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Casting the Net
by Barbara Buell
It's no fish story. Marketing on the Internet means targeting each client, even as you net more customers.
The Internet
today is a bit like radio in the early days, when a communications medium suddenly
captured the imagination of a huge audience. In 1926, the National Broadcasting Company
was born, and concepts like mass market, national brands, and prime time launched a
multibillion-dollar marketing machine. Today, the information superhighway seems poised to
revolutionize business in even more dramatic ways. "It is changing so quickly I have
to check the stats every time I teach," says Business School lecturer Ward Hanson, whose Internet
marketing course teaches the effective use of electronic commerce.
If you're thinking about marketing on the Internet, says Hanson, the first thing you need to know is that its power lies in its phenomenal growth. The number of Internet users is now pegged at 23 million and market researchers have estimated that number could swell to 150 million by the year 2000. At the same time, the number of computer servers spewing information onto the Net has also exploded. By mid-1996, there were more than 275,000 servers hooked to the Net, nearly triple the number just six months earlier. "The power of the network is exponential," says Hanson.
How do you tap this vast and interactive resource? Hanson, who will publish a book called Principles of Marketing on the Internet this year, says there are four important ways to take advantage of the Internet, whether you are a corporate marketing manager or a startup "Netrepreneur."
Create personal marketing relationships.
The Net gives you an opportunity to enjoy a personal marketing relationship with customers that practically wipes the notion of brand marketing off the boards. Marketing is fundamentally different when it moves to a one-to-one connection. "The World Wide Web changes marketing from brand management to customer management," says Hanson. "You talk about a customer portfolio. It's the idea that you can target and measure and get good results."
For example, many Web
sites can put something called a "cookie" on your hard disk when you visit the
site. This electronic file contains a history of all your preferences, purchases, and
movements on the Net. It is a gold mine for effective marketing, allowing electronic
merchants to target the ideal customer. It also goes to the heart of the privacy issue --
one that is unresolved when it comes to electronic communication. But customization is
also a consumer convenience. Users can set up their Net browsers to routinely show sports
scores, fashion magazines, or recent book titles on management consulting.
Create community to generate customers.
The best Net businesses are taking full advantage of the interactive nature of the Net. Web merchants create virtual communities where like-minded consumers gather to swap information and buy something. One of the most successful has been Amazon.com Inc., an online bookseller. By creating chat rooms on various topics and a home page that updates visitors on special subjects, Amazon.com lures people with specific interests to come back time and again to check for relevant information. Founder Jeff Bezos recently told Business Week that community is the "secret weapon" of an electronic merchant.
Put costly services online and save money.
The practice of putting automated functions as well as product manuals and product support services on the Net is still in its infancy. Potentially, it could save corporate America more than $20 billion in customer support costs inside a decade, figures Hanson. Intuit, the maker of income tax software, is already saving. The company ships its products by Thanksgiving in time for Christmas shoppers, but in the past it had to mail IRS rule updates to customers when they were issued after the holidays. Now, customers can upload the new rules directly from Intuit's Web site. With more customers getting on the Net, it increasingly saves Intuit on processing and postal bills.
Since business can be conducted in real time on the Net, some banks, such as Wells Fargo, have already put automated teller functions online. Although there is no charge for this feature, the bank gains from improving the quality of services offered to consumers. "They are using the Web to build loyalty and hang on to customers," says Hanson.
Capitalize on the cheap, flexible nature of the Net.
Digital storage and
transmission makes marketing on the Net cheap and flexible. You can mix formats, such as
home pages in different languages, or weave together multiple media -- audio, video, and
text. Because the cost of digital technology constantly spirals down, businesses are
putting a tremendous effort into digitizing information so it can be accessed and sold on
the Internet.
One startup, called Geospan Corp., has started cataloging streets and addresses with videos of the real estate and surrounding infrastructure. It has developed a rapid data collection vehicle (the "Geovan"), which uses eight broadcast-quality cameras to take more than 100,000 pictures an hour. It "sees" everything in all directions as it drives every street in a community. All the images are integrated into a single database, providing a new class of information previously unavailable.
"These types of applications require tremendous processing power and storage," says Hanson -- storage that is increasingly cost-efficient thanks to digital technology. The information is packaged in CD-ROMs, with each disk holding data on 110 miles of residential streets. Such data will be useful to individuals, real estate agents, and insurance companies, Geospan believes.
The bad news
Despite the new opportunities electronic commerce offers, it is not without challenges, warns Hanson. Congestion remains the most difficult issue for marketers on the Internet. "Brownouts," or delays caused by too much data traffic, can halt business. Worse, it can erode customer confidence in corporate services or the ability to deliver.
Pricing is also a bugaboo. Information sellers are still pondering whether they should bundle specific services or charge a flat fee. So far, individuals prefer a flat fee. "The phone companies have found this out," says Hanson. "People don't want surprises. They'd rather pay more and know what the fee will be." Many traditional retailers are also struggling with pricing. Hanson, who is often trolling the Net when he's not teaching, notes that although the majority of Fortune 500 companies now have a home page on the Web, many major retailers have not yet joined. Classic regional pricing strategies simply don't work on a worldwide network.
And, of course, there's advertising. It's at the core of radio's success, but on the Net it will be constrained by incumbent technologies like radio, television, and direct mail, which already have tremendous momentum. The Net's greatest strength may be its interactivity, allowing users to get what they want, as opposed to the other media's constant feed of programming. In the long run, it is likely to have a far larger impact on marketing and the dissemination of information than radio has had over the past seven decades. "We're experimenting," says Hanson. "Most of the potential of the Net is still untapped."
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