In fact, Web advertising, and links to information and offers about products, is probably one of the most sophisticated marketing tools ever conceived. It is starting to have a huge impact on the marketing of software products, and that impact will move to other business categories as well.
STRANGE DEVICE IN 1975
As background, in 1975, if you bought a personal computer, it was a strange device having the power of 250,000 instructions per second. This is often referred to as .25 mips (millions of instructions per second). That machine would cost you about $2,400, so you were paying the equivalent of $9,600 per mips. Today you can get a 200 mips machine for about $2,800, which equates to about $14 per mips. That is a decrease of more than 99%, and is real productivity in the R&D area!
That trend is still continuing, and it is leading to continuing growth in the use of the PC for many tasks. For example, we are up to 39% household penetration of PC's in the U.S.
Concerning the marketing of computer-related products, new technologies are starting to have a big impact. These purchases are well thought out investments, and people do seek out a lot of information. In fact, they even love to read the ads! For perspective, when computer professionals were asked, "how do you evaluate different software brands?", 67% of them said, "from the ads in PC magazines."
MAGAZINE ADS IMPORTANT
That source of information was second only to the software reviews that appear in magazines, where 78% of computer professionals cited that source.
This was even true for typical PC users, where 54% claimed ads in magazines were a significant source of information. Net, these people want a lot of information, and the technologies can help provide it.
An important aspect of marketing in the high tech sector is the broad variety of target audiences that you must deal with. Quite often the demographics for a particular type of software can be quite narrow. For example, if it is a kids game, that target must be taken into account, the message must be crafted accordingly and the media device must be carefully selected. If it is a server operating system to be used only by computer professionals who build mission critical information systems for corporations, that is quite a different marketing task. Again, the message must be crafted carefully with a lot of specific information about the product, and the media vehicle needs to be selected with care.
Given the significant need for a lot of information, and the variety of target audiences that relate to the broad set of PC-related products, the most significant change with respect to the marketing of these products is the Internet. This is because the users of the Internet tend to be the best customers of these products. It can also help isolate very narrow target audiences, such as Web sites frequented by teen-age gamers. Consequently, the Internet is a terrific media delivery device for key messages and information about these products to very clearly defined target audiences.
Another important aspect of Internet marketing is how quantitative it can be and how responsive it can be. For example, in launching the new Microsoft Front Page product (it makes it easy to develop Web pages), testing was done with two different banners on different Web sites (but with similar traffic). n the course of a week, Banner A achieved about 450,000 impressions (i.e., a screen appeared in front of a user and it contained the banner), as did Banner B. Importantly, Banner A caused 2.25% of the users to click on it and transfer to the Web site of Microsoft Front Page, where incredible amounts of detail about the product were available, as well asSpeed of gains opening marketing doors
the ability to download it. For Banner B the transfer rate was only 1.74%. Given that the sites where the banners were located were carefully balanced to make them comparable, it is clear that Banner A outperformed Banner B in terms of delivering users to the source of in-depth information about Microsoft Front Page.
Additionally, for a particular banner, you can then track the number of people who visited the detailed information and the percent of those who actually downloaded the beta version. You can then ask those people to register the download and ask their consent to send them e-mail in the future in regard to the possibility of purchasing the product when it becomes available.
You can then record the percent that did purchase, and the e-mail addresses of those who did not. All of this quantification generates valuable learning about what works, which leads to higher quality marketing. Stepping back, what all this represents is direct mail without having to wait for the U.S. Postal Service to deliver the goods. It literally puts direct marketing into a time warp and creates almost instantaneous marketing feedback that is far more quantitative than most other marketing vehicles.
We fully expect Internet marketing to be an incredible rage. While it is very hot today in the area of computer-related products, such as software, it is spreading to other products very rapidly. For perspective, the research firm IDC estimates Internet users will continue to grow 40% per year through the year 2000 and that while there will be roughly $100 million in transactions over the Internet in 1996, that should grow to more than $10 billion in the year 2000.
What we are witnessing is an important step in the evolution of information. When you look at the devices that have helped us communicate over the past hundred years or so, and you see the progression from the printing press to the telephone, the radio, television and now the personal computer, it is clear we are living in an incredibly exciting time with respect to the evolution of marketing capabilities.
On the other hand, do not expect to see big declines in the utilization of key marketing tools such as television advertising and print advertising in the next few years. Do expect to see a very rapid increase in on-line marketing, as people begin to accept the personal computer and the Internet as an exciting vehicle of commerce and an exciting marketing tool.
Robert J. (Bob) Herbold is executive VP and chief operating officer of Microsoft Corp. He is responsible for worldwide operations, including finance, manufacturing, distribution, logistics, information systems, human resources, corporate services and real estate. He also is a member of Microsoft's office of the president, a group that shares responsibility with Microsoft Chairman and CEO Bill Gates for broad strategic and business planning for the company. Mr. Herbold, who joined Microsoft in 1994, had been senior VP of advertising and information services at Procter & Gamble Co. There, he was responsible for P&G's worldwide advertising and brand management operations as well as all marketing services, including media, package design and television program production.