Build Your Digital Command Canter Part 1

The popularity of Star Trek is based, in part, upon our fascination with advanced technology. We're excited when Captain Picardorders his crew to take The Enterprise to another galaxy with the simple command "Make it so." In the distant future, it seems, we'll be able to entertain our merest whim by pushing a button or by telling a computer what we want done. Powerful machines will do the rest.

To succeed at digital marketing, you need to build your own version of The Starship Enterprise. You need to develop a digital command center in your company to communicate on a day-by-day basis with your customers and prospects. Unlike a traditional marketing department — often far removed from direct contact with customers — a digital marketing department must be hardwired to Customers. E-mail messages, for example, must be read and replied to Within hours, if not minutes, and your Web site content may need to be updated and changed daily. In addition, your customer database should be constantly churning with new information uploaded from your salespeople, your customer service representatives, and your customers.

Integration in the Digital Economy

To gather, store, process, and distribute digital information, you need to integrate your company into the digital economy. In the next three to five years, you will need the following capabilities in your company.

• Every computer is connected over a network using highspeed cable. This network includes an internal e-mail system that allows for the sending and receiving of Internet e-mail messages.
• Everyone involved in your company — employees, customers, and suppliers — are able to communicate by e-mail with everyone else in your company. As bandwidth becomes greater, you can upgrade your e-mail capability to include video-mail and live video-conferencing.
• Employees and contract workers are able to work at home, or at satellite offices, as easily as if they were in the office. Note: In the digital world, you may not have an office; your entire operation may run over a central server that electronically connects your organization.
• Your internal computer network is connected directly to the Internet over high-speed telephone or cable lines. This means every computer on your network is connected to the Internet at all times. In fact, it means your computer network is actually part of the Internet.
• You have security measures in place which restrict access to private corporate information on your network. One solution is to set up an Internet fire wall.
• Your marketing presentations, internal communications, and training courses exist in a multimedia format which combines text, graphics, sound, and video. You have software that allows for the easy development of multimedia content.
• You have one or many different types of online servers running on your network. This includes one or more Web servers, a BBS network server, and online database servers. Each of these servers are available to selected people within your organization over an Intranet, or outside your organization by way of the Internet.
• As an alternative to internal online servers, you can lease space with service bureaus. For example, you can rent space on a Web site that is halfway around the world. You can update its content as if the server was in your office. You may use a service bureau to set up and run your online BBS system. Remember, you don't need to buy expensive digital equipment in order to use it — you can rent it as well.
• Your customers access information about your business using a variety of digital communications tools including the telephone, fax, e-mail, the World Wide Web, interactive kiosks, and CD-ROM, and perhaps also through some sort of virtual reality (VR) device. Ideally, your customers are able to purchase your products and services electronically.
• You have an extensive database on all your customers and prospects. This database is relational in structure. All your digital communications and your digital marketing promotions are aimed at increasing the size, quality, and complexity of this database.
• All your computer systems are compatible. In the computer industry, this is known as "Open Systems Architecture." This means all your corporate information is accessible, no matter what type of computer is used. As well, your information should be accessible through all digital devices, not just computer-related ones.
• Your employees are fully fluent in the ways of basic digital technology. Everyone in your organization knows how to use the three major types of software programs: word processing, spreadsheet, and database. They are comfortable creating _and viewing multimedia content. They understand the basic concepts of the Internet, and can find the information they need on it.

In order to succeed at digital marketing over the long term, you need to set up this type of infrastructure within your company. However, man didn't get to the moon in one day. So take it one step at a time. Here's an explanation of how to take the first steps:

E-NEWSLETTERS - DEFINING AND REFINING Part 12

Decision 20 - listening

While the clickthrough and web-site outcome data can be used to second guess how well an e-newsletter is working, and what customers think of the company, there is no substitute for asking the question 'what do you think?', either face to face or through a structured survey, with recruitment of respondents through the e-newsletter or via a separate e-mail.

Since e-newsletters can become a large element of how your brand is perceived, it is important to know what people really think. We can 'See that online brands such as Tesco.com and lastminute.com poll their audiences regularly to find this out. An indication of the health of an e-newsletter can be built up using a mixture of 'watching and asking'. The Tesco.com e-newsletter seems to be in good shape, judging by the 'watching and asking' metrics provided by Kanaiya Parekh, the commercial development manager at Tesco.com, who presented the following at the 2002 Marketing Week Conference on e-mail marketing:

• 80 per cent of customers rated it as excellent
• there was a 65 per cent open rate (against the industry average of <20 href="http://internet2010.blogspot.com/search/label/cent" _fcksavedurl="http://internet2010.blogspot.com/search/label/cent">cent)
• 50 per cent of customers read the entire e-mail
• 20 per cent of customers purchased due to e-mail
• an additional 37 per cent of customers were considering purchase
• 13 per cent of customers forwarded the e-newsletter to friends/family
• there was a 5-10 per cent average clickthrough rate
• there were less than 1 per cent unsubscribes.

E-NEWSLETTERS - DEFINING AND REFINING Part 1

Many web sites now have a prominently placed `Sign-up to our newsletter' box. But is this enough?

How many e-mail newsletters do you subscribe to? If you're anything like me, the number is well into double figures — and most weeks I will opt in to yet another. The trouble is, the more I subscribe to, the less likely I am to have time to look at them, so some are never opened. I think we all have a mental list of 'must read', 'maybe read' and 'only if I have time' e-newsletters. Typically, I don't unsubscribe, since I may have a chance one week to look at them.

Thus, for organizations to make their e-newsletters successful, they have to work really hard to get them into the 'must read' category of their subscribers. This is a big challenge because, in any sector, many companies have already seized the opportunity provided by e-mail newsletters to build relationships with potential customers and develop relationships with their existing customers. However, it is certainly possible — in the UK, consumer newsletters from online brands such as lastminute.com, dabs.com and Tesco.com get great open rates and deliver a substantial amount of business. Many business-to-business e-newsletters have also found the secret of success within their niche.

When devising an e-newsletter, there are many decisions that must to be made for it to be effective. This section is about the decisions you take as you plan the launch of an e-newsletter, and also decisions regarding how to gain subscribers and keep them. Use these lists of decisions to plan an e-newsletter or to improve on your current e-newsletter.

Decision 1 — organization objectives

The starting point for planning an e-newsletter has to be to examine (or re-examine) why you are publishing it. You will probably have a primary objective, such as boosting sales on a site through clickthrough, or building a brand by providing value to customers, but what about other objectives? The 5 Ss of Smith and Chaffey (2005), originally applied to a corporate web site, provide a good way to think about e-newsletter objectives:

Sell — grow sales (the e-newsletter often acts as both a customer acquisition tool and a retention tool)

Serve — add value (give customers extra benefits online, such as online exclusive offers or more in-depth information about your products or industry sector)

3. Speak — get closer to customers by creating a dialogue, asking questions through online research surveys, and learning about customers' preferences through tracking (that is, what type of content are people most interested in)

Save — save costs (of print and post); if you have a traditional offline e-newsletter, can you reduce print runs or extend its reach by using e-mail?

5. Sizzle — extend the brand online; a newsletter keeps the brand at 'front-of-mind' and helps reinforce brand values, and added value can also be delivered by the e-newsletter in informing and entertaining customers.

All the newsletter design decisions we discuss below should, of course, also be controlled by the main objectives of the e-newsletter.

Decision 2 — measuring success

When thinking about the objectives, consider how you will judge the success of your newsletter.

The following metrics are commonly used to assess the effectiveness of e-newsletters through time:

• open rates (for HTML e-newsletters)
• clickthroughs to more detailed content or promotions
• number of unsubscribes
• number of new subscribers.

While it is easy to automate collection of these metrics, think about whether they really relate to the goals in Decision 1. Think also about whether the automated measures give you the full story. Some companies also conduct surveys to determine softer measures related to how the customer perceives the newsletter and how it impacts on the brand. This is also covered in Decision 19 — tracking and assessing satisfaction.

Managing Inbound E-mail House List

There will be a high turnover of your e-mail addresses or 'gone-aways' (in traditional direct mail speak). Research by MercerMC (2001) showed that, on average, 20 per cent of customers in a typical database will change their contact information over the course of a year. Changes vary from 16 per cent for the address and 17 per cent for the job to 25 per cent for the e-mail address and 33 per cent for a cell-phone number. Furthermore, they estimate that the cost of updating or reconsenting these databases can run into tens of millions of dollars for a large database — not to mention the opportunity costs from lost customers. These figures highlight the importance of creating measures to capture these changes. Worse still, the permission provided for contact may change through time, since you will have asked different questions about how personal data will be used to market to the customer. Options for managing this change include:

• periodic checks by call centre staff and at other touchpoints
• a 'change personal details' option on the web site (this is required by data protection laws in some countries)
• e-mail or telesales campaigns aimed at updating data (Case study 4.1 shows how this process works).

Software designed specifically for cleaning a list is Winpure (www.winpure.com), although many ESPs also contain this capability.

Note though, that changing e-mail address seems to have stabilized more recently. The

Doubleclick Sixth Annual Consumer E-mail Survey(Doubleclick, 2005) showed that, when asked how long they had maintained their e-mail addresses, most consumers had kept the same address for four to six years. Nearly two-thirds of consumers had never changed their e-mail address.

The survey (Doubleclick, 2005) also showed that almost half of all consumers reported maintaining at least three e-mail accounts — an increase from 2004. Nearly 95 per cent considered one of their e-mail addresses to be a 'primary' account; 72 per cent used a single address specifically for making purchases. This shows the importance of gaining the primary e-mail address for opt-in, particularly for an e-newsletter. To help with this, make sure you explain the proposition in detail and give examples of previous e-newsletters. If the frequency is relatively low, this may also help with gaining the primary e-mail address.

Inbound e-mail is all incoming e-mail to the organization. This includes bounces but also managing e-mail enquiries from customers. There are two conflicting concerns in managing inbound enquiry or support e-mails that will of effectively answering queries from customers whose support query may refer to a combination of online or offline activities. Multi-skilling also reduces hand-offs, and can increase variety for contact-centre staff.

Balance between automation and manual processes.Automated responses, intelligent routing and autosuggestion are all techniques, described in the next section, which can be used to reduce the number of queries handled by human operators. If the automated approach fails, however, then inappropriate responses may be received by customers.

Insourcing or outsourcing. Software, hardware and staff can be deployed internally or outsourced to an application service provider, who will work according to a service-level agreement to achieve quality standards.

Building Brand Awareness

Powerful companies with large promotional budgets are reinforcing their competitive advantage through strong advertising offline as well as online. In 1998, the rage cost of building a national online brand was about $5-10 million. In 000, it cost $50-100 million, a tenfold increase. In 1999, 40 per cent of web-development budget was going on towards marketing, with more than 80 per of all television commercials in the USA featuring a Web address and 30 cent promoting an individual Web site (Lindstrom, 1999). Excessive spending brand-building without compensating revenues can be blamed for the down- of many dotcoms. Many of those that survive have incurred significant cost. According to Haigh 00), AOL has so far spent $2 billion on building its brand identity and Yahoo! 00 million.

Web site promotion is becoming more sophisticated, but there is always the danger of targeting the wrong audience, which was estimated to be the case in many as 70 per cent of 1999 campaigns. This has led to a quest for a more effective way. Some companies have been quite creative. For example, Orange Technologies, during the launch of a special youth product, offered to repaint its customers' cars free of charge. The only condition was that Orange would choose the colour. (Guess which one!) After just one day, 24 cars had been painted, at the cost to Orange of $4,200. Even giants like Yahoo! have resorted to creative, inexpensive offline promotions. Chauffeurs holding signs at airports to pick up 'Mr Yahoo!' have actually been corporate promotions (Lindstrom 1999). Gimmicks like this resulted in extensive free publicity for such companies in the media in the early days of the Internet. Small companies have found it hard to compete with these levels of expenditure, and hence need to be particularly creative in order to maximize the value of small promotional budgets. Many advertisers have adopted the now widespread use of banner advertisements as branding tools rather than transactional tools. 'There is absolutely a branding opportunity for advertisers on the Web,' says Jim Nail, senior analyst at Forrester Research, in Cambridge, Massachusetts (Heim, 2001). A good example is the Visa credit card company (ww w.visa.com), which in the past has blanketed the Web with banner advertisements. The consistency of the Visa brand has been likened to a reader consistently seeing the same advertisement on the back of a magazine. This in effect is helping Visa to solidify its brand image. Nevertheless, research undertaken by Dahlen (2001) on banner effectiveness has found that there are major differences between the performances of banner advertisements for familiar and unfamiliar brands. Unfamiliar brands initially perform badly, with very low click-through rates, but with repeated exposures the response rate increases. Familiar brands initially attract interest but customers quickly get bored with their campaigns, and response rates fall. Moreover, major differences were found between novice and expert Internet users with regard to their relative susceptibility to Web advertising. Dahlen therefore recommends that unfamiliar brand banner advertisements should have long-term goals, allowing multiple advertising exposures. For familiar brands, on the other hand, there should not be a long-term goal, as the advertisements quickly 'wear out'.

BRAND CONVERGENCE

Creating a strong brand both online and offline involves far more than the 'look and feel' of the Web home page, the logo or the new brochure. The very essence of a strong brand philosophy is the way in which the staff serves customers - a key part of creating brand convergence. Whether the customers are surfing the Web site or using the service offline, the organization must ensure consistency of all 'customer touch points' to create a single, comprehensive and memorable brand. This involves significant management and staff training, motivation and constant follow-up. Striking the right balance between online and offline delivery systems to satisfy and deepen customers' relationships and maintain the uniqueness of the brand has to be the key to success. A convergent brand strategy has to address some or all of the following issues:

• Which are the channels that the customers find best suited for delivery of each service: a branch, telephone or online?
• Are the marketing strategic plans adequate to support integrated delivery through all the channels?
• Are the staff motivated and appropriately trained? Remember, a `convergent brand' will have an impact on all areas of the organization.

Ensuring integration of high-touch/high-tech delivery channels, creating consistent, differentiated brand and maintaining acceptable operating costs customer will be essential for survival. Offering customers relevant services building a strong brand image in this way are seen as vital for the future of industries such as banking (Weber and Seibert 2001).

`Bricks' or 'Clicks'?

Around 1998, many banks hoped that online banking would allow them to cut costs dramatically by closing branches. They are now becoming increasingly aware that because customers expect a choice of channels, absolute customer numbers are not a 'able indicator of the success of an online offering; rather, the number of active online customers is a more meaningful measure. Recognizing that it will take much er to realize the anticipated cost savings, banks are adopting various strategiespush customers online:

• using branches to educate customers in how to use online services;
• providing reassurances over security;
• offering lower fees and higher interest rates;
• giving staff incentives to encourage customers to use online banking services.

The 'bricks and mortar' bank branch, therefore, is unlikely to become redundant in the near future.

Generally speaking, traditional banks have not adapted products and prices or developed customized propositions for their online operations. 'Pure plays' (new sternet-only banks) have competed so far on the basis of products with aggressive pricing, innovative offerings and investments in new technologies. However, their efforts towin market share have been costly and will not be sustainable in the long term. In a very crowded marketplace, banks will increasingly try to 'poach' other online customers, which is a potentially more profitable strategy than encouraging existing customers to migrate to the Internet.

Some authors are now pointing out the irony that virtual banks are seeking to set up physical operations just as traditional banks create online ones. Gandy argues that competition is not about 'bricks' versus 'clicks': 'It's about integrating both — pulling together the best of what is available through the physical distribution with the best of the Web world' (2000: 122). Yakhlef (2001) examined four dominant banks in the Swedish banking sector to ascertain whether Internet banking was causing the Importance of bricks and mortar locations to diminish. The results indicated that banks have achieved better communications with their customers and lowered transaction costs whether they have used the Internet as a complement to or a substitute for their existing operations.

A further structural dilemma for banks is to determine whether their online operations should be integrated into the existing business or 'ring-fenced' as a separate Jivision. Gulati and Garino note that the issue of integration or separation is not a zero-sum game, and that companies should 'strike a balance between the freedom,

flexibility, and creativity that come with separation and the operating, marketing, and Information economies that come with integration' (2001: 113). In December 2001, the Bank of Ireland decided to merge its previously separate Internet bank, called F. Sharp, into its main operations after attracting just 2,000 customers. The rationale was that the online operation could not offer the high level of customer service on its awn that is necessary to support high-net-worth customers (e.business magazine, January 2002).

Loyalty Programmes and Personalization

Despite the problems listed above, it does seem that relationship marketing at east has the potential to enhance customer satisfaction. Although it is easy to be cynical, a satisfied customer is more likely to be loyal than one who is not. A loyal customer base has a number of benefits to a company:

• Higher returns will accrue, from repeat sales over time.
• Increasing levels of competition means that service quality may be the only differentiating factor between otherwise similar companies.
• Higher costs are associated with recruiting new customers than with managing existing ones (because of the need to conduct credit checks, take up references and other administrative tasks).
• It provides scope for cross-selling.
• It creates possibilities for strategic partnerships.
• Loyal customers will recommend the company to others by word of mouth.
• Promotional costs to acquire new business are reduced.

Loyalty programmes (also known as 'reward schemes') can be introduced to increase loyalty. For example, successful programmes have been introduced in recent years by airlines such as BA and supermarkets such as Tesco. The costs of the rewards given away can be more than offset by the additional business gained through repeat or additional purchases. For example, Tesco's Clubcard loyalty programme now covers more than 14 million customers, and special offers can be customized, based upon analysis of transactional data in order to enhance the brand image and build trust. By 1996, 200 million in-store purchases per day were being tracked by the programme, and over 5,000 distinct customer segments identified, each receiving personalized coupons. Profits have grown from £500 million in 1995 to nearly £1 billion in 2000 (www.ltol.com). When Tesco began selling goods online (admittedly after a shaky start, when the company's computer systems were not sufficiently integrated and orders had to be rekeyed manually!), the company was a 'known quantity' in comparison with the unproven Internet `pureplays' that were setting themselves up in competition. Additional Clubcard points were awarded for online purchases, and Tesco now has over 1 million online customers. In 2000 it sold half of all online groceries in the UK (www.datamonitor.com). It dominates the home delivery market to such an extent that many competitors have accepted defeat. Safeway, for example, decided in 2001 to stop selling its goods online and concentrated instead on refurbishing and upgrading its retail outlets.

Another popular method of boosting loyalty is personalization. Tesco is moving in this direction with its online service, which is now becoming more sophisticated in its analytical capabilities in terms of suggesting particular products or special offers that might appeal to individual customers based upon their purchase history. Personalization software allows the name of the user to be incorporated into the Web pages, any previous transaction details to be displayed, and related areas of interest to be flagged. Personalized email messages can be distributed to highly targeted groups of customers at a very low cost. This type of marketing is also being driven by research such as that by Cyber Atlas (www.cyberatlas.com), which established that Web users who configure, person. alize or register on Web sites are more than twice as likely to buy online as those who do not. A combination of a reward scheme and personalization can therefore be a powerful tool to drive loyalty. Such mechanisms are of course ideally suited to online transactions, and this aspect will be considered in more detail in the next section.

As with relationship marketing as a whole, there has been a lot of hype recently claiming that personalization is a panacea for success. This ignores the fact that in many circumstances, customers are quite happy to receive a 'mass market' approach, and find any degree of personalization an intrusive invasion of privacy. Examine the mini case study below and make up your own mind — do you find such approaches valuable or intrusive? Why?

The Catalog Market - Catalogs That Sell Catalogs

Along with other cataloging techniques, we'll cover the five "Ps" of cataloging:

1. Positioning
2. Presentation
3. Production
4. Personalization
5. Persistence

Understanding these will give you insight into how the industry operates and the unique advantages that catalogers have built for their companies.

A catalog, in retail terms, is a "shelf' that relies on direct marketing techniques. It can encompass education as well as entertainment. This is not just due to the inherent nature of the catalog—the fact that it's a portable picture book. It's also due to the diligence the industry has given to effective presentation including compelling artwork and persuasive copy. Even several business-to-business catalogs have created interesting dynamics in their books and have added significant value over the years. Trade catalogs may include sidebars explaining specific techniques or procedures and are often perceived as reference materials as well as sales vehicles.

Because the catalog industry is so dependent on repeat sales, it has been critical to develop a rapport with customers by mailing frequently and using effective promotional techniques. Due to these techniques, catalogs have gained perceived value that other shelves have not. Customers often keep catalogs even when they are out of date.

The catalog industry is segmented into business-to-business (B-to-B) and home- or consumer- focused mailers. The two often differ in the size, complexity, and frequency of publication. The business-to-business market varies depending on the industry it supports. Frequently, the catalogs are large reference books designed to facilitate both routine purchases as well as those, infrequent, hard-to-find product searches. These catalogs are positioned primarily for the businesses they serve, and within an industry, it is sometimes difficult to tell them apart. They are often supplemented with more frequent catalogs featuring specials and promotions.

Home- and consumer-based catalog firms, however, have learned to segment along vertical markets and have flooded the market with specialty catalogs. Many catalog firms have decided to focus on more narrowly targeted catalogs for two reasons. First, catalogers have become more proficient at targeting consumers effectively. Secondly, catalog firms found they could cut costs and deliver more timely and relevant materials by creating smaller but more frequently mailed catalogs.

Specialty catalogs often feature only one category. There are catalogs specifically for popcorn, chocolate, shoes, hams, rings, and T-shirts. Sports and hobby catalogs specialize in virtually every activity imaginable. These catalogs bring new meaning to the term "armchair shopping."

Whether a business-to-business or a consumer catalog, positioning serves the purpose of differentiating in a crowded market. Historically, catalogs have evolved in the following ways:

1. First, some companies have spawned vertical-market catalogs from their larger, more inclusive catalogs. Based on historical sales, they have identified opportunities to specialize and have positioned smaller catalogs to fulfill specific needs. They have, on occasion, separated low-volume specialty goods into catalogs that are updated less frequently and cut costs by removing these from the more expensive, larger book. JC Penney focused exclusively on its large catalog until the company separated several specialty categories into smaller flyers. Bridal, special-size apparel, and home & leisure are a few of the vertical specialty markets they serve.
2. Next, retailers have given birth to catalog businesses, and, just as frequently these days, catalog firms have developed corresponding retail outlets—sometimes clearance houses for overstocks. The stores have pre-defined the business and are often the result of emergence on the web. Office product superstores created their own specialty catalogs for frequently purchased items, and sales are supplemented by larger contract stationer catalogs for hard-to-find items. Spiegel owned a thriving catalog business before opening retail outlets to sell discounted overstocks. True hybrids—stores with catalogs designed from the outset to compete on both fronts, are somewhat rarer because most establish one or the other first.
3. Last, some vertical catalog businesses have been created to function in the specialty realm with only a website as an adjunct. Companies with special expertise in a market or those that have embarked on significant research to understand market opportunities are most likely to enter these niches.

Each catalog needs its own identity to create competitive distinction. This position must be firmly ingrained in consumers' minds and deliver a package of products, services, and promotions that meet their needs. Vertical catalogs—catalogs designed for narrow markets—may satisfy product needs, but they must also appeal to the specific customer segment for which they are intended. Because the catalogs are so specialized, the cataloger must know quite a bit about that particular product segment and the corresponding lifestyle of the consumer.

The personality of the catalog is apparent through the use of copy, images, the quality of the paper, and the quality of the products. Graphics and visuals are critical to convey messages. Customers usually browse catalogs rather than read them. Pictures and captions may provide the only opportunity for a cataloger to communicate with his audience.

Other, subtle characteristics, such as the selection of models in the apparel industry, give signals to your customers. It's difficult to gain credibility with older consumers, for instance, if 20-year-old models don clothing meant for the senior consumer. Relevance is key to positioning—especially in the catalog industry where one-to-one marketing is the name of the game.

Today's catalogs are so varied that the industry has spawned a new phenomenon—catalogs selling catalogs. These flyers list a variety of unique specialty catalogs, and the reader can order any of them for a small fee. They fulfill two needs—they create awareness for specialty catalogs that otherwise would be unable to gain distribution, and the responses feed into a database qualifying consumers based on interest while updating current demographic information. In addition to receiving revenue from the sale of catalogs, these firms also receive advertising revenue from the feature placements and are able to sell their databases to other catalogers.