Stop Internet Marketing (3) All Determination; No Distribution

Less distribution cost, shorter distance to consumers, larger sales can't be wrong.

---

The Internet has long been considered a type of media, hence the preponderance of discourse and discussion of Internet advertising and paid content that one can find using any search engine. However, few eCommerce enthusiasts can provide a straight/convincing story of how the Internet should co-exist with its alter ego of a distribution channel.

As has been previously discussed, marketing without a solid planning of distribution, is like a puzzle with an unbearable number of missing pieces at best. We, however, can hardly blame people in the past for not doing a better job at this, since that was a time when eCommerce was characterized by many individual yet separate points of operations without any industrial value chain to hold them together. That was a time when the Internet as we know it, with all its potential to be an effective means of distribution, had not materialized.

If you want to start up a business in the real world, for example, you can choose among the options of setting up a store in a crowded commercial district like Ginza in Japan, having your stuff set out on the floor along a busy street, renting a spot within a department store, or having your merchandise sold through someone who is more comfortable facing consumers than you are.

These conventional sales patterns have familiar names like chain stores, franchised stores, distributors, dealerships, roadside stalls, department counters, specialty stores, you name it, and one should feel free to adopt any of the above as you see fit.

In the virtual world of the Internet, as in the world of the tangibles, one can find the whole gamut of the aforementioned types of distribution channels. For instance, PC Home's online shopping website (the largest online shopping website in Taiwan, whose business model is to take orders form consumers and then transfer them to suppliers) could be said to be the counterpart of a hypermarket in the real world. That is, all the items for sale on PC Home are chosen, sourced and put on racks by PC Home staffers.

If you decide to go for this kind of channel, then, the only role you can fit into would be that of a supplier, who simply waits for orders on the Net to be transferred to you by PC Home. All that's left for you to do is deliver the goods. Of course, PC Home has the right to shut your stuff out, but in turn you get to use a platform without having to go about maintaining it, like people having their own websites must.

Through such platforms as Yahoo! Auction or eBay, you can enjoy yourself setting up a small place where people will come and chat with you and maybe get something from you if you guys really hit if off, exactly the way people mingle and do business along bustling streets in Shanghai. There is a flea-market feel to these auction sites, so to speak.

This kind of parallel existence also extends to the duo of real stores and virtual stores on shopping websites, in the sense that Yahoo! and eBay act like commercial buildings where a certain number of spaces are available to be rented out to business proprietors who wish to sell things in the building. People want to move in, because it is the responsibility of the owner of the building to round up enough business to form a cluster and to conduct promotions to boost consumer walk-ins (click-ins).

Also, you can choose to set up a specialty store, in which you sell your very own products. An Internet counterpart to this mode of business would be a website of your own. Usually, people go on this model if they aim to nurture their own brand names or to get a direct hold of the clients, as opposed to the aforementioned business models in which access to clients is in someone else's hands.

Those perks, however, come at a cost that is usually the highest among all of mode of operations. But that price may be justifiable due to the fact that over long term, when your brand name is well and alive, you get to reap better revenues plus a bunch of loyal clients. Just image, who gets the credit for a product provided by you but sold via eBay? Who owns that particular client? You or eBay?

Specialty stores, of course, come in different types. Many famous apparel brand names, for example, set up counters at department stores besides having their own stand-alone boutiques. By the same token, you can at the same run your own website and have a branch set up within a portal site.

To avoid the rather high cost that comes with having a specialty store online, many strategies apply. Some might focus on their own stores if it's the brand name they cherish; others might be happy just to see their goods sold and find having a spot within a portal/auction site a reasonable choice. You, advisably, should consider your operational focus and it should never embarrass you to go back and forth between the two as you see fit.

Other than all the above, there is one ultimate way to lower the cost of opening a store. That is, the franchise system that has roamed the real world for a really long time has finally infiltrated the Internet, as one lesser-known Internet mall has adopted this mode of operations to set the record for the busiest surfer turnover in Taiwan.

You might be taken aback a bit that the virtual business is now conducted in ways so similar to those commonly seen in the real world? But this is hardly surprising, really, since eCommerce has had years of development under its belt and is not exactly a spring chicken anymore. That is, eCommerce now comes in as many modes of operations as one can think of.

The bottom line is that as someone who wants to conduct Internet marketing, you must ponder on such questions as "how do I measure the cost of distribution?", "how badly do you want to have your own brand?", and "would I rather be a supplier and let someone else worry about selling my goods?" These are all distribution issues that you should give thoughts to before taking the plunge into eCommerce.

How can one keep distribution cost to a minimum? How can one get closest to consumers and how can one maximize sales? The one who can possibly answers these questions best for you is yourself. After all, who knows your business better than yourself? Also, don't assume that these questions would have different dimensions if yours was a store firmly based on the ground and not drifting on the Internet. Online marketing is really not a big deal. It's just marketing, if you push the question. (
2004/03/21 - By Digitalwall.com - Way to
China Internet/Telecom )

---

- Read More

Prev : Stop Internet Marketing (2) All Action; No Reaction

---

- Today in History

Great Changes in Wireless Internet Industry (3) Nokia's Strategy - 2008/03/23

Predictions on China Internet Market (5) Search Engines - 2006/03/26

Media, Community, and Blog (4) Production-Marketing Relations - 2005/03/27

Media, Community, and Blog (3) Deconstruct Blog - 2005/03/20

Stop Internet Marketing (3) All Determination; No Distribution - 2004/03/21

3G Time Comes (3) SMS, Email and MMS - 2003/03/23

Stop Internet Marketing (2) All Action; No Reaction

Consumers are jaded on or off the Internet.

---

Stimulus, reaction; stimulus, reaction... This description should not find you baffled if you knew that it is the traditional Internet marketing I am trying to depict. This simply is how consumers have been treated for a long while.

Let me elaborate on how consumers get impatient and finally jaded with this seemingly unending process of stimulation and reaction, a process that has seen the Internet read and treated as a medium and a marketing channel for at least the past five years. This, nevertheless, is an approach that has been survived by the newest expectations of Internet marketing.

In Taiwan, the year 1998 marked the roughly simultaneous establishment of five major commercial portal sites as well as a number of mid-size content websites that might be smaller yet collaborated to form an advertising network. Online advertising, as a concept, has since been commercialized, meaning any salesperson would be able to show you the price list of Internet banner ads any minute now.

Earlier on, the advertising banners posted on portal sites could register a click rate of at least 10%, meaning that out of every 100 persons who laid eye on that page, ten would actually click on the ad. Some ads with more sensational copywriting or more alluring gifts might even make it above 20%.

These click rates, however, proved to be short-lived as they dropped to less than 2% within one short year and then to about 1% after another. The hit rates thrived and then tapered off for the simple fact that Internet ad's attraction wore off as time went by. After all, the initial attraction stemmed from the novelty of the Internet as a never-before-seen media, not from the ad content itself.

Starting 1999, the free newsletter service as a power ad tool began to gather attention, as eCommerce website owners found that ads inserted into newsletters got more click-ins than website banners and were capable of achieving a click rate of some 10%. Better, these inserts are at eCommerce websites' liberty to be sent to consumers, making them a more effective promotional tool.

In just one short year, however, this figure has fallen back down for the same reason. That's when the eCommerce website owners found that they must introduce database marketing to differentiate between newsletter subscribers that belong to different demographic categories along the lines of age, gender, and income, and then send ads of different contents or styles accordingly, to improve click rates.

Such strategy has given rise to eDM. Due to the fact that portal sites come with a large number of members, however, even the highest level of precision in data analysis, cross reference, and client targeting could not revive click rates to above the 10% mark.

Entering 2003, when the SARS outbreak pushed up concurrent Internet user count, people suddenly picked up the habit of shopping online and more people realized that they could start a small business for extra income. The bad news, however, was that with people of this mentality growing in numbers, junk mail became an almost intolerable nuisance to many.

I myself have an e-mail account that I have used for seven years. With this e-mail account, I have purchased plane tickets, handsets, books, and movie tickets. Every week or month, like a clock that does not need new batteries, eCommerce websites I have patronized mail me newsletters, either to send regards or messages of discounts.

As time goes by, I have lost track of the things I've bought over the Net and the newsletters could well have inundated my place just as the owl mail flooded the house of Mr. Dursley in the first installment of Harry Potter franchise were it not for the fact that all of these commercial prints existed formless.

It turns out that every eCommerce website thinks it a good idea to prompt me to buy more by sending me newsletters; worse, I never missed any of this junk mail given that this e-mail account has been there forever.

Newsletters of this sort come in every day like there is no tomorrow. In fact, it has gotten to a point where I have to routinely delete over 500 e-mails tagged "unable to handle" manually, and by routinely I mean every single day. Here I am talking about a huge chunk of mail mass that comprises junk mail, eDM from eCommerce websites, and free newsletters whose sheer number snuffs any possibility of me reading them.

What I am experiencing is a critical phase where consumers have started to feel numb to stimulation. That is, a lot of these e-mails are getting are blown off as useless and go straight from inbox to trash box. We'd be pushing it to claim that this should not be happening. We must realize that "online" marketing is only as effective as the marketing itself can be, despite all the hype and fancy names that Internet marketing heaps onto itself.

The old-school direct marketing, defined by acquisition of a list of target clients and then the mailing of ads right to their mailboxes, has averaged a return ratio of some 2%; by going digital, to one's dismay, the improvement of the ratio is hardly noticeable, if any.

Not in the least being scornful of Internet marketing, I am here simply trying to shed light on the fact that in recently years, when eCommerce has been making its second comeback, many website owners are actually in the thick of eCommerce for the first time and have been innocently buying all the traditions that have been passed down during the past five years. What they fail to realize is that now is a different time and age.

I dubbed this a "blind faith" in the Internet. A lot of people making their first attempt at eCommerce scamper to order newsletter, community, shopping cart, and credit card payment system features. What they fail to reflect on is the question of whether they really need these and whether these functions will give them what they want.

Last but not least: do you really need a website to be in the "eCommerce"?

Advertising or marketing based on the formula of stimulus-reaction will ultimately fall on its face. In fact, it has, signaling that it's high time that one parted with these marketing gimmicks and looked for redemption in brand names. As a pity for most and a bliss for a wise few, this reality hasn't sunk in for many out there. (
2004/03/14 - By Digitalwall.com - Way to
China Internet/Telecom )

---

- Read More

Prev : Stop Internet Marketing (1) All Market; No Marketing


Next : Stop Internet Marketing (3) All Determination; No Distribution

---

- Today in History

Predictions on China Internet Market (4) Job, Education & Games - 2006/03/19

Predictions on China Internet Market (3) Online News & Blog - 2006/03/12

Media, Community, and Blog (2) The Dream of New Media - 2005/03/13

Stop Internet Marketing (2) All Action; No Reaction - 2004/03/14

3G Time Comes (2) Mobile Internet Is Not the Killer Application - 2003/03/16

Stop Internet Marketing (1) All Market; No Marketing

A marketing that hails advertising but turns a blind eye to building of distribution channels is one-legged. It simply doesn’t get very far.

---

Just the other day, a friend of mine forwarded me a letter, which told of a seminar on Internet marketing. The lineup of the lecturers seemed quite impressive, with many of them having been long known as experts on Internet marketing. Some names were familiar and I could tell that the initial involvement of some in Internet Marketing could go back five or six good years.

The curriculum outline, however, told of a different story, as it sadly struck me that the discussion of Internet marketing as a supposedly very important subject has managed to come up with very little new stuff in a span of five to six years. That is, people remain hung up on such matters as how to set up websites, how many different types of Internet advertising there are, how to buy ads more effectively, how to compile a list of potential customers through promotional activities, how to induce forwards, and how to keep track of newsletter subscription and penetration.

Granted, these bits of practical information can prove essential to those who want to plunge into Internet marketing right away since they would want to know how well their newsletter ads would work out and whether it is a good idea to play some interactive game with Internet surfers to collect some names.

Despite these considerations, the reality remains that these courses on Internet marketing only deal with the issues of contacting target clients on the Internet, communicating with them and keeping track of them. Interestingly, these issues are not unique to Internet marketing. That is, one gets to ponder on all these questions when he buys a TV ad slot, since the TV ad agent, too, will let you in on the effectiveness of the TV ad through market research.

What, then, is Internet marketing? Stripped down, Internet marketing is just marketing. Having "Internet" installed in front as a modifier doesn't really say anything except that this particular type of marketing takes place on the Internet. It means as much, or rather, as little as "TV marketing" or "newspaper marketing," if there were really such terms.

We must then revisit the core of marketing. That is, marketing can be broken down into combinations of STP and 4Ps. STP, to begin with, are the initials of Segmentation, Targeting and Positioning, while the four Ps stand for products, prices, places (outlets, distribution channels), and promotions.

Let me be very clear about one thing. By giving you these jargon terms, I am not showing off my knowledge of marketing 101, since these bits of information are to be found in books for anyone willing to make a small effort. What I am trying to say, really, is that I am disappointed to find veteran Internet professionals got so hung up on the "Internet" part that they haven't even covered the basic marketing know-how.

Segmentation, to begin with, can be done using such standards as age, gender, presence/absence of kids, and whether the targeted consumers are in the habit of using skin-care products, to name just a few. That is, one who aspires to sell skin care products on the Internet must choose males or females to be one's target clients. That, my friend, would be segmentation at work.

Then, we must proceed to locating the target market. That is, once the potential skin-care product users have been segmented into such groups as males, females, teenage students, and so on, you might then decide to focus your marketing offense on students as people their age supposedly use the Internet most frequently and influence of the Internet supposedly rubs off on them most effectively.

Later on one might find this group of consumers drawn to effective yet rather cheap products as market research on the Internet shows that these people spend quite some time yet not much money on the Net. With this knowledge, it makes sense for the budding eCommerce website to position itself as a "price breaker."

As such, one might start out selling renowned brand-name products at sub-par prices to gain a foothold. To this end, in turn, one must find ways to source inventories at low costs to produce enough force of price competition. Naturally, the best way to do that is buy in large quantities and sell on slim margins.

With the profit model set come the tasks of picking products that are suitable for sales on the Internet, setting prices that are acceptable for the targeted consuming populations, and finally, deciding through what to have these products sold. As for that last question, one can usually choose among the options of setting up one's own website, registering with an auction website, and setting itself up as a supplier to some portal site and having them do the selling for you.

Such considerations, however, have nothing to do with whether you plan on setting up your store online or offline. Whether you are basing your store along a business street, inside a department, or hawking your stuff squatting on the ground, you will all go through the identical set of considerations. That is, where you can best meet your targeted consumers and how much it costs to maintain one's business model of choice in terms of distribution, rent, and merchandise.

Once these elements are in order, one should then proceed with promotions. For instances, one can have product A and product B sold bundled to prod sales or one can offer a small sample of product D to buyers of product C in case consumers might find product D equally intriguing.

On thing especially noteworthy about the Internet is its ability to carry real-time interaction. That is, whatever your product mix is, you can now very soon how consumers feel about it and adapt/adjust immediately. After all, product mix welcomed in the bricks-and-mortar outlets is not necessarily hip on the Internet. This is when experience must come into play.

The very last in the long list of an eCommerce website owner's concerns should be through what Internet advertising activities to let consumers in on the fact that you have started a new business, how to fathom the effectiveness of these ads, how to manage your website's newsletter, and how to go about managing your clients so that they will become regulars.

By enlisting a product that I am not particularly familiar as an example, as I did above, I was simply trying to demonstrate a point on Internet marketing. That is, Internet marketing is little different from marketing you've always known. Therefore, there is no need to be overwhelmed by fancy wording in Internet ads or by the sophistication embodied by the newsletter system.

The old-school Internet marketing sees the Internet as a media and a media only. That is why people back then concentrated so much on Internet advertising and seemed blind to the fact that the Internet is also a distribution channel, and indeed, such tilting in emphasis on two equally important halves of eCommerce has proved to be unsustainable. (
2004/03/07 - By Digitalwall.com - Way to
China Internet/Telecom )

---

- Read More

Prev : The PDA Trilogy: A Story of Evolution


Next : Stop Internet Marketing (2) All Action; No Reaction

---

- Today in History

Great Changes in Wireless Internet Industry (2) Yahoo!'s Strategy - 2008/03/09

Great Changes in Wireless Internet Industry (1) Google's Strategy - 2008/03/02

Predictions on China Internet Market (2) Subscriber Number Is King - 2006/03/05

Media, Community, and Blog (1) The Beginning of the Story - 2005/03/06

Stop Internet Marketing (1) All Market; No Marketing - 2004/03/07

3G Time Comes (1) What Is 3G? - 2003/03/09