Business-to-Business Internet Marketing Silverstein This book shows you how to effectively apply proven direct marketing principles to the new world of Business-to- Business Internet marketing — today’s fastest growing seg- ment of online commerce. This practical yet forward-think- ing blueprint for success is packed with examples and real- world advice. You’ll learn — step by step — seven proven strate- gies for increasing profits by direct marketing to businesses over the Internet. This new Fourth Edition has been updated with the latest case studies, Web site references, Internet use statistics, and other developments in the online business-to- business world. Included with the book is your personal password necessary for accessing the companion Web site which provides up-to-the-minute Internet marketing news, expanded information, and other helpful online marketing resources. This book/Web site combination is unbeatable! About the Author Barry Silverstein is CEO of Directech|eMerge — an award-winning, multimillion dollar, business-to-business direct and e-marketing agency based in Burlington, Massachusetts. Barry has twenty-five years of marketing communications and direct marketing experience holding previous positions at Xerox Corporation and Epsilon, a database marketing firm. He founded Directech|eMerge in 1983 and was voted “New England Direct Marketer of the Year in 1992.” He resides in Acton, Massachusetts. $34.95 US ($52.95 Canada) BUSINESS/INTERNET Distributed by Independent Publishers Group (IPG) 605 Silverthorn Road, Gulf Breeze, FL 32561 (850) 934-0819 www.maxpress.com Profit from Proven Business-to-Business Techniques! This book will help you: • Get your share of the multi- billion dollars in direct sales conducted online • Increase your profits through better lead genera- tion/qualification • Avoid costly false starts and wasted time • Learn from others who are succeeding online • Stay current with the latest trends through the “members only” companion Web site “…step-by-step, battle-proven advice on how to use the Internet to sell to business…” —Arthur Andersen's Knowledgespace.com “If you are going to read only one book about Internet marketing this year, read this one.” —Mike Bayer, Compuserve Seven Proven Strategies for Increasing Profits through Internet Direct Marketing “This is by far the best book on Internet Marketing yet.” — Database Marketing Institute Barry Silverstein Business - to - Business Internet Marketing F ourth Edition Fourth Edition bs-Intro.PMD 11/1/2001, 8:43 AM26 The Age of the “e” 1 1 1 The Age of the “e” This is the Age of the “e”; e-marketing is the new term for marketing; eCRM is the latest positioning for Customer Relationship Management; e-commerce is an integral part of selling for most b-to-b companies. Today, organizations are either e-enabled or moving toward becoming e-businesses. Although some of us have had enough, we must acknowledge that the “e” is representative of the influence of the Internet on business, our lives, and our world. Even as we assimilate the Dot-Com Crash of 2000–2001, we can be sure that the Internet’s impact is long term and sustainable. Before we delve into specific strategies, we need to examine the marketplace, so Chapter 1 sets the stage for the rest of this book. Here we look at some important statistics, consider the Internet’s role in the b-to-b world, and explore the growing importance of the Internet as a gateway to global marketing. The Numbers Game In this chapter and throughout the book, you will see statistics regard- ing Internet usage, e-business, and b-to-b e-commerce. The numbers are bs-ch01.pmd 11/1/2001, 8:43 AM1 2 BUSINESS-TO-BUSINESS INTERNET MARKETING changing so quickly they will be out of date by the time you read this sentence. Rely on such Web sources as eMarketer (www.emarketer.com), CyberAtlas (www.cyberatlas.internet.com), and Statmarket (www.statmarket.com) to gain access to the latest statistics. Just to put things into perspective, let us examine a few of the more significant facts. By year-end 2000, according to CyberAtlas, there were about 136 million Internet users in the United States, 27 million in Ja- pan, 19 million in Germany, and 18 million in the United Kingdom. eMarketer’s 2001 eLatin America Report indicated that the number of Internet users in Latin America will reach close to 41 million by 2004, up from over 15 million in 2000. Canadian research firm Ipsos-Reid (www.angusreid.com) says that in 2000, there were about 350 million adults worldwide using the Internet by year’s end. The firm reported that Canada and Sweden actually led the United States in terms of percentage of the population using the Internet. According to International Data Corporation (www.idc.com), world- wide e-commerce revenue was about $350 billion in 2000 and will rise to about $3.14 trillion by 2004. GartnerGroup (www.gartner.com) says worldwide b-to-b online sales will grow from $433 billion in 2000, to $919 billion in 2001, to $8.5 trillion by 2005. The Boston Consulting Group (www.bcg.com) estimates b-to-b online revenue in Asia will be $430 billion by 2003. The Internet’s economic impact is reported in research conducted by the University of Texas’ Center for Research in Electronic Commerce, commissioned by Cisco Systems (www.internetindicators.com). The fourth study covering the first half of 2000 reveals some fascinating statistics: • Although dot-coms have been the center of media attention, they are not the center of the Internet economy. Only 9.6% of the firms in the study are true dot-coms, with 95% or more of their revenue from the Internet. • For Internet economy companies, Internet revenue is one quarter the size of non-Internet revenue, but growing three times as fast as corporate revenue as a whole. In the first half of 2000, Internet economy companies generated $1 of every $5 in revenue from the Internet. Internet economy revenue is growing twice as fast as Internet economy employment. The Internet economy was pro- bs-ch01.pmd 11/1/2001, 8:43 AM2 The Age of the “e” 3 jected to produce $830 billion in revenues in 2000, a 58% in- crease over 1999. • The Internet economy directly supports more than 3.088 million workers. Total employment at Internet economy companies grew 10% between the first quarter of 1999 and the first quarter of 2000. The Internet economy is creating jobs in numerous areas— and seven of every ten jobs created are traditional, not high-tech jobs. The job function generating the most Internet-related em- ployment is sales and marketing (33%), with IT jobs at only 28%. The report 2000 Economic Impact: U.S. Direct & Interactive Mar- keting Today, issued by the Direct Marketing Association (www.the- dma.org), says U.S. consumers and businesses spent over $24 billion as a result of direct marketers’ online media expenditures in 2000. Direct marketers spent $2.8 billion on interactive media marketing in 2000, up from over $1.6 billion in 1999. This, as the report emphasizes, is in spite of a weaker economy and dot-com failures. The third annual America Online/Roper Starch Cyberstudy, con- ducted in August 2000 among a random sample of over 1,000 adult online users, suggested significant positive shifts in Internet acceptance. For the first time ever, more than half of the survey respondents said they shop online, nearly double the percentage who did so two years ago. More than half the respondents would be interested in using a small Internet device to go online from any room in their house; close to half log onto their home accounts even when they are away from home; and two thirds of the respondents would be interested in checking out a Web site they’d seen on TV without leaving their TV to find it. The Wired World Today the Internet is already a mature medium, despite its newcomer status. It is certainly the technology area with the most significant and explosive growth ever. In 1998 and 1999, the Internet’s economic im- pact on the U.S. economy was clearly proven just by the amount of venture capital invested in Internet companies and by the number of successful Internet company IPOs launched. By early 1999, Internet IPOs had dominated the stock market, creating another round of young bil- bs-ch01.pmd 11/1/2001, 8:43 AM3 4 BUSINESS-TO-BUSINESS INTERNET MARKETING lionaires, not unlike the software boom decades earlier. By late 1999, it was the dot-coms that moved “offline,” dominating the airwaves, fe- verishly snapping up television time, and grabbing national magazine and newspaper space to launch their fledgling brands. By 2000, the success of the dot-coms had started to dwindle. Many merged and many more failed, but not before the Internet had permanently become part of the fabric of American business. The Internet is very serious business, and it is an unavoidable fact of business life. A recent study by IT research firm Forrester Research (www.forrester.com) said that 98% of large businesses (more than 1,000 employees) and 45% of small businesses (less than 100 employees) will do business online by 2002. A landmark study done by the NEC Research Institute (www.neci.nec.com) in early 1999 put the number of individual Web pages at some 800 million, with 3 million added each day. The pre- dicted rate of Web page growth is phenomenal, perhaps 1,000% over the next few years, yet the NEC Research Institute study indicated that even the most comprehensive Web search engines combined covered no more than 42% of indexed pages. That is one good reason that Internet information access services are growing at such a rapid rate. Businesses that never would have existed before the Internet are now springing up to help online visitors find what they are really looking for on the Net. There has never been a time when a mass medium has held such potential. The Internet is more accessible to more people globally than any other medium except television. Web sites and e-mail newsletters are for the most part free. With all this, however, there are still significant challenges facing the Internet. One of the greatest of these may be the privacy issue. With the mass adoption of external e-mail by consumers and businesses alike, this “private” one-to-one communication quickly became another pro- motional channel for IT marketers. It was not long before unsolicited e-mailings (“spamming”) were commonplace. Now, the heat is very much on those who do not respect an individual’s privacy on the Internet. For example, the Direct Marketing Association (www.the-dma.org) launched an electronic media privacy program in 1998, encouraging organizations that use the Internet for direct marketing to post a privacy policy prominently on their Web sites. In February and March 2000, the Federal Trade Commission (www.ftc.gov) conducted a survey of commercial sites’ information prac- bs-ch01.pmd 11/1/2001, 8:43 AM4 The Age of the “e” 5 tices, using a random sample of 335 Web sites, in addition to “most popular sites”—91 of the 100 busiest U.S. commercial Web sites. The survey found the following: • In the random sample, 88% post at least one privacy disclosure and 100% of the most popular sites post at least one privacy disclosure. • In analyzing these disclosures in light of the fair information prac- tice principles of Notice, Choice, Access, and Security, the per- centage drops dramatically. Only 20% of the random sample sites that collect personal identifying information, and 42% of the most popular sites, implement, at least in part, all four fair informa- tion practice principles. • The commission also looked at the number of companies enrolled in the primary industry self-regulatory initiative, online privacy seal programs. The survey found that 8% of the random sample, and 45% of the most popular sites, display a privacy seal. The survey led the Federal Trade Commission to conclude that pri- vacy self-regulation alone would not suffice. As a result, the commis- sion recommended that Congress enact legislation that will help to ensure adequate protection of consumer privacy online. This, of course, is only the federal perspective. There are states that have already adopted legislation that restricts unsolicited e-mail and protects consumer privacy. This increasingly strict regulatory environ- ment should be taken into consideration by every b-to-b marketer. No less daunting is the technology of the Internet itself and access to it. On the service side, major telecommunications and cable compa- nies have already entered the Internet Service Provider (ISP) market. AT&T, WorldCom, and Sprint provide Internet access services, as do all of the Regional Bell Operating Companies. Communications giants are lining up to compete in the massive Internet market. AT&T and cable leader TCI merged in 1998 so that AT&T could offer cable mo- dem service. WorldCom integrated its former UUNET division to make WorldCom the world’s largest business ISP. The Internet access alterna- tives available to businesses and consumers are proliferating, as are the ways access can be provided. Internet access over both telephone and bs-ch01.pmd 11/1/2001, 8:43 AM5 6 BUSINESS-TO-BUSINESS INTERNET MARKETING cable connections is commonplace. It’s only a matter of time before Internet access is bundled with electric service. The end result will be the same: the massification of the Internet. One of the biggest concerns has been the bandwidth associated with delivering Internet service. As more people sign up for Internet access and actively use the Internet to conduct business, the Internet can be- come choked with traffic. The demand for bandwidth rises exponen- tially, but even the bandwidth problem is on the way to being alleviated. Massive technological improvements are being made to the Internet in- frastructure by leading networking companies. Innovations are coming from all sides. Most cable companies are becoming broadband enabled. Broadband is basically Internet access over cable, and it is feeding hungry Internet users with electronic infor- mation at blazingly fast speeds. Broadband is one significant advance, but it is not the only way that consumers and businesses are getting high-speed Internet feeds. Through faster ISDN (Integrated Services Digital Network) connections running over ordinary phone lines, and with the new higher-speed modems that are hitting the market every day, fast access will be a diminishing problem for even the smallest busi- nesses. ISDN is fast being replaced by ADSL (Asymmetric Digital Sub- scriber Line). Telecommunications and cable companies alike are introducing DSL rapidly throughout the United States, targeting both business and home use with the hope that DSL will be the killer Internet access application. That is because DSL can share phone lines, using modems that are 50 times faster than conventional modems. DSL and other technologies mean that Internet access soon will be a utility. People will not even need to think about turning it on and off, because it will be like the telephone, cable television, and electricity. Lately, talk is about the “second Internet,” an industrial-strength Net that may be only a few years away. Infrastructures are being built today that are expected to solidify the Internet economy and make it a global reality. And those infrastruc- tures may not even be underground. Cisco Systems, the leading manu- facturer of networking devices, introduced a wireless Internet in the year 2000. The company planned to offer Internet connections up to ten times faster than DSL via low-frequency microwave transmission. Even today, wireless connections to the Internet via cellular phones and PDAs are possible, and although Europe and Asia are on the lead- bs-ch01.pmd 11/1/2001, 8:43 AM6 The Age of the “e” 7 ing edge of wireless, this market is expected to grow rapidly over the next several years in the United States. eMarketer, reporting the results of a 2001 study by the Universal Mobile Telecommunications Systems Forum, says mobile Internet access subscriptions in North America will grow from just over 2 million in 2005 to 18 million by 2010. A Paradigm Shift of E-proportions Before we head off into an exploration of marketing in cyberspace, I would like to put the subject of technology-driven marketing into his- torical perspective from my own vantage point. In 1974, I became em- ployee number 51 at a small company called Epsilon Data Management. Epsilon was in the business of helping fund-raising and membership organizations communicate with their constituents—past, current, and future donors or members. Epsilon’s real business, though, was database marketing. The four Epsilon founders had helped pioneer the use of computer technology to take massive lists of donors’ names and addresses and “smarten” them with data. Each donor record was constructed with variable-length fields so that a lot of data could be stored and tracked. Because each donor could also be given a unique identification number, the data could drive fund-raising programs that recognized the individual donor’s unique characteristics. Epsilon was one of the leaders in a technique called “variable up- grading.” When each donor received a computer-generated letter, the suggested donation amount could be varied, based on the donor’s previ- ous contribution. A majority of donors would in fact upgrade their gifts to the new suggested amount. Even in mailings of several hundred thou- sand letters, the technique could be applied. I remember watching the line printers chunking out the letters on continuous form paper. I was amazed as the letter-quality line printers were directed by the computers (mainframes back then) to spit out very respectable corre- spondence without hesitation. Each letter had a different name and ad- dress, and each letter and accompanying personalized reply slip had a different suggested gift amount inserted into the letter text. Signatures were preprinted or postprinted on the paper stock in blue ink, perfectly bs-ch01.pmd 11/1/2001, 8:43 AM7 8 BUSINESS-TO-BUSINESS INTERNET MARKETING positioned with the computer-generated text, to simulate hand signing. It all looked very believable, and it was responsible for raising millions of dollars. I was witnessing a paradigm shift, of course, although I did not real- ize it at the time. The 1970s were the early days of computer personaliza- tion driven by database marketing, now a common and accepted practice. In those days, it took mainframes in climate-controlled, glass-en- closed, raised-floor computer rooms to make all of this marketing magic happen. Today, you could run a sophisticated database program that does much the same thing, only better, right from your desktop. The reason for this reminiscing? To demonstrate that, over 25 years ago, something quite profound happened to marketing. Computer tech- nology changed it forever. We can state without reservation that the impact of the Internet on marketing today is no less profound, and once again, database market- ing is playing a key role in the evolution of marketing, driving the Internet to be the ultimate one-to-one relationship-building marketing tool. Computer technology has stretched across physical boundaries, and we have created a virtual world no less real than our physical one via networked communications. The Internet has caused networking, tele- communications, hardware, and software companies to completely reengineer themselves. Practically all other businesses are following suit by reorienting their business operations and information systems for the electronic future. Organizations are feverishly building intranets (in- ternal Internet-based networks) and extranets (“private use” external Webs), depending more and more on the Internet for entire networking infrastructures. As a testament to this fundamental change and the influence of the Internet, you have only to look at the nomenclature of popular IT pub- lications. CommunicationsWeek, long a major computer industry pub- lication, was renamed InternetWeek (www.internetwk.com) in late 1997. In May 2000, PC Computing changed its name to Smart Business and PC Week became eWeek. Business 2.0, focusing on the Internet economy, became one of the most successful magazine launches ever. The Wall Street Journal and The New York Times launched recurring sections on e-business and the Internet, BusinessWeek introduced e.biz, and Time magazine spun off On magazine. Now there are more publications (both in print and in electronic versions) covering the Internet and the Web than in any other publishing category. bs-ch01.pmd 11/1/2001, 8:43 AM8 [...]... a standalone element Moreover, marketers will need to learn how to ensure that the same measurement criteria can be applied to Internet marketing as to traditional direct marketing bs-ch01.pmd 25 11/1/2001, 8:43 AM 26 BUSINESS- TO -BUSINESS INTERNET MARKETING Transition to Integrated Marketing Now As marketing becomes more reliant on the Internet, b -to- b marketers will face a new media world—one that... via direct mail and, later, by phone, quickly became the staple of consumer and b -to- b direct marketers alike Database marketing was another direct marketing breakthrough of historic proportions Yet it was a small, far simpler technological innovation that truly changed the direct marketing business forever It was this innovation that opened the door for personal direct marketing interactivity: the toll-free... 28 BUSINESS- TO -BUSINESS INTERNET MARKETING Going Global: How Internet Marketing Can Create a Worldwide Business for B -to- B Companies As a marketing medium, the Internet is the easiest, most cost-effective route to global marketing There has never been a single medium that, even at its inception, offered this promise The Internet is very much a medium that already has the infrastructure necessary to. .. respond to them The Nature of the Internet It is important to put the Internet in the context of other direct marketing media to discover whether or not it “looks and feels” the same—so we know how suspects, prospects, and customers will react to it bs-ch01.pmd 33 11/1/2001, 8:43 AM 34 BUSINESS- TO -BUSINESS INTERNET MARKETING What Is Its Content? Internet content is diverse Like print advertising and direct. .. more than other forms of direct marketing and advertising have disappeared Direct mail will continue to have its rightful place, as advertising has had before it, but Internet marketing has already become an accepted and increasingly popular method for successful b -to- b marketers Now the challenge is how to intelligently integrate Internet marketing with advertising, direct marketing, and other means... 365day-a-year customer support How a company services its business customers differentiates it from its competitors The Internet can facilitate online customer service centers and provide customer-only information, bs-ch01.pmd 31 11/1/2001, 8:43 AM 32 BUSINESS- TO -BUSINESS INTERNET MARKETING service, support, and, in the case of software and information, live product With the advent of Internet telephony,... Offers Increased Business Penetration As a business tool, the Internet is unprecedented in its penetration of the business community As previously mentioned, the Internet s historic roots are implanted in science and business, and business- to -business usage has continued to lead the growth of the Internet With the emphasis on intranets and extranets, business- to -business usage is virtually exploding, even... even automatically to a visitor’s computer desktop via push technologies As a result, a marketer can initiate a bs-ch01.pmd 17 11/1/2001, 8:43 AM 18 BUSINESS- TO -BUSINESS INTERNET MARKETING one -to- one relationship via e-mail and the Web with a prospect, customer, or business partner The marketer can also learn from that relationship via database marketing and grow the relationship over time The Internet. .. often the case, business- to -business marketing use of the Web is proliferating as inferior marketers begin to weed themselves out The tantalizing promise of the Web—electronic commerce— has now emerged as a significant factor for business marketers Marketing Benefits of the Internet The Internet Is Boundless According to CyberAtlas (www.cyberatlas .internet. com), there were almost 136 million Internet users... reach— perhaps even topping television As indicated earlier, widespread acceptance and dropping access prices will dramatically accelerate this growth What will this growth mean to b -to- b direct marketers? The use of direct marketing itself continues to grow in its own right A Direct Marketing Association study says that direct marketing is expected to outpace total U.S growth through 2002, growing . Business- to -Business Internet Marketing Silverstein This book shows you how to effectively apply proven direct marketing principles to the new world of Business- to- Business Internet marketing — today’s. you are going to read only one book about Internet marketing this year, read this one.” —Mike Bayer, Compuserve Seven Proven Strategies for Increasing Profits through Internet Direct Marketing “This. real- world advice. You’ll learn — step by step — seven proven strate- gies for increasing profits by direct marketing to businesses over the Internet. This new Fourth Edition has been updated with