Internet marketing strategy - a review of key issues

I posed this question a couple of years ago in a previous article on Internet marketing strategy issues.

In this article, we will look at what’s still hot and what’s now less so. We will see that many of the core issues are similar, but there are new issues to consider like ‘Web 2.0’ and the ongoing need to establish a ‘Right Touching’ strategy.

As well as revisiting my previous top 10, we will start by taking a look at what the UK E-retail industry believes are their top issues. IMRG (2006) reviews the state of UK online retail according to the Internet Media in Retail Group Senate which is made up of the top UK retail brands like Arcadia Group, Argos, BT.com/dabs.com, Comet, Debenhams, easyJet, Figleaves, IKEA, John Lewis Partnership, lastminute.com, Littlewoods/Shop Direct and Tesco. It also polls the issues amongst the wider IMRG membership, so it represents a barometer of the main Internet strategy issues from a retail perspective. Even for non e-retailers it provides an interesting benchmark to compare themselves against – how do your strategy issues and growth rates compare?

Top 10 UK E-retail priority issues

The IMRG (2006) report is very upbeat about UK e-retail and so it should be. The headline figures are impressive:

• Online retail has increased by 2900% in the last 6 years
• 10% of UK online retail purchases are forecast to be made online by the end of the year
• This will amount to £26 billion spent online by UK shoppers
• On average, online shoppers will spend £1,000 each
• 540 million parcels will be shipped to the UK’s 26 million Internet shoppers
• For every pound spent online, the web will influence another pound spent in traditional retail outlets

The growth in e-retail sales of individual companies is also impressive, with Alison Lancaster of John Lewis Direct quoted as saying:

“John Lewis Direct continues to show very strong sales growth. Sales for 2005/6 were 70% ahead of 2004/05 levels - which is in line with the average annual growth rate of 70% achieved in the last four years. This year has started very positively and we expect to continue this pattern of strong growth throughout the year”

Achieving this growth hasn’t been straightforward though, with many retailers having to adapt their processes of product targeting, marketing and distribution.

The top 10 priority list of key e-retail issues in the UK according to IMRG members are:

1= Usability / Customer Journey (mentioned by 56.5% of IMRG respondents)

By implication improving conversion of site visitors to sale is the joint top issue. This is perhaps surprising, since it might be thought that with many usability studies and site redesigns over the last 5 years, this might be resolved. However, average E-commerce conversion rates remain low, typically much lower than 10% for new visitors, so it is easy to see why retailers of all sizes will be trying to improve their performance in this area (See Chaffey (2006) for typical E-commerce conversion rates).

• 1= Customer Retention Strategies (56.5%)

Less surprisingly, customer retention and growth, is also top. This will continue to be a key issue, particularly with the ease with which the web facilitates switching between retail brands for different product categories through use of search and price comparison engines.

• 3. Interactive Marketing (54.4%)

Customer acquisition is a close third. Applying the right e-communications techniques to deliver new customers at an acceptable cost per acquisition is also a key issue.

• 4. Industry Statistics (46.1%)

This seems to be a request by members for a more industry benchmarking data on the key areas of acquisition, conversion and retention.

• 5. Multichannel Integration (45.6%)

The importance of integrating channels is seen from the summary figure that for every £1 spent online, £1 is spent in-store, so facilitating channel switching is important.

• 6. Exploiting New Technologies (39.4%) This is a new entry into the top 10 for 2006, doubtless fuelled by the hype around ‘Web 2.0’ which we will look at in more depth in next months article. Many retailers are starting to look again at Mobile commerce which is at number 12 in the list, mentioned by 29.5% as an issue.
• 7. Delivery / Fulfilment (37.3%)

The proportion mentioning delivery and fulfillment highlights this as a key issue that is important in terms of cost effectiveness and the overall customer experience.

• 8. e-Crime (34.7%)

Reducing fraud and identity theft are also seen as important.

• 9. Email Strategies (34.2%)

Although not that high in the top 10, e-mail marketing is a key tactic to the top-placed issue of customer retention strategies.

• 10. Payments (34.2%)

I’m not sure why this is a concern, perhaps its the cost of payment systems, or simply getting paid given the amount of E-crime!

So, what’s missing? Well perhaps it’s because of the questions posed by the IMRG to its members, but I would have expected to see more reference to the good old, still relevant, marketing mix. Some online marketing mix issues are covered, for instance, Promotion, Place and Physical evidence (equivalent to usability online), but what about the Product and Price? With online price transparency it would be expected that this would be highlighted. Perhaps product and pricing issues are what is really behind the top 2 challenges!

My Top 10 Internet marketing Strategy issues

As I mentioned, I posed this question a couple of years ago in a previous Internet marketing strategy article.

I wrote this from the perspective not just of e-retailers, but also other types of online business such as publishers, consumer brands, charities, and business-to-business relationship-building organisations.

For the record, in 2004, the issues I identified in 2004 were:

Internet marketing strategy Issue 1. The E-marketing planning process

The integration of e-marketing-specific objectives, strategies and activities into the traditional annual marketing planning process.

Internet marketing strategy Issue 2. Organising and resourcing for e-marketing

As the importance of online channels increases, the structure of the marketing organisation and responsibilities may need to change to maximize the opportunities available through new media.

Internet marketing strategy Issue 3. Defining the Online value proposition (OVP)

To achieve increased customer usage of online channels (web, e-mail, wireless), a distinct, detailed differentiated proposition must be developed for these online channels and it must be clearly communicated online and offline.

Internet marketing strategy Issue 4. E-brand value

How does the Internet contribute to and influence brands?

Internet marketing strategy Issue 5. Setting the e-communications mix

Defining the proportion of online spend on different elements of the communications mix.

Internet marketing strategy Issue 6. E-mail marketing integration (Touch strategy)

Integrating different forms of marketing e-mail, i.e. rented list, house list e-blasts, service e-mails and e-newsletters with traditional communications, i.e. direct mail, advertising, etc to achieve maximum response.

Internet marketing strategy Issue 7. E-CRM

Using online channels (web, e-mail, wireless messaging linked to customer databases) to build and deepen relationships with customers.

Internet marketing strategy Issue 8. Building and exploiting customer knowledge

Customer knowledge is profiling information and research characterising customers including their characteristics, communications preferences, behaviours and perception of service.

Internet marketing strategy Issue 9. E-marketing automation

Developing personalized marketing messages delivered by web and e-mail in response to customer events and behaviours.

Internet marketing strategy Issue 10. E-channel optimization

Developing a continuous improvement process to monitor the effectiveness of web and e-mail marketing.

So how have these strategies issues changed in the past 2 years, and how do they compare to IMRG priority issues? From the strategy workshops I run as part of consulting I think this list holds up well. There are close links between my top 10 issues and IMRG e-retail priority issues. Specifically, many of my strategy issues can be thought of performance drivers to achieve the main 3 issues from the IMRG study of customer acquisition, conversion and retention.

Right Touching Internet marketing strategies

My 2004 list mentions the need for having the right ‘Touch strategy’ which is key to the IMRG retention strategy issue. Today, I think the single biggest issue to address, which unifies these issues of acquisition, conversion and retention is ‘Right Touching’, which I define as:

A Multi-channel Communications Strategy Customised for Individual Prospects and Customers

Which… Delivers the Right Value Proposition Accompanied by the Right Message With the Right Tone At the Right Time With the Right Frequency and Interval Using the Right Media / Communications channels

To achieve… The Right balance of value between both parties

Right Touching for customer acquisition

In an online context, Right Touching for Customer Acquisition involves delivering the right message via the search engines, portals and comparison sites such as affiliates and aggregators when the customer is in ‘research mode’ or ‘buy mode’.

Since paid search marketing has become so expensive through competition it is not practical to buy all relevant keywords for a product search. Instead companies have to decide whether and when they can afford to purchase to display their ads in sponsored links. For example, high search volume generic keywords related to the search head of the Search Long Tail such as “plasma TV” may be expensive, but can be important to put a company onto a prospect’s consideration list early-on in the buying process. Meanwhile more specific phrases of the search tail such as “42 inch panasonic plasma TV” may convert better, but the volume is too low to rely on these alone.

Some companies have found that more sophisticated ‘dayparting approaches’ are required where ads are only displayed on particular days or times of day when searchers are more likely to convert. To manage this complexity, it shows the importance of my Internet marketing strategy issues 9 and 10 – having the right processes and tools for marketing optimization and automation.

Right Touching for customer conversion

Right Touching to convert site visitors to sales requires a highly relevant product, message and offer to be delivered which is consistent with the customer journey. i.e. if a visitor arrives from a search for ‘Plasma TVs’ the landing page they arrive on needs to have a guide to selecting the product, the main suppliers and best price promotions. If a more specific search for a product model is entered into the search engine, the visitor needs to arrive on a deep landing page featuring that model, the best alternatives and clearly showing why this is the place to buy. This requires a clear online value proposition (Internet marketing strategy issue 3) to differentiate this supplier from another. One simple tactic to do this, is to include a “customer promise” portlet throughout the site, no matter where the customer lands. Dabs.com does this well with its promise offering: “Same day dispatch”, “Lowest prices checked”, “Safety and security assured”, “Online service support”. Again practical issues of usability and message testing are important to deliver results.

E-consultancy (2006) has just revised its Online Customer Experience benchmarks report which summarises appoaches retailers can use to improve their customer journeys. This indicates there is still much room for improvement and perhaps shows why this is the top issue for IMRG members.

Right Touching for customer retention and growth

Tesco.com provide a good example of best practice in Right Touching, but their marketing activities also show some of the challenges. Tesco have a sound lifecycle segmentation approach described by Humby and Hunt (2003), who describes how e-retailer Tesco.com use what they describe as a ‘commitment-based segmentation’ or ‘loyalty ladder’ which is based on recency of purchase, frequency of purchase and value which is used to identify 6 lifecycle categories which are then further divided according to demographics and purchase behaviour to target communications:

• “Logged-on”
• “Cautionary”
• “Developing”
• “Established”
• “Dedicated”
• “Logged-off” (the aim here is to winback)

To achieve “Right Touching” across millions of customers is is challenging since it requires sound strategies in each of my Internet marketing strategies 6. E-mail marketing integration; 7. E-CRM; 8. Building and exploiting customer knowledge; 9. E-marketing automation and 10 E-channel optimization.

Tesco use automated event-triggered messaging for different segments to encourage continued purchase and cross-sell. Their touch strategy includes a sequence of follow-up communications triggered after different events in the customer lifecycle. For example, in the example given below, communications after event 1 are intended to achieve the objective of converting a web site visitor to action; communications after event 2 are intended to move the customer from a first time purchaser to a regular purchaser and for event 3 to reactivate lapsed purchasers.

Trigger event 1: Customer first registers on site (but does not buy).

• Auto-response (AR) 1: 2 days after registration e-mail sent offering phone assistance and £5 discount off first purchase to encourage trial.

Trigger event 2: Customer first purchases online.

• AR1: Immediate order confirmation
• AR2: 5 days after purchase e-mail sent with link to online customer satisfaction survey asking about quality of service from driver and picker (e.g. item quality and substitutions).
• AR3: Two-weeks after first purchase - Direct mail offering tips on how to use service and £5 discount on next purchases intended to encourage re-use of online services.
• AR4: Generic monthly e-newsletter with online exclusive offers encouraging cross-selling
• AR5: Bi-weekly alert with personalised offers for customer.
• AR6: After 2 months - £5 discount for next shop
• AR7: Quarterly mailing of coupons encouraging repeat sales and cross-sales

Trigger event 3: Customer does not purchase for an extended period

• AR1: Dormancy detected – Reactivation e-mail with survey of how the customer is finding the service (to identify any problems) and a £5 incentive.
• AR2: A further discount incentive is used in order to encourage continued usage to shop after the first shop after a break.

The beauty of this approach is that once the optimal form of targeting, frequency, messaging, mechandising and creative have been established, the triggers will run automatically, but with some variations for new products and offers.

So far, so good, and highly sophisticated compared to many companies touch strategies, but even Tesco has difficult delivering relevant messages with the right frequency.

Tesco.com have recently been exposed by the BBC as ‘bombarding UK consumers with a massive e-mail marketing campaign’ (BBC, 2005). Based on the E-mail tracking service E-mail Monitor (www.emailmonitor.co.uk) from Interactive Prospect Targeting Services, the BBC says that, Tesco is blitzing the nation with 16-20 million e-mails per month. It reports that in September 2005 it issued 44 separate e-mail campaigns which was more than Sainsbury, Asda, Waitrose and Somerfield put together! Part of this activity can be explained by Tesco’s market share. A Tesco spokesman was reported as saying ‘More people shop with us online than with anyone else and we do communicate with a lot of them by email. We know that customers hate junk mail so we try to target them as much as possible and make it easy for them to stop receiving emails if they don't want them."

But Tescos approach is working – it is driving sales and it shows the benefits of getting Right Touching right and overcoming the key e-retail issues identified by the IMRG members. The BBC reported that in 2005 Tesco was dealing with about 170,000 orders per week, compared with its nearest rival, Sainsburys.co.uk, which gets about 38,000. Over Christmas 2006, IMRG (2006) reported that over 1 million UK customers placed online orders at Tescos.

References

BBC (2005) Tesco in E-mail marketing assault

Chaffey (2006) E-commerce conversion rates statistics

E-consultancy (2006) Online Retail User Experience Benchmarks 2006

Humby, C. and Hunt, T. (2003) Scoring points. How Tesco is Winning Customer Loyalty. Kogan Page, London, UK.

IMRG (2006) Internet Media in Retail Group. Annual Statement 2006. May 2006. www.imrg.org.