Online brokerage firm E*Trade has taken aim at the 10 million to 15 million investors who go online for research but trade elsewhere with a multiple step approach that seeks to customize each investor's experience.
Starting with the launch of its public Web site (www.etrade.com) last fall, E*Trade intends to spend $150 million in the next year to attract new customers through an integrated campaign that relies primarily on Internet marketing but also will encompass direct mail, print and TV advertising. However, one industry watcher said a lack of spending on teleservices could stunt the firm's growth.
E*Trade, Palo Alto, CA, said it has attracted 500,000 new members since the launch of the site, which had previously been open to account holders only. The site, which vice president Lisa Nash said has 10 times more research than the original plus an expanded product line, is the centerpiece of the firm's four-tier customer acquisition strategy that relies on feedback to determine appropriate marketing approaches.
Site visitors and other prospects occupy the lowest tier on the E*Trade pyramid. Traffic building is the goal at this level and it is driven by alliances with nearly 30 affiliates — including America Online, Yahoo and the financial news site cnnfn.com — that maintain links to the E*Trade site.
Offline, traffic will be driven by several direct mail drops of 500,000 pieces from E*Trade and alliance partners, such as First USA, that will promote the site in statement inserts and credit card mailings. The firm also will mail to subscriber lists of select financial publications. Nash said 1998 was used to test direct mail and this year will see more execution. A print campaign will get under way this month with ads appearing in major daily newspapers and financial and news magazines, including The Wall Street Journal, New York Times and Money Magazine.
Site visitors gain access to investment content by registering, which includes the option of setting up a personalized e-mailbox. At this second level, E*Trade uses tailored e-mail marketing, based on areas of interest indicated during registration, to convert members into account holders. One e-mail promotion offers a free six-month membership to AOL for opening a brokerage account.
While offline promotion helps, Nash said it cannot replicate the “kick the tires” experience of navigating the site, setting up a portfolio and researching stocks.
“There's no way we can tell you, even in the best direct mail letter in the world, what you can get out of the site,'' she said.
Since the launch of the new site, the firm said it has registered 500,000 new members. Nash would not disclose the account conversion rate but for the three months ended Sept. 30, 85,000 new accounts were established while 127,000 new members were registered.
Once a member is converted into an account holder, the firm sends out periodical e-mail surveys that gauge ways to improve and better personalize the site. Customers have the power to personalize the site, choosing their own start page, charts and other data. Customers can subscribe to institutional research reports from securities firm BancBoston Robertson Stephens, San Francisco, for $9.95 per month. This latter group makes up E*Trade's top tier customer.
E*Trade now offers auto and life insurance through alliance partner InsWeb, Redwood City, CA, and is positioning itself as a one-stop financial services center. Nash said the intent is to provide all the tools necessary to enable a customer to invest on their own but Michael Gazala, an analyst with Forrester Research, Cambridge, MA, said the firm lacks the personal advisory services to transition from an online broker into a “mid-tier” broker.
Gazala predicts the mid-tier broker — an online broker that provides automated financial advice and access to a live Internet investing assistant — will dominate the online market by 2002.
“When you start getting into the business of offering advice, it becomes a real challenge to maintain your position as a single-channel play,'' Gazala said. “Expecting that technology will have developed to the stage where everything can happen, truly self service is not realistic.''
To stay competitive with such multichannel brokerage firms as Schwab, Fidelity and Waterhouse, he said E*Trade will have to link with or build a robust call center infrastructure that provides access to live advisers.
