RE-LEARNING THE BASICS OF MARKETING
Byline: Nancy Brumback
CHICAGO — “You have to fish where the fish are. You have to put your message where the target customers are. The basic rules still apply.”
That was part of the message of marketing e-tail, as spoken by Mark Nassutti, the vice president of marketing for Eddie Bauer Retail North America at a recent conference sponsored by the Retail Advertising & Marketing Association here.
As the fortunes of the Internet world have risen and fallen, so have the budgets devoted to marketing. But panelists at the conference said they have learned — or relearned — some basic lessons.
It’s critical, said Nassutti, to link retail, online and off-line marketing efforts together. “You have to be trichannel, or you’re toast,” he said. Integration is the new buzz word, and the most effective way to reach customers for online retailers is via affiliate programs, e-mail outreach and advertising on shopping rather than content Web sites.
Off-line advertising and marketing to promote online business peaked in 1999, and is likely to stabilize at 25 to 30 percent of marketing budgets, said James Vogtle, e-commerce research director for Boston Consulting Group out of the firm’s Toronto office.
BCG’s recently released study of online retailing showed the percentage of marketing budgets spent off-line by online retailers topped out at 62 percent in 1999, driven by expensive brand-building television ad campaigns that “have gone away.” However, customer acquisition costs have dropped, from $71 in the fourth quarter of 1999 to $20 in the third quarter of 2000, as efficiency has increased.
The most popular promotional strategies during the holiday 2000 period were: e-mail advertising, gift certificates, new portal deals and new partnership deals with content Web sites.
Jon Nordmark, president and chief executive officer of eBags, an online luggage retailer, was also on the panel, which was moderated by Elaine Rubin, president of ekrubin Inc., an e-commerce consultant, and chairman of Shop.org, a trade association for companies selling on the Internet that became a division of the NRF in January.
Nassutti and Nordmark pointed out that e-mailing directly to customers, as well as affiliate programs with Web sites that direct viewers to the shopping portals, such as schoolpop.com and befree.com, have been the most effective methods of attracting customers to their online sites.
The retailer’s Web site, eddiebauer.com, was profitable in 1999, broke even last year and is expected to be profitable this year, he said. It started two new programs last year that have been effective so far, said Nassutti. First was an affiliate program with schoolpop.com, which donates a percentage of transactions made through it to schools of the customer’s choice. Those donations are funded by commissions paid by retailers for customers who come to the e-tail site via the affiliate Web site.
“We are getting a 20-to-1 return on that investment,” Nassutti said. Eddiebauer.com has also expanded its outbound e-mail program and that effort is generating a 10-to-1 return on investment, he added.
The much-maligned banner ad “is still very effective and one of our main sources of new customers. Banners are not dead if you have a good brand,” Nassutti said. The key to banner ads, he said, is placement. “Content sites don’t deliver well. Their viewers are not in shopping mode.” Instead, Nassutti suggests running banners only on shopping Web sites, “where you see other great brands such as J.C. Penney Co., Lands’ End and L.L. Bean. If you don’t see those brands, you don’t want to be in that neighborhood.”
Two years ago, he noted, big Internet portals such as America Online, MSN and Yahoo! were “almost the only game in town” for Internet advertising. Those portals cost almost 15 times as much as affiliate programs now, he said.
But now, with the right combination of affiliates, e-mail and banner ads, “it’s getting to the point where we can tell AOL to take a hike, if they don’t bring their rates down,” Nassutti said.
The two-year-old eBags does about $4 million per quarter, with losses running about $1.2 million a quarter — not a bad equation, Nordmark said, particularly when compared to losses of more than $12 million a quarter for Internet retailers with similar sales, such as the ill-fated Garden.com and Pets.com.
The company is spending about $250,000 a month on marketing, down from $1 million a month slightly more than a year ago, scrapping such “fluffy marketing” programs as celebrity endorsements. This quarter, the company expects to generate $5 in revenue for every dollar spent on marketing.
“None of the off-line marketing stuff worked. It’s a direct-marketing game,” said Nordmark.
Like eddiebauer.com, eBags is focusing on affiliate programs and e-mail. “We do a huge affiliate business,” including a site called befree.com, he said. About 10 to 15 percent of ebags.com’s customers come through the affiliates. “For every 80 cents we spend there, we get $10 back,” Nordmark said.
The company is working on additional affiliate programs with online travel Web sites operated by Sabre and Worldspan, with United Airlines’ online store, and with travel agents.
E-mail marketing efforts generate about 20 percent of the company’s sales, he added.
Portal deals also generate customers, about 8 percent from AOL and 6 percent from MSN. Nordmark agreed with Nassutti that it is vital for an online e-tailer to be in the shopping areas of the portals.
“AOL made us do all kinds of stuff, such as ads on travel sites, but we found the shopping area is what worked,” he said.
Asked about Eddie Bauer’s in-store marketing for its online site, Nassutti noted only 1.2 million of the store’s shoppers are on the e-mail list. The company is making a concerted effort to collect e-mail addresses from its brick-and-mortar customers. The retailer is emphasizing convenience — tracking purchases, finding a full range of size and color — in order to entice customers to try shopping on the Web site. For example, there are now signs in the dressing rooms at Eddie Bauer stores that suggest customers try buying online if they can’t find an item in that store.