February 12, 2004

During a session that quickly became a seminar of negative comparisons to TV advertising, some of the country's largest marketers detailed how "on the cheap" Internet methods have become a central muscle of their marketing communi-
cations programs.

A growing number of large marketers are finding Internet direct-marketing and relationship-building strategies more effective than TV advertising, attendees at the iMedia Brand Summit heard.

Some described their successes with pure Internet plays, others with strategies that used economical Internet tie-ins to boost the impact of their TV buys.

DaimlerChrysler boosted its online media spending 30% last year, largely because of the importance of the Internet as an information medium for car buyers, said Bonita Stewart, director of interactive communications for the automaker. She said that 70% of car shoppers use the Internet as their primary means of getting automotive information.

Some of the most effective online efforts, however, dovetail with TV, she said, noting a 215% spike in overall site traffic and a 1,500% increase in the number of "handraisers" seeking information about the Dodge Magnum in the day following a Feb. 1 Super Bowl ad for the vehicle.

Chrysler now gets 80% of its online handraisers for quotes and product information online, Ms. Stewart said, adding that "800 numbers are just falling off a cliff and [voluntary response cards] are not as effective."

She said a branded entertainment test Chrysler did with TiVo involving a 30-minute program that integrated its Crossfire model into the plot yielded four times the usual 2% response rate for other direct-marketing strategies.

ING Direct found that direct marketing, including both mail and e-mail pitches, is yielding customers at a small fraction of the cost of the TV advertising the online bank initially tried in 2001, said Dave Lewis, chief marketing and information technology officer for ING.

"TV has worked a lot less than direct response -- both mail and interactive," he said. TV had a strong role in creating awareness, but ING research found direct marketing also created strong awareness even among non-respondents, he said.

Direct marketing vehicles yielded new accounts for as little as $10 to $15 each, he said, compared to as much as $150 to $200 for TV and $35 for incentive-based member referrals.

That can be the difference between profit and loss for ING Direct, an online bank that has concentrated mainly on a simple model of savings accounts paying 2% interest and mortgage lending, relying primarily on volume rather than up-selling its customers. An average savings account for ING is $10,000 and yields a gross margin of only $50 annually. But by acquiring accounts efficiently, Mr. Lewis said ING Direct now has $20 billion in assets and turned a profit its second year, three years ahead of plan.

ING's $50 per customer is roughly similar to the revenue Unilever sees from each of its customers, said Tony Romeo, CEO of the consulting firm Strategic Dynamics and a former interactive marketing executive for Unilever.

So, not surprisingly, package-goods marketers also are looking to interactive programs to reach consumers on the cheap, said Grad Conn, a former Procter & Gamble Co. executive and now vice president and managing director of Grey Global Group's Grey Direct Canada, Toronto.

Package goods marketers are spending hundreds of millions of dollars online, but very little of it on media, having concentrated on aggregating customers using custom content on their own branded and multibrand lifestyle Web sites, Mr. Conn said. They've already compiled vast online databases, ranging from P&G;'s Tremor program with 280,000 highly connected teens to its 385 million name European database. He said 12% of P&G; customers now connect with the company online.

Brands, such as Kimberly-Clark Corp.'s Huggies, have shifted 50% of their marketing budgets to relationship programs, much of that online, he said.

Because package-goods online marketing has migrated entirely to relationship programs, he said online publishers need to shift from cost-per-thousand to cost-per-acquisition (of new opt-in program members) to win their dollars.

But Mr. Romeo said even the relationship programs remain a fairly low priority with most package-goods companies, though some larger brands, such as Huggies or Unilever's multi category Dove, have the resources and consumer appeal to support them.

Source: Adage.com

        

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