Dot.coms forced to rethink marketing strategies

Internet companies have spent millions on advertising that has failed to penetrate their target audience. Now Impact Traffic says they need a marketing rethink

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By  Barnaby Chesterman Published  January 31, 2001

For too long now, e-commerce companies and Internet start-ups have been like Norway lemmings, rushing headlong off a cliff into the sea and attempting to swim across it as if it were a little river.

Well, like those many unfortunate lemmings who fled overcrowding and a scarcity of food in search of rich pastures new, many of those dot.com start-ups drowned. Unlike the lemmings, though, dot.coms seem to be learning the errors of their ways and not so many are jumping off cliffs any more.

Seventeen e-commerce companies bought 30-second Super Bowl adverts last year, at an average cost of US $2.2 million each. In 2001, though, only three e-commerce companies will have Super Bowl commercials, the same number that, out of the original 17 that spent millions, went out of business throughout last year.

More than 200 Internet companies went out of business in 2000 in the US but now the survivors seem to have learned an important lesson. They’re beginning to move from commercials designed for mass audiences to marketing that is targeted at people who could realistically become customers.

“Mass advertising reinforced credibility, but a lot of companies saw waste,” says Elaine Rubin of Shop.org, a US trade group that represents online retailers. “They were spending huge amounts of money to bring customers in when they weren’t the right customers and couldn’t be converted into loyal customers.”

According to Simon Acton-Bond, director for Impact Traffic, the interactive/new media division of Impact BBDO, dot.coms face an uphill battle in trying to formulate a brand online. “They’re having to spend huge amounts of their budget to drive awareness through TV and print advertising to get a presence in the market,” he says. “But of the people they’re targeting, the penetration rate of those that have a call to action to go to the Web site, may only be 20%. So there’s a media wastage of 80%.”

The problem for dot.coms is trying to compete with established physical companies that also have an Internet presence. They’re on a hiding to nothing from the outset. “The example I always use is if you were trying to buy a trainer, you would always go to Adidas, Nike or Reebok.com,” says Acton-Bond. “Now if you set up a dot.com shop called the ShoeShop.com, how would anyone out there know there was an online store called the Shoe Shop?”

In order to gain brand awareness, such a store would be forced to spend huge amounts on advertising and even then it couldn’t guarantee it would work. Acton-Bond believes Internet companies need to form strategic alliances in order to be more effective. “They should start publicising themselves in the e-commerce sections of portals like Arabia.com, Planetarabia, Naseej or Maktoob, and start forming relationships with them,” he suggests.

Acton-Bond thinks that portals are the key to online marketing, and this medium needs a greater amount of attention than traditional above the line mediums. “Because the user has to be on the Internet in order to buy from these companies, they need to advertise where people are spending their time on the Internet, which is normally portals,” he says.

It would seem that already US companies are thinking that way. A study by the Boston Consulting Group and Shop.org found that e-commerce companies in the US were rapidly shifting their advertising spend from traditional mediums to the Internet. Online retailers spent 62% of their marketing budget offline and 38% online in the fourth quarter of 1999. But by the third quarter of 2000, those numbers were almost reversed, with 64% of the budgets spent online and just 34% spent in traditional media, such as television, radio and newspapers.

The reason for this is more than just targetability. While dot.coms were experiencing a lot of wastage in traditional advertising mediums, they are now finding that as well as targeting the right consumers, they can monitor and track them as well. “The reason for Internet advertising is to build a relationship with the customer,” says Acton-Bond.

When a potential customers clicks through a banner advertisement onto a company’s site the company can then monitor that person’s movements within the site to determine their interests. If they also purchase something from the site, the company can then begin communicating with them via e-mail. “It’s about personalisation and customisation,” says Acton-Bond. “Using push and pull technologies allows you to then serve a banner advert that is tailored to a target audience.” Once a customer has indicated a particular interest by their movements throughout the Web site, the owners can insert a cookie which in turn activates only banners tailored to that person’s interests next time they visit the site.

That way companies can avoid the escalating wastage that blighted dot.coms in the UK and US over the last couple of years. And maybe dot.coms in the Middle East could try taking after the North American brown lemmings rather than their Scandinavian cousins. The brown lemming is not drawn to the peculiar migration habits of the Norway lemming. It sticks to the environment it knows best and just tries to make the most of it. Dot.coms could do worse than learning from that.

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