Marketing Profs, June 29, 2010
Marketing at Cyberspeed: What Today’s Internet May Mean for Your Launch Strategy and Beyond
By Olga Taylor and Barbara Bix
Launching a business may be as easy today as registering a website. But winning a share of the market will remain tricky as long as it is subject to customer preferences, channel demands, and competitive offerings.
To increase their chances of success, both traditional and e-businesses have long relied on market research. In its ideal form, market research is a “learn-and-confirm” loop, similar to scientific research.
When used systematically, market research is not simply a predictor of success or failure of a particular product idea. Rather it is ongoing two-way communication between the business and its target audience. Treated as such, market research becomes a constant source of information about opportunities for improvement and innovation.
Until recently, however, only a handful of the largest companies could afford to thoroughly research all aspects of buying behavior. But even these companies fell short of continuous dialog with their entire markets.
Enter the connectivity and behind-the-scenes data capture of today’s Internet. Now a whole generation of e-businesses is finding itself with a direct round-the-clock link to every potential customer via the worldwide web.
Today’s on-line market researcher is “wired” into his world, not unlike a day trader or a cyber games whiz kid. Product releases, like software updates, and promotions like website and media content – can be made instantly available to the entire market via browser-based applications. The market response is, likewise, instantly visible to the researcher. All one has to do is review web traffic reports, typically built into the "back end" of a website.
So what does this mean in the context of a real company’s day-to-day marketing operations? To get a feel, let’s have a look at a young Internet company launching its first website.
What can you do on-line that you aren’t already doing? Gemvara, a Lexington, MA based on-line jewelry retailer, is betting you will buy custom-made jewelry through its new website Gemvara.com.
Gemvara’s unique on-line customization feature allows shoppers to substitute their choice of gemstones and precious metals when ordering any piece of jewelry from its stock. Substitutions are instantly reflected in the photo and price of the item, making it easy to “redesign” any piece to fit a color scheme – or a budget.
In 2006, Matt Lauzon, then a student at Babson College, won the Babson annual business plan competition – and made BusinessWeek’s Best Entrepreneurs Under 25 – with the idea of a web platform for custom-made jewelry.
In 2008, the start-up company made business headlines again, when it received $5.8M in series A financing from two prominent venture funds: Highland Capital Partners of Lexington, MA and Canaan Partners of Connecticut.
In late 2009, the company decided to target individual consumers and began to assemble a consumer-savvy management team. In February of 2010, Gemvara.com opened its virtual doors to the on-line shoppers.
Marrying the age-old jewelry industry with a current technology – a web-based platform – to enable a growing trend – mass customization – is an excellent start. What happens next, however, is just as important to the young company’s eventual success as the impressive milestones already under its belt.
Just as any new business, Gemvara must put in place a marketing structure to build a sales pipeline. What gives the company its distinct 21st century edge is the social and business infrastructure of today's Internet.
What do we mean by this? A marketer’s job is to reach, attract, and engage the “right” buyer. Today, we can reach millions of web visitors in a matter of hours through popular sites and social networks – while almost simultaneously measuring “attraction” and “engagement” through sophisticated and highly accessible web traffic statistics on our site.
Let’s see how Gemvara, born and raised on today’s web, uses it to lead the prospective buyer through the steps necessary to initiate a sale.
Step One: Reach and Attract
The first step is attracting shoppers’ attention. With thousands of jewelry retailers already on the web, being found is a challenge for established businesses, let alone a newcomer like Gemvara.
Solution? Gemvara is advertising with comparison shopping sites – that have built up traffic and name recognition – to redirect customers to its own site. They've decided to add a "new product" for each piece of jewelry a prospect creates, since the more content a company has the higher it appears in search rankings.
Then, there's marketer’s best friend, the good old word of mouth. Gemvara makes it easy to refer your friends with a “Share on Facebook” button next to the picture of your purchase. When you click on it, just below the picture a hard-coded message reads: “I designed this piece at Gemvara - The World's Largest Selection of Customizable Gemstone Jewelry”.
Step Two: Engage
Once you attract their attention, how can you get the shoppers to buy? At the very least, they should be looking at a few pages every time they visit. If they leave the site after seeing only one page, chances are they are not interested – and will not be back.
Therefore, the first and most important statistic Gemvara chose to watch – and act upon – is the bounce rate, the percentage of visitors who leave the site after looking at just that page, for each of its web pages. The company uses a similar trial-and-error tactic to improve shoppers’ experience throughout the site. They focus on pages with the highest bounce rates and try to bring the bounce rate down.
“When we launched the site, the bounce rates on some of our catalog pages were terrible”, says Dan Marques, Gemvara’s Director of Online Marketing. “We looked at other sites and saw that they had price tags, while ours didn’t.” By adding prices and testing a few different ways to display them, Gemvara was able to bring the highest bounce rates down to the site’s average.
In many cases, Marques can guess why people are leaving, from comparison with an established competitor or just by staring at the screen. When this is the case, he will fix and re-test screen design, one feature at a time – and test the shoppers’ response before and after each change.
If there is no obvious remedy or if results do not improve, Gemvara conducts a usability test through a third-party vendor. (In the old days, it was expensive and time-consuming to recruit the right users. Today there are many options for faster and cheaper on-line testing.)
The other key statistic Marques is tracking is the percentage of shoppers who use the customization feature. To Gemvara, customization rate is not only a measure of customer engagement, but also an indicator of how well its business idea is catching on. Marques explains. “Our value proposition is customization.”
But, What about Sales?
Before Gemvara, or any emerging business, can achieve financial success, it must figure out how to generate revenues and make the most of its limited marketing and sales resources. Conventional marketers do this by identifying the best prospects and then conducting research to determine what matters most to them and how they prefer to buy. Then, in combination with competitive research, marketers use this information to develop product, pricing, promotion, positioning, and distribution strategies to accelerate the sale.
Historically all these activities were conducted pre-launch, delaying product release until there was sufficient evidence to support all the important marketing decisions.
Gemvara's experience shows that today it is possible to launch sooner – and make adjustments post-launch, using large volumes of immediate response data. This learn-as-you-go approach poses some interesting questions that all marketers should consider.
Can you get all the relevant market data post-launch?
You can learn a lot from web traffic. The question is can you gather all the information you need without having the opportunity for direct observation and in-depth discussions.
Is it sufficient to work backwards from a sale – using the data you automatically capture? What if you supplement passive data capture with online forms pro-actively asking for additional data about purchasing process or criteria?
What are the risks of putting off research until you enter the market?
The Internet makes is possible to gather better data, more quickly and less expensively, so why wait? One reason is to confirm that you've identified the most promising prospects. If you wait until after you launch, you run the risk of needing to rethink all your marketing strategies – since each of these depends on who is making the purchasing decision.
Post-launch shifts in marketing strategy can cost you immediate expenditures, longer time-to-revenue, and even a "first mover" advantage you might otherwise enjoy. They may also negatively affect your brand – which depends on clear and consistent messages repeated over time.
Another reason to conduct the bulk of the research before launch is to focus on strategy before many operational details divert the company’s attention. Once we launch, it is only too easy to get caught up in nuances and miss the big picture.
What can you do before launch to minimize risk?
• As much as possible, confirm that you've identified your most promising prospects
• Perform competitive analysis and research, online and off, to determine when, why, and how these individuals typically buy; learn best practices for speeding the sale.
• Use this information as you identify the right business partners
• Determine what kind of data you will need post-launch to confirm your hypotheses and to identify additional opportunities to accelerate the sale.
• Set-up a tracking mechanism that will enable you to easily work backwards from a sale to measure what works and find ways to streamline the process.
• Develop a plan that will help you recover quickly if any of your assumptions are off.
The Internet has changed marketing – and there's no going back.
The Internet speeds up sales and marketing – and cuts expense. In the past few years, Internet technologies have simplified and brought within the reach of every business many complex marketing activities, including research, testing, and communications.
On the web, it's much easier to learn what captures attention, engages interest, and ultimately leads to a sale – just by following click streams. Delivery is quick since everything is online. Gone are the lags associated with convening buyers and sellers, or shipping and restocking marketing collateral. Social media amplifies word-of-mouth referrals by eliminating the need for parties to share a common space, connect in real-time – or even have a prior relationship.
On the other hand, the broad affordability of channels and tools for marketing and market research raises the bar for the entire industry. The web lowers the cost of entry and therefore stimulates competition. Competition raises quality standards and erodes profit margins.
Under these conditions, only those businesses that study and understand their audiences will survive and win market share. If in the past a small business felt that it could not afford thorough and systematic market and competitive research, it cannot afford not to do that research today.
Olga Taylor is Vice President of Marketing and Business Development for Quartesian LLC, providing clinical research and data services. Barbara Bix is a B2B strategic marketing consultant and the Principal of BB Marketing Plus.