Internet Invasion: Web-based activity fuels 44-percent rise.
For many marketers, the Internet represents the promotional equivalent of the Holy Grail. The medium offers speed, cost-effectiveness, targetability, and trackability. With 39 million U.S. households currently online and a total of 60 million projected to be Net-enabled by 2004, marketers are preparing for a not-so-distant future when online promotions will allow them to target all customers on a one-to-one basis.
Despite the heavy media attention given to the Internet segment, brand migration to the online promotional arena has been slow. Although brand managers maintain that the Internet will play a significant role in future promotional planning, most have moved cautiously in funneling a large portion of marketing budgets online. Almost half (41.4 percent) of marketer respondents to promo’s Promotion Trends 2000 survey say the Web didn’t have a large impact on their promotion strategies in 1999 (see Introduction).
But spending is most definitely on the rise. Marketers sank $926 million into Web-based promotions in 1999, nearly twice as much as the $475 million spent in 1998, according to promo estimates based on industry sources. The figure includes spending on a variety of Internet tactics, including online sweeps, couponing, loyalty, and sampling efforts, as well as the fulfillment involved in these strategies.
In 1999, online promotions were spun from virtually every brand marketing camp. Sweepstakes and games were big (a General Motors game for Chevy Tracker drew 1.3 million Web entries). So were coupons, sampling programs, and cross-promotions (Sharper Image scored big with an Inspector Gadget tie-in). Online and off-line brands ran their own campaigns, but also teamed up on numerous efforts (Sears, Roebuck and Co. is launching co-branded marketing initiatives with America Online).
About 67 percent of respondents to Promotion Trends 2000 are dedicating one to five percent of their dollars to online promotions. Where are Web promo bucks coming from? Forty percent of respondents reallocated money from their advertising budgets and 21 percent from consumer promotion budgets. Ten percent created new allocations to fund the initiatives.
For those wondering how quickly the segment will grow, more than half of respondents to the survey said Internet promotions will garner a six-percent or more slice of promotion budgets in 2000. And Boston-based Forrester Research’s new Promotion Commotion research report is calling for Internet spending to ring in at $1.7 billion in 2000 and grow to $14 billion by 2006.
SURFIN’ SAFARI
Internet promotional spending hikes are, for the most part, a result of two factors. One, the sheer number of companies launching Web promotions is increasing almost exponentially. And two, the integration of online and off-line marketing elements is taking shape just as quickly. In the mid-1990s, marketers used online promotions as stand-alone efforts, but more recently have begun to integrate them into overall brand initiatives. Sports Authority distributed 1.5 million gamepieces through its stores last year, but sent shoppers to the company’s home page to find out if they’d won. Campbell Soup Co. tagged a Web promotion on millions of soup cans.
“Online promotions used to be ugly stepchildren,” says Bill Carmody, chief marketing officer with new high-tech promo shop Seismicom in San Francisco. “But brands are now starting to use the Web smartly. They’re combining the media and no longer treating online and off-line separately.”
As the Web-based promotions segment becomes more sophisticated, companies are looking more deeply into mining the customer data retrieved from online promotions while learning how to effectively develop permission-marketing efforts. Brand managers are using the Internet to test different offers and starting to use e-mail in their programs. About 70 percent of respondents to the survey said the Internet has helped increase data mining capabilities. Marketers are learning the customer-retention values of viral marketing – the use of e-mail as a loyalty and continuity tool – and will be sending more than 200 billion marketing e-mails annually by 2005, according to Forrester.
“There are far more effective ways to measure ROI these days,” says Joe Hartnett, chief integrated marketing officer with The Phelps Group, Santa Monica, CA. “We can track a consumer’s behavior all the way through to a sale if we want to.”
As marketers get more comfortable with the Internet, “the lines will blur between online and off-line,” says Steven Krein, ceo of New York City-based Promotions.com. Brands will begin developing Internet components for most – if not all – of their consumer promotions. Krein believes the day will come when the Internet is the primary vehicle for delivering promos and the main marketing mechanism within any campaign’s promotional makeup.
The Internet’s time has come
– Spending on Web-based consumer promotions jumped 95 percent to $926 million.
– Spending on telephone-based promotions was flat at $545 million.
– The integration of online and off-line promotions is picking up speed.
– Roughly 60 million U.S. households are expected to be Internet-enabled by 2004.
Although the Internet is all the rage these days when it comes to interactive promotions, non-Web interactive campaigns are still popular among marketers. Spending on other interactive marketing strategies rang in at $545 million in 1999, about even with 1998 figures, according to PROMO estimates and industry sources.
A bold example of the continued popularity of telephone-based interactive promos came through last summer’s Coca-Cola IYDKYDG (If You Don’t Know You Don’t Go) effort. The beverage giant sent out direct-mail pieces containing five IYDKYDG cards to 1.2 million teenagers, inviting them and friends to get free phone time and a personal voice mailbox by answering questions (likes, dislikes, trends, etc.) when activating the card. To obtain additional phone time, kids could buy Coke products, call in a new PIN number from under the cap, and answer questions or listen to ads from sponsors (a sweeps overlay supported).
To pull off the campaign, Coke set up the world’s largest voice-mail network and purchased 50 million PIN numbers to tuck under bottle caps. Atlanta-based U.S. South Communications directed phone operations for the effort, which helped build a powerful database for Coke. (Calls were transcribed daily and reported to marketers.)
The campaign served as a strong signal that, although consumers are going ga-ga for the Web, phone programs can still serve as purchase incentives and continuity drivers. They can also be intensive research vehicles.
In a 1999 program called Around the World in 90 Days, the U.S. Air Force in Europe boosted morale among its ranks by awarding points on peel-back cards to attendees of educational and recreation events held at bases across the continent. Participants registered to win prizes for accumulated points through a toll-free number.
Pagers also continue to be used in promotions. Marketers use pagers as a way to send targeted messages to consumers and also as premium incentives. The World Wrestling Federation, Stamford, CT, ran a beeper blitz last year that worked fans into a suplexing frenzy with alphanumeric pagers boasting special messages and offers. The alphanumeric pagers, which can transmit sentences instead of straight numbers, are expected to become popular with brands in 2000. (In the past, most consumer beeper promotions were restricted to paging consumers with phone numbers they would need to call to hear special messages or offers.)
“Marketers are looking to engage consumers in a variety of interactive ways,” says Brad Wendkos, president of Fort Lauderdale-based Phoneworks, the Aspen Marketing division behind the Air Force effort. “The days of single interactions are over. These days, it’s all about driving a series of interactions.”
The future will bring more sophistication to the interactive promotion segment, thanks in part to the Internet, which is already migrating into this area. Web-based promotions are beginning to be intertwined with phone efforts and pager initiatives. And wireless promotions will roll out later this year, giving marketers a true way to reach consumers wherever they are. “Consumers will be able to sit in an airport and use their wireless phone or personal digital assistants to register for a sweepstakes,” says Wendkos.
Developing voice recognition technology also promises to bring new possibilities to interactive data capture.
