Advice from the front lines of the online marketing shakeout.
Every week we hear of a new dot-com that has closed its virtual storefront. Walt Disney’s Toysmart.com has a “bankruptcy sale” notice on its home page. Clothing retailer Boo.com has a “sign up for e-mail updates” form on its home page and no other explanation as to what happened to the site.
What happened to these businesses? What will happen to their brethren as the shakeout continues? How can marketers avoid the pitfalls that will shake traditional companies venturing online, as well as the dot-coms born there? Having experienced a dot-com meltdown myself – the quick rise and fast crash of Whole Foods Market’s WholePeople.com – I can offer these lessons as a dot-com survivor.
Dot-coms must make money: Avoid drooling when you hear the term “IPO.” It’s not a magic word anymore. Sure, we’ve all heard of the millionaire shipping clerk that made his fortune by starting with a dot-com on Day One. That phase of wild growth is over. Money is no longer free, and the world has realized that a dot-com business works just like every other business and has two columns on the balance sheet.
If you’re a traditional company doing business with a dot-com vendor, look for the same benchmarks of stability you expect from other vendors.
Not all businesses belong on the Web: Like the rest of the business world, only the most compelling value or convenience propositions will prevail. Does your business belong on the Web? Make sure your customers think so before you spend millions on a business plan. It’s no longer in vogue to think that in order to succeed online you must be willing to “fail fast.” It’s OK to start small, test the waters, and learn as you go.
Think small: Hear those pink slips rustling? That’s because every MBA with a dot-com business plan and a little bit of venture capital thought he was destined to become a billionaire. Many dot-coms have been over-staffed and over-invested in real estate, technology, and office furniture. Strive to keep your culture lean and small: Not everybody gets a cell phone and a Palm VII. Train all employees to do more with less and resist the temptation to keep up with your dot-com neighbors. Grow your business within the confines of your revenue. Make investments that have a direct return and you will be taking steps in the right direction.
Marketing must work: Don’t look for a repeat of this year’s Super Bowl, when dot-coms spent half their market capitalization on 30-second spots. Accountable marketing plans are back in style and must show a return on investment. Don’t let dot-com mania trick you into abandoning tried-and-true methods of testing before rolling out programs. Make sure you can track results, and only roll out in a big way once a program has proved effective. After rolling out, monitor results closely, wait for the inevitable response downturn, and kill programs before rather than after they stop making financial sense.
The same rules apply: If you are a traditional marketer, apply the same success metrics to Internet tactics as you would to traditional programs. Statistically relevant testing periods may be much shorter than your infrastructure can support, and results may not always be apples to apples, but try to make comparisons. And remember that traditional tactics don’t always translate to the personalized, interactive medium of the Internet. Look Ma, no hands: The dot-com business culture has spawned many marketing tactics and technologies that are brilliant and will prevail long after dot-coms stop losing money. A number of forward-thinking companies have brought together the best in direct-marketing tactics and the best in real-time analytical and reporting technologies to create marketing solutions that blow away old-fashioned spreadsheets. These technologies can learn in real time, refine their own tactics, and grow more effective over time. Does your spreadsheet do that? Take time to learn what these companies are doing, understand the lingo, and apply the lessons to your marketing plans.
Don’t be a lemming: I was recently at a company meeting at our expensively retained, award-winning ad agency. We were reviewing beautiful, well-written, well-designed, and very expensive print ads and the accompanying multi-million dollar media plan. I asked, “Why are these ads going to work when every other dot-com in the industry has run in these publications with equally clever four-color ads, and they are all bleeding cash at a rate worse than us?” A hush fell over the room and the agency suits began the spin cycle.
Management canned the ads 48 hours later, a triumph for learning from your predecessors. My advice? We all should feel at liberty to learn from the mistakes of those who have gone bankrupt before us.
On the other hand, it’s OK to copy a good idea – especially if you think you can do it better.
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