E-Commerce Potential Rests With Rules

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Marketers and consumers alike are obsessed with the possibilities that the Internet might make commerce frictionless. The Internet has the potential to help marketers communicate more cost-effectively than ever with consumers.

The result should be lower transaction costs for marketers and ultimately lower product costs for consumers. But will it?

To fulfill its promise successfully, the e-mail marketplace needs rules. Simply having the ability to send a marketing message to everyone on the Internet doesn't mean we should. Low-cost communication is not enough. The market still demands rules to assure that consumers receive offers that are likely to interest them and that marketers, in turn, have ways to identify those consumers who offer a high potential for buying.

In the postal world, the rules that control this process include, for example, list availability, the access to appropriate consumer information, and the resulting high costs of mailing an unqualified consumer. How should these rules translate to the Internet?

The California Approach. Under a bill introduced by Assemblywoman Debra Bowen and signed into law in August 1998, the California took the first significant step toward defining the rules of the marketplace for commercial e-mail. The law mandates that bulk e-mail be labeled ADV in the subject line. The requirement to use this ADV label will lead to a significant number of ISPs or consumers filtering or deleting the labeled e-mail and send response rates through the floor. This will certainly kill most, if not all, spam. But what about legitimate e-mail marketing?

Here's the good news. The labeling requirements of the new law do not apply to mailers who have an existing relationship with the recipient. Under this rule, marketers do not need to use the ADV label if, for example, the consumer is already a customer or has signed up for a program offered by the marketer (i.e. request for information or price quote). Therefore, the final result of these rules is that marketers can only e-mail consumers, without the ADV label, if they have an existing relationship.

A formal introduction. Imagine a world with millions of consumers on hundreds of targeted e-mail lists available for you to send your offer. It exists today. Using an approach pioneered decades ago, the direct mail industry can begin capitalizing on the Internet opportunity. While a third party cannot mail your e-mail file without labeling, you can mail their offer to your e-mail file. Yes, endorsed e-mail. A practice that, in the postal world, has been used for decades by such prominent marketers as American Express and Spiegel. This approach also is recognized as among the most effective ways to acquire new customers.

Several e-mail service bureaus have started to manage e-mail processing in the same way your service bureau and lettershop process your postal mail. It's easy to imagine brokers working with these companies to arrange endorsed mailings for their clients. A rough estimate might find most direct mailers already have collected 50,000 to 100,000 e-mail addresses from their customers. This would make millions of names available right now. And in the next 12 months, most mailers hope to collect e-mail addresses for up to 50 percent of their current customers. These are likely to be acquired through direct requests in print and over the phone, as well as by matching compiled e-mail/address files.

Think about it. In less than a year, the size of the available universe of e-mail names could approach half of the current postal list market. That's good news, but be careful. Endorsed e-mail requires the mailer to thoroughly consider what offers they are willing to send to their customer file. Unlike postal list rental where the list owner can be anonymous, using endorsement requires you to let your customer know you're sending them the endorsed offer. Done right, such offers can enhance your customer relationship by demonstrating that you are considering their needs beyond your own ability to meet them. Done wrong, by sending too frequent, totally unrelated or suspicious offers, you can damage or destroy your own relationship with the customer.

Proceed with caution. For the e-mail marketplace to reach it's potential, mailers have to exercise caution about what they send to whom and how often. Taken to its extreme, filling every consumer's e-mail box with 50 commercial messages a day will certainly lead to stringent labeling, filtering or even restrictive legislation. An endorsed e-mail approach will provide the mechanism required to limit commercial e-mail volume to that experienced in postal mail. As a result, your customers will enjoy receiving your e-mail; and if you are careful about the endorsed e-mail you send, there will be no consumer backlash and the need for legislation or other remedies will be eliminated. And direct marketers will have found a more cost-effective way to service their customers' needs.

Keith Wardell is president of Shop2u.com, which delivers electronic catalogs over the Internet.

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