Marketing Rules!

The web is changing. Instead of being a grouping of “information” sites, it’s starting to become a grouping of “participation” sites, where people can express their comments or opinions about a wide variety of topics.

This new use of the Internet is called web 2.0. It comprises blogs (like the one you are now on!), podcasts, videos, wikis (such as wikipedia, where users can add their own entries).

This month’s Raphel Report discusses a project we are working on for our hometown of St. Johnsbury, VT. We’re trying in our small way to bring web 2.0 to our town. We’re including blogs and videos on our site. We’re going to cover local events with photographs and videos. If we’re successful, we think maybe other towns in Vermont will join web 2.0. Then we can all link up and provide another level of “participation” for locals and visitors to Vermont.

When you are a writer of advertising or marketing material, it’s always worthwhile to see research into how people actually “read” your copy.

Some of the best research into “eye tracking” has been done by Siegfried Vogele, Dean of the Institute for Direct Marketing in Munich, West Germany. His groundbreaking study on how the eye actually reads advertising material was first presented in 1986 at the Montreux International Direct Marketing Symposium.

His conclusions, shown in this visual, are quite interesting and show that people want to know who the letter is from and what the PS contains before they read the body of the letter.

More recently, one of the world’s best usability experts, Jakob Nielsen, showed how the eye takes in copy and visuals on the Internet. This article presents Nielsen’s interesting research, and some of the comments that accompany the article are quite amusing.

Suppose you’re an operator of an Atlantic City casino. The city has just made a requirement that 75% of your casino space must be non-smoking by April 15th. Do you:• Protest loudly that the new regulations will hurt the economic base of Atlantic City by making gaming patrons go elsewhere?

• Say that you will make 100% of your gambling space smoke-free to benefit employees and customers alike?

• Hedge your bets and say that you’ll think about making one of your four casinos completely non-smoking?

Atlantic City casinos did all of the above. The Harrah’s organization, which owns four casinos there, and a couple of other casino operators said they would make 100% of the casino space smoke-free. Carlos Tolosa, Eastern Division president for Harrah’s Entertainment, said his company likely will establish non-gambling smoking lounges for its Harrah’s, Bally’s, Caesars and Showboat casinos sometime next year, pending regulatory approvals.

“We will have two or three smoking lounges at each property and then have the casino gaming space smoke free,” Tolosa said. “My long-term solution is that none of our employees will be exposed to smoke.” The Tropicana, another casino in Atlantic City, pledged to be the first casino with a completely smoke-free floor.

The Trump Organization, which owns four casinos, said they will set aside smoking areas on the casino floor for now, but are considering making one casino completely smoke free. The newest and most successful Atlantic City casino, the Borgata, said it will conform with the new law and identify smoking areas on the casino floor.

Even though the casinos would probably all prefer to maintain their current smoke-filled rooms, the new regulation is providing a textbook example on how companies employ different marketing strategies to confront new regulations.

Sure, casinos have never wanted to confront this issue. They don’t have clocks or windows in casinos – nothing to encourage a gambler to leave his or her comfy chair at the table. How many gamblers also want to smoke while losing their shirts? Why would any casino operator want to encourage a patron to leave the table to smoke? It looks like Harrah’s has thought about this, and chosen to go non-smoking anyway. The short-run benefit to the casinos of having smoking areas can have negative long-term health effects on customers and especially employees. Smoking is a health concern to employees and subjecting thousands of workers to cigarette smoke over many years is bound to create many employees with long-term health problems.

The casinos that are voluntarily going completely smoke-free include Harrah’s, the most successful casino chain in the world. If anyone can solve the marketing problem, Harrah’s can.
The solution can include:

• Informing customers of the change;

• Explaining why Harrah’s is opting for a total smoking ban.

• Giving incentives to customers to come to Atlantic City in the near future.

• Highlighting the availability of smoking lounges off the casino floor.

A marketing campaign that explains Harrah’s reasons for embracing non-smoking casinos will be helpful in customer retention.

We think this may be a tough sell for some casino customers, although nonsmokers will revel in the news. Do you think Harrah’s can do it?

In early February, Kroger, one of the nation’s leading supermarket companies, began offering personal finance offerings. According to the Lexington Herald-Leader, “customers can now sign up for a mortgage on a home equity loan, sign up for identity theft protection, purchase pet insurance or get a credit card.”

The chain has recently offered gasoline, DVD rentals, and health clinics. Merchandise offers include toys, furniture, and lawn and garden products.I have a couple of reactions to Kroger’s latest forays.

The Good: Using customer information gathered from frequent buyer cards is an excellent way for a supermarket to expand its offerings from grocery items. Tesco in Great Britain and Costco in the United States are great examples of using consumer information in novel ways.

Also, because of Wal-Mart’s incursion into the grocery industry, supermarkets have to learn how to fight back. One way: to use customer information to sell items (such as financial services) that Wal-Mart might have a tough time imitating. Wal-Mart just recently failed in their efforts to offer more banking services. Also, by selling items such as toys and furniture, supermarkets have less dependence on grocery items as their sole source of bottom line income.

The Bad:

1. Privacy: Supermarkets have to be careful about not using frequent buyer card information without customer permission. Supermarkets must recognize that consumers are starting to take privacy scares to heart. Supermarkets must not give information to third parties without their cardholders’ permission. I don’t know if Kroger will be giving financial information to third parties, but they should only give information with customer approval.

2. Loss of focus: Supermarkets are food experts. They can compete in other areas, but they have to make sure that their food quality or focus does not suffer. If customers lose faith in a supermarket’s food selection or pricing, then they will stop going to that supermarket. All the variety in the world will not save a supermarket with poor food quality or selection.

What are your thoughts?

I enjoyed the premise and execution of “The Truman Show,” the 1998 Jim Carrey film in which an innocent Carrey is the unknowing subject of a 24/7 TV show which an adoring public watches with unabated curiosity.

In the latest version of life imitating art, I woke up with the “Today” show this morning doing a feature on Justin.TV, the brainchild of a San Francisco group of twentysomethings that puts Justin up live up on the web 24/7 for a fascinated group of voyeurs. Technology companies and others are waiting in the wings for the birth of a new expose-your-navel fad to be the next YouTube.

I guess there are marketing possibilities both online and elsewhere (can you imagine a cereal company paying Justin for product placement – why not if he can get on the “Today” show?)

The best thing about this spectacle being on the Internet is that people can decide for themselves whether to watch it. But for me, this sort of spectacle has something distinctly unappealing about it. It is a parody of “reality” TV, which in turn is a parody of real life. It makes me feel a kinship to the Luddites, a social movement which disapprove of advances in technology. To riff on Timothy Leary, it makes me want to tune out, turn off, and, especially, drop out. At this point in my life, a blog is enough public exposure.

Stan Golomb died a few ago but his ideas, energy, enthusiasm, and stubbornness still inspire me. Stan worked with drycleaners for many years, helping them through incentive programs, games, postcard mailings, and innovative marketing techniques to “Find, Capture, and Keep Customers” (the title of one of Stan’s books).

I was reminded of Stan recently while watching Elizabeth Edwards describe how she would continue to campaign with her husband despite stage 4 breast cancer. Stan Golomb battled heart disease much of his adult life (he even had a heart transplant at age 63!) but despite poor health he always made business fun, exciting, and profitable.

Here are a few of the marketing lessons I learned from Stan Golomb:

• If you have a bricks and mortar business, think of your market area the way a farmer thinks of his fields:

1. Calculate your yield (of customers) per acre. Find out how many people live in the neighborhoods surrounding your business and how many of those people are potential customers.

2. Do some test marketing to decide which fields best support your product.

3, Use mapping and demographics to find your best customers and continue to advertise to those customers.

• People love games and gimmicks. For drycleaners, Sam ran “jackpot” programs, “blackjack” programs, and “silver eagle” programs. In the blackjack program, when you went to the drycleaner, you rubbed off a spot on a postcard you received in the mail to see what hand you had. Various hands had different discounts. An 18 received 10% discount, a blackjack a whopping 40% discount.

• Stan counseled drycleaners to collect birthday information on all their customers…and then reward their customers on their birthdays.
Stan constantly would find new ways for his clients (and drycleaners throughout the country signed up for Stan’s programs) to keep in contact with their customers through direct mail and in-store advertising.

The incident that most touched me was a plan Stan concocted for keeping in touch with people after his death. About a week after Stan died, I received a letter. The one line letter said simply, “Thank you for being my friend.” It was signed “Stan Golomb.”

For direct marketers like us, mass media advertising on TV has always seemed mysterious. Why would a marketer pour a lot of money into TV if there is no way of selecting your audience? Isn’t there an alternative way to price TV spots other than the rate cards of networks and cable companies?

The pricing and distribution of TV commercials could change dramatically in the near future, and Google (yes, that Google) could change it.

Google has already changed the marketing paradigm of the Internet. Google’s AdWords (and similar programs by Yahoo and other search engines) have outpaced pop-up and banner advertising in popularity. Firms are spending countless hours figuring out which keywords to bid for to achieve prime placement in Google’s search results advertising space.

Now, Google is seeking to crack the $74 billion TV advertising world with programs that offer “mass personalization.” The Wall Street Journal says that Google is working with a California cable provider to offer commercials that have been sold to advertisers by Google. According to ZDNet, Google is also recruiting software engineers for television applications.

What would a world of Googlized television advertising bring?

• More personalization. Google’s data capabilities may lead to ads being personalized by subscriber demographics. So if your household is in a high income zone or subscribes to the tennis channel, you may see more ads for tennis racquets or tennis vacations than your downscale neighbors.

• More bidding for ads: Google is experimenting with an auction based system for selling its advertising (similar to how it sells AdWords on the Internet). Ad space may go to the highest bidder. An auction system would bring a new element of flexibility (and perhaps more instability) into TV commercial pricing models.

We find these developments exciting. The one downside is that we have to find a way to satisfy people’s notions of privacy while still using demographics to target ads. I don’t want to turn a TV on in the morning and when it’s time for a commercial hear the announcer say,

“Neil, because you have a wife and two children you should seriously consider our accident insurance program.”But I like to play card games, especially bridge. I might not mind a commercial for a duplicate bridge instructional camp to improve my spotty defensive play. It’s a fine line between targeting and intrusion. Let’s hope that Google will get it right.

What do you think of Google jumping into the TV advertising medium? Is this a new advertising arena for direct marketers, or will the coming of Google make more money for Google and less for traditional advertising companies?

Take a look at coca-cola’s web site when you have a chance (http://www.coca-cola.com/).

It may be me, but I think something’s going wrong here. It’s like some deranged 20 something year olds started playing around with web development tools and tried to create a site. The graphics are interesting, but the site doesn’t make any sense.

To give just one small example, when you finally get into the site (which takes a while to enter even on my fast connection), you’re connected to The Coke Show. I clicked on “See the entries” even though I didn’t know what the entries were for. Then I clicked on the mini-challenge, “The Coca-Cola Company Theme Song” and I clicked on “See the entries” again. It first told me I had 54 days to enter my original theme song and then it said 53 days. There were no entries to see. I tried some other categories and they didn’t make much sense either.

I thought it was just me until I showed the site to 10 college students. None of them could make heads or tails of it and all expressed frustration with the site.

Where is Coke going with this. Shouldn’t the #1 brand in the world be able to create a functional website?

For a contrast, visit the www.toyota.com site. A functional site that is anything but dull.

We started our Internet marketing class at a local Vermont state college with this seemingly simple question: “Should a small business owner advertise on the Internet?”

An hour and twenty minutes later we still had not answered the question. But it wasn’t for lack of trying. Our class realized after awhile that the question on whether or not to advertise on the Internet hinged on a lot of other questions a small business had to answer.

Here are some of the relevant considerations:

• First of all, do you own the type of business that can benefit from Internet advertising?

Many local businesses would be far better off advertising locally. For instance, a dry cleaner will probably do 90-95% of its business within five miles of its store location. Similarly, most supermarkets pull most of their customers within five miles of their store locations. (There are exceptions: Some specialized supermarkets, like Trader Joe’s and Whole Foods, draw customers from a much larger radius).

If you own a local drug store, hair salon, or ice cream parlor, you might be much better off confining your advertising to the local market. Internet advertising usually has a much larger reach than local residents. So if your business is the type that is mostly confined to local traffic, Internet advertising might not make much sense.

It still might make sense to have an Internet site. In this wired time, most businesses should have some type of web presence. It can be a small web site with information about the company and the owners. For a restaurant, it may be menus, location and hours of operation.

Many small businesses with a small web site would be better off trying to do some free web communication rather than paid Internet advertising. Try collecting the e-mail addresses of your store customers and web site visitors. Send out an e-letter or e-newsletter to your mailing list once a month. It doesn’t have to be a formal document. It can be a chatty letter with a couple of special Internet offers. This type of communication does not cost anything and can result in good customer relations and even some new business.

• Does your business have a product that is suitable for Internet advertising?

Our company, Raphel Marketing, sells books and tapes and marketing services. We are not confined to our local trade area. We have clients all over the country. We have the perfect type of business for the Internet. Customers can buy our books without visiting a retail shop. They can visit our Internet site for more information about our marketing and consulting services, and then call if they have more questions.
So advertising on the Internet would seem to make sense for a company like ours. However, we have to balance the cost of advertising versus the results we would achieve through advertising. Although we do some Internet advertising, for the most part we have concentrated our Internet efforts on improving our website and developing customer lists that we market to directly, plus our e-newsletter and this new blog.

But you can be a company with strong local roots and still benefit from Internet advertising. For instance, suppose you own a supermarket. Most of your business probably comes from the local market. But if you have one product that people really want, and you can easily ship it, then advertising on the Internet makes perfect sense.

Example #1 – Dorothy Lane Markets in Ohio. Besides being a great supermarket, they make wonderful “killer brownies.” Check out the brownies at http://www.dorothylane.com/departments/bakery/killerbrownie.html. Yum!!

Example #2 - Stew Leonard’s in Connecticut and New York. Yes, they have wonderful local supermarkets, but they also sell gift baskets through the Internet and direct mail. Here’s where you can order Stew Leonard’s products for friends or as corporate gifts: http://www.stewleonards.com/press/gift_catalog.cfm.

• Do the advertising possibilities on the Internet make sense for your firm?

The most popular way to advertise on the Internet these days is through paid search advertising, such as Google AdWords and Yahoo Search Marketing. But these alternatives are constructed as auction sites. You bid for certain keywords and if you bid high enough, you will get a desirable advertising position when customers search for the words you bid on. Suppose you owned a company that made table legs. You certainly would want to be one of the highest bidders for the search term “table legs.” But because Google and Yahoo auction their search words, it is hard to fix your advertising cost for the long run. You may receive great placement by bidding 30 cents today and next week it could cost 45 cents for the same positioning. Also, the return on keyword advertising fluctuates, and by some accounts keyword advertising is not now as effective as it was in the past. By the way, we know someone up here in Vermont who happens to make table legs – quite a lot of them. You can check his site at http://www.tablelegs.com/.

Those are just some of the considerations our class wrestled with as we determined when it made sense to do Internet advertising. Some other questions we considered are:

• How sophisticated an Internet presence does the company have? The better the web site, the better the case for Internet marketing.

• Is there a way to start Internet marketing slowly and measure results? If Internet marketing proves reliable and effective, then more money can be put into it.

• How effective is the business’ current marketing? What current marketing could be eliminated to direct dollars toward increasing the company’s Internet presence?

Let us know if you have any other thoughts concerning when and how to do Internet marketing. To leave a comment on our blog site, just click on comments below. Your first comment will be moderated (to avoid spammers). After that, you can post comments immediately.

Have you read the latest D.C. gossip at Wonkette? Get your political news at ABC’s The Note or at Daily Kos or The Huffington Post? Have you dug Digg or read Reddit? Checked out the gadgets and cultural curiosities at BoingBoing or Engadget?

If you have done any of the above, you’ve blogged. And you are not alone. According to Wikipedia, the online encyclopedia, there are over 60 million blog sites now. Blogs have moved out of the strictly personal diary/confessional arena to encompassing opinions on almost every topic imaginable. And blogs are becoming much more commercial. Many now accept advertising and many companies now add blog entries to their websites. Readers like the personal nature of blogs and often enjoy adding their two cents to an issue. Because of the popularity of online blogs, we started thinking of adding a blog to our Raphel Marketing website.

Like Hamlet, we debated the pros and cons of starting a blog ourselves.
A blog would give us a chance to reach out and engage in conversation with our customers and other visitors to our site. We could express opinions on marketing and other subjects, ask for comments, let guest bloggers give their opinions on various issues. We could give links to other interesting marketing sites and other bloggers. And maybe we could become so popular with our views and marketing information, that advertisers would come purse in hand, begging us to let them ply their wares on our amazingly popular blog site.

Or maybe not. Maybe we would serve up our opinions to an unresponsive cyberspace. Maybe no one would care. Maybe people would get angry at one of our opinions and write back unflattering or nasty notes. What could we be getting ourselves into?

My particular experience with blogs gave me a little bit of a pause. I had gotten addicted to political blogs in the months before the 2004 Presidential elections, and I wasted countless hours on the reading of one silly rumor and opinion after another. On election day, I became convinced that the bloggers who predicted Kerry’s election from exit polls were right, only to be informed later in the evening that there would be four more years of Bush. After the election, I swore off political blogs, at least until the next election.

We finally decided to let some college students weigh in on the usefulness of blogs.
My wife Janis Raye and I are team teaching a course on Internet marketing this semester at a local state college in Vermont. We were recruited to teach the course at the last minute after another professor suddenly resigned, and so we were forced to scramble to stay at least one lesson ahead of our students.

One day in class we were discussing the various ways communication occurs on the Internet, we happened to start talking about blogs. We didn’t mention we were thinking about doing a blog ourselves, but we gave the students some information about how blogs work. We told them that writing about one’s thoughts and feelings has really caught on, and that blogs were becoming an important part of Internet marketing.

To our amazement, none of the students in our class read blogs on a regular basis. In fact, most had never heard of them. We assigned them some popular blogs (political, sports oriented, diet, skiing) to look at. Our students said they were not particularly impressed, saying that they would be just as happy if blogs never existed.

Part of this disapprobation may be regional. Our students are from northern Vermont, a region of politeness and reticence. Our students are not as likely as students from other regions of the country to brag about themselves or take prolonged public looks at their navel. When we told them about strides in video email, they said they’d rather receive text messages. When we asked them how much time they spent on facebook, a college network, most visited rarely if they had an account at all.

Our students certainly were not giving blogs a thumbs up. But we decided to keep investigating blogs. Like Hamlet, we didn’t want to make a final decision until all the facts were in.

How about the competition? To see what other people liked, we looked at the Marketing Sherpa’s list of its readers favorite blog sites. (Marketing Sherpa at www.marketingsherpa.com is a great source of web marketing information.). Take a look for yourself at Marketing Sherpa’s list of top-rated blogs at http://www.marketingsherpa.com/article.php?ident=28308. After perusing some of these blogs, I found that some piqued my interest, some were not my speed at all, and some seemed to be so full of advertising that I couldn’t separate content from salesmanship. All and all a rather mixed bag at best, and not a group that I would mind competing with in the area of marketing tidbits.

I then thought about a former employer and friend of mine, Victor Niederhoffer, who runs an extremely successful hedge fund business. Along with his colleague Laurel Kenner, and featuring collaborators among other business people and cognoscenti, Victor runs a blog/website “dedicated to ballyhoo deflation and applying the scientific method in finance.” Victor and his associates have created an interesting, pugnacious forum in which interested individuals can inform each other on a variety of issues, mainly related in some way to market speculation. Victor’s site serves a serious purpose in an entertaining way, and maybe I could do the same thing in the marketing arena. To see Victor’s site, go to www.dailyspeculations.com.
I started to think about the ideas I had put down so far in this Raphel Report. Hmmmm, my thoughts on blogging, links to other sites, soliciting other people’s opinion. Sounds suspiciously like a blog. If I enjoyed doing these Raphel Reports (and I do), maybe I would enjoy a blog.

So I did it. Or rather we did it. All of us at Raphel Marketing are starting a new blog on marketing. Hopefully you will join in the conversation. And maybe you’ll become a guest blogger, or maybe you will start a blog of your own.
Goodbye to my Hamlet-like indecision. It’s time for action.
I came. I saw. I’m blogging!