Successful E-Marketing Gets Personal

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We've all heard more than enough about the potential of the Internet. We've heard how statistical approaches such as collaborative filtering will enable marketers to achieve marketing nirvana by delivering offers to consumers that are so personalized that they will be irresistible. We've heard how meaningful, one-to-one customer relationships will be developed using every scrap of customer information available. We've heard how catalogers soon will stop printing operations altogether.


Clearly, the Internet's potential and reality are two different things.


The dictionary defines potential as "existing in possibility." And while the possibility may exist for the Internet to become a new form of marketing, the reality is that Internet marketing is direct marketing. More specifically, it is rapid response direct marketing.


E-mail campaigns are executed in days rather than weeks. Responses are analyzed in hours rather than days. Orders are taken in milliseconds rather than minutes. It works just like direct marketing in a time warp. What this means is that offline principles of successful direct marketing can and should be applied to online marketing.


Successful direct marketing has two critical elements -- identifying the right prospect and making a relevant offer. In the offline world, much effort and talent have been focused on identifying the best prospects. Direct marketers use RFM data, demographics, lifestyles and just about any piece of information they can find to develop scoring models designed to rank prospects from highest to lowest in terms of their likelihood of response.


And, unfortunately, most of the time the best prospects all receive the same offer. Lester Wunderman, founder of Wunderman Cato Johnson, scolded the direct marketing community for this several years ago in his keynote address at the Direct Marketing Association's annual conference, calling it "mini-mass marketing," not direct marketing. Despite Wunderman's valid criticism, the widespread use of versioned direct mail has been limited by the costs and complexities of implementation.


Designing, printing and mailing multiple versioned direct mail pieces for different consumers or consumer segments may be challenging, but some traditional direct marketers are doing it. Dillard's department stores, Branch Bank and Trust, La Mansion Hotel in San Antonio, TX, Royal Resorts in Cancun, Mexico and Cablevision in New York have all successfully developed versioned direct mail campaigns based on a thorough understanding of their key consumer segments.


In Internet marketing, success is still a function of identifying the right prospect and delivering the most relevant offer, but technology makes it much easier and more cost-effective to work on the second half of the direct response equation -- the offer. This is where the potential of the Internet is unique. With a thorough understanding of the consumer, an e-mail can be personalized, or a Web site customized in the blink of an eye.


Effective marketing is both an art and a science. It always has been and it always will be. In part because development of the Internet has been driven by young, tech-savvy computer users, the early marketing approaches tended to be scientific or statistical in nature. Collaborative filtering based on empirical data from observations of clicks, page views and transaction data has received much early attention.


Although it has proved to be a successful tool in certain types of targeting applications -- such as recommending a second book to a customer based on observations of what others buying the same book bought subsequently -- collaborative filtering is pure science that obviates the art of marketing. Because it tells you nothing about who the customer is, it inhibits any efforts by the marketer to speak to a customer in a more relevant manner.


In its worst form, it is detrimental. I bought a Beanie Baby for my daughter last Christmas at Amazon.com. Now, every time I log on to the site, I am offered another Beanie Baby. I'm sure it's the Beanie Baby most people buy after they buy the one I bought, but I don't want another Beanie Baby. However, if I act now I can get free shipping on the Beanie Baby that I don't want. Enough already.


I'm a thinking, feeling consumer, but I'm being sent an offer based on some obscure probability theory. That's not to say that science isn't important to marketing, it's just that mathematics is only part of the story.


Only through the effective combination of consumer information and behavioral characteristics can the full potential of the Internet be maximized for the marketer and the consumer. Direct marketers have long been putting consumer demographic and lifestyle data together with transactional data to develop a more thorough consumer understanding. By segmenting consuming households into similar or homogenous groups, consumer understanding can feed marketing strategy development, product and offer development, advertising and effective customer acquisition and retention marketing program implementation.


Once you know who customers are, the Internet provides a perfect environment for communicating with them in a relevant manner. Personalized e-mail, dynamic content and more relevant offers and purchase incentives are just a few of the tools available to marketers that are now more easy to deliver than at any time in direct marketing history.


The key to successful Internet marketing is the same as that of direct marketing -- knowing your customer or prospect. Know who they are and you can talk to them in the way in which they want to be talked. Know who they are and you have a much better chance of figuring out what they might want. Know who they are and you can use the wonderful direct marketing tool that is the Internet to its fullest capacity.


• Scott D. Schroeder is chief operating officer at Looking Glass Inc., Denver, a strategic marketing company. Reach him at sschroeder@Cohorts.com.
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