While it would be trivial for a company to put up two different web pages
with the same product offered at different prices, and even lead customers
selectively to one or the other, for a company that is seeking to build
a customer base and preserve reputation, Internet price testing is not
a good option. The area of the Internet corresponding most to direct-mail
testing is Internet banner ad testing. Multiple banners can be run and
you can measure the "clickthrough" for each banner, or how many people
click on the banner and go to your web page. And, you can examine what
proportion of the people arriving from a banner are converted into online
sales. You must factor out the site from which the people are arriving
for this to be valid. Often the most important factor in growing a marketing-oriented
business is not the rate at which you can get people to place their first
order with your company. The real key is the rate at which you can convert
first-time buyers into repeat buyers.
At present, Internet banners are relatively untargeted. But, in the future,
banners will be highly targeted. Whereas traditional direct mail focuses
upon getting lists of prospects, who are all very similar, and then finding
an offer that is appealing to the aggregate, the evolution of Internet
marketing will eventually target marketing right down to the individual
level. Computer programs, called recommendation engines, will be used
to select the content to be displayed to a given consumer. Information
about a given person, stored in a database or in some cookie-equivalent
concept, will be used to help generate most web pages. The individual
customer profile will be used to recommend books, CDs, what banners are
most appropriate to that particular customer, etc.
Pages will be dynamically generated to the taste of the customer. Anyone
looking over the person's shoulder will say, "What weird ads you have.
Here's one from Mole (film lighting), one about a new book on Active X,
one about Chinchilla farming." Of course, the person's real passionate
hobby will be developing Active X controls that control lighting of Chinchilla
farms. Take a look at netperceptions.com, a Minnesota-based company which
is a leader in developing software that works behind the scenes to recommend
products. It really is amazing stuff.
As Thinking Like An Entrepreneur mentions, this is the future direction
of direct mail. While traditional direct mail is about testing and roll-out
and segmentation of people by shared proclivities and interest, one-to-one
marketing will be much more up-close and personal. Go ahead, try to find
a mailing list of Active X programming Chinchilla farming filmmakers!
Personalization will become very impersonal behind the surface. And the
programming and data filtering demands will become relatively significant.
Because of this, larger companies will be best able to use the power of
recommendation engines and such behind-the-scenes customer evaluation
tools. At least for a while, much of this power will be too highly-priced
for smaller companies. Companies that are making intelligent decisions
about Internet business, such as amazon.com, will acquire customers, because
they can provide a very customized "personal" shopping experience. Imagine
going into a bookstore and finding it filled with shelf after shelf of
books all of which are about topics that greatly interest you. But, these
businesses are also aware of the need to be price competitive. Ordering
from the competitor is only a click away.
What does this all mean for the smaller business that has relied upon
direct mailing of catalogs? Same question as always: Are you really marketing
to a niche, or are you just nipping the fringe of the niche? If you have
been nipping at the fringe of a niche, your life is going to become complex.
But, if you satisfy the demands of the most price-conscientious and knowledgeable
members of your niche, you should be well positioned as you put your catalog
online.
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