Marketing Coined by Marketing Guru Jay Conrad

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

Search Engines

Search engines at portals sites are an absolute must in online marketing (Waxer 2000). The top spot among Internet portals is Yahoo! Inc. which draws more than 48 million visitors each month and boasts more than 5,000 advertisers. Yahoo! accounts for close to 56% of all search engine referral, the amount of Web traffic worldwide directed to other sites. AltaVista, its closest alternative, lags far behind at 16%. In addition to Yahoo and Altavista, other sites with leading search engines include Excite, Hot Bot, InfoSeek, Lycos, Web Crawler, AOL and Google. Most of these search engines will list a web site free of charge, with a top ranking potentially resulting in millions of visitors to a site. Submission services such as Submit-it, Register-it, and Self-promotion.com will submit information about a site to today's major search engines -- for a nominal price. The fees for submission services varies, ranging anywhere from $8 to $995 per month for what is essentially the same service, so online marketers need to do their homework to get the best deal.

In their struggle to get top billing at search engine sites, many companies are using unethical tactics to make it appear that they are generating more search requests that they actually are (Waxer, 2000). One such practice is called keyword stuffing. A meta tag is a line of HTML code that is inserted into a finished web page and serves as a site's mini index. Search engines use these tags to determine a site's ranking. but, webmaster are beating they system by saturating source codes with repeated references to search an undeserved top billing. and, some companies are actually spamming search engine sites to make it look like their company is frequently requested in searches.

Rather than cheating, most marketing advisors recommend selecting a favorite search engine and customizing your site accordingly to get a top rating (Churchill, "Search Tip: Use Gateway Pages"). To get a high ranking on search engines, it's important to carefully select the keywords you use on your page. However, the more keywords you specify, the more you dilute of relevance of any one keyword. The most effective approach to avoid this problem is to use gateway pages. A gateway page is specifically designed for submission to search engine and is turned with a specific set of key words to increase the chance that these keywords will be give a heavy weight by search engine spiders. Gateway pages can be designed to work well with a specific search engine. Because different search engines use different rules to rank pages, it's difficult to build a page that gets a top score from all search engines. The way to get around this is the create a set of gateway pages specific to each search engine.

Cost-conscious businesses increasingly are turning to e-mail in lieu of traditional direct mail campaigns, according to findings from research firm Gartner cited by Saunders (2002 March 20). Gartner projects that e-mail advertising revenue will reach $1.26 billion in 2002, up from $948 million in 2001. By 2005, e-mail advertising revenue is forecast to total $1.5 billion.

Direct mail has reached its peak and will account for less than 50% of mail received by U.S. households by 2005, down from 65% in 2001, said Gartner. Gartner believes that as e-mail use, familiarity and trust increases, consumers will become more comfortable with accepting advertisements through their computer.

Companies are exploring e-mail campaigns because of the relatively low cost vs. The costs of an offline mailing. Specifically, offline campaign expenses include not only the design and development of creative content, but the costs of printing and mailing. On the Internet, expenses associated with printing are irrelevant, while postal costs give way to cheaper e-mail rates. Gartner priced e-mail campaigns at about $5 to $7 per thousand, while it said direct mail costs range from $500 to $700 per thousand. Also, offline mail costs are directly proportional to the number of items mailed out, limiting the ability to conduct continuous, high-volume mailings vs. e-mail where most of the costs are assumed upfront and then scale at a very low cost.

There are more benefits than just the lower cost of email. For example, the complete cycle time of an e-mail campaign from creation to delivery and response is one-tenth the time of traditional direct mail. Thus, marketers can gauge response quickly and react immediately by making adjustments to their e-mail campaign. E-mail also the Direct Marketing Association (DMA) found that e-mail is proving to be more effective than direct mail for many marketers (Saunders, 2002, October 25). Online marketers participating in the DMA study reported more than a thirty-five percent increase in responses in 2001, while twenty-five percent of offline mailers reported the same. Only six percent of online mailers said they saw a decrease in response rates, while traditional direct mailers reported a twenty-one percent decrease.

E-mail has already made a significant impact on online and offline purchases. A study conducted by Beyond Interactive and Greenfield Online surveyed one thousand consumers and found that seventy-eight percent of online shoppers have made a purchase after clicking on an e-mail (Saunders, 2002, October 25). Thirty-three percent of those surveyed said they clicked an e-mail and made an immediate purchase, while thirty-five percent said they clicked through and made a later online buy. Fifty-nine percent of those polled said they had received e-mail marketing and then made purchases in retail stores; thirty-nine percent said they bought something through a catalog after e-mail marketing, thirty-four percent through call centers, and twenty percent through postal mail.

E-mail volume may become a major impediment to the continued success of email. Respondents in the Beyond Interactive and Greenfield Online survey estimated that they received sixty percent more e-mail in 2002 than they did in 2001 with an average of 254 e-mails in their in box every week. As a result, half of those surveyed said that they have begun having their emails sorted in bulk or separate e-mail folders that they seldom look at. This problem is likely to get worse as direct marketers increase their use of e-mail. An e-mail user is already overwhelmed by the more than 3,900 spam e-mail messages that he or she is likely to receive on an annual basis. As e-mail volume increases, privacy concerns and pressures prompt e-mail marketers to use different list strategies than those of offline direct marketers. For example, only eight percent of online mailers rent or exchange e-mail lists in comparison to thirty-five percent of postal mailers. Many leading e-mail marketing firms, advertisers and advertising industry groups are concerned that the continuing growth of spam hurts the industry by dissuading consumers from opening commercial mail.

Another concern of e-mail marketing is the inability to maintain a continuous relationship with the customer over time. This is because thirty-two percent of all consumers change their email address each year (Livingston, 2002). Customer change their e-mail addresses when they switch their ISPs, change jobs, want to avoid spam, change addresses, want a more attractive e-mail address, or change their name after getting married or divorced. Most of these consumers do not notify web sites when their address changes, resulting in a twenty to twenty-five percent annual email churn rate for online marketers.

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