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Integrating Online and Offline Marketing Strategies © 2001 Ann Schlosser, University of Washington Business School.

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Presentation on theme: "Integrating Online and Offline Marketing Strategies © 2001 Ann Schlosser, University of Washington Business School."— Presentation transcript:

1 Integrating Online and Offline Marketing Strategies © 2001 Ann Schlosser, University of Washington Business School

2 Newspapers and the Internet Information good supported by advertising and subscription revenues –High fixed costs –Modest incremental costs in physical form –Low incremental costs in digital form On the Internet, unbundle news from classified ads –News available for free –Classified ads become the content of Web sites (e.g., Monster.com, Carpoint, Realtor.com)

3 Unbundling = Potential Spiral of Decline High margin classified revenues Subscription prices Size of circulation Attractiveness to advertisers - + - +

4 Should Boston.com “upsell” classified ads? Arguments for upselling: New revenue opportunity –Provide incentives to sales team Recapture portion of inevitable erosion to online Online rates are low compared to print prices Educates clients regarding online value Arguments against upselling: Could reduce number of online listings Hastens unbundling of classifieds from newspaper Exacerbates internal conflict (e.g., tension from coordinating across media)

5 What should Boston.com’s marketing strategy be? Invest aggressively in customer acquisition and brand building? Or move slowly to protect the existing brand? –Get Big Fast (GBF) strategy best if: Online ad/commerce revenue will surge over the next few years “Winner take all” dynamics apply Lifetime value of customer exceeds cost of acquisition Risks of competitive preemption are high –Get it Right First (GIRF) strategy best if: Protecting quality and brand is paramount Examine in terms of Boston.com’s business models: content provider, vertical portal and market maker

6 Boston.com as Content Provider Supports GIRF strategy –Modest threat of competitive preemption in the online distribution of local news –Not subject to strong “winner-take-all” dynamics –Protect integrity of Boston.com (and Globe) brand –Trying a range of interactive services to augment online content During this experimentation phase, should they pursue a GBF strategy and risk confusing/alienating a large number of users with site changes?

7 Boston.com as Vertical Portal Support for GBF strategy –Compete with Ticket Master’s City Search and AOL’s Digital Cities Risk competitive preemption –Local portal may attract different (younger) audience than the Globe Support for GIRF strategy –Portal model is less susceptible to “winner-take-all” dynamics

8 Boston.com as Market Maker Market maker = neutral intermediary helps fragmented populations of buyers and sellers identify and communicate with each other –Classifieds –Auction Support for GBF strategy –Subject to “winner-take-all” dynamics (especially network effects and high retention rates) –Subject to competitive preemption in classifieds

9 Customer Acquisition Costs vs. Lifetime Value Boston.com in 1999 Assume 50% of 6 million Boston residents were Internet users (3 million) Boston.com’s reach is 20% (600,000) – Exhibit 1A Revenue per Boston.com user = ($10 million)/600,000 = $16.67 Assume 90% variable contribution margin, then $15/user Assume can retain customer for 3 years (comparable to newspaper and magazine subscribers) Lifetime value = $15 x 3 = $45

10 Customer-Acquisition Costs *Multichannel = offline company with revenue-generating online operations; Source: www.shop.org

11 Boston.com Run as a Hawk or Dove? Hawkish choices: –Separate physical locations –Separate brand –Dedicated online sales force –Separate management and reporting structure –Link to Boston media companies Dovish choices: –Sharing newspaper content –Heavy cross-promotions –Shared resources and staff (e.g., IT staff, legal services) –Double commissioning of print ad reps

12 Where Should Boston.com be? HawkDove GBF Don’t GBF

13 Update Upsell recruitment ads at $50 –80% “compliance” rate Later increased to $100 –No drop in compliance Globe staff sold upcharge, Boston.com sold banners and sponsorships Introduce community site “Abuzz” New services and sections (e.g., “Digital Mass”)

14 http://www.boston.com/mediakit/shosh_globe.htm

15 http://www.boston.com/mediakit/shosh_atbat.htm

16 Boston.com = nonstop news

17 "I only have anecdotal information from our marketing department that online customers also buy offline." (Book retailer) "We can't really tell if people are spending more if they are shopping in more than one channel." (Music retailer)

18 "I sent out Web brochures to the retail guys to stuff in bags, but they never used them. People sabotage cross-channel efforts because each division has its own goals." (Specialty gift retailer) "Some here have an 'us against them' mentality." (Apparel retailer) "Customers don't get a very consistent cross-channel experience from us because we have different phone numbers in each channel. A Web customer service rep doesn't know that a customer also interacted with a catalog rep." (Apparel retailer)

19 What Customers Use to Find New Web Addresses

20 Consumers And Retailers Are Not In Sync

21 Fragmented Customer Experiences Uninformed –FACT: only 48% of firms know about a problem before the customer does –FACT: only 37% know if they share a customer with another division –FACT: only 20% know if the customer has visited the Web site –FACT: only 23% of telephone agents can see customer's Web activities –FACT: only 10% share customer-focused metrics across divisions Missed Opportunities –FACT: Only 43% alter service based on customer profitability –FACT: Only 42% would sell something during a service call

22 YesNo VP-level person responsible for overall customer experience? 38%45% Permanent cross-functional teams?47%46% Assign a universal ID to each customer?27%72% Cooperate a lot across channels?48%52% Track whether customers using multiple channels spend more? 44%52% Cooperate a lot with other divisions?25%65% Efforts to Integrate the Customer Experience


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