October 2004 - Weighing the Options

Finding it tough to decide between offline and online marketing? Cost-efficiency, tracking capabilities and flexibility may help you tip the scale or keep things balanced.

By Alexandra Harrington

In the direct response industry, where the correct advertising plan makes or breaks companies, the debate over online versus offline marketing is heated. While online marketing seems to have a new gimmick with each passing week, are these the tools industry players need to reach their audience and, more importantly, make a sale? Can direct marketers afford to lessen the role of traditional offline marketing, such as print, radio and TV? Industry players weigh-in on the value of online marketing.

For Steve Hamlin, vice president of operations for QVC.com in West Chester, Pa., there is a distinctive difference between the company’s online and offline marketing. In the offline realm, when the home shopping network runs print ads in magazines, such as In-Style or Vogue, they view it as an image campaign for QVC and its brands-while its television advertising is themed to reach a mass market. However, for an E-mail campaign, the home shopping company uses very targeted marketing based on buyer history. And on the Internet, QVC will use affiliated target marketing-purchasing branded key words such as Diamonique on search engines.

Cost is another important distinction between the two marketing methods. “It’s my experience that online marketing is more efficient than offline from a monetary standpoint,” says Ed Elliott, co-president of Media Partners Worldwide in Long Beach, Calif. “The biggest difference stems from the ability to make changes on the fly-there’s no need to traffic a new creative.” According to Elliott, another aspect of online marketing’s efficiency is the medium’s ability to be tracked on several levels-from the time a person clicks on the creative, which may help determine if the individual will become a customer, repeat purchaser and beyond. “This data can’t be gathered for traditional media,” he says.

In determining where to focus a company’s advertising, new regulations are an important factor. The enactment of the CAN-SPAM Act recently affected many E-mail marketers. The law signed by President George W. Bush on Dec. 16, 2003, took effect only two weeks later on Jan. 1, 2004. The Act was passed to crack down on the explosion of commercial E-mail by imposing limitations and penalties on such E-mail. While the Act didn’t affect everyone, QVC, for example, only E-mails its customers, always includes an opt-in function and does not use third-party lists. Other companies saw significant changes such as Media Partners Worldwide. Elliott’s clients discontinued E-mail advertising all together when the Can-Spam Act went into effect, deciding to wait until the issues are sorted out. “Due to the way the laws were written, my clients felt it was legally in their best interest to discontinue E-mail advertising,” he clarifies.

E-mail marketer Jordan Finger, owner of Ardis Market Group in New York, also saw considerable changes as a result of the new legislation. “At the end of last year, beginning of this year, we saw a drop in business,” says Finger. “The law came into effect very quickly. There was no grace period and a short time to comply.” All the companies Finger works with wanted to meet the requirements and it took time to get their lists compliant. He notes that business has since bounced back, but the law affected legitimate E-mail marketing companies. According to Finger, when you rent a mailing list offline, you may be in possession of the names, while in the online environment, the marketer never has possession of the list. Rather the list owners send the E-mail through their servers. All it takes is one or two people to say they are being spammed by a company to create a problem.

Finger explains a further complication, “Now the major E-mail providers, AOL, Hotmail, Yahoo, etc. ,sniff out if E-mails are compliant. Often they classify compliant E-mail solicitations as junk E-mail even if the subscriber has opted in.” Whether filtered or not, by being compliant, legitimate advertisers are being penalized, he believes. Finger has found that offshore companies are bypassing this law. They get past filters by using bogus subject lines, omitting the opt-in/opt-out function and by not making it clear that it’s an advertisement. “It’s a catch-22,” says Finger. “If the end consumer didn’t buy, spammers wouldn’t exist, but the spammers give everyone a bad name.”

However, the CAN-SPAM Act did have a positive effect for Ardis Market Group. “To offset loss revenue from the law, we tested other venues.” They used different types of ad units, such as skyscrapers, and found them effective. Unlike E-mails that he finds peak on Thursday and Friday, Finger was able to predict the bottom line order through the Microsoft skyscrapers.

Taking all of this into account, why should direct and brand marketers consider online marketing? Marty Fahncke, president of FawnKey & Associates sees it this way: “When the Internet first became a phenomenon, people touted it as being the death knell of all other forms of marketing, including newspapers, TV, radio, etc. Then, when the dot-com bubble burst, others claimed the Internet was just a fad, and was never going to be very big. Somewhere in the middle is the truth.” He believes that for a successful direct or brand marketer, the Internet is a powerful tool whose value should not be overlooked or overblown. Online marketing, he believes, “should be viewed as an effective, profitable ingredient in the overall marketing recipe, but it needs to be blended in the right proportion for best results.”

During QVC’s Klondike Gold day on TV, the online site is integrated with its promotions.

Finger echoes this sentiment, contending that online marketing isn’t mandatory for direct and brand marketers, but he strongly believes that it should be part of their mix. He comments that while direct response marketers have long- and short-form TV advertising down to a science, they seem to view online marketing as an afterthought. “The marriage of television advertising and online advertising makes sense,” he says.

He further notes that online advertising is a very trackable medium. “If I spend $1,000, I know what I will get back.” It’s also possible to see customers’ first, last and cancelled orders online. “By tracking this action, I can learn a lot very quickly without spending a lot of money,” he continues. He claims he knows if an ad will work after spending $5,000, which is impossible for other advertising channels. The other reason he believes marketers should consider this medium is that it’s cost-effective and garners responses overnight-with users receiving instantaneous data, not metrics, for analysis.

“Everyone should consider online marketing,” says Hamlin. “The Internet has huge audience reach and offers new distribution and touch points for a company,” he notes. “Companies can test things quickly.” He cites the example of online marketing versus a print catalog. While a print catalog can be very focused, he notes that once it is printed it obviously can’t be changed. On the other hand, online marketing can be easily changed or modified if the campaign isn’t working. “Online marketing is very quick, it’s easy to modify and target,” he continues. “To me, with the Internet’s wide reach, it’s a great channel to test brands for other mediums.”

Direct response companies are using various methods of online marketing with great success. At QVC, the company integrates its online marketing and television campaigns. For example, during QVC’s Klondike Gold day, the online site is integrated with the day’s promotions. The homepage will be in gold showcasing the home shopping network’s theme for the day. “We also integrate search engines, by buying keywords on Google, aligning the promotion with the day,” says Hamlin. This integrated approach allows QVC to use television ads to promote other mediums.

QVC incorporates several other methods for online marketing, including manufacturers’ site links, portal arrangements, and shopping cart technologies. For example, a consumer can go to the QVC site and use Arts Select technology. “QVC uses all of the technology Arts Select has created to allow buyers to put art in different frames and on different wall colors,” says Hamlin. “But while the consumer is using this technology, it all flows back to our shopping cart on QVC.”

For his clients, Fahncke finds that the most effective online marketing channel is search engine optimization and pay-per-click advertising. “This is by far the most profitable area, because you are reaching consumers at the exact moment they are actually seeking what you have to offer,” he says. “Imagine being in a retail store and having the ability to stand in the aisle when a customer walks down and stops in front of your item. You then have a prime, motivated prospect to which you can tell your story,” he continues. By using effective search engine marketing, he claims marketers are speaking to that motivated buyer 24 hours a day, seven days a week. “Every campaign has a unique twist, and a unique audience, so you must test and customize each campaign to reach the right audiences with the right message,” he stresses.

Fahncke notes that the most effective method of online marketing is being generated offline in the form of television direct response. “Many DRTV companies today report that at least 25 percent, and up to 75 percent of their overall orders from a DRTV campaign come in via the Web, and not from the traditional toll-free number,” he explains. “This percentage continues to grow every year.”

As the online environment offers so many channels, it can be difficult to decide which methods a direct marketer should pursue to stay competitive. Media Partners’ Elliott recommends various means of online advertising including cost-per-acquisition programs, which are similar to per-inquiry television campaigns. Campaigns can also be supplement through contextual advertising where, for example, if a user types in credit cards into the AOL keyword search, his or her advertisement also pops up with the search findings. He also finds success with affiliate marketing, based on the radio/broadcast model, where loosely formed networks of smaller Web sites are packaged together to appeal to advertisers. Further, he finds companies can defray some advertising costs by purchasing large remnant blocks of advertising on sites such as AOL, Yahoo and MSN.

When running an Internet ad, Finger recommends spending more money to get on the network rather than spending excess money on ad placement. “Pay the rock-bottom price the company offers to get on their site and don’t pick the area where the ad will run,” says Finger. “The results don’t outweigh the cost. Go for the mass reach while keeping costs down.”

Industry experts offer several tips marketers should use in campaign design. QVC’s Hamlin stresses that companies should figure out how they will measure the campaign, have the ability to track its success and to make sure it is targeted. “Non-targeted banner ads don’t work,” he notes. “At least QVC can’t justify the expense.” Hamlin explains that pay-for-performance is the ideal way to enter into a marketing relationship, whereby a company pays for the percentage of sales an ad produces. This deal works for different types of ads such as search engines, banners and portals. While he finds that this type of arrangement is harder to do, it is still the preferable way to conduct business. Contractually, Hamlin recommends companies make sure they have the ability to get out of a deal at any time. “Don’t tie yourself in for large amounts of money,” he says. “The reality of the situation is that there are a lot of ways to advertise, but not a lot of those ads pay out,” he concludes.

For Ardis Market Group’s Finger, “The more focused the online offer the better.” He further finds that good technology is critical, with end users being able to upload pages and transact the sale with ease. “Good technology also allows marketers to be creative with their offers,” he says. He cites the example of upselling other products. By using database files, it’s possible to E-mail a customer an offer to try a new product, which is similar to a recent purchase at a discounted rate with the ease of billing the cost to the credit card number on file. “It comes down to efficiency,” he says.

“One of the biggest obstacles that traditional direct response advertisers face is how to make the Internet work for them,” says Elliott. He believes they often overlook the channel losing, in his estimation, 35-45 percent of their sales potential. He recommends these advertisers hire an expert either as a consultant or in-house to sort out any complications or to overcome any obstacles.

Fahncke sums up his advice as: define the goal of the campaign; develop the creative and channel strategy that will attract customers; develop the Web site and/or landing page so that the customers you attract will take the desired action; measure all results to optimize every step; test and tweak; and roll out with what’s working.

While direct marketers continue to ponder the value of online versus offline marketing, it all boils down to which medium generates the highest return on investment. Flash and glitz aside, income and profits are, and should be, the deciding factor.

Alexandra Harrington is a contributing writer to Electronic Retailer magazine. She is the former director of communications for ERA.


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