IN THIS ISSUE: May 24, 2000 To Archive Index Exclusive Interview: Marketing Guru Al Ries "Lots of Pioneers Got Shot..." How People Search For Online Info

What's Next Online Exclusive Interview

EVERYONE WANTS TO BE ONLINE, BUT FEW HAVE STRATEGY THAT MAKES SENSE, SAYS MARKETING GURU AL RIES

Since 1994 Internet usage in the United States has increased 10,000 percent from 3 to 304 million people. Along with this amazing growth has come a period of previously unimaginable innovation.

But marketing guru Al Ries, author of "Positioning: The Battle for Your Mind," and most recently of "The 11 Immutable Laws of Internet Marketing," says few companies have an Internet strategy that makes any sense.

Companies don't understand the difference between the Internet and "the Outernet," Ries' name for everything outside the Web. "Taking your real world name and putting it on the Internet is line extension and that is wrong on a fundamental level," the pundit insists.

While many Internet mavens may disagree strongly with some of Ries' views on the new economy, there is one important thing to remember. This man has been right about branding issues many, many times in the past 35 years. And often his was a lone voice in the forest.

"Branding for the Internet is more important than in the Outernet," says Ries, who invented the concept of positioning products to achieve a share of mind with consumers. "That's because the Internet has no visual clues to get you into a site."

Brand Invisibility

Internet brands are invisible until you input the brand name into the keyboard. If you don't know the brand name and how to spell it, no sale can happen. Therefore, online, name recognition is paramount.

In the Outernet, you can walk past a shoe store and have something in the window catch your eye. You can go inside, try on and buy a pair of shoes and walk away without really remembering the name of the shoe store. A similar experience can't happen on the Internet because it lacks visual clues that can attract casual shoppers.

Ries disagrees with new economy observers who believe bricks and mortar companies can also sell online, and with those who say luxury items can be sold on the Internet. Ries says the Internet will turn out to be a place to find low prices, not high service.

Despite Web business' ability to automate many customer service functions and provide a convenient shopping experience, Ries says people will always want to touch, feel and try products before they buy.

Internet brands have an advantage where communication with customers is involved, Ries says. The Internet can provide better two-way communication with customers than real world stores. But it can't provide a smile and a cup of coffee while you shop.

Advertising is Useless: PR is Key

The most widespread misunderstanding of the Internet, according to Ries is the idea that advertising can be used to establish online brands. "Unless your site has some angle for creating news it isn't going to be successful. When you try to save the situation by advertising, people ignore you. Yet most dot.coms are advertising because their names are unknown and they think advertising can solve the problem. It can't."

Another widespread misconception is that search engines can direct a great amount of traffic to sites. Early on very few brands are strongly registered in the mind so people have to use search engines, Ries says. People go to search engines now because we are still learning how to use the Internet, Ries says, but he suggests that long-term they will become less important. As people continue to use Internet they will go directly to various sites.

What Internet businesses need to do before advertising is PR. "Unless you are relatively known - maybe not well-known -- but have some degree of presence in the mind, advertising is almost sure to be a total waste."

While there's much talk about integrated marketing today, Ries says, "It usually has to do with launching a program with a big bang: using advertising, direct mail and publicity all at once. I am talking about sequential launches - launch with a massive publicity campaign. After gaining some name recognition and acceptance, shift to advertising for name reminders."

Hire PR Firms for Strategy not Ink

Dot.coms must have publicity, Ries maintains. "It's not easy to do, but if you tell me your site can't get any publicity I will tell you there is something wrong with the site. Generally only the first mover can get publicity - but there always is an opportunity to create news by narrowing the focus."

For example, Ries says, let's say a company sells a huge selection of golf clubs on the Internet. Along comes a second site that wants to sell golf clubs. It carves out its niche by selling only left-handed clubs. That would be newsworthy even though the site isn't a first mover. Only after the site created name recognition through publicity would it make any sense to advertise. Advertising needs the credibility publicity can create.

The failure of dot.com advertising shows the importance of bringing in PR people who can think strategically, Ries says. "Strategy may not be the strength of traditional PR firms. Many of them are totally focused on getting publicity in the media. But getting coverage is not what it's about. They even measure the value of a story by the amount of money it would cost to advertise in comparable print inches or minutes of air time. That's ridiculous."

For example. Ries explains, the introduction of New Coke is said to have gotten over a billion dollars worth of publicity but the product was a complete failure. "The PR firm should have told them they were crazy to mess with the formula for the most successful soft drink in history. From a traditional PR point of view I'm sure it looked like a plum of a story, but strategically it was a disaster. The best strategists don't take what a client says they are going to do at face value. They question name, price, distribution, and slogan. The best PR strategists would have told them not to launch the product."

Good strategy will give way to better business models that will change with the times. Adapting to the Internet age doesn't necessarily mean you need to launch a web site, Ries says, but you may need to change the way you do business.

He predicts it will be 50 years before the full impact Internet-fueled change is fully understood.

Business Models Must Change

Ries rails against bricks and mortar companies trying to become bricks and clicks companies. Putting an Outernet company online dilutes the brand, he maintains, and that's a sure recipe for failure. A far better strategy for changing with the times is to give the online venture a new name or a new function.

For example, he says, Home Depot has a low price strategy in their stores. Their Internet strategy is to warn suppliers that if they catch them selling the products on the Internet they will drop them, Ries notes. "They're in a squeeze because suppliers could make more selling their products online."

In order for both Home Depot and its suppliers to thrive, Home Depot could shift its store strategy from price to a more service-oriented approach, perhaps giving classes in plumbing and carpentry. Then they could launch a web site under a different name, and the suppliers would be able to sell to Home Depot and through their own Web Sites.

Low price is the driver in the Outernet, Ries maintains, but that will change. Research shows,he notes, that the Number One reason people give for buying in retail stores is price. But the Internet soon will offer the best buys and the Outernet will be forced to make great service its main selling strategy. There is a high end, but it's a tiny share of market.

"The Number One retailer in America is Wal-Mart. Their theme is 'we sell for less.' Because of the Internet Wal-Mart could potentially be in trouble strategically. They have to move toward service because Internet companies will be able to sell the same products for less money because as a result of their lower overhead."

Internet Can't Provide a Hand Shake

Observers say that many shoppers will use the Internet for research but make their purchase at an Outernet store. Ries concurs. The consumer's ability to get instant price comparisons on the Internet will force most Internet retailers to have a price orientation.

"If all you want is the low price, you have to go to the Internet. The Internet can't provide one thing that people still want: to touch and try the product."

A recent study by the London-based by Economist Intelligence Unit (EIU) drew the same conclusion. It reported that instead of the Internet crushing traditional dealerships, car buyers are likely use Web sites for finding information, but not for completing deals.

Projections were that 60 percent of car sales would be made over the Internet by 2005, says Ian Robertson, director of the EIU's automotive group. In reality, the report shows people using the Internet to gather information and intelligence on prices, but to conclude the deal they are still searching for the reassurance of that traditional handshake you can't find over the Internet," Robertson told Reuters.

Some may insist that Internet businesses will provide low price, convenience and service. Others will note that the trend toward one-hour delivery by companies like http://www.kozmo.com will add the element of instant gratification now missing from the online experience.

To those we say: Ignore Al Ries at your own peril.

Quote Of The Week

Regarding the demise of boo.com (What's Next Online issue 26) KPMG corporate recovery partner Mick McLoughlin, who handled the sale of Boo.com's assets, told Reuters: "I don't think this is an isolated case. ... There was [sic] an awful lot of people who got caught up in the excitement of being pioneers. And the thing that you have to remember about pioneers is that lots of them got shot.''

Back to Top

Survey Reveals Search Habits

A study commissioned by RealNames has provided a variety of statistics related to searching, including:

• Over 75 percent of web users use search engines to traverse the web.

• Half of web users spend 70 percent or more of their time searching online.

• 70 percent of those surveyed know specifically what they are looking for when they use a search engine.

• 44 percent of web users say they are frustrated with web navigation and search engine use.

• When unable to find what they are looking for, most web users will try another search engine, but nearly 20 percent completely give up.

The study was conducted in April by Berrier Associates, for RealNames. Over 1,000 people aged 18-49 were surveyed by phone, with a nearly equal number of men and women sampled. Only those who use the web for five or more hours per week were included in the survey.

RealNames: www.realnames.com

Back to Top