Guerrilla marketing techniques for online promotion and customer engagement

Marketing

Coined by marketing guru Jay Conrad Levinson, guerrilla marketing is marketing that is unconventional, nontraditional, not by-the-book, and extremely flexible. The nine major differing factors from conventional marketing provided in "360 Degree Internet Marketing - Think Outside the Box for Minimum Cost, Maximum Results," (2001), are:

Instead of investing money, you invest time, energy and imagination.

Instead of guesswork, you utilize our expertise and experience.

Instead of measuring your success in terms of traffic, responses or sales, you do so in terms of profits - your bottom-line.

Instead of ignoring customers once they've purchased, you follow-up for cross-sales, up-sales, and referral sales with great persistence.

Instead of only concentrating on making sales, you are dedicated to making relationships, which result in many more sales over the long-term.

Instead of focusing on a single strategy, you utilize a combination of many.

Instead of growing large and diversifying, you grow profitably and maintain focus.

Instead of aiming messages at large groups, you target individuals and small groups.

Instead of growing only by adding new customers directly, you lean upon the enormous referral power of your customers to grow exponentially."

As early as 1999, research firms such as Forrester Research ("Forrester Report," Affiliate Marketing.co.uk) had began to understand the power of online guerilla marketing as a channel with high utility and growing usage, recognizing the effectiveness of affiliate marketing, e-mail and opt-in email as shown in the following table.

Rank

Method

Usage

Effectiveness

Affiliate Marketing

Customer Email

Public Relations

Television

Outdoor

Email (opt-in)

Magazines

Radio

Direct Mail

Sponsorships

Buttons

Banners

Source: Forrester Research April 1999.

Effectiveness ratings based on 1 (poor) to 5 (good).

This paper explores the pros and cons of these online guerilla marketing techniques as well as low-cost methods including viral marketing, banners, search engine optimization, and mobile commerce enablement. The relationship between online guerilla marketing and more traditional offline channels is also summarized. In addition to describing channels to promote web sites, this research briefly covers newer infrastructure technologies that enhance the customer experience on the web site.

Viral Marketing

Venture capital firm Draper Fisher Jurvetson claims credit for creation of the viral marketing strategy in 1997, defining the term as a network enhanced word of mouth (Jurvetson 2001). Viral marketing is used to describe any online strategy that encourages individuals to pass on a marketing message to others. The original inspiration came from the launch of Hotmail in 1996 when Draper Fisher Jurveson persuaded this company to include a promotional pitch for its Web-based email with a clickable URL in every outbound message sent by a Hotmail user. Thus, every Hotmail customer becomes an involuntary salesperson simply by using the product.

The power behind viral marketing lies in its ability to create exponential growth in the message's exposure and influence. According to Jurvetson, a first-order model for viral spread is:

cumulative users = (1+fanout) ^ cycles

The exponent cycles is the number of times the product is used in the time period since launch (or frequency x time) and fanout is the number of new users. In Hotmail's example, this company fanned out to about two new users every month, so one seed user grew to three users at the end of the first cycle, nine by the second, twenty seven by the third, etc. Juvertson also factors in the variables that describe the success of the recruiting message and the retention rate as percentages:

Cumulative users = [(1+fanout * conversion rate) * retention rate] ^ frequency * time

Ideally, viral marketing will communicate with many people, will convert a high percentage of them to new users, will retain a high percentage of them and will also be used frequently. A more accurate second-order model must consider decay functions on variables that reflect novelty and saturation effects.

Wilson (2000) defines six effective viral marketing strategies. The first is to give away products or services such as e-mail, information, "cool buttons," and software programs to get widespread attention. Viral marketers practice delayed gratification to generate immediate interest with the hopes of future profit and customer loyalty. Revenue can come from future product sales, the value of the collected e-mail addresses, advertising revenue and other electronic commerce sales opportunities.

Secondly, Wilson recommends that viral marketing should provide for the effortless transfer to others by taking advantage of e-mail, websites, graphics and software downloads. The reasons viral marketing works so well on the Internet is because instant communications is easy and affordable and digital formats simplify replication. Marketers should make their message simple so that it can quickly understood and transmitted easily without performance degradation.

The third viral marketing strategy that Wilson identifies is to use a transmission method that can scale easily or to plan for increasing scalability as part of the viral marketing model. He cautions that the virus can multiply only to kills the host before spreading, as is the case with mail servers. Wilson also suggests leveraging existing communication networks. People on the Internet develop networks and relationships by collecting email addresses and their favorite website URLs. These can be exploited by affiliate programs and permission e-mail lists to multiply message dispersion.

As with any marketing campaign, viral marketing requires the ability to exploit common motivations and behaviors. and, Wilson believes that the most effective viral marketing plans use the resources of others to get the word out such as placing text, graphics, links, and article on other websites. This has the advantage of not only having another's webpage convey your marketing message, but also provides the ability to use someone else's resource rather than depleting your own.

Case studies and research suggest that viral marketing can be a huge success. For example, in the initial use of viral marketing by Hotmail (Jurvetson, 2001), this company grew its subscriber base from zero to twelve million users in eighteen months, more rapidly than any company in world history. and, it did so with only a budget of $50,000. Like Hotmail, instant messenger ICQ reached close to the same number of subscribers in eighteen months via viral marketing. MTV, the inventor of music television, has also experienced success with viral marketing when it created a MTV viral Christmas card to cut through all the Christmas promotional noise ("Case Studies," the Viral Factory). The goal of the viral card was to generate goodwill for the MTV brand name and to increase Web sit traffic. In the first three weeks, 30,000 people downloaded the clip and an estimated 6.6 million people watched the MPEG file by summer 2002.

General statistics provided by Sepos (2003) show that eighty percent of online firms are already using viral marketing and are experiencing the following behavior:

Eighty-one percent of viral email recipients pass them to at least one person

Forty-nine percent send email messages to two or more people

Five to fifteen percent of viral recipients click through Fifty-six percent of browsers find new sites through viral marketing

Jurvetson (2001) asserts that viral marketing is more effective than third-party advertising because it conveys an implied endorsement from a friend. One key element of consumer marketing is usage affiliation or wanting to be a member of a group that uses a product.

Despite the many advantages of viral marketing, it does have disadvantages as pointed out by Krishnamurthy (2000). He admits that viral marketing can allow companies to build a customer base at a low acquisition cost and that it allows companies to move from a marketer-to-consumer communication to consumer-to-consumer communication. but, he believes that companies must understand what they are giving up when they engage in viral marketing. For starters, he states that companies lose control over their brand because messages often end up in undesired audiences and because individuals can modify the original message. Krishnamurthy continues to explain how viral marketing can lead to unanticipated growth paths. As an example, he described how many Hotmail became widely used in India as individuals started emailing friends who lived there, but it's not clear if that's what Hotmail expected or wanted. it's also difficult to measure viral marketing campaigns because you can't always track emails.

One of the most problematic aspects of viral marketing is when does it cross the line and become spam. Foster (2002) cites AllAdvantage as one company with a business model that may have gone overboard. AllAdvantage pays customers fifty cents an hour to display its display ads on their desktops. but, AllAdvantage also pays ten cents for each hour that someone that you refer to their services uses the display ad and five cents an hour for anyone who your referral then signs on to the service. These pyramid referral credits can go down four levels and some customers earn more than $5,000 per month. Critics argue that this is acquaintance spam and that it is a misuse of an individual's email who had only given permission to send information of a personal nature.

Affiliate Networking

Unlike viral marketing, which fosters a community of consumers, affiliate networking connects businesses that need an additional revenue stream to businesses that want to improve sales or increase their own online traffic (Waxer, 2000).

With this type of marketing, a Web site owner registers with an affiliate program and agrees to post another company's promotional links and banners. If a consumer clicks through these links and banners and completes a purchase, the web site owner received a commission for generating the sale, typically ten to fifteen percent of the sale. Affiliated marketing allows retailers to expand their online presence, grow their Web business, and capture the attention of specific target demographics.

Affiliate marketing offers an advantage over viral marketing because companies can track the number of sales to determine buying preferences and online behavior.

But, like viral marketing, affiliate marketing experiences a viral distribution effect. On average, users tell twelve other people about their online shopping experience, so the network of affiliates grows very fast. table below.

Wilson (1999) provides guidance for marriages between affiliates and merchants. First, the affiliate program should match the main focus of the merchant site as well as marketing values and philosophy. A merchant will be more attractive to affiliate visitors if they are related to the interests of the visitors. Affiliate programs work the best when links to the merchant are tightly woven into the content of the site. For example, links via product reviews and information are better than banners which should be limited to the site areas best targeted for the product or service. Merchant commissions should be enough to make the merchant/affiliate relationship worthwhile and merchants should schedule regular payments.

The merchant also needs to work closely with the affiliate to communicate ways they can improve sales and affiliates should share real-time reports with affiliates so that they will know how they are doing. Finally, the bottom line is what counts the most and revenue generation is always a more important metric than click-through rates.

One of the draw backs of affiliate marketing is that a merchant needs thousands of affiliates to make the strategy effective because twenty percent of affiliates account for eighty percent of all sales. However, it's difficult for the merchant to know which affiliates will account for those transactions. On average, a large online retailer has ten thousand affiliates.

Pay-for-performance facilitated by affiliate networks is becoming a widely desired method of online advertising because you get the same exposure as ads, but you don't pay anything unless you make a sale ("The E. In your Business," 2000). and, the effectiveness of affiliate networks is greater than banner ads because they automatically link like-minded sites together. Increasingly, the reach of affiliate networks is increasing. In the United.States, one of the largest affiliate networks deals with 250 million people. Allied companies average eleven percent higher revenue and twenty percent higher growth rates than unallied companies. A survey of fifty large U.S. online retailers found that thirteen percent of their revenues come from affiliate programs, with this number forecasted to jump to twenty percent this year.

Banner Ads

Web banner advertisement is generally a rectangular graphic, a GIF or JPEG image, placed on purchased space on a Web page. "Its goal is to attract the user long enough to compel a click through which is usually an invitation to visit another web site. Banners were one of the most popular forms of online advertising, accounting for more seventy percent of all online ads as indicated in statistics provided by Enbysk (2001). but, in 2000, this percentage dropped to forty-seven percent. Despite this decline in the use of banner ads, global spending on banners, buttons and links was still $1.6 billion in 2000.

Waxer (2000) argues that banner ads provide questionable value in online advertising. According to her work, banner ads never enjoyed a high click-through rate to begin with and the problem is getting worse. Banner click-through rates have dropped from only 1.35% in May 1997 to.39% in March 2000. Waxer believes this is because it's too difficult to lure Web surfers already suffering from information overload into boring rectangular boxes and recommends getting more attention by using interactive features such as drop-down menus, check boxes or video streams.

However, other research states that Internet visitors log onto the Internet with a specific purpose in mind and are simply not interested in banner ads which many users find irritating ("The E. In your Business," 2000). If interested in lead generation or sales, they believe that online advertisers are better off putting their time and resources into more appealing forms of advertising such as affiliate networks that obtain ten times the click through rates of banner ads.

Some feel that banners are necessary to help build brand even if they don't generate leads or immediate sales via direct click through. A study by Forrester Research ("DotCom Marketing - Banners Build Brand," Iconocast) showed that offline sales of an impulse food product rose nineteen percent among households exposed to a banner campaign in comparison with a control group that did not see banner ads even the click-through rate had only been.27%. Banner ad frequency was a factor in determining success. Those who saw the ad seven to ten times over a sixteen week period made twenty-eight percent more purchases than the control group. The conclusion of the study was that online banner ads work much like its offline counterpart; consumers get the message, but buy when it's convenient for them to do so.

Nevertheless, companies should try to maximize their return on investment with this type of unproven advertisement according to Waxer (2000). Online advertisers might consider banner exchange programs that where companies swap real estate space on their respective web sites. but, this offers a significant downside to companies that don't want to use their web site as a billboard for another company's business. A better option proposed by Waxer, especially if a company is interested in leads and immediate sales, is to negotiate the cost of a banner ad campaign based on the click-through rate instead of the traditional impression fees that change based on the number of times a banner ad is displayed. If paying based on impressions, online advertisers should be aware that they have a lot of bargaining power because the average price of banner ads is falling and the number of web sites that are seeking advertising is increasing. Cost per thousand (CPM) was only $30.52 by the end of 2000, with most site category pricing ranging from $20 to $45 ("DotCom Marketing - Banners Build Brand," Iconocast).

In addition to negotiating for the best price, it's important to optimize the effectiveness of the banner ad because the average Internet user views more than 830 marketing impressions every day. Reed (1998) provides many suggestions for the design and placement of banner ads. Surprisingly, the best click-through rates are for banners that are positioned among the content within the first screen of viewing, not the very top of the page. Banner ads placed one-third own the page can generate as much as a seventy-seven percent high click-through rate than ads placed at the top. and, ads placed in the lower right-hand corner of the first screen generate more than two hundred percent high click-though rates than ads at the top. Click-through rates are better for Web pages that only have one banner, but banners with different shapes or sizes will reduce this issue. The frugal use of color improves click-through rates, as does type that reverses out so it will contract with the web page its placed on. Rich media ads increase awareness, recall, purchase intent and perceptions. Studies have show lead generation success to be.05% with a rich media ad compared with.03% for a standard GIF banner. With regards to animation, there's a fine balance between getting noticed and being intrusive.

Reed's article also suggests the importance of messages that target specific audiences. Ads that use the company logo get near-zero click through. it's better to use tag lines that clearly identify the value proposition of a product. Ads need to have a strong concept, excellent art direction, creative copy writing, animation for the sake of reinforcing the concept, small sizes for quick load times (10K or less) and be brief and to the point.

Finally, banner ads that are rotated based on a time interval may have better click-through rates at sixty to seventy-five-second intervals than at fifteen to thirty second rotation intervals

Opt-in E-mail

Opt-in e-mail is a web marketing term for promotional e-mail that recipients have previously requested by signing up at a Web site or a special banner ad. Typically, web users are invited to sign up for promotional information about one or more categories of products or services. Those who sign up have thus "opted in." Anyone sending them e-mail as a result hopes that the message will not be perceived as unwanted spam. Marketers are most commonly deploying ezines which are simply opt-in newsletters and information blast sent via e-mail.

The use of opt-in email is growing at an astounding rate as shown in statistics provider by Waxer (2000). She states that eMarketer is predicting that e-mail marketing expenditures will increase more than four hundred percent to $4.5 billion of the end of 2003. Opt-in email has grown by more than fifty-two percent in 2000 with an annual volume of over sixty-one billion messages. FloNetwork, an online direct marketing service provider, reports that fifty-eight percent of online buyers find out about new products and services through permission-based e-mail, compared to only two percent through television advertisements.

Opt-in email is viewed as very effective way to retain customers as shown by statistics reported by Livingston (2002). Companies enjoyed, on average, an eight percent click-through rate and a three percent conversion rate in their retention marketing efforts in 2001. This represents a cost of only $6.25 per conversion, a very reasonable cost for gaining repeat business. Amazon.com generates almost two-thirds of its sales from repeat buyers, many of whom are drawn to revisit the site with e-mail promotions.

Success rates of opt-in e-mail can be attributed to its ability to allow companies to send announcements and promotional offers to a captive audience that has already asked to be included on a mailing list. Marketers can easily refine opt-in e-mail campaigns, can customize them to target the individual, and provide direct links to their site, and consumers are receptive because they are free to unsubscribe at any time

Opt-in e-mail requires the construction of a large target mail list. Third-party e-mail service bureaus have recently become a popular way to build target lists for opt-in e-mail campaigns (Waxer, 2000). These bureaus solicit consumers to grant permission to receive e-mail solicitations and then sell the e-mail lists for $0.10 to $0.25 per solicitation. According to Forrester Research, companies who employ the services of an e-mail service bureau enjoy a success rate four times higher than those companies who manage their e-mail lists in-house. As an alternative to e-mail service bureaus, direct marketing firms specializing in e-mail address management such as NetCreations offer companies the ability to generate traffic and access consumers through e-mail. NetCreations has built a database of more than ten million opt-in e-mail subscribes who have given their permission to receive e-mail messages on one or more of three thousand topics. NetCreations services is used by companies such as Dell Computer, Compaq and J. Crew.

Although opt-in emails are less prone to consumer backlash than some other forms of online advertising, marketers must be sure that they state their privacy policies up front and that they keep their promises of confidentiality.

And, they need to make sure that their frequency rate is appropriate for their audience even though they have permission of the recipient (Livingston, 2002). When asked to opt into a regular e-mail service, the research in June 2002 showed that thirty-five percent of readers prefer weekly delivery, but nine percent preferred daily delivery, eight percent preferred deliver every two to three weeks, eleven percent wanted deliveries two to three times per month, twenty-percent wanted monthly delivery, and seven percent wanted to receive material less than monthly. Eight percent did not want to participate in opt-in emails

Mobile Commerce Enablement

Mobile commerce has proven to be more hype than reality, particularly in the United States. Only about thirteen million wireless transactions occurred in 2002, indicating that marketers need to take steps to make sure that shoppers using wireless devices can shop from their site ("M-Commerce - New Trends and Opportunities," 2003). Although there are more than 110 million mobile phones in the United States, only 0.1% of mobile phone users purchased goods using wireless data services in the year 2000. Some of the key factors slowing the adoption of mobile commerce are:

Inferior purchase experiences on wireless devices due to non-dynamic user interfaces and slow networks

Users are not comfortable handing mobile content

Security and privacy concerns

Incompatibility of systems and devices

Insufficient infrastructure to support mobile commerce

High cost of mobile commerce transactions

Absence of sound business models by content providers

Lack of compelling applications

However, many of these issues are likely to be resolved in the not too distant future. Mobile phones are providing better resolution, increased system and device compatibility, and easier text-entry. Next-generation cellular networks will gain acceptance and offer more reliable and faster access. Mobile enterprise applications such as wireless customer relationship management will be adopted and digital content will expand.

M-commerce will likely morph into a complementary marketing tool for contextual marketing and CRM and become part of a contextual marketing proposition, where customers will be reached where they are ready to buy, whether in their cars, at their PCs, or at kiosks in malls ("The 'M' in M-Commerce Stands for Marketing" (2001, February 22).

In the key markets, this transformation may take another four to fove years, perhaps as long as nine years for it to reach ubiquity. Research and advisory firm IDC predicts that wireless will serve as a customer service enhancement rather than as an evolution of electronic commerce.

Traditional Channels

Online marketing will not replace traditional marketing channels, but will prove to be a critical part of a marketing strategy that blends online and offline marketing channels. Eighty percent of all online businesses use traditional offline promotional methods in addition to their online campaigns (Waxer, 2000). A 1999 study by Pitney Bowes showed that sixty-one percent of households in the United States still preferred receiving product information through regular mail, with television or radio preferred by twenty-two percent of households, phone preferred by nine percent, and e-mail preferred by only seven percent. Yet, a study by Deloitte & Touched showed that ninety-one percent of business executives believed that e-mail will be the primary source of communicating business information by 2005 followed by corporate intranets.

Arora (2000) points out that traditional marketing is also often overlooked as a way to drive web site traffic. He advocates using word of mouth, business stationary (business cards and letterhead) and promotional materials (fliers, newspaper ads, and radio commercials) to promote a site.

Infrastructure Technologies

In addition to generating web site traffic, it's important to optimize the user experience of the web site visitor. Gutzman (2000) provides a list of five essential technologies that are useful to facilitate web site transactions. First, personalization technologies should be used to make customers feel welcome when they return to a Web site. and, there are new technologies that anticipate the needs of first time visitors to enhance their experience. Shopping wizards and natural language query handling helps customers quickly solve their own problems so that they can then purchase products. Web sites should accept multiple currencies to remain competitive as the proportion of non-domestic customers that shop online increases. Customers should be given real-time access to inventory, order status and returns processing to promote customer loyalty. All sites should use an apt content management solution that not only provides bug-free content, but that also provides real-time reporting. In the areas of customer service, Guzman advocates real-time presales chat to reduce shopping cart abandonment and integration of customer service across all channels.

Conclusion

All of the guerilla online marketing tactics discussed in this paper, viral marketing, affinity networks, banners, search engines, e-mail and opt-in e-mail are useful in some form or fashion. An effective marketing strategy will develop goals and then evaluate these methods based on their respective pros and cons to achieve desired results. In most instances, a mix of online guerilla marketing techniques combined with traditional offline marketing channels will be needed to meet marketing objectives. In all cases, Web sites need to take advantage of new infrastructure technologies such as personalization, shopping wizards, natural language query handling, international payment, inventory and order tracking, content management, human interaction enablement, and multi-channel integration to enhance user experience once potential customers have been driven to a web site.

The following table provides some generalizations of the strengths and weaknesses of each online marketing technique presented in this report:

Table 2: Strengths of Online Marketing Techniques

Online Marketing Technique

Building

Customer Base

Brand Building

Targeting Marketing

Customer Retention

Return on Investment

Viral Marketing

Affiliate Networks

Banners

Search Engines

Mail

Opt-in Email

= High, 2 = Average, 3 = Low

Viral marketing and affiliate networks can have the greatest power to expand the customer base. The first approach involves marketing through consumers and the later engages businesses. Affiliate marketing focuses on immediate revenue while viral marketing focuses on longer-term revenues after generating initial subscribers or leads with offers of free products or services. Banners have little affect on generating direct web traffic because of its low click-through rates, while search engines, mail and opt-in email all have proven value in generating Web traffic and revenue..

Despite their increasingly bad reputation, banners create brand awareness by essentially serving as highly-controlled online advertisements. Opt-in e-mail as well as e-mail can be very effective at reinforcing brand if the content is useful. but, because the user has granted permission for opt-in emails, there's a great chance that branding will be more effective than generalized emails that may get lost in a sea of Internet spam. Viral marketing poses a significant risk to branding because it's impossible to determine what context the messages will appear and because the messages themselves can be altered. Because merchant content needs to be tightly integrated with affiliate content, there could be either a positive or a negative impact on a company's branding.

Affiliate networks provide an enormous opportunity to expand reach without losing control of who is being targeted while viral marketing provides no way to restrain who receives the marketing messages. Targeted e-mail lists give marketers the ability to seek out desired prospects for e-mail and opt-in e-mail campaigns. The web site selection process for banner placement helps to somewhat control who views banners. Most search engines, on the other hand, make it difficult to hone targeting because of the need to be flexible in key word selection to improve rankings on a search site.

Opt-in email facilitates phenomenal opportunities for customer retention and affiliate networks can drive customer loyalty if there is a good affiliate/merchant relationship over time. The other techniques such as viral marketing, banners, search engineers, e-mail are best used for initial prospecting.

Finally, all online marketing channels explored in this research were selected for inclusion because of their low-cost applicability to guerilla marketing. However, none of these channels drive home the concept of pay-for-performance as well as affiliate marketing does by linking marketing expenditures directly to online sales.

Mobile commerce is not listed in the table yet because it's not expected to have an impact on online sales for several years. Although mobile commerce isn't yet ready for prime time, it's not too early to begin planning how a mobile user can interact with an online site to shop. Amazon built major momentum because it was one of the first online sites that figured out how to leverage the Internet for electronic commerce and, similarly, there may be first mover advantages for mobile commerce as well.