For b-to-b direct marketers, the past year has been one of the most tumultuous. New technologies, software, opportunities and approaches have gone from being speculative concepts to vital realities. Trends such as globalization, rich media and the integration of e-mail marketing have completely reshaped the way marketers can—and must—do their jobs.
In this special report, BtoB asked top direct marketing executives to give their takes—and rankings—on the movements most affecting the way they do business.
The globalization of b-to-b direct marketing is the most marked and oft-cited trend. While many U.S. financial and hardware companies have long been quintessentially global, b-to-b direct marketers are only now tackling non-U.S. markets in earnest. But the speed with which they are making gains—or, at least, announcements—is simply remarkable.
Earlier this month, True North Communications Inc. acquired two b-to-b direct marketing firms, one in the U.K., the other in Brazil. Just a few days before, e-mail marketer Bigfoot Interactive launched Bigfoot Japan Corp. And prior to that, FloNetwork Inc. and Experian entered a broad European e-mail marketing pact.
The direct marketers are building networks outside the U.S. because that is where coveted Fortune 500 companies do much of their b-to-b business. But they are also doing so to court dot-coms, which by virtue of their wired business model can—and are expected to be able to—do business as easily in New Delhi as in New York.
“The fact of the matter is, only five years ago, Coca-Cola Co. and American Express Co. were the only global brands,” said Larry Kimmel, COO of Grey Direct. “But now, when you serve up software, the developers in Mumbai raise their hands and say, ‘I want that now.’ “
Direct marketers, in turn, are finding that having an international network is becoming a requisite for winning big accounts. In some cases, client demand has even exceeded expectations. “The requests for international lists are a lot more than we ever anticipated,” said Scott Paternoster, president, 24/7 Media Solutions, a division of 24/7 Media Inc. “To do something on a global basis only last year was infrequent,” he said. “Now b-to-b is much more global. Clients are talking at least Europe, then Asia.”
Still, the hype surrounding global b-to-b direct marketing still exceeds any real progress. This is hardly surprising. Top business schools are replete with case studies of U.S. companies floundering in foreign markets because they failed to adapt to local customs. Blue-sky planning about doing business in, say, Guangzhou, China is one thing; negotiating with local bureaucrats to set up an office there is another matter altogether. This is a reality that grizzled Fortune 500 executives have patiently learned to deal with and work around. Whether upstart b-to-b e-mail marketers can be as successful is yet to be seen.
“There have been some enormous failures,” said Susan Jones, professor of marketing at Ferris State University in Big Rapids, Mich., who believes U.S. b-to-b executives need to do a better job adapting to cultural and business differences.
Others said the biggest challenge is getting reliable international b-tob lists. “If I want to get Australian Lotto players, that’s one thing,” said Diane Widerstrom, VP-list services at Grizzard Agency. “But if I want Australian CIOs, that’s a lot harder. It’s not out there.”
E-mail marketing integration
Executives at big b-to-b companies are increasingly integrating e-mail marketing efforts with more traditional marketing programs, instead of running them separately. This is a clear departure from just over a year ago, when corporations often ran e-mail marketing campaigns that had little to do with existing traditional campaigns.
“B-to-b marketers are getting serious about testing the Internet and finding out how it fits in and how to integrate it into their ongoing, core marketing efforts. There was a mistake in the beginning, treating the Web as a separate activity,” said Rich Baumer, president-CEO of VentureDirect Worldwide Inc.
Large b-to-b companies are also integrating e-mail marketing across divisions because they need to if they want to compete with dot-coms, which have been e-mail marketers from the get-go. But, tellingly, they are also doing so to keep these start-ups from poaching their business.
Until recently, big company divisions not only regularly passed off responsibility for their e-mail marketing campaigns to sister Internet units, but also routinely farmed out work to dot-com agencies. These agencies were charging their regular fees and sometimes taking their patron’s clients with them after the job was done.
“These dot-com deals are lethal. They are stalking your customer base and taking them,” said David Ceolin, founder and president of Digital Cement Inc., a developer of corporate marketing portals. Large corporations have made gains in preventing this from happening, he said.
Privacy and b-to-b
Privacy, a longtime boogeyman among business-to-consumer marketers, is now beginning to spook the b-to-b crowd. And rightly so.
Like their business-to-consumer brethren before them, b-to-b marketers quickly graduated from using e-mail sparingly to doing so with abandon. A backlash among targeted executives soon followed, leading to a renewed restraint among marketers. It might be too late.
Congressional and state representatives, looking to placate corporate and consumer constituencies, are now keen on getting involved. All manner of legislation is being floated, some of which could do real damage to b-to-b. “It’s like public concern No. 1,” said Brad Shapiro, VP-marketing of ActiveNames Inc., a New York-based e-mail address company.
Among important recent developments, the powerful House Banking Committee, spurred by identity theft concerns, is now investigating data sales practices. And states such as Missouri, which is seen as a bellwether in terms of legislation and public opinion, are increasingly scrutinizing privacy standards and coming down hard on companies that purportedly abuse them.
The Direct Marketing Association, which was criticized for not taking an active enough role in monitoring b-to-b privacy issues early on, is now taking the lead in developing best-practice guidelines on the issue. It is also actively lobbying Congress and the states.
Indeed, as much of the New York-based organization’s lobbying is directed at state reps as at Capitol Hill insiders. The strategy makes sense; legislation from 50 different statehouses could prove more crippling than a sweeping federal mandate.
The DMA is also encouraging nonmembers to tread carefully on privacy issues. (For more, see the Q&A with DMA President-CEO H. Robert Wientzen on Page 42.)
B-to-b marketers have almost uniformly adopted opt-in policies. This was done as a pre-emptive strike against rising privacy concerns. List managers followed, touting their wares as being fully compliant. Opt-in lists became the rule, with double opt-in carrying even more cachet. Some thought such lists would prove a marketing panacea. Who better to target, after all, than someone who said “yes” twice?
But as is often the case with so much of the Internet, rosy concepts do not always lead to workable realities. Opt-in is making such gains in popularity that some industry executives fear lists will inevitably become diluted. This contention bears out for anyone who has opted in for information on one b-to-b subject, only to get flooded with e-mails on others. After a while, reading and then deleting simply evolves into deleting. “Certainly this is occurring as more people get more and more e-mail,” said Lee Kroll, president of Kroll Direct Marketing.
“There are only so many opt-in lists people can be on before they stop paying attention,” said Dev Bhatia, president-CEO of HotSocket Inc., New York. He said that widespread disillusionment among targeted executives could ensue, making direct marketers’ jobs all the more difficult.
As a countermeasure, many direct marketers are now giving targets the choice to opt out after each e-mail. “We always allow for double opt-in and always give the option to opt out in every subsequent e-mail,” said Debra Taeschler, president of Grafica Inc. “Corporations love it [opt-in e-mail] and will use it until you reach a saturation point, which is coming,”
Quicker data delivery
Internet time has hit direct marketers, a trend lauded by those interviewed for this special report. New technologies are allowing list managers and database companies to deliver targeted information quicker than ever. This lets marketers better gauge the effectiveness of an ongoing e-mail campaign and adjust it if it is floundering.
“In the bad old days, you would wait for your campaign to be over, then ask for an update,” said Josh Siler, Internet strategist at Babcock & Jenkins, a b-to-b marketing consultancy. “Now it’s happening in real-time. Now we know halfway through a campaign which lists are pulling better.”
Direct marketing executives say this quicker way of doing business is being driven by—surprise—the Web. “What we see the Internet doing is operating as a data distribution tool,” said Paul Theriot, VP-business development at telemarketing list provider AccuData America. “It’s all about quicker delivery. We have an online account and order system on the Net. Clients can get this in seconds. This used to take hours.”
Personalization has been a buzzword among b-to-b direct marketers for years. But e-mail marketing, which can be easily customized, has allowed for real progress. “It’s now a monologue to start a dialogue,” said Tracy Emerick, VP-chief technology officer of IQ Digital Services Inc., Portland, Ore. “Now, we can develop e-mails specifically designed just for [targets]. Now I know: Do I want to give them offer No. 1, No. 3 or No. 10?”
The integration of traditional direct marketing techniques allows for even greater personalization, Emerick said. “People are coming at them with phone calls, regular mail, e-mails. In this type of market, we really can create a relationship,” he said.
Indeed, many start-ups view personalization as a way to cultivate a lasting relationship with a b-to-b customer. It doesn’t come cheap, however.
“The interesting thing is that there seems to be an immense effort to try to understand which personalization techniques work and which don’t work, from banner ads to collaborative filtering to CRM on the back end,” said Christian Gheorghe, CEO of Tian Software Co. Inc., a Denver-based ASP. “The general consensus is that they are expensive, and marketers are starting to look very carefully at this measurement.”
Still, companies can keep costs down if they view personalization not from a myopic technology vantage point, but as part of an integrated marketing process, Gheorghe said.
Focus on clients
When b-to-b companies introduced their first Web sites in the early- to mid 1990s, the emphasis was on product. Many were tech- and jargon-heavy clunkers, difficult to read and even harder to navigate. In the late ’90s IBM Corp. made its Web site more customer segment-focused, a move followed by big companies and dot-coms alike.
This trend toward client focus is now taking root across all customer interfaces, from Web sites to e-mail marketing programs. Industry watchers say this trend will benefit b-to-b companies, which stand to get increased sales from clients that appreciate offers that take their various needs into account. “Wise companies, and especially those that understand CRM, are recognizing that they need to organize around customers,” said Ruth P. Stevens, a consultant on customer acquisition and retention who teaches marketing at New York University.
The reasons for this are straightforward. In years past, marketers often targeted clients with offers based on past purchases, such as a certain type of software or server. But since those needs were already met, clients began to view subsequent marketing efforts involving similar products as redundant.
Now, b-to-b companies are increasingly anticipating clients’ needs and customizing offers based on them. “At the end of the day, customers have dozens of needs. One way to provide for them is to give them auxiliary help,” said Ceolin.
Rich media has long been touted as a killer app for the Napster set. But its use in targeting b-to-b clients to date has been limited. Expect that to change, especially if vendors get their way.
A host of tech sellers, from big ones such as IBM to start-ups such as Radical Communication Inc., are saying a wider use of rich media among b-to-b companies is imminent.
Executives note that b-to-b TV advertising has departed from its boring heritage to a more compelling consumer style and that e-mail marketing is soon to follow. Rich media, including streaming video, will be a big part of this, they say. “There’s so much technical and complicated information that, at the end of the day, it doesn’t matter if you’re a business or a consumer; those things that appeal to human nature work as well in b-to-b as in business-to-consumer,” said Baumer.
The long-standing downside to using rich media, however, still exists: Corporate users often do not have the bandwidth to support it.
State Internet taxation
That Congress will one day forgo yet another moratorium on federal Internet sales taxes is certain. Now, it is becoming increasingly evident that the states will follow suit. The ramifications for b-to-b direct marketers are marked.
While business-to-consumer direct marketers have long fretted about the prospect of state taxation, b-to-b marketers are now tracking the issue just as closely. Indeed, they are doing so with good reason: Statehouse legislators, seeking even greater surpluses, are evaluating the issue more intently than ever.
A recent General Accounting Office of the U.S. Congress report estimated that the feds and the states could miss out on some $12 billion in potential online sales taxes in 2003. (Congress’ most recent federal moratorium, issued in April, lasts two years.)
Late last month, California Governor Gray Davis vetoed a bill that would have levied online sales taxes in that state. He also called for a three-year moratorium. While b-to-b direct marketers breathed a collective sigh of relief—holding off taxation in the Golden State is especially important—similar legislation in other states is no sure thing.
Logically, the DMA’s Wientzen has made staving off state Internet taxes a clear priority and is orchestrating much of his organization’s sizeable lobbying efforts on behalf of the issue.
B-to-b executives, meanwhile, are also monitoring the taxation issue closely. “The states are looking at this, saying, ‘It’s not fair, we need our piece of the pie.’ But you just can’t apply that unilaterally,” said Sherry Szydlik, VP-marketing at Primary Knowledge Inc., New York.
Catalogers adapt to e-hubs
The percentage of retail sales generated from catalogs and the Internet is forecast to almost double by 2004, according to a recent DMA report. “Rather than just being order-taking sites, catalogers are moving toward participation in b-to-b exchanges, and doing proactive e-mail marketing techniques,” said Michael Petsky, CEO of New York-based e-commerce consultancy Winterberry Group.
While predictions bode well for the catalogers, some executives in their ranks say they have much to do to avoid negation by b-to-b exchanges. A major concern is making sure that catalogers keep their data relevant and proprietary, especially when tying the information into outside e-hubs.