July 2000 vol2 What's the Buzz? LEVERAGE SIDEWAYS MARKETING, NOT AD SPENDING FOR ONLINE DOMINANCE Does the amount of money a company spends on advertising translate to online dominance? Not in the new world of "sideways marketing" brought about by the Internet, says Becky Roberts, senior manager of broadscale advertising at Amazon.com. Sideways marketing is the word-of-mouth marketing from consumer to consumer that the Internet has enabled, Roberts told an audience at Chicago Internet World last week. Roberts and other panelists were addressing the question posed by the session title, "Is There a Correlation Between the Volume of Advertising and Online Dominance?" The panelists' unequivocal answer: no. Amazon's Roberts says sideways marketing has replaced the top-down marketing of old, where messages about products originated with marketers. Now, email allows for "dynamic, unpredictable word-of-mouth" communication between consumers, the media, and what Roberts call enablers. Enablers are other companies that, though they aren't necessarily Web companies, are associated with ecommerce. These companies, such as credit card companies and shipping companies, are "scrambling to be seen as enablers to ecommerce and to be seen as associated with your company," Roberts says. "Striking partnership and using co-branded advertising with enablers has been effective." STILL IMPORTANT, BUT FOR DIFFERENT REASONS Given the newly vital role of sideways marketing, is advertising still important? Yes, says Roberts, but in ways different than in the offline world. In the online realm, advertising serves as the online equivalent of a real-world merchant's storefront -- something that pure online players would otherwise be lacking. It also is a catalyst and an extender of word of mouth, Roberts says. And "amid all the chatter out there, advertising is a unifier and a brand builder," she says. Finally, "advertising lays the foundation for Day Two," the day after your website is the beneficiary of consumer buzz. "After all, the chatter won't last forever." Recent ad spending and brand awareness data for some online merchants proves there isn't necessarily a correlation between ad spending and online dominance, Roberts says. Recently eToys, for example, spent $34 million on advertising to achieve a brand awareness of 26% and 5 million unique visitors. During the same period, eBay, a great beneficiary of sideways marketing, spent $7 million on advertising, but had a 46% brand awareness and 12 million unique visitors. ARE YOU GENERATING WORD OF MOUTH? How likely is your site to tap into sideways marketing and generate positive word of mouth? If your site offers customers a good experience, chances are they'll talk it up. B.L. Ochman examines some websites that are using a good customer experience to competitive advantage in the first of a two-part article. Next week she'll examine some sites that are driving away customers -- and potential customers -- with customer experiences that infuriate rather than enliven. And check out this week's News Spotlight for the latest analysis of Internet usage from Nielsen//NetRatings' Allen Weiner. WEB MEDIA MARKET STRATIFYING, NIELSEN//NETRATINGS ANALYST SAYS As the popularity of Web media properties begins to stratify, the Internet is beginning to look like other media, according to Allen Weiner, vice president of analytical services for Nielsen//NetRatings. Weiner, speaking at Internet World in Chicago last week, said with three Web properties -- Yahoo, AOL and MSN -- far outpacing others in terms of unique visits and page views, the Web looks like the television market when three networks dominated. In the past six months, 90% of Web traffic went to 10% of websites. The top sites got that way by beefing of the depth of their content and adding services, Weiner says. "Five years ago, they only provided a light dusting of content," he says. "Then vertical sites came out and gave the major portals more competition. They responded by becoming wide and deep." They also added services, such as email, chat and calendars. "These sites are becoming one-stop places for information and services for your entire life," Weiner says. Weiner also says consumers' Internet usage habits at work -- where most have high-speed connections -- indicates what they'll do when they get broadband connections at home. And what they'll do with broadband connections is use the Internet more, Weiner says. At home, where slow connections predominate, only 62% of people who had an Internet connection used it in the past month. But 94% of people with work connections used it in the past month. How To Implement Ecommerce On Your Website Web companies are coming to grips with the fact that the new economy functions a lot like the old one, where only the strongest are likely to survive in a crowded marketplace. Clearly a lot of companies are going to fail. How do you avoid being one of those companies? There are as many hypothetical answers to that question as there are unique challenges to small businesses. But for most companies, to increase the level of sales from their website and facilitate market growth, their sites need to be ecommerce enabled. So, what does it take to become ecommerce enabled, how much does it cost and is it worth your time and money? Presuming you've developed a well-designed website, there are four components of ecommerce to consider: MERCHANT ACCOUNT It's vital that you can quickly accept payment from your customers. If you're planning to only accept cash or checks, you're bound to lose business: A majority of customers prefer to pay by credit card when making online purchases. Credit card transactions account for 88% of online transaction revenue, according to Jupiter Communications. According to Jupiter, credit cards also allow you to: Capitalize on customer impulse buying Improve your website's credibility Provide convenience for your customers Before establishing a merchant account, determine your needs, examine your resources, and identify all options. DETERMINE YOUR NEEDS Merchant account providers charge various rates and fees for their services. All merchant account providers charge a discount rate (a percentage of the amount of the customer transaction), a per-transaction fee and a monthly statement or management fee. Some providers also charge additional fees, such as batch header fees, monthly minimum fees and application or set-up fees. Begin by considering the nature of the products you sell. If they are large and expensive, seek a merchant account that offers a higher flat-rate transaction fee and a lower percentage charge. Even a hefty $1 transaction fee will be far lower than a 2.5% deduction from the charge. Most merchant accounts charge somewhere between 20 cents and 50 cents per transaction with a 1.5% to 3% discount rate. Add to this a few hundred dollars for set-up costs, another $50 to $80 for leasing a terminal or transaction software, and $20 to $50 monthly sales minimum. When talking with your merchant account representative, be sure to ask about any additional expenses like charge-back fees and programming charges. Merchant account providers may be flexible with their fees and charges. If you'd like to stick with your current bank, let them know if you find lower fees elsewhere. They may lower their fees to keep your business. EXAMINE YOUR RESOURCES Different merchant account providers also require distinct purchasing procedures at your site. If you plan to process your orders manually, will a secure Web form be good enough or will your require extensive modifications to your site, including programming code? If you don't program or haven't hired a programmer, you may find some card-processing systems too complex to use. Fortunately, a number of providers are now offering simplified, comprehensive turnkey systems which include a shopping-cart programs, order verification and processing, and automatic emailing of orders. IDENTIFY YOUR OPTIONS You may encounter obstacles to working with some merchant account providers. Some will not accept "high-risk" accounts, a term that usually encompasses adult sites, online casinos, and sites operated by foreign companies. If your business is considered high risk, at the minimum, you can expect to pay higher fees. Also, as a start-up business or an individual with a bad credit history, be prepared to have your financial background probed, and know that you may not qualify for the lowest rates. Fortunately, because of the boom in electronic commerce, merchant account providers are accepting more accounts and the costs to businesses are decreasing. It's also becoming easier for home- and Internet-based businesses to obtain merchant accounts. If you're in the market for a merchant account, you can probably have one by the end of the week. TRANSACTION SOFTWARE The next step is to have an interface for the actual processing of orders. The most common way for a smaller merchant to do this is offline. That is, you download customer orders and then manually process them just as in a brick-and-mortar store. Choices include an electronic terminal or transaction software. It is essential to protect yourself and authorized credit cardholders from any fraud. For security, the software you use should require purchasers to submit detailed information such as address and phone number. Once entered, customer information is sent to an authorization network (an Address Verification Service or AVS), which confirms the validity of the card and billing request by checking the card's registered address. It takes just seconds for the authorization network to process your request. This security measure is important because charge backs for credit card fraud or mischievous behavior can affect your merchant rating and can lead to higher service costs. SECURE CONNECTIONS One of the most overlooked components of ecommerce is the secure certificate or secure connection. If you have ever ordered online you may notice that sensitive information is usually always delivered at a Web address that begins with https://, rather than the standard http://. The "s" indicates a secure server is being used. Secure servers have software that encrypts information being sent through them to keep it safe from hackers. The most common encryption being used is 128-bit. The encryption process makes secure servers process data more slowly, so it may take a few more seconds for a screen to come up or a form to be processed. If your website is virtually hosted, you may have the option of sharing a secure server and a secure certificate. While sharing the secure server helps in reducing your costs, sharing a secure certificate can confuse your customers and cause you to lose sales, because the certificate holder's name appears on the digital certificate. If the certificate holder's name is not your company name, the customer might think that an error has occurred in the transaction and they may revoke their order. Verisign is the premier supplier of secure certificates. SHOPPING CART SOFTWARE Shopping cart software allows visitors to place multiple product orders from your website. While some minor configuration to your HTML and the software is required, once in place, cart software automatically calculates and totals orders for your customers. While there are many shopping cart software programs available and many ways to install them, most must be installed on the same server hosting your site or on the secure order-processing server. Most merchant account providers also provide shopping cart software. Good merchant providers also have the capability to interface the merchant software with any shopping cart on the market. When choosing a shopping cart software package, consider whether the purchase price includes adequate technical support, how much upgrades will likely cost, and whether it comes with additional useful utilities, such as email autoresponders or report interfaces. By Christopher Swift Christopher Swift ( swiftc@cardaccept.co ) is vice president of marketing for WebTranz, which specializes in helping companies to securely accept credit cards and checks on the Internet. WebTranz offers solutions to all online payment processing requirements, including options such as real-time credit card payment processing and a sophisticated, yet easy-to-use shopping cart.