Set-Tops as a DR Marketing ChannelThere are many new products and technologies being offered in the emerging wired world. The explosion in product offerings began with the PC and has been fueled by the Internet. Today, any service company has Internet service delivery as an integral part of its business strategy. This ranges from PC variants to handheld organizers, from cellular phones to pagers, from various Internet appliances to TV-based set-top boxes. But how do these products - in particular, the set-top box - aid and enhance direct response marketing?
Set-top boxes have been around for several years - starting with basic analog cable and satellite set-top boxes for delivery of TV programming. Operators have been developing and upgrading their networks to support digital services for many years. These new digital networks can carry both digital TV and Internet data content. New digital set-tops are capable of processing and displaying Internet content on the TV and enable new Internet service offerings to consumers.
In terms of direct response marketing and advertising, the fact that the Internet is available on the TV is not critical. Any digital system operator has the ability to deliver targeted, and even personalized, content to specific homes. This can be TV programming or advertising. Even e-mail can be routed from an operator's private digital network onto the Internet. An Internet connection is extra icing, purely as a consumer service offering.
The largest issues surrounding the ability for direct marketers to leverage their businesses through digital infrastructure are customer reach and clutter management, including the reduction of spam. While digital set-tops are being deployed, the total U.S. subscriber base is only in the millions. This year, forecasts predict anywhere from 5 million to 10 million new subscribers - subscribers whom the operators own and control regarding any content delivery. Operators consider Internet services as incremental - a position supported by market research which shows that 62 percent of consumers are mostly disinterested or not at all interested in Internet on the TV.
This leaves direct response marketers with the serious issue of overall market reach. Direct response marketers cannot count on being able to reach all their current customers, anywhere in the country, through digital set-tops for many years, perhaps for decades. The basic dichotomy originates from the fact that digital systems are being developed to support primarily digital TV. These systems can be leveraged by advertisers and marketers, but since they were designed and deployed for different purposes, they limit marketers in terms of reach, and to some degree, flexibility and capability.
The only truly "new" tool available is e-mail, especially opt-in e-mail. By working with multiple operators, including Internet service providers, advertisers and marketers can compile substantial consumer lists, which can be separated and organized into endless configurations for targeting. These are new lists and most commonly do not allow marketers to reach all their current core customers. Direct response marketers must therefore manage and coordinate electronic promotions with traditional direct marketing channels - which is why most offer Internet-only promotions and handle traditional direct response marketing separately.
Looking at the PC and Internet appliance industries, the line between actual physical products and services is being blurred by bundled services in which innovators are trying to create new business model economics. Despite the great fanfare around the Internet, the fact remains that the majority of U.S. households are not yet online. Some market researchers forecast U.S. home Internet users to pass the 50 percent mark this year, but reach only 51 percent penetration through 2001. Even the hype with broadband Internet doesn't overcome the reality, in which market research shows only 12 million homes with broadband Internet access by 2003. And most of these users will be converts from current analog-modem dial-up services.
Worse yet, market research shows that while PC penetration has passed the 50 percent mark, the percentage of home PC owners who actually use their computers has dropped from 90 percent in 1995 to 50 percent in 1999. The data show that home users either don't have the time to use their PCs, get frustrated with them or cannot deal with the complex interfaces and user requirements for computer use and Internet surfing. Clearly, the age of ubiquitous home Internet use is still far, far away.
New specialized Internet devices are becoming available and promise the allure of the Internet through simple, convenient, dedicated appliances. Outside of e-mail-only devices, Internet appliances are designed for Internet access. Although growth projections show appliance shipments outstripping PC shipments by 2002, these products are not necessarily better suited for direct response marketers' specific needs - the need to reach all their core customers in an environment that is as noncompetitive as possible.
Web site marketing has evolved significantly over the past two years but remains unproved for several reasons. Although advertisements can be targeted and offered in certain categories (such as sports products on a sports Web page, or investment services on a finance page), advertising can be purchased by anyone. This is only channelized advertising and not true personalized direct marketing. There is limited effectiveness because there is little difference from print advertising, where there is no control over who sees the advertisements.
Market research from this past holiday season shows that a staggering 22.4 percent of all Internet users recalled no advertisements following all their Web surfing. Aside from Amazon.com, no other company achieved an advertisement recollection rate higher than 3 percent - with the leader being Yahoo, whose users have clearly learned to ignore advertisements as a necessary evil on Web pages.
Information that is displayed as a personal information channel on the TV, through a set-top appliance - a large display available in 97 percent of U.S. homes, is the present and the future for direct response marketers. Consumers spend more than 10 times more time watching TV than using their PCs, keeping the TV as an ideal medium to display targeted content.
These systems can deliver personalized news and e-mail content to users - content that can be reviewed spontaneously and efficiently, without any delays, in very short user sessions. This allows people to return quickly to their normal TV viewing. Merchants can present offers for products of interest, according to consumer profile information. Retailers can present specials for anything from diapers to pizza, from clothing to travel offers. Promotions can be designed for immediate purchase or to bring consumers into retail stores.
These systems are unique in that they enable direct response marketers to leverage their existing sales infrastructure - whether it's a retail facility or a toll-free call center. They enable in-person sales, a cornerstone technique for many direct response marketers. And they provide specific value to consumers because the advertising is not from an unknown party but from known, trusted merchants with whom the consumer has an on-going relationship.
There will be many new, innovative Internet-enabled services offered to consumers over the next few years where everything is tailored to specific user interests, including news content, subscriptions and advertising. Whether this approach will be successful remains to be seen, but it is clear that this is the first business predicated on servicing and enhancing traditional direct response marketing businesses with Internet-enabled capabilities.