|SSP (Shameless Self-Promotion)||This
Week's Clue: Couponing Redux
Last week's main Clue was written as I traveled to the Multimedia Marketing Group's Cascade Conference in Bend, Oregon. They'd invited me to share some Clues with a select audience, and I was trying to earn their time with some new ideas.
I was in for a pleasant surprise, however, for after my talk Bill Lederer of Artuframe showed the conference how my little idea of couponing had evolved in the real world, into the "gift certificates" (coupon is a horrible name, he explained) of his affiliate program. Lederer spoke softly, but the soft words told an inspiring story.
Artuframe is a perfect site for affiliate marketing. It has an inventory of 100,000 prints and posters, plus framing services, and a site whose topic covers any subset of that collection can provide real value to its users through a link. But managing that program profitably has proven a challenge, Lederer said.
The first step came in the program's design. Lederer said he asked himself hard questions about the value of a customer relationship. "It's a function of how much they'll buy from you over time," he said, matched against how much it cost to acquire the customer, and a reasonable profit. Lederer concluded he could afford a discount of just 6% to the affiliated sites, but by tracking the customer relationship (through those gift certificates) he could pay that on every purchase by a customer acquired through an affiliate. He could even add an "override" to sites recruited by trusted affiliates. The 90-10 rule on affiliates applies, he added (90% of the money goes to 10% of the affiliates), and at Artuframe the ratio's more like 95-5.
Lederer also shares a lot of information with affiliates. "You need to understand what the other party needs. Building that relationship is the most important thing," he said. Lederer also makes sure he sends affiliates their checks within 10 days of a month's close, along with a detailed report on traffic.
Artuframe managers each handle far fewer relationships than their counterparts at, say, Amazon.Com. Amazon has 6 employees managing 100,000 associates, while Artuframe has six managing a small fraction of that, Lederer estimated. Artuframe also tracks carefully - when click-through rates fall below 3% they're pro-active, creating new services for affiliates. "What if you could provide a glossary, or a dictionary, or quotations on others' sites?" he said. "We did a deal with a greeting card company where you put custom art on a greeting card, then buy a framed poster of the same artwork. That's a nice win for both of us," he said.
"I'm asking you to be incredibly good listeners with your partners," Lederer continued. "Ask yourself, what will catch the attention of that site's users, and drive traffic." Most of all, "play fair with the other guy. The brand is a promise, and affiliate marketing is another promise. If you don't dedicate people to it you'll get burned."
It's the honesty of the relationship that grows the affiliate network, Lederer has found. Nearly half of his new affiliates now come from referrals from existing affiliates. "You can't be selfish. You have to constantly ask, are they (affiliates) getting a fair share. We pay low commissions, but someone can go to your site, then buy six months later, and we pay you." Through open relationships, careful tracking, and a hands-on approach, "we're not the largest affiliate program. But we're one of the best in return on investment."
How good is the return? Lederer has calculated the cost of acquiring customers in all media - TV, radio, print, Web ads, public relations, and affiliate marketing. The cost of acquiring a customer through a broadcast ad, he concluded, comes to $100. With affiliate marketing it's under $10. It's not a total answer - affiliates still represent just 21% of Artuframe revenues - but it's a profitable answer. "PR is close," in terms of cost, "but affiliate marketing also gives you immediate feedback." Lederer's conclusion is also something you can frame and hang on a wall. "CPM (cost per thousand) is dead. Pay for performance."
One more point. In the question-and-answer period following his talk, Lederer was asked what mistakes he'd made along the way. He made one big one, he admitted, in naming his company. He found himself constantly having to spell the URL in interviews, and many users were still confused. So, as espnet.sportszone.com became espn.com , he's biting the bullet to buy a new URL.
SSP (Shameless Self-Promotion)
I learned something important in Oregon. I do have something to say and not just something to write. I'll be offering "Clues to Commerce," featuring trends ripped from the days' headlines, to trade shows and other events, and hope to turn it into a book as well.
Speaking of books, you can now order "Web Commerce: Building a Digital Business," , by Kate Maddox with yours truly (but with on the cover) through Barnes & Noble. It's on sale at $20.95, (down from a cover price of $29.95, and down from Amazon's price of $27.95) part of the Wiley/Upside series. You can also read a review of the book, from Dr. Ralph Wilson, by clicking here .
A-Clue.Com has also been picked up by Andover News as its Monday e-commerce column. Thanks to you, A-Clue.Com now goes to well over 1,000 Clued-in subscribers each week. Thanks to Multimedia Marketing Group a UnityMail customer, it's also an in-line HTML file (no more messy Web codes). Besides producing A-Clue.Com, I contribute regularly to such publications as Net Marketing , Boardwatch, Datamation and Atlanta Computer Currents . Your magazine can join the list - send me an e-mail and let's start the ball rolling.
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And now back to our show...
Bill Hunt, vice president-international for the Multimedia Marketing Group, correctly put his finger on one of the biggest problems with today's Web. It's the Cluelessness of most U.S. businesses regarding the international opportunity the Web affords them.
The fact is, Hunt noted, most U.S. exports come from just a handful of multinational companies. Yet 30% of all visitors to U.S. Web sites are from other countries, European Web shopping is growing 40% per year, and 200,000 Indians use Hotmail for their business correspondence. Want more facts? Some 91.4 million Web users are English-speakers, 66.4 million are non-English speakers, and 32 million Americans don't speak English at home. Oh, and the international (Ted Turner insists we don't use the word "foreign" here in Atlanta) audience is also an elite, with wonderful demographics for Web shopping.
Most of the sins U.S. sites commit are obvious, and easy to fix. U.S. firms don't offer metric measurements, they don't understand foreign customs regulations, and they don't offer banners in foreign languages. Most don't take foreign currencies, and many are real bandwidth hogs, failing to understand that most overseas users are on modems and paying per-minute charges for access. When they do things right U.S. companies can get click-through rates of over 20% on some banners, Hunt said, for a minimal investment.
Some companies do get it. The Microsoft Network will be available in 30 languages by the end of the year - Yahoo is now online in 9 languages, and its sites are among the busiest anywhere. Here's another interesting fact. Do you know how most international visitors find Web sites? E-publications like the one you're reading, mailing lists, and Internet magazines. "They don't have time to surf," says Hunt.
Hunt's advice is to target individual markets, mirror your best content in local languages, and follow local customs. It's not hard to do, and the profit potential is enormous, he says. It's good advice.
The Internet industry is stepping into a PR black hole thanks to the merger between the old Association for Interactive Media, originally created to lobby for online services like AOL, and the Direct Marketing Association .
The DMA is a powerful lobbyist on behalf of direct mailers, and as it's entered the Internet arena it's become the spam lobby. They claim to oppose spam, but they insist business needs the right to spam so it can do what it wants when the coast clears. Meanwhile, despite a distinctly unclear coast, the spam flood keeps growing. I'm now getting spams from legitimate software companies, credit card processing agents, and travel agencies who would have never considered the practice a few months ago. I've even gotten messages I considered spam-ic (is that a word?) from Jeff Bezos of Amazon.Com and Microsoft.
I mention this because the spam battle is really a sub-set of the ongoing battle over marketing and privacy. The battlefront there is in Europe, where a new "Privacy Directive" will mandate common privacy laws (strict ones) in 15 countries. In advising its members, the DMA recognizes no difference between protecting direct paper mail and direct e-mail. (Differences like who's paying.) In an October 5 directive to members, the DMA's vice president for international business development and government affairs, Charles Prescott, goes on at length over how marketers need to understand how data flows within their companies, auditing their practices and assuring every name on a list can opt-out. Notice that key term, opt-out. The DMA has yet to recognize that the Internet, because of its economics, must be an opt-in only zone, and its takeover of AIM extends and expands that Cluelessness.
What the DMA fails to recognize is that, with the passage of this directive, the field of battle has shifted from legislatures to courts. Privacy International has begun investigating information practices at 25 multinationals, including EDS and Microsoft. On anything they find they'll take legal action in Europe, and not just anywhere in Europe, but in the European country that promises to be most friendly to their cause.
The process is called "venue-shopping." American companies have long done it between states. Now their opponents will do it between nations. And the precedent may render the Internet only as free as the least-free nation in the "civilized" world. (To follow legal disputes over venue-shopping and similar legal issues free of charge, click here.
After the new Communications Decency Act passed Congress, I had some research done on the targets of that act - porn sites. What we learned was a surprise. The vast majority of such sites seem to be in compliance with CDA II! By requiring real names and credit card numbers before allowing entry into even "free sample" sections (where kids could get the dirty pictures), most of these sites made themselves compliant. As to the others, it should be noted that many .com sites are offshore, and if the U.S. prosecutors seek extra-territorial enforcement of Internet laws, the money's in Antiguan gambling sites. Still, as in the above note on privacy, attempts to enforce domestic laws on foreigners can work both ways.
We identified Zap.Com as Clueless July 13, in V2I28. At that time I wrote, "What's Clueless is the idea of buying in the middle of a mania, building none of your own software (so you don't know what good work really costs), then loudly proclaiming you're going to beat outfits worth billions." While in Oregon for the MMG Conference, organizer John Audette picked up the "scoop" (quickly confirmed by all media) that Zap had reneged on previously negotiated deals to buy dozens of Web sites. Please don't cry too much - most of the sites didn't have a valid business case to start with. Those that did will find other buyers, or at least their creators will find worthwhile jobs.
Clued-in is Pam Alexander . Her timing in selling Alexander Communications was exquisite. Her choice of a buyer was also expert. Not only do her technology clients get the lobbying and export help they now need so badly, she gets the name Ogilvy, one of the great names of 20th century marketing, to take into the 21st century. That's why the lady is a champ...
Clueless is Excite , for doing little that's useful to improve its key search capability. A friend did an Excite search for A-Clue.Com, then asked its search engine to find "other sites like this." Among the Top 10 offerings were CITI Computers , a strategy game, frequently-requested routes from CalTrans and two foreign sites with absolutely no relation to what you're reading. The funniest link was this one . Excite does some interesting things but it's not funny when you ignore the girl who brought you to the party.