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Think Marketing on Second Life Sounds Promising? You Might Already Be Doing It.

It's hard to open up a newspaper or a business magazine without stumbling upon an article about Second Life, the Linden Labs virtual world which has a thriving virtual economy,  a real estate market, a crime rate, and a host of other pleasures and pains you'd think were only available in the real world.

Retailers, including big names like 1-800 Flowers, have launched virtual storefronts on Second Life (see article), I assume in hopes of attracting virtual customers that might someday turn into real customers that spend real dollars instead of Linden dollars. IBM has an avatar-run customer service center on Second Life (see article), and Sears, in their own version of virtual re-creation, launched an avatar shopping site for teens and tweens this back to school season(see article), along with already having a Second Life 3-D home showroom. Maybe that Land's End Virtual Model really was just ahead of its time.

Now, if you're an e-commerce marketer who's tapped out real world marketing media like email, search, TV and print,  this might sound like an interesting opportunity.

But a few things I've read recently might make you think twice - or they might make you even more curious.

The WSJ recently published a story called "Is This Man Cheating On His Wife", about an addicted Second Life user who has all but abandoned his real world life and wife, opting instead to (get this) spend over 14 hours a day in his virtual life, where he has a job, a wife, a sex life and a large circle of friends.  When I finished the article I concluded: a) this man needs serious help and b) he and others like him are never likely to become an attractive target for real world retailers, given that they are never in the real world, unless it's to sleep, eat and go to the bathroom (the only three things you don't do on Second Life).   

Then, an article in the NY Times called "Even in a Virtual World, 'Stuff' Matters", made me think again.  Materialism definitely exists on Second Life, with avatars buying up better hairstyles, clothes and shoes, and even taking on second jobs to be able to look good and keep up with their avatar Joneses.  But here's the catch: a lot of real world brands have flopped on Second Life, with names like Calvin Klein virtually ignored (no pun intended), American Apparel closing up shop and Wells Fargo abandoning its presence.  So the rebellion against mainstream brands is alive and well, with independent designers and entrepreneurs succeeding at a faster rate. Lesson learned: retailers setting up shop will face a new economy of discriminating avatar consumers.

But, I've saved the best for last. Here's the real kicker: we might all actually be living in someone else's Second Life right now.  Another NY Times article, this time in the science section, not the business section,  will really make you think.  It's called " Our Lives, Controlled From Some Guy's Couch".  We've all seen The Matrix and wondered if we might all just be part of one big video game.  But now there's actually (according to an Oxford University philosopher) a very real mathematical chance that this is indeed the case.  He says "my gut feeling ....is that there's a 20 percent chance that we're living in a computer simulation."  So, if that's true, all of the work you're doing to run a successful business, have a fantastic web site  and market effectively to your customers is actually someone else's doing.  Note, this would probably not be a good thing to bring up the next time your CEO asks why your business is not growing as fast as he'd like to see.

Now, for me, the thought of not being in charge of my own business and my own life seems preposterous. But in the off chance that the Oxford philosopher is right, I've decided to take matters into my own hands (as much as is possible, given that I might be controlled by someone else).  Since so many retailers seem to be floundering to establish themselves on Second Life, I'll be setting up an e-commerce consulting practice there. Who knows, with a couple of good engagements, maybe I can buy a new outfit and look as good as the other avatars. 

Summer Interview Series #1 - A Recipe for Marketing and IT Harmony From Peter Kretzman

It's summer, and I wish that I could say I'm doing interviews instead of solitary blog posts because I'm on vacation.  But actually, I'm doing them because I'm really busy, and because I know some terrific talents in the e-commerce space that I always enjoy talking to.

One of them is Peter Kretzman.  Peter and I worked together when he was CIO at Classmates Online.  He has over 25 years of leadership success across a wide variety of industries and platforms, including wireless, social networking and enterprise software.   I always learn from him, both as a technology leader and as a seasoned executive.  You can check out Peter's blog at http://www.peterkretzman.com

Getting marketing and IT teams to see eye to eye is a challenge in a lot of  organizations.  Why is that?

It can be a challenge.  Here are the factors that I tend to see again and again:

• Business expectations are always sky-high,  not to mention market pressures in an increasingly competitive world.
• Trade-offs (functionality needed vs. time alloted, or project vs. project) are not well understood, or simply not accepted.  Most organizations regularly bite off  far more than they can chew. 
• Communication (from IT) on "what it will take to deliver" is usually deficient.  Communication on what's needed to "keep the lights on" and "support the last project that we launched"  is usually deficient.

What is it like when it's working well?  What kinds of processes and communication disciplines are in place?

I'll step on one of my favorite soapboxes here: it's absolutely critical that projects be viewed as a portfolio rather than one by one in terms of the level of effort and time line required.  That requires a systematic examination, at regular intervals, of all projects in the immediate pipeline, and a slating of what will get worked on and what won't.  When this works well, (usually via a major quarterly planning session, along with a high-profile weekly recap), everyone understands that project success is a team effort and the mutual trust starts to build:  IT understands that everyone is pushing hard for launch, that the intentions or success criteria aren't going to change underneath them, and that we'll all  deal with issues and roadblocks jointly as they come up.  Equally, marketing folks understand that there's a wealth of complex detail, trade-offs and that their contributions are as critical to delivery as anyone else's.

The "portfolio planning" concept is hard for business people to accept, as it appears it will slow them down - but it can actually help things get done more efficiently, right?

A portfolio planning approach doesn't just "help", but is actually essential to get things done efficiently and with some degree of predictability.  Projects can't be dealt with  serially, one at a time.  We all need to work on multiple things at once in today's complex business environments.  So: if we're not working on projects in a serial fashion, and we want to meet delivery commitments, then we all need to understand the whole of what we are working on, and we need to have this mix stay fairly constant for a time period (in my experience, a quarter is a good time envelope here).  Every shift of this plan causes ripple effects that can end up derailing just about everything.  As the saying goes: plan the work, then work the plan.

So, for marketing and e-commerce leaders  who want a better relationship with their IT teams, what are some of the things they should start doing differently?

• Include the senior IT leader as much as possible as a colleague in all business planning.  She leads a service organization for the rest of the business, but she's not just an order taker.
• Don't question the estimates you're hearing just because you want it faster.  Instead, ensure that all terms and objectives are clearly and jointly understood, and then probe about alternative approaches that could be taken to change the game.  Get the IT people to embrace one of my favorite adages:  Don't tell them no.  Tell them what it'll take to say "yes".
• Adhere to your own commitments and deadlines on the project (i.e. the things that you need to deliver to IT before launch).  They're on the "critical path", which means if they slip, the whole project is likely to slip.
• Never suggest that simply adding resources will solve delivery time line problems.  It won't, because of interdependencies and communication issues.  Read The Mythical Man Month by Frederick P. Brooks.
• Don't try to get everything into a first release.  For follow-on releases, it's your responsibility to follow up and prioritize the subsequent functions to be built rather than assume this will happen automatically.  Recognize that the upcoming quarterly planning process will need to prioritize it against all the other wishlist items you have in mind.
• Recognize that there's a high cost to switching the game plan (e.g. abandoning or deferring a project in progress so that you can shift to something which now seems more compelling).

Peter and I welcome any thoughts on other "best practices" out there - let us know what works for you.

Personalization 2.0: Capturing The Customer "In The Moment"

I shudder at the personalization attempts I encounter while shopping on the web.  How many times do I have to see an email or homepage pushing products based on what I bought 6 months ago?  I've moved on.  How about what I want to buy now?

Over time, I've found that I'm usually more impressed by sites that can help me "in the moment" than by sites that know my life story.  Apparently, I'm not alone.  Two very good articles by Jack Jia, one in the E-commerce Times and the other in DM News ran recently.  They indicate that targeting offers based on the shopper's current context gets it right 62% of the time, while targeting based on historical behavior gets it right only 18% of the time.

I recently came across a few new site concepts that appear to be the seeds of a new world of personalized shopping; one which I will welcome with open arms, both as a retailer and as a customer.

Vertical Search:  Check out Zafu.com.  They use the vertical search/affiliate model to create personalized shopping help for a specific product - in this case, to help me find the right jeans (and who doesn't need help finding jeans?).  By answering a few questions about my body type, I can see a range of jeans from a variety of retailers that are likely to fit me.  At last, an affiliate site that truly adds consumer value (not to mention that it delivers me to the retailer's site as a highly qualified lead).

Social Apps As Personal Shopper: This is a bit out there, especially for those of us over 25.  A recent article in the New York Times introduced me to Zebo.com.  On Zebo, you post pictures of your stuff.  Your clothes, your furniture, your electronics, etc.  Friends (and ultimately retailers, I assume) can comment on your stuff, ask you where you got it, and tell you where you can find shoes to go with that dress or a chair to go with that couch.  For those that don't mind the self exposure, there may be something here.  It can't be too long before you can go to your favorite handbag site, post a picture of your new shoes, then let site editors and other customers suggest handbags to go with them.

Live Help From an Expert:  Check out LivePersonalShoppers.com, an offshoot of LivePerson, which provides live chat customer support to online retailers.  On LivePersonalShoppers, you can choose from a number or live agents to help you find what you're looking for anywhere on the web, either via live chat or email.  It's early stage, and so far there's no revenue model, but I think we can all see where this might go if it catches on.

Clearly, extensive product data, aggregated customer shopping data and robust technology are required to pull any of the above off at scale.  But so far, I like all of them a whole lot better than the "you bought this bag last year, so now we think you'll like another one almost like it" approach.

And just in case you're depressed about how far we have to go to make web shopping truly personalized, read an article that appeared in WSJ : "Prowling the Racks With Personal Help". It's the story of the writer's quest to get highly personalized attention via "personal shopping" services at various brick & mortar stores, most of which fell short of expectations.  Getting it right in person appears to be just as difficult as getting it right online.

10 Years After - What's Really Changed About Consumer Behavior

Yesterday marked the 19th annual Washington Retail Seminar, hosted by Tom James of Opus Law Group, a Seattle firm specializing in retail law. 

I've spoken at this even a few times over the years, usually on some variation of the "how e-commerce/multi-channel is impacting brick and mortar retail"  theme,  since the audience is largely rooted in land based selling.

As I prepared for yesterday's presentation, it occurred to me that the first time I spoke at this conference was in 1997, when were in the early stages of our e-commerce effort at Eddie Bauer.  I covered the coming e-commerce revolution, how this new sales channel would ultimately play a significant role in every retailer's business. Obvious now.  Not so back then.  I was talking to alot of skeptics.

So now it's 10 years after - and consumer behavior is profoundly different than it was a decade ago.  A few highlights from the presentation:

• We've come a long way:  over 650,000 companies sell online in the U.S.  17 e-commerce sites toped $1B in sales last year - most of them are multi-channel with a strong brick & mortar presence (JC Penney, Sears, Victoria's Secret, Staples, Office Depot, etc.) 83% of e-commerce sites reported profitable operations in 2006 (Shop.org SORO report)
• Search is the driving force: As much as 25% of e-commerce traffic is coming from search, as much as 55% of e-commerce sales start from a search engine query.  Over 300 million searches take place every day, over 13B every month.  Who's getting those searches? Google of course, to the tune of nearly 70%.
• Still room to grow in terms of penetration: Online sales were just over 8% of the total U.S. retail market in 2006, online ad spend was just over 6% of total U.S. ad spend.
• In many ways, it's about offline influence more than it's about online sales. People are researching online, buying offline in record numbers, with up to 1/3 of offline purchases influenced by online research.

Now, this isn't just because companies have put up websites and people have started using search engines.  There are many influential factors that are pervasive in our lives today that didn't exist 10 years ago:

Wireless access,Ipods, TiVos, Blackberries, Blogs/Wikipedia/MySpace/YouTube and a whole host of self publishing tools, digital cameras, RSS, and of course Google (they are 9 years old, publicly traded for  the last 3).

The combination of e-commerce with the list above means that the very nature of selling is different than it used to be, and alot of the fundamentals of merchandising and marketing just aren't true any more:

• Time and place don't matter- it's not about being in front of your TV at a certain time or being in your office to get your information.  Whatever you want to read, watch, listen to, buy or research is available in a portable format whenever you want.
• We trust each other for information, as much as the "authorities" - anybody can publish an opinion, post a photo or a video and we're increasingly seeking each other out as the source of truth vs. relying on a network or an editor or a company to tell us what we want to know.
• We're not alone - sure, people talked about the web being a "social media" from the very beginning, but it's not about email and clunky message boards anymore.  Websites are truly collaborative efforts between companies and consumers, and consumers can share with one another.
• Hierarchies of information are becoming obsolete - search means  that consumers can bypass homepages, decision trees and other "front doors" into the information that they want.  This means that marketers and merchants are no longer in control of the path, among many other things.
• General interest is irrelevant - it's not about the Top 40 songs or the best selling books.  It's about the niche products that appeal to the needs and preferences of individuals. More business is being done in small quantities of many skus. It's The Long Tail coming to life.  And people are looking to find those things online, starting with a search.

Now, based on this, if you are still looking at merchandising and marketing the way you did in the 20th century, it's time for a change.  The consumer dynamic requires that retailers undergo significant process and organizational change in order to tap into the immediacy and amount of customer information that is is now in our grasp. (see my previous post : Are Your Merchants and Marketers Fighting? The Real Reasons Why).  Things look different now:

       

These changes should give us more than enough to work on over the next 10 years - here's what's likely in store:

• Consumers will search for, find and covet quality niche retailers, both online and offline
• Big chains will struggle with operationally and organizationally with demands for segmented and individualized offerings
• Product content (user generated or otherwise) will finally get the credit it deserves as a strategic asset, forcing operational and technical issues to get resolved(see my previous post: Ecommerce leaders: The One Job That Should Be On Your "Must Hire" list)
• Lines between social networks and commerce will continue to blur and influence one another, and as a result...
• Retailers and agencies will develop ways to tap into social media for product and brand insights
• Search will evolve beyond text to display, video and personalized results, altering the economics and logistics of search marketing
• Consumers will continue to get more comfortable with small screens, making mobile media and commerce critical to retail strategy at last

So, save the date. Retail 2017 should be quite an event.  And the skeptics?  They'll be out of business by then.

The Real Problem With Online Yellow Pages - Snake Oil Salesman

My husband and I own a successful small business - the success is thanks to him.  He works his tail off making it great, I give advice at dinner time.

Last week he told me about a meeting he had with a salesman selling online yellow pages and other online search placements- a common occurrence these days.  The yellow pages sales person has an existing relationship, and that huge paper book is finally migrating online. A quick, easy way to get a good presence on the web by just checking a box for one annual fee.  Not so fast.

For those business owners that don't take the time to look past the sales pitch and do the math, these deals can be deceiving.  Here's what they were proposing:

12 months of listing in the online yellow pages  plus a "click package" from "various search placements" (they would not specify where) across the internet for $11,500 annually.  OK, so for alot of you e-commerce leaders and marketers out there, spending less than $12,000 a year sounds like chump change. But in the perspective of a small business, that's not a small amount of money.   All of this of course came wrapped in the sales package of the "billions of searches" that are done ever month,  and the "millions" of people that are out there searching for businesses like yours, waiting to find your listing.

Fortunately, my husband had the good sense to ask a few practical questions and press on some assumptions:

Question: "You mentioned the "billions" of searches that take place every month on the internet....doesn't Google get over 60% of those? So, how many searches do you get for my service in my town? Answer: (after an enormous amount of seat squirming and tap dancing) 6000 searches a year. So much for all of those billions.

Let's make some assumptions on how many of those searches are actually going to result in a click on my placement - so, if we said that 5% of those people were going to click on me, that's probably very optimistic, but let's use that as an assumption.  That's 300 clicks a year. Let's then add to that the 3,000 "guaranteed" clicks that are thrown in as part of the click package.  So 3300 clicks.

Now, let's say that 5% of those people actually pick up the phone and request a quote - again, probably optimistic given that most of those clicks are coming from "various search placements" and there's no accountability for the quality of the click.  That's 165 leads at a cost per lead of $70.00

OK, now let's assume that 25% of those actually turn into an order , at my average order value of $500.  Forget about re-orders and repeat business for now, this is just about acquisition. That's 41 orders and $ 20,625 in sales.  The ad cost is $11,500, so about $279 for a $500 order. And that's comparing ad cost to sales, not REAL ROI.

AND we're being really optimistic on the clicks and calls. And this is a supposed to be a GOOD deal?

Now, all of this only gets better when you find out that this salesman boasted that several other similar businesses in a neighboring city were already signed up, they're having great response to the program!

When my husband walked him through the math, the salesman sheepishly shrugged his shoulders as if to say "I wasn't counting on you being this smart..."

Seeing online marketing from this perspective is both interesting and disturbing. Clearly, small businesses have an enormous amount to gain by having a presence in paid search and probably even in some of the online yellow page directories.  But these are small businesses after all. Most of them - plumbers, hair stylists, print shops and the like don't know anything about direct marketing and are intimidated and mystified by the online world.  They are being  blindly led by an advertising sales process that is stuck in the dark ages, and don't understand that paying for performance  and tracking results down to the sale and beyond is a critical component of making direct marketing work.

And, let's remember that local search has not been mastered yet by either the directories or the big portals. So you have a deadly combination of advertiser ignorance and salespeople who either a) are taking advantage of the ignorance or b) are too ignorant themselves to modernize their product and pricing models into truly accountable formats.

Darwin will take care of this eventually and the expertise on both sides will evolve - maybe.  But small business owners have a very short attention span for new things.  If the guys that sign up for this snake oil see that over the course of the year they aren't getting a return for their money, they're not coming back. Even if the deal is better, like a pay per call or true pay for performance model, all they will likely remember is that "The internet doesn't work for us. We tried it". 

So, if you're in big business and you know someone in small business - help them out. Educate them, help them understand that there are easy options for them to have a presence on the internet that offer a reasonable return. Walk them through the math. Tell them to consider a more accountable and track-able model, like pay per call or pay per lead. And tell them to watch out for the snake oil salesman.

And if you're a small business owner, beware, but be brave. You can be successful on line - but find a friend (or a wife), not a snake oil salesman, to help you.