when retailers enter “the black” after months of luring semi-disinterested shoppers into their stores with discounted pricing.

The former phrase has only been in usage for a few weeks. It’s the day when shoppers return to the office and start shopping on-line, the location from which 58% of us make our on-line purchases according to comScore Networks.

The phrase also provides more insight about how savvy manipulation of hype-driven media gains attention, rather than providing an accurate measure of retail trends, according to BusinessWeek. 

The article reports that Shop.org, an association for retailers that sell on-line, coined the phrase in a November 21 press release claiming Cyber Monday to be “one of the biggest on-line shopping days of the year.” It is, in fact, the 12^th busiest day according to comScore and even trailed November 22 for sales this season.

So should we accuse the on-line retailers of living in a past era, one in which behaviour is driven by hyped events? Not all. This savvy industry understands as well as any that the Internet changes the rhythm of our lives, and is at the forefront of developing web tools that fundamentally change the way we shop.

In its new ranking of the Top 50 Retail Sites, Internet Retailer provides an interesting list of the innovations these companies have developed, including:

• Musicnotes.com developed software that displays a page of music, then plays the piece being shown while a cursor indicates which notes are playing.
• Peapod.com is equipping its delivery fleet with GPS navigation devices and providing customers with an update on delivery time with an e-mail, text message or phone call when the truck is 10 minutes away.
• BestBuy.com offers a kitchen and laundry planner that allows shoppers to create on-line plans of their rooms, then populate them with appliances. They can e-mail the resulting plans to friends, family or builders and print them out to take to the store when they buy the appliances.
• Circuit City Stores Inc. guarantees that items bought on-line will be ready to pick up in the local store in 24 minutes.

What the “Cyber Monday” phenomenon demonstrates is that much of the media will respond to a well-written press release with as much alacrity and obedience as parents will to a child’s demand for a hot toy. That approach, and the growth of blogs it helps fuel, is the topic for a different article.

In the meantime, I have to find a pink guitar for a three-year old girl. And I don’t care if I find it on-line or in a store, as long as I find it in time to put under the tree on December 25^th.

Those of us that are in the business of selling products and services to other businesses (B2B) know full well that traditional consumer marketing does not work for our business. There is no better way to waste your marketing money than on traditional advertising on radio, television or newspapers.

B2B marketers prefer to spend their money on more traditional, organic methods, but with an increasing budget directed to digital and e-mail marketing. In fact, according to a Forrester Research study highlighted by e-Marketer (B2B Marketers Shift Budgets to Online), in-person event marketing such as tradeshow participation is the number one preferred tactic of B2B marketers.

Although TV is listed as the 5^th most popular tactic, I’m sure you’d find that much of that TV advertising is targeted cable TV advertising on specialty channels such as the Money channel or MSNBC.

Of particular interest to digital strategists such as myself is that no digital marketing makes it into the top 5 tactics. After the military and education, B2B were the first early adapters of digital marketing and electronic sales. Electronic Data Interchange (EDI) was being used by many B2B companies before many of us had even heard of the Internet. Despite this early mover advantage into the digital world, B2B marketers have not discounted more traditional methods such as face-to-face and PR.

The good news for digital media buyers and marketers is that digital marketing –such as e-mail marketing and paid search – is being used more and more often by B2B companies and is projected to be the number two tactic of choice by 2008.

ANALYSIS

Traditional, organic marketing such as in-person events and public relations works best for many B2B organizations. Digital marketing, particularly targeted permission marketing (see Web marketing (part III): E-mail marketing ), is becoming more effective and will continue to garner more and more of the marketing pie. Increases in digital marketing budgets will continue to be at the expense of less successful media such as newspapers, printed newsletters and radio.

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If you can’t beat ‘em, join ‘em.

If only the record companies had thought this way when Napster first hit the scene instead of spending tens of millions of dollars in legal fees and associated marketing trying to fight downloadable music. Well, that’s mostly in the past now as the labels have come to learn the power of e-commerce, thanks in-part to iTunes.

A remarkable new study released this week by NPD Group found that iTunes has begun to displace retail chains in music sales. In fact, people are buying more music from Apple’s iTunes than from big chains such as Tower Records and Borders. Wow.

In Q3, the top 10 retailers were as follows (note: numbers within parentheses denote retailer unit-sales position in Q3 2004):

1. Wal-Mart (1)
2. Best Buy (2)
3. Target (3)
4. Amazon.com (4)
5. FYE (10)
6. CircuitCity (Tied for 5)
7. Apple\iTunes (14)
8. Tower Records (Tied for 7)
9. Sam Goody (Tied for 5)
10. Borders (9)

Despite the fact that iTunes has only been around for a couple of years, there are only six retailers that sell more music.

“The ongoing and growing popularity of Apple’s iTunes Music Store now positions the company as a leading music retailer, and continues to legitimize legal digital music retailing,” said Russ Crupnick, music and movies industry analyst for The NPD Group. “With the growing interest in digital music, forecasts of more iPod demand this holiday, plus the stocking-stuffer appeal of iTunes gift cards, we can expect Apple to increase its share even more by year’s end.”

If you’ve not yet identified what online threats could supplant your traditional business then you’d better do your homework. I guarantee you that Towers Records did not formally take into account three years ago the threat that iTunes has become today. In only a couple of years iTunes has managed to build a business that once took decades to build.

Internet speed waits for few.

New research reports that consumers are 50 percent more likely to be influenced by word-of-mouth recommendations from peers than by radio/TV ads. Growing confidence in consumer-generated-media (CGM) creates a strong impetus for marketers to influence this new media, and a recent survey from Bain & Company provides an excellent suggestion about how to start: keep your customers happy.

The “2005 Consumer-Generated Media (CGM) and Engagement Study” a new study of consumer behavior by Intelliseek Inc., contains interesting findings on the interaction between old and new media and the behaviour of Internet-savvy consumers:

·        “Active ad skippers” are 25 percent more likely to create and respond to Internet message boards, forums and blogs.

·        Word-of-mouth behavior among “familiars” trumps all forms of advertising and is more trusted than news or “expert commentary.”

·        Consumers are on track to post close to 2 billion comments on the Internet by the end of 2005.

While it’s critical for marketers to ramp up their knowledge of the blogosophere and develop strategies for managing their brand in this space, they can’t take ignore the source of the positive or negative comments that will be posted: the customer experience.

The Bain & Company survey indicates companies need to be more honest with themselves about their performance in this area. In a survey of 362 firms, the consulting company found that 80 percent believed they delivered a superior experience to their customers. But when they asked customers about their own perceptions, they found that they rated only 8 percent of companies as truly delivering a superior experience.

Bain went on to determine what criteria put the top performers into the elite eight percent, finding that they take a broad view of the customer experience and pursue three imperatives simultaneously:

1. They design the right offers and experiences for the right customers.
2. They deliver these propositions by focusing the entire company on them with an emphasis on cross-functional collaboration.
3. They develop their capabilities to please customers again and again—by such means as revamping the planning process, training people in how to create new customer propositions, and establishing direct accountability for the customer experience.

When was the last time you used “salesperson” and “Internet strategy” in the same sentence? If you did, the sentence probably also included either the phrase “reduce costs by using fewer,” or the verb “avoid.”

Salespeople are much maligned. Customers resent their pressure tactics, executives often question their commission cheques and the Kids in the Hall made them the subject of plunger jokes.

Worst of all, marketing strategists often ignore them, launching expensive campaigns that always factor in the Internet but frequently neglect the sales force. And that leaves the sales team still on the street, representing the company’s product and brand. But doing it badly and with poor information.

Tim Riesterer, in an article for MarketingProfs, describes this space as “no brands land”: the gap that exists between the 30,000-foot ad campaign and the 3.5-foot level, which is where the company’s sales team is persuading prospects to make a decision. Only they might persuade a customer to look elsewhere because their information and positioning is inconsistent with the company’s web site. Which the customer checked a few minutes prior to meeting with the sales person.

As Riesterer points out, many companies—especially those in complex b2b selling environments—have embraced consultative selling methodologies to differentiate themselves in a world of product parity. He quotes Evan Hirsh, author of Channel Champions, who writes that: “From these [sales] channels flow customer satisfaction, market share, revenue gains and profitability.” However, they have not translated the high level positioning on the web site into street-level value propositions and solution-messaging that align with the sales team’s training.

The effectiveness of these solution selling techniques can be boiled down to access to up-to-date information and productive use of sales time. In other words, sales effectiveness screams intranet.

That point has not been lost on CMS vendors or intranet thought leaders. For example, Prescient Digital Media's President, Toby Ward, wrote in a posting called “The intranet bolsters sales” in Prescient's companion blog that: “While there is a certain amount of guesswork involved it is easy to see that the intranet can have a positive effect on the bottom line and impact an organization’s sales.”

Which might explain why too few companies talk about their Internet strategy and their sales force effectiveness in the same conversation. Not only do marketers often create the strategy without considering the sales team, the methodology for developing an effective intranet strategy—which can be ideal for creating an effective sales intranet to complement an on-line presence—is often created by the HR or communications departments, who work in a different silo to sales and marketing.

So the next time you’re developing an Internet strategy intended to boost sales revenue, make sure you think about the sales team that is responsible for delivering those numbers. And if you need any help in determining how to help them manage information effectively, ask Communications how they developed their intranet plan.

I hate spam. You hate spam. We all hate spam. Yet, just like negative political advertising during the heat of a hot campaign, it works brilliantly.

In fact, except for traditional direct marketing, there is no single more effective marketing tool.

Here are some of the numbers:

Ø       Only telemarketing has a higher ROI than e-mail (IAB)

Ø       In Q2 2005, the open rate fell to 23.6 per cent versus 2004 (DoubleClick)

Ø       Bounce rates, which were at an all time low at 7.9 percent, declined 25 per cent from 2004 rate (10.5 percent) (DoubleClick)

Ø       Orders per e-mail delivered were 0.35 percent in the fourth quarter of 2004, an all-time high and much higher than the previous records - 0.30 percent (DoubleClick – based on  2.5 billion e-mail sent)

That last number is very telling. It means there’s a sale, on average, for every 300 e-mail solicitations sent. While it depends on how you do it, the cost of sending 300 e-mail is next to nothing. And this is why e-mail marketing continues to be wildly successful despite the stigma against spam.

To be honest, the real winners are not those marketers that are spamming (though some are wildly successful), but those that undertake permission marketing.

Permission Marketing

The growth of VOIP and the threat it poses to the trillion dollar telephone industry is attracting well justified attention and creating lessons in Internet strategy no one can ignore. But the performance of the established telecoms demonstrates that while there’s never a good time to dissatisfy a customer, a “cable guy” approach to customer service is particularly ill timed now that alternative technology is available.

Web guru Tim O’Reilly forecasts that VOIP’s participatory technological model will disrupt the established telephone players. The father of disruptive innovation, Clayton Christensen, cites VOIP as an excellent example of why all industries should evaluate the opportunity or threat created by the radical business models it exemplifies.

Another theory, enthusiastically articulated by a friend of mine who has chosen VOIP over her landline, is: don’t piss off your customers.

While not grounded in the same academic rigour as O’Reilly or Christensen, her experience provides a case study of what happens when an industry facing intense competition fails to provide even basic customer satisfaction: she eradicates them from her life.

The growth of VOIP is remarkable. Japan already has over 8 million subscribers today andIDC predicts that the number of residential VOIP subscribers in America will grow from 3 million at the end of 2005 to 27 million by the end of 2009.

Such growth inevitably captures the attention of the business press, such as The Economist which produced an in-depth report on telecoms and the Internet. It provides startling evidence that the telecom industry will be devastated by VOIP.

The report holds up Skype as a leading example of a disruptive agent terrifying the incumbents, and not because of its current business performance. The three year old company will only make US$60 million in revenue this year and will likely not be profitable.

Skype earns attention because of the credentials of its founders who clearly grasp the participatory, collaborative nature of Internet technology. Niklas Zennstrom and Janus Friis also founded KaZaA, and its their combination of of philosophical insight and business acumen that has drawn the attention of Tim O’Reilly, an influential proponent of Internet-enabled collaboration.

Skype is also a poster child for Christensen’s theory of disruptive innovation, a player that can take out entrenched incumbents by kneecapping them with superior pricing tactics. Consider Skype’s model:

§         It can add 150,000 users a day without spending anything on new equipment or marketing.

§         With no marginal cost, Skype can thus afford to maximise the number of its users, knowing that if only some of them start buying its fee-based services—such as SkypeOut, SkypeIn and voicemail—Skype will make money.

§         As a result, according to Zennstrom: “We want to make as little money as possible per user. We don't have any cost per user, but we want a lot of them.”

§         This is the exact opposite of the traditional business model in the telecom industry, which is based on maximising the average revenue per user.

Not only does the Skype business model have experts like Rich Tehrani, the founder of Internet Telephony, predicting that in the future all voice communication will be free, recently released statistics demonstrate that VOIP may completely eliminate traditional phone service.

According to the Telephia Emerging Personal Communications Options (EPCO) survey of high-tech households, Internet-based telephone service (or Internet telephony) is replacing traditional landline phone service among those who have chosen VOIP.

§         53 percent of high-tech households subscribing to Internet telephony have completely replaced and disconnected their landline phones. (High-tech households are identified as those who currently subscribe to at least three bundled or emerging services—e.g., wireless data, video-on-demand, Internet-based telephony, satellite radio, broadband, DVR, etc.—or expressed an intent to purchase four or more services.)

When asked what the primary reasons were for subscribing or having interest in Internet-based telephone service, the high-tech households responded with explanations that strongly reinforce the pricing model implemented by Skype:

• 59 percent said savings on calls within the United States was the top factor in making the switch.
• Among those who showed interest in adopting Internet telephony, but have not subscribed to a service, 30 percent said that bundled package deals were a key reason for their interest.
• For these “intenders,” 17 percent said interconnectivity across different communication services was important.
• 15 percent cited the ability to switch between telephone networks.
• 11 percent mentioned caller ID on TV as a reason for interest.

Which brings us back to my friend. An executive with a multi-national software manufacturer, she and her husband fit comfortably into the high-tech household category. But she never mentioned the factors above when telling us why they have removed their landline and are now exclusively using VOIP and cell phones for their voice communications.

She chose to disrupt her telephone provider after it was unable to resolve a technical problem after seven service calls (all of which required her to be at home and not all of which resulted in the appearance of a service technician) and long-winded explanations from CSRs about how she might not actually have a problem with her phone line.

There are few industries in which the stakes are as high as telecommunications and the differences in business models between disruptors and incumbents are as stark. Nonetheless, everyone evaluating an Internet strategy must be following the developments in the industry because of the important lessons it provides.

But one can only hope that we don’t need to read the work of business and web theorists to understand that forcing a customer to endure seven service calls to not resolve a problem will motivate them to switch the moment an alternative is available.

Paid search gets a lot of press because it’s making a big bang. However, many advertisers and web managers are still confused about this hotly evolving science (or art depending on your perspective).

Paid search allows an advertiser to pay for small text ads, that sometimes look like they are regular search result listings or they are offset from the regular listings as small promotional boxes, and are served up alongside regular search result listings. For example, do a search for “intranet consulting” and you will produce the following:

The paid ads are those that are highlighted by a red box (the red boxes are strictly for illustrative purposes). The regular search result listings appear as they normally do in the center of the page.

In publishing the ads, you choose the keywords that you want your ad associated with. In the example above, advertisers are paying to have their name associated with the term “intranet consulting.” The advertiser only pays only when someone clicks on the ad. This rate, called Cost Per Click (CPC), is determined by how often users search out that phrase or word, how often they click, and how big the competition is for advertising with that phrase.

The big players in this space are Google and Yahoo! (which bought Overture) with Google still leading the way. MSN recently broke into the space and others offer it but have miniscule audiences in comparison.

Paid search also allows you to track exactly how you’re doing: how many times people are seeing your ad, how many are clicking through, and what is the exact cost to you the advertiser.

However, paid search is part art and part science. You may want to have your ad associated with keywords and phrases, but you will have competition. And getting the top spot is not yet determined solely by price but my algorithm. However, MSN, Yahoo! and Ask Jeeves are all moving to a highest bidder model.

Bidding on keywords can be very expensive if you have rivals jockeying for position. Alternatively, you can bid on more obscure keyword phrases that no other advertiser is using where you can assure yourself the number one ad placement, but you won’t get as much traffic as more popular search phrases.

To determine what keywords to associate with your ad, there are a couple of tools:

·     Hitwise's search term analysis – type a phrase and it will list the sites that receive the most traffic and their percentage share of the total traffic generated by the phrase.

·     WordTracker – competitive analysis tool to seek out the best keywords based on over 300 million keyword phrases.

·     Pay Per Click Galaxy - generates thousands of keyword phrases to consider and experiment.

·     Google link analysis – type in your URL and find out what websites link to your website. 

While traditional online display advertising (banner, spatials, etc.) accounts for 45% of all online advertising, paid search advertising accounts for 34% of the marketing (JupiterResearch) and is growing at a massive clip. In fact it won’t be long until paid search advertising passes all other forms of online advertising. The study forecasts paid search to exceed banner ads by 2010. At the same time, the cost-per-click is anticipated to grow from $.39 in 2004 to $.58 by 2010.

Despite the increase in cost, paid search clearly is good bang for the buck. Forty-two percent of the study respondents that classify themselves as sophisticated marketers plan to increase their paid search budget next year.

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Web marketing (Part I): search engine optimization

The Amazon Lesson

HALIFAX, NS - If you’re taking the time to read this then I need not remind you of the power of the web. But just in case you’ve recently come back down from the mountain or emerged from a getaway in a cave here are some of the latest numbers, for the record:

·         Almost 80% of North Americans have Internet access

·         More than 50% have made online purchases (Ipsos-Reid)

·         A majority use the Internet as a decision-making tool

·         The Internet cited as the most influence on luxury purchasing (cited by 44% of affluent purchasers) (IAB)

·         39% of North Americans use online banking (Ipsos-Reid)

·         73.5% of e-commerce sites estimate sales growth of 15-35% this year (35.5% estimate growth of 35% or more) (Internet Retailer)

·         60% of chain retailers estimate web sales growth of 25-200% (21.7% expect growth of at least 100-200%) (Internet Retailer)

·         Time spent online by adult Canadians has increased 50% since 2002 and Internet use is ready to overtake watching television (Ipsos-Reid)

The power is present, significant and growing. For those that seek to further harness their this power there are a number of marketing practices worth noting. In the first of a three part series, I will examine one of the most important Internet marketing disciplines, search engine optimization (SEO) – a requisite for maximizing the value of your website.

SEO

The Internet has taught us the value of permission-based marketing, but it has also demonstrated the importance of customer permission: what and how will your customers permit you to sell to them?

The Internet spawned exciting new companies like Amazon and Ebay which found innovative ways to communicate with and sell to customers. It also rewarded existing players that grasped how to reengineer themselves while still delivering a consistent brand experience. Dell provides a great example of the latter case, famously incorporating an Internet strategy—disintermediating the channel—into its brand with its “be direct” slogan.

Recent statistics on e-commerce transactions and an announcement in a shift in strategy from Dell demonstrate yet again that customer permission remains a critical consideration when contemplating a web strategy.

In its assessment of best selling product categories for July’s top 10 e-commerce sites, Nielsen/NetRatings reported that EBay led the pack in total purchases with 26.4 million in July, followed by Amazon and Symantec  with 4.6 million and 1.1 million purchases, respectively.

It’s interesting to see what their customers are buying from the companies, notably that a brick-and-mortar company, Wal-Mart, has succeeded in winning customer permission to offer a new product, while Internet players like Ebay and Amazon remain constrained, to varying degrees, in the product categories in which they started:

• Photo services accounted for 52 percent of online purchases at Wal-Mart.com, with photo pick up at brick and mortar Wal-Mart locations.
• Ebay’s top selling product category was Toys, Games & Hobbies, the company's original product offering.  But this category only accounted for 29 percent of its customers’' purchases.
• Amazon continued to rely heavily on book sales, which constituted 57 percent of purchases on that site.

On the Dell front, the company has announced a new higher-price line of consumer PCs. Marketed under the existing “XPS” name, the new machines, Dell says, combine “the ultimate in performance, experience, and service.” While it still sells machines for as low as US$299 after rebates, the company is hoping this fundamental shift to move into a higher priced product will reverse poor sales trends  by delivering a higher average selling price.

By doing so, Dell will be testing its customer permission, not just what product it will be permitted to sell, but also at what price point. More significant, it will also be testing how it will be permitted to support the new product. Dell’s service has become a mini-Internet phenomenon, which has prompted the company to announce a beefed up service offering for the XPS machines.

Could advertising agencies be facing the same fate as blue jean manufacturers? It’s a possibility raised in a recent Wired News article about a new site called Adcandy, which allows the public to contribute their original advertising ideas. In doing so, the sites’s founder, Per Hoffman, wants to tap into one of the great strengths of the Internet: it’s power as a collaborative tool that unleashes the creativity of so-called amateurs. “People want to participate in all forms of culture, so why not commercials, for better or for worse?” says Hoffman.

Contributors can win cash prizes from $50 to $500 for their phrases or campaign ideas, which prompts Carrie McLaren of Stay Free Magazine to suggest another power of the Internet: it’s ability to demolish the economics of long-standing business models. “It’s safe to say that $50 for a winning idea would be comparable to sweatshop labor in the advertising world,” observes McLaren.

The challenges facing advertising agencies in the Internet age are well documented. Their business model, evolved over the last century, is to develop creative for brands with big budgets. Their primary revenue stream has become the fees they tie to a percentage of a media buy, which principally means television. With brands and budgets in flux, and new media both challenging television and offering skinnier percentages for media buys, could agencies be vulnerable to the transformative economics of “sweat shop” labour that have ravished other industries?

Before envisioning hordes of black turtlenecks on street corners with (elegantly designed and hip) signs reading “killer creative for food,” you may want to check out Alan Deutschman’s article in Fast Company about Wenda Harris Millard, Yahoo’s chief sales officer, who’s responsible for bringing big-brand advertisers to the Web site.

Deutschman leads with the statement that: “traditional advertising is in deep trouble,” but goes on to observe that: “The Web always had the potential for reinventing and reinvigorating advertising. With its unique ability for measurement — tracking who clicked on an ad and how they interacted with it — the Net promised to solve the classic problem stated by department-store pioneer John Wanamaker: ‘Half the money I spend on advertising is wasted; the trouble is, I don't know which half.’ But in its early years in the 1990s, the Web couldn’t deliver the mass audiences needed by national consumer brands. Lately, though, Millard has been instrumental in showing Madison Avenue that the Internet has developed the audience reach, the technology, and even the creative ferment to realize its great potential.”

Whew, it looks like the agency model is safe. Or we could discover that shouting “wassup” really is as easy as it looks.