Report: Narrow-Thinking Online DMers Miss Opportunities

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Although it predicts that direct marketing will account for at least 50 percent of ad dollars spent on the Internet by the year 2001, a recent report says narrow thinking has online direct marketers missing huge opportunities.

According to research firm The Yankee Group's Internet Direct Marketing Report, "Despite the onslaught of new players in this space, there remains little implementation of Internet direct marketing strategies." The report cited a poor corporate understanding of Internet direct marketing and its benefits and a lack of execution on the part of agencies as two causes.

"Direct marketing on the Web is not all about driving transactions online," said Melissa Bane, senior analyst at the Yankee Group, Boston. "Using the Web wisely today is about looking at it as a channel to drive sales and response to any channel."

According to the report, even "early adopters" of Internet direct marketing are missing opportunities by "limiting themselves to a narrow definition of response or action item, which is the goal of an Internet direct marketing campaign."

The report defined Internet direct marketing as an online campaign that drives the user toward a transaction at the end of it. The transaction can be anything from printing a coupon to making a telephone call, the report said. It noted that too many companies limit their definition of transactions to those where payments happen online.

The report said marketers are missing key relationship-building opportunities by not only narrowly defining Internet direct marketing during strategy development, but also by not integrating online and offline direct marketing efforts.

According to The Yankee Group's Interactive Consumer Survey, 5.2 million home shoppers bought something on the Internet during September and October 1997, up from 3 million during the same period a year earlier.

"With only 5.2 million households out of 20 million total connected households actually purchasing, a balanced Internet direct marketing strategy offering multiple response options encourages all customers to do business with a company," the report said. "With the majority of Internet direct marketing campaign redemptions taking place in an offline, nonreal-time environment, any Internet direct marketing effort that drives a user to only one response may well be missing an opportunity."

Still, the Yankee Group predicts a bright future for Internet direct response.

"The nature of advertising on the Web has got to change," Bane said. "There's always going to be a certain amount of brand building, but we're already seeing that what people want on the Web is far more interactive. I think you're going to see a lot more advertisers and marketers begin to include calls to action [as in 'click here' on banner advertising]."

The Yankee Group report said coupon companies are well positioned to capitalize on the Web market because coupons are a traditional response device with which consumers can identify. As evidence, the report noted:

* 60 percent of respondents to a recent survey of online households indicated that they would respond to coupons offering discounts on products and services.

* 55 percent said they would respond to discounted Internet access fees.

* 53 percent said they would respond to points redeemable for goods and services.

* 42 percent said they would respond to frequent-flier miles.

* 30 percent said targeted online ads would get them to respond to a marketing message.

As for e-mail marketing, the report included numbers that on the surface bode well. Thirty-four percent of consumers reported being bothered by e-mail marketing, compared with 87 percent who reported being bothered by telemarketing. Eleven percent of consumers reported being bothered by banner advertising, and 13 percent said they were bothered by direct mail.

The report warned, though, that as e-mail campaigning becomes more prevalent, consumers will probably become more vocally opposed to it. Although free e-mail companies such as Juno, Hotmail and Bigfoot offer some of the most comprehensive e-mail data, marketers should consider that free e-mail customers probably are being barraged with offers, making specific ads more likely to get lost in the crowd.

The report added that while registration-based Web sites are the online equivalent of the publishing industry's list business, marketers should beware of the potential for consumers to fill in incorrect information about themselves, rendering the lists useless.

The report concluded that privacy issues must be resolved or the online market could come "to a screeching halt."

It outlined the efforts of nonprofit TRUSTe, Palo Alto, CA, which is working to help online marketers define industrywide privacy standards. Although the Yankee Group thinks that many consumers aren't aware of privacy issues, the report said, "It will take just one publicized case of breach of privacy to send this market into a bad PR spiral. Smart players [will comply] with industry standards before that happens."

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