March 2000 vol2 What's the Buzz? NEW SEARCH ENGINE PROGRAMS AIM TO DELIVER FAIRNESS, REVENUE With the ascendancy of major search engines financed by Internet companies with huge marketing budgets, Web marketers with smaller budgets have felt overlooked. Now three search engines have introduced new programs to help smaller websites increase traffic and revenue. Clickey, a search engine that debuted last year, has expanded its small-website-friendly offerings. Among other things, Clickey randomly sequences the presentation of domains that match users' queries. Specifically, if 1,000 domain names come up as a match, both the 200 that are presented to the user, and the order they are presented in, are randomly determined. (For more information on Clickey's search policies, see WebPromote Weekly, October 1999, Vol. 4.) Now Clickey has introduced a free affiliate program that aims to help websites get their departing customers to return in the future. Affiliates must have a link to Clickey on their websites. Then, if a visitor goes from an affiliate site to Clickey, the affiliate's logo and link appear at the top of every Clickey page the visitor sees. If the visitor returns to Clickey in the future, the affiliate's logo and link again appear on every page. "Let's face it, the odds of someone leaving your website and visiting a search engine to find the next thing they're looking for are very high," says John DeUlloa, Clickey's vice president of business development. "If you're going to have someone leave your website, why not send him or her to a search engine that cares about making sure you're found by plastering your company logo or graphic on all of their search results?" Fairlinks is a search engine that shares Clickey's goal of more equitably displaying websites. Like Clickey, Fairlinks verifies site content and randomly rotates all sites to the top of listings. It also rates sites. "Fairlinks is an association of honest, reputable Internet sites that have become frustrated with the 'old-school' search engine listing methods," says CEO Dan Bradshaw. Among those listing methods Fairlinks assails are "trickery, purchasing of banner ads, or outside influences to get a site listed higher in the engine’s rankings." Fairlinks says it is will list websites for free until it has 100,000 unique hits a day. Then it will begin billing commerce websites $150 a month. Two-thirds of that money will be used for offline advertising for Fairlinks. Search engine 7Search.com's new affiliate program offers websites a chance to make more money. An affiliate website includes a link to a 7Search.com's search return list showing links with related content. The return lists are pay-per-ranking lists. If the visitor to the affiliate website then clicks onto one of the advertiser links, the affiliate website gets 70% of the advertiser's bid price. 7Search.com says the plan lets websites promote thousands of related products and services without any contractual agreement with the sellers. For example, a florist's site can include a 7Search.com link that offers visitors greeting cards to accompany their flower purchases. WILL THEY WORK? Time will tell if any of these alternatives will be viable sources of traffic and revenue for smaller websites. For some Internet marketing guidance that has already been proven viable, read "Moving Your Brand Online: How Sharper Image Did It" in this week's edition of WebPromote Weekly. A companion article, "Going Online: Tips from The Sharper Image," reveals some of the online marketing and business-building lessons The Sharper Image has learned on its path to success. " Moving Your Brand Online: How Sharper Image Did It Specialty retailer The Sharper Image has a unique, carefully crafted brand image as a "cool place for fun products," says Kathryn Grant, the company's senior manager for Internet strategy. In recent years, the retailer's challenge has been to transfer that sense of fun and excitement to the Web, Grant told an audience at the Chicago Association of Direct Marketing's recently held DM Days 2000 conference. In her presentation, Grant outlined how the company made the transition, a transition she says has been successful, based on The Sharper Image's 479% Internet sales increase from 1998 to 1999. The industry average year-to-year Internet sales increase is 300%, according to Grant. BUILDING A BRAND The Sharper Image began building its unique brand in 1977 with its first product, a digital watch that the company advertised in a jogging magazine. That item grossed $750,000, and by 1979, the company had a 12-product catalog with other distinctive, technology-oriented products. Now The Sharper Image sends out 40 million catalogs a year and has 90 retail stores. As the company grew, maintaining its brand remained a priority. "We sacrificed a lot of profitability in favor of advertising to establish our brand," Grant says. Sharper Image's brand is also built on its exclusive product offerings. The company started designing its own products in 1993, and now 30% of its revenue comes from in-house products. "You need to establish yourself as a unique place to find your product or service," Grant says. MARKETING ACROSS CHANNELS The Sharper Image first went online in 1995, and in 1996 got its own domain name. The company has been doing online direct marketing since 1998, including email marketing to its own customers. Now it emails offers to its customers two or three times a month, Grant says. The company uses its various channels to support its brand and to support each other. For example, the company spends $25 million a year to produce and mail catalogs that also drive traffic to its stores and to its website. The Sharper Image advertises its dot-com business on its storefronts and its bags, and the website uses text and photos from its catalog to create continuity and reduce production costs. The company also emails coupons to its online customers that are only valid at its store locations (the message encourages consumers to forward it to a friend if they don't live near a store). Three-dimensional features on The Sharper Image website support the company's brand image as a technological leader, as well as duplicate the fun environment of the store online, Grant says. Consumers can view Sharper Image products in 3D, and see some of them move, such as a rotating CD rack. Similarly, The Sharper Image's auction site, opened in March 1999, duplicates its entertaining store environment--also supporting the brand image. Only available via the main Sharper Image site, the auction site also helps the company manage inventory more effectively than it can with outlet stores. The Sharper Image seeds its auctions occasionally with small numbers of new or best-selling products, which encourages repeat visits. Going Online: Tips From The Sharper Image Though her presentation at the recently held Chicago Association of Direct Marketing's DM Days 2000 was titled "Bringing Your Successful Brand Online," Kathryn Grant, senior manager for Internet strategy with The Sharper Image, touched on many aspects of online business-building and marketing. Here are some of the lessons The Sharper Image has learned: If your company has expertise or resources from other channels, use them on the Web. To support its direct marketing operations, The Sharper Image had its own fulfillment operation, product artwork and copy writing resources. All of those resources now also support the company's online operation. Besides providing consistent branding, leveraging those in-house resources has helped keep online costs down and enabled the division to be profitable from day one, Grant says. Use the online channel to expand your customer base. Thanks to partnerships with America Online and affiliate management operations like Linkshare, Grant says 70% of The Sharper Image's online customers are new to file. Online customers are also slightly younger than its other customers, which positions the company well for the future, Grant says. Reward customers who conduct business via the low-overhead online channel with Web-only discounts. The Sharper Image recently offered online customers a $20 discount on any order over $50. But the high discount didn't gouge margins because the customers placed large orders, Grant says. Personalized email pulls better. The Sharper Image tested two different messages sent to customers who had previously bought its ionic breeze air filter. The messages announced the availability of an upgraded version of the product. One message explicitly referred to customers' previous air filter purchase, while the other didn't. The one that referred to the previous purchase had a 50% higher response rate, according to Grant. By Ross Brown Put Your Internet Marketing to the ROI Test Most marketers know all about return on investment, or ROI, the number that tells you if a marketing campaign is working. Marketers often estimate ROI before launching a campaign, using average response rates for a particular marketing tactic to calculate the expected return. Marketers who want to calculate ROI for Internet marketing can find plenty of tools to help them figure out if their plans make financial sense--both before they start a campaign and after the real-world results are in. PROJECTING RESULTS WITH AVERAGES Estimating ROI in advance of a marketing campaign helps you determine if the projected results are worth the expense. To calculate the ROI for a permission email campaign, you can use the free ROI calculator at yesmail.com. The calculator is offered by yesmail.com, an outsourcer of permission email marketing service and technology. yesmail.com's own salespeople use the calculator to help prospects determine their projected ROI for yesmail.com campaigns, according to Peder Jungck, yesmail.com's chief technology officer. To determine estimated ROI, yesmail.com's calculator uses average response rates and costs for various marketing tactics: 7.5% for opt-in email, 1% for Internet banner ads, and 1% for offline direct mail. Here's a ROI calculation scenario for an email campaign offering an item for sale that yields $40 per sale. The letters in the following steps are used to illustrate the formulas used by the yesmail.com calculator. Send campaign to: (A) 100,000 recipients for (B) $40 product (C) Cost Per Piece, to send = $.25 (D) Expected Response Rate = 7.5% (industry average) (E) Expected Conversion Rate = 10.0% (industry average) (F) Total Program Cost is A x C = $25,000 (G) Number responding is A x D = 7,500 (H) Cost per response is F / G = $3.33 (I) Number converting is G x E = 750 (J) Cost per conversion is F / I = $33.33 ROI = [Conversion (I) x Sale (B) = 30,000] - Program Cost (F) ROI = (750 x $40) - $25,000 = $5,000 or 20% CALCULATE ACTUAL ROI Internet marketing, whether it's permission email or another tactic, also lets you calculate ROI after the fact, using your actual response rates. To get the most accurate ROI data for a campaign, you need precise response tracking. Tracking individual responses eliminates sales increases from variables other than the specific campaign you're measuring. Technology such as unique URLs and password-protected memberships can help you identify the results of a specific campaign. Internet marketing service providers--whether it's an ad network, a website, or an email campaign provider--are constantly improving such tracking technology because they're hungry for your marketing dollars. MORE ACCURATE ROI PROJECTIONS Internet marketing service providers are also working to help marketers make more accurate ROI calculations before they launch their campaigns. yesmail.com, for example, has developed a response modeling system that will better project the likelihood that specific email recipients will respond to marketers' offers, according to Len Dintzer, yesmail.com's director of customer intelligence and database services. Spinway.com, an online advertising agency, also promises more accurate ROI projections. Spinway.com co-brands free dial-up Internet access to attract, retain and profile users. This lets advertisers get a more accurate reflection of Spinway's user base: their activities, their preferences, and their online spending habits. Based on the data it collects, Spinway says it can more accurately project ROI. "The performance of a typical web-based ad campaign is measured mostly by click throughs, which is the widespread adopted way to monitor how well your ad campaign is doing," says Maura Rodgers of Spinway.com. "Unfortunately, click throughs and conversion rates do not provide advertisers with accurate enough data to project ROI." Regardless of which marketing tactic you're using, it's imperative that you use all the marketing analysis technology available to make sure that every dime spent comes back to you in terms of purchase and customer loyalty. By Shannon Kinnard Shannon Kinnard is president of email marketing agency Idea Station and author of "Marketing With Email"." PRIVACY CONCERNS STALL DOUBLECLICK'S USER TRACKING PLANS Online privacy advocates scored an unprecedented victory earlier this month when banner ad server DoubleClick put on hold its plans to match online and real-world consumer information to track online users by name. "Until there is agreement between government and industry on privacy standards, we will not link personally identifiable information to anonymous user activity across websites," said CEO Kevin O'Connor. The concession came in response to mounting pressure on numerous fronts. State and federal agencies were investigating DoubleClick's consumer tracking plans, and civil suits had been filed against it, according to the privacy advocate JunkBusters. In addition, The Wall Street Journal reported that DoubleClick customers such as AltaVista were distancing themselves from the company due to concerns about how it handles user data. Wired News pointed out that DoubleClick did an about face because, for the first time ever in a high-profile Internet privacy brouhaha, the accused company's stock price suffered. Before the publicity about its planned real-world user tracking, DoubleClick's shares were at $120. The stock sunk to $75 in the middle of the outcry, but then went back up to $97 after the company announced its data matching moratorium.