The Secret to E-Business Success

OK. Quick poll: Who likes spam? Anybody? Come on… don’t be shy. Nobody? Hmmm… OK, who likes to have his or her personal information shared with direct marketers? Don’t everybody raise your hand at once. Let me try again: Who likes to have sites deliver information personalized to your interests? OK. There we go… lots of you do. Now we’re on to something!

If you balked at the first two questions and answered affirmatively to the third, you’re not alone. A recent report from Cyber Dialogue entitled “Privacy Vs. Personalization” found that most consumers felt the same way.

In a study of 1,500 web users, Cyber Dialogue found that while 80 percent of people didn’t mind providing personal information in order to receive customized information from a site, 49 percent of surfers felt that sites sharing this information with others is a violation of their privacy. And when it comes to email, 71 percent of users have tried to get off of direct email lists by directly emailing the sender, 16 percent have tried to stop spam by contacting the offending company, nine percent contacted an advocacy group, and eight percent contacted a consumer organization to try to get the mail stopped.

Clearly, people are sensitive to what we’re doing with their personal information. But it doesn’t mean they’re going to stop offering it up. It just means they want to get something in return for their valuable data. The bulk of the people surveyed want to be recognized when they return to a site, most want access to “members only” data, many want personalized content, and nearly 50 percent even want advertising specifically targeted to their interests. Consumers clearly see benefits in passing along personalized data. Now it’s time to give it to them.

Customer loyalty is vital to e-tail success. Bain & Company and Mainspring recently reported that the average customer must shop four times at an online store before they’ve paid back their acquisition costs, and must shop for a whopping 18 months at an online grocery store before they become profitable. Repeat customers spend 67 percent more in their third year of shopping on a site and refer four times as many people to a site once they’ve shopped ten times. Of course, these numbers reflect only the small number of sites that have been around long enough to provide data, but they’re instructive nonetheless.

So loyalty is important, and people don’t like their privacy violated. So why are so many e-marketers not taking this information to heart?

Could it be because so many dot-com CEOs, in the words of Forrester CEO George Colony, “lack depth, experience and common business sense” and are primarily motivated by greed, short-term thinking, jealousy, and the desire to be first no matter what the cost? Could it be that as click-through rates plummet, we’re all looking for business models that work? Or could it be that marketers abuse privacy just because they can?

The answer, I think, is all of the above.

Up until a few weeks ago, the market thought the Net could do no wrong. Dot-com IPOs were thick as flies and everyone was in to make a quick buck. No scheme was too stupid, no idea too hair-brained, and no marketing tactic too brazen to keep a company out of favor. Now the tides are turning, and it’s time to start thinking for the long term. And long term means paying attention to privacy and loyalty.

I once spent a year as a direct mail copywriter for a less-than-savory direct mail company, and a lot of the techniques used by the sites that don’t care too much about my privacy feel the same as the techniques employed by my old company. None of these techniques selling lists, sending unsolicited messages, not delivering any added value for my data builds loyalty or makes me want to come back to a site (and I suspect you’d feel the same). In effect, chasing the quick buck might yield results in the short term, but it doesn’t build the repeat customers that offer the one thing that most dot-coms don’t have: profitability.

So what can you do if you want to build loyalty? Most of all, build trust. Be open and honest and let your customers know what you’re going to do with their data. The Cyber Dialogue study found that most people don’t mind if their information is shared in relation to promotions, ad targeting, or attitudinal information… as long as they get something back.

And if you think about it, it’s pretty intuitive: Few people are pissed off when Amazon.com suggests a new book to them because it provides added value and actually makes their life more interesting. Sure, a lot of that data Amazon collects goes to fine-tune the marketing machine, but I certainly don’t care if they consistently find new gems for me.

Secondly, make sure that your privacy policy can be read by regular folks. Sure, lawyers usually write these things, but lawyers aren’t the ones who need to understand it. Be clear, concise, and state everything you will and won’t do. Your customers will thank you for it.

Third, if you’re going to go with an opt-in email program, make sure that you’re actually going to allow your customers to OPT in. This doesn’t mean having your “Please send me lots and lots of spam about products I probably don’t want” button default to YES. It means giving your customers the choice. Over 65 percent of the respondents in Cyber Dialogue’s survey said that they had unwillingly signed up for email lists and they weren’t happy. Give people the choice… clearly.

Finally, think long-term. Sure, click-through rates and conversions for spam-like promotions may be high initially, but how many customers are going to remain customers once the promotion’s over if they don’t see any value in coming back? A crafty salesperson can always get a higher percentage of shoppers to buy than a laid-back one, but who ever walks out of a high-pressure sales room feeling good about the transaction? Who wants to come back?

As so many dot-coms are finding out when it comes to business principles, the basics matter. In privacy and sales the basics of providing value and a good experience matter, too. Let’s hope it doesn’t take everyone too long to find out.

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