Commentary by Yosi Heber

BEYOND GUT FEELING: THE STARK REALITIES OF ONLINE MARKETING

Understanding the Web's Eight Strategic Revenue Drivers

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Imagine turning the clock back 10 years. In 1994, American Express spent about 80% of its media budget on TV; by 2004 that number was down to 35%. Ten years ago, we spent our days in meetings and on the phone. Today, over 25% of our
Yosi Heber, a former senior marketing executive with Kraft, Dannon and IAC/InterActiveCorp, is president of the strategic marketing firm Oxford Hill Partners, based in Oak Park, Mich.
day is spent reading and composing e-mails. And 10 years ago, if we wanted information, we bought industry reports or checked out the yellow pages. Today, we go to Google.

According to a Jupiter Research report, the Internet occupies 14% of an average person’s media time, yet amazingly, the Internet accounts for a mere 4.3% of all advertising spending. However, with search engine marketing growing quickly and 60% of U.S. households now having broadband access, companies are starting to take the Web seriously.

Web profitability
But just how profitable are our overall efforts with the Web? As we begin to invest more in this medium, we must become more cognizant of this question.

I can vividly recall my many years at Kraft General Foods where I managed brands such as Jell-O and Post Alpha Bits. We spent tens of millions of dollars on TV advertising and consumer promotions, but we often had no way of knowing which of the specific programs were truly profitable and which were not.

Given the new digital world, and the “instant” and measurable nature of the Internet, we marketers are starting to become fully accountable for specific programs, whether they be offline or online. In my recent role as chief marketing officer of IAC/InterActiveCorp’s entertainment division, we were expected to demonstrate clear and measurable ROI results for key interactive programs on a regular basis.

Yes, the world has changed for us. A CMO and his or her marketing team can no longer hide behind just a “gut feeling” about the success of a campaign. You’ve got to prove clear results.

Missed opportunity
All companies have Web sites (some have invested millions in the endeavor), but few have really figured out how to make money from them. In fact, in many instances, Web operations have simply become new “cost centers” that actually lose money. There are plenty of exceptions -- Amazon, Dell, Expedia -- but for many of us, the Web feels like a missed opportunity.

Indeed, that opportunity lies in thinking way beyond just using the site to provide information and a positive customer experience, and toward somehow leveraging it to increase company revenue and profitability. The question therefore becomes: How can a marketing executive apply the familiar and powerful platforms of classical consumer-package-goods (CPG) and b-to-b strategic planning and marketing (like branding, promotion and customer acquisition and retention) to the Internet to create Web-based solutions that help the entire marketing team generate significant new and incremental revenue streams for their business?

Beyond standard Web analytic tools that look at Web site traffic, clickstream customer movement, and the point at which visitors drop out, I believe we can borrow from the key platforms of CPG and create a framework for broad, high-level strategic Web site evaluation.

Eight strategic drivers
Almost all of what drives a site’s overall effectiveness -- and therefore its ultimate ability to drive revenue at the site (or send consumers to retail to buy) -- lies within how well a Web site performs in eight strategic categories:

1. Potential traffic and new customer acquisition: For example, how high is your Web site ranked on Google?

2. Home page and branding: Is it clean and simple?

3. Products and product merchandising: Do you enthusiastically articulate clear-cut consumer “end benefits” about your product or service?

4. Navigation and customer experience: Is there a site map? A search box?

5. Entertainment value and stickiness: Do you feature games or online videos? White papers?

6. Customer care and trust: Is it easy to get help?

7. Call to action and revenue maximization: Do you highlight free shipping and cross-sell related products?

8. Relationship building and customer retention: Do you ask for an opt-in e-mail address?

Meaningful evaluation
By applying this evaluative framework to your Web assets, you can take meaningful steps to maximize the ultimate revenue stream. In fact, new strategic Web evaluation tools like “EQ Pulse” can now evaluate over 100 aspects of a Web site across these types of strategic revenue drivers and help compare your site to the competition and the rest of the industry so that focused action steps can be taken.

Many marketing people work overtime preparing to fight competitive battles over one or two share points through the development of line extensions, promotions and price wars. But they don’t even consider their Web assets. Imagine if you leveraged some of these eight strategic revenue drivers in new ways and added $10 million in new revenue streams without a lot of extra work. Here are some examples of companies that have successfully applied these types of drivers.

Potential traffic and customer acquisition: Godiva likely acquired new corporate customers when it identified a new customer target—business gift giving. Through search engine marketing, when searchers look for business chocolate gifts on Google, they are directed to a custom Godiva landing page featuring chocolate gifts sprinkled with relevant and familiar business terms such as “volume discounts.”

Revenue maximization
Revenue maximization: Amazon is certainly a master at maximizing revenue potential by cross-selling other products beyond the intended purchase. Have you ever tried to buy a $20 book on their site? They’ll automatically offer a second (and highly relevant) $22 book, and bundle it with the first (“Get both for $32”), thereby increasing revenue by 60%.

Relationship building and customer retention: Your objective here is to give the customer a strong incentive so they’ll want to provide you with an opt-in e-mail address. That way, you build your internal customer database, can communicate with them on a regular basis, and sell more products later. IAC’s Match.com offered a powerful step-by-step guide on “How to Find the Right Person in 90 Days” for those who were willing to register on the Web site. This was an impactful value exchange because the freebie is extremely relevant to the potential customer. By securing the consumer’s opt-in e-mail address, Match.com can now offer this potential customer with short-term promotions that generate revenue and develop long-term relationships with them via periodic e-mail newsletters.

In 2005, the number of households with broadband Internet connections surpassed the number of households with slow dial-up connections for the first time. There is now an unparalleled opportunity to capitalize on your Web assets and integrate them powerfully into your marketing mix.

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