Building or transferring a business online is about more than getting stock levels right and technical systems glitch-free. Establishing your brand is more important than ever.
On the one hand, marketing rules are the same as for any new medium, online retailers say; on the other the Web allows the development of a brand anew, and the ability to quickly create new brands, sub-brands and associations. Every Marketing 101 student learns the four Ps of marketing - product, price, promotion and placement - and the three Cs: company, customers, competitors. The US online business magazine Business 2.0 has suggested that online marketing brings four new Ps: penetration, permission, personalisation and profitability. While the concept is obviously an editor’s stretch for effect, grabbing eyeballs is now what it’s all about. Probably 80% of online advertising currently goes to about 20% of sites. As the online market matures, online traffic will migrate toward smaller niche sites and marketers must allocate ad spending accordingly. Permission-based marketing is more effective in increasing response rates; the alternative is consumer backlash. And while the Internet is perhaps the most expansive marketing medium ever, customers are conversely demanding more customised experiences and will only respond to ads they deem personally relevant. Finally, of course, investors will start demanding funds-draining companies show signs of becoming profitable.
Stefan Preston, of online retailer Flying Pig, finds a little truth in the four new Ps but says the fundamentals of marketing haven’t changed. The same analysis of the new channel must be undertaken but with new distinctions. The Internet is good at handling information but its cost structure is different: on the Net your services and products are available to the world. Meanwhile, the brand attributes - the distinctions people make about brands - work just the same, though the Internet “opens and closes a lot of doors in terms of attributes”. An offline brand has offline attributes, says Preston - for example, Whitcoulls has its stores, product range, pricing and service. There is an online “attitude”, says Preston, and early adopters on the Internet suffer a “dissonance” with offline brands online. These people, such as information technology professionals, readily accept cyber-brands. As more “regular” people come on to the Net, says Preston, they will be far more ready to accept standard brands. Even so, he believes offline brands will struggle online for some time. “They are always going to suffer that lack of focus.” Hence he sees a marketing conflict between running online and offline operations. “You have to be schizophrenic to run both.”
He notes that few retail brands have succeeded online, citing US booksellers Barnes & Noble’s epic (and expensive) battle with Amazon and eToys’ success over toy store veteran Toys R Us. “I put it down to three things - brand conflict, issues of competence and management attention, then ability to deploy capital.”
There is a big expectation of cheaper pricing and a wider range on the Web, says Preston, but a retail company can’t sell cheaply on the Web and have customers returning products to its stores. The Internet offers inherent trade-offs, such as near zero-cost marketing personalisation yet no touch and feel. Flying Pig uses offline brands like Whitcoulls, Noel Leeming and Bond & Bond to support its business, though these retailers have no real individual online presence. The quality of products they sell are vital to the success of online retail, as customers’ trust in product brands becomes even more important when they can’t touch the product. “Generic brands can’t compete on the Net.”
Preston, who was previously general manager for Whitcoulls at the time it went online, acknowledges that its Web site was not a completely successful effort at establishing the brand online. The Whitcoulls referral Web site claims to now sell one million titles through Flying Pig.
Getting personal
Advertising types agree the Internet changes the standard customer-retailer relationship. Mojo’s Zane Hall, who worked on the Heysistercam.co.nz underwear campaign for Bendon, says traditional media such as TV uses interruption-based marketing. The Internet uses reverse psychology, he says: a “Would you like to try this?” approach. A good brand is “not about domination [but] infiltration”, he says. Rupert Howell, president of the UK-based Institute of Practitioners in Advertising, has said that what makes a great brand is identical both online and offline. What has to change, he says, is how the industry executes its brand strategies. It took a generation to build trust in brands like Heinz, he says. Some, like Body Shop and Virgin, took between 10 and 15 years to get to the same position. “But the dot-com companies are reaching maturity within two or three years. The timespan in which to build a brand that people can trust is getting shorter and shorter, and it's getting more and more expensive. And in the US they reckon marketing can represent as much as 60% of total costs.”
Many New Zealand online operations appear to have opted for a smarter - and cheaper - approach. The key for Manukau-based online underwear retailer Jenniferann.com, which spent probably $100,000 on its development, was understanding its customers and the online business and tailor the marketing effort as distinctions were discovered. While its male-female customer ratio is about 50:50, owner Jenny Hannah has been surprised by the number of women over 35 and the number of men apparently buying lingerie for themselves. The huge advantage of the Internet is that it is impersonal - anonymous almost - yet personal, says Hannah. The company uses its customers’ details “to our advantage”. Jenniferann.com sends out a personalised email about every 10 to 12 days. Those entering the .com site get $US prices and US sizes; those entering the .co.nz site get local prices and sizes. About 60% of customers - the site gets about 5000 hits most days - come from Australia and the US, the rest from New Zealand. The US was always an important target market, and the company is likely to set up an office there for returns: US expectations of service are extremely high, says Hannah and must be met to compete with established outlets like Victoria’s Secret. Jenniferann.com has been active in registering with search engines, has bought a SearchNZ banner ad to good effect and is doing deals with firms such as American Express. US banner advertising is expensive though its can be effective, says Hannah. With little advertising budget, any future offline efforts have to be cheeky and clever, says marketing manager Martin Rotteveel.
Designer Exposure, run by Auckland-based Maria Williams, has been both. Although she has been running her designer-label clothes recycling shop for 15 years, traipsing the world for top-notch cast-offs, she says her four-month-old US-based Designerexposure.com Web site has been profitable “from day one”. Williams researched online retailing for nine months and taught herself computer skills. A world market is more sensible for her business, as there is “no point of reference” for prices and brands in the small New Zealand market, and Williams will, like Jenniferann.com, soon set up overseas offices. Marketing has been through registering on search engines (“it’s easy to get lost in the scramble”), a presence on online auction giant eBay, and through magazine articles overseas. Ultimately, every business will have to have a presence on the Web, she says.
And Internet service providers will benefit from that ongoing growth. Ihug now has one of the most well-known brands in the ISP market after spending five years plugging its smiley logo. Its cat-with-goggles billboards have been around for a while but marketing manager Jennifer O’Hara says the company only started TV advertising about a year ago.
“The Ihug brand has relied more on word of mouth and service previous to that.” She says Ihug’s icon “Ginge” has been key in invigorating the brand - the intention is to convey approachability and accessibility to the world of the Internet and computer hardware. Ihug entered the market at a time when Internet use and knowledge was low. Rather than "educating" the public about the Internet, O’Hara says Ihug’s approach was to demystify it, remove computer jargon and not reinforce technology fears. It coupled this with flat rate pricing, an “innovative underdog” PR campaign and an “uncorporate” look through cartoon-ish logos and a consistent colour scheme. “This was classic brand positioning - realising a problem and turning it into a positive. This is done offline as the advertising itself has little to do with being online.”
As with any new business venture, the Internet is both opportunity and risk. Says Preston: “The Internet is not better than bricks and mortar - just different.”
Mark Broatch is an Auckland writer.
| Rupert Howell, president of the UK advertising institute IPA, writing in the Guardian this month, says that in the dot-com frenzy generally three categories of operation come to him for marketing help. "No brainers" comprise excellent ideas backed by a substantial organisation with a carefully thought out business plan and funds in place. Then there are the good ideas from high-calibre people in cahoots with a big accountancy firm or a management consultancy seeking venture capital and wanting a marketing team on board. “You don't turn these ones away lightly - they may be the Beatles.” Then there are "timewasters dotcom" (a phrase coined by Ogilvy & Mather’s Paul Simons). “Usually run by a 25-year-old, with reasonably good ideas but no business plan. And they all want to make £1bn on a float.”
No doubt all three types are itching to break into the local market, but Flying Pig’s Stefan Preston suggests New Zealand is perhaps four years behind the US in online retail, because the size of the US market means companies have been able to invest in infrastructure and marketing. -- Mark Broatch |