Everyone’s a Direct Marketer, Part III

With every company as a direct marketer, and with (hopefully!) every company embracing some of the best DM principles, what does this shift mean for the way companies will be structured in the future?

First, let’s talk about the internal structure of a company.  The biggest shift going on here is that customers are becoming a more important part of all employees’ daily lives, not just those in the advertising department.  I wrote an earlier posting called Everyone’s a Marketer which applies here.  Most likely, more and more members of your organization are touching customers every day — and they need to be trained how to think like marketers.

But beyond that, companies will be constructed differently in the future as well.  While not true in some industries, there are many industries founded on the “mass” which will never be the same again.  Here are three examples of how direct marketing is infiltrating — but enhancing the opportunities of — corporate America.

– Disney’s film unit used to make movies only for theatrical release.  Today, they have an enormous volume of direct-to-video (or DVD) movies that never see the big screen but that drive huge sales numbers when marketed to Disney’s customer email database.

– Ralph Lauren used to make Polo shirts with a fixed number of configurations of shirt color and knitting color of the logo.  Now, you can go onto Polo.com and custom build a personalized shirt for someone with the right size and color combination of their college or company or favorite baseball team.

– Barry Diller used to run a studio, then he bought a TV network called the Home Shoping Network (and, I’d add, a lot of people laughed at him for doing so).  He has now turned HSN into InterActive Corp, a true convergence company that mixes content and media with commerce and direct marketing with brands like Match.com, Ticketmaster, eVite, CitySearch, and Expedia.

That’s it for this series.  All thoughts and comments are welcome.

Anything Worth Doing is Worth Doing Well, Part II

I posted Part I a really long time ago — it’s pretty self explanatory.  I was given a related gem today from fellow blogger Hawaiian leadership coach Rosa Say:

"If you don’t have the time to do it right, when will you have the time to do it over?"

Now there’s something to keep in mind every time you’re doing something halfway!

Now, This is What Blogs Are All About

In case you missed it, this article from Peggy Noonan in today’s Wall Street Journal is a great follow-up to my rant yesterday about how blogging isn’t going to eviscerate commercial email.  This is what blogging is all about, not replacing marketing tools and techniques.

The Rumors of Email’s Demise Have Been Greatly Exaggerated, Part IV

This one could also be entitled “What Are The Bloggers Smoking?”

Reports from last week’s Blog Business Summit like this one are starting to filter in (pun slightly intended).  This one gets a big yawn from me, even more so than the other times I’ve posted on this subject, here, here, and here.  I’m as much of a blogger and a believer in blogs and RSS as the next guy — maybe even more so — but honestly, people, blogs are going to replace email?

I’d like to address a few critical points here head on, although a large part of me doesn’t even want to dignify yet another empty “email is dead” quote with a response.

Basic error #1. The article seems to confuse blogs with RSS feeds.  RSS feeds are data streams coming into an RSS reader application.  Blogs are web sites.  Hello?!?

Fallacy #1. Because blogs/RSS are interesting new media, email will go away.  To paraphrase my colleague Mike Mayor, why is it that whenever something new comes along, its proponents have to bash the current paradigm to make their thing seem more important?  Let’s go through this one — TV came along, and people said radio would go away.  Cable came along, and everyone said the networks were toast.  The fax machine came along, and FedEx was said to be relegated to legal documents that needed to be signed personally.  The Internet came along, and people said everything else was insignificant (newspapers, TV, radio, snail mail).  So yes, new media do arrive on the scene and perhaps make a dent in all prior media, but I’m having a hard time thinking of that one comes in and clocks another one mano a mano.

Fallacy #2. Spam has made email more difficult, therefore email will go away.  There’s a whole industry out there fighting spam.  I know, I know, just because we want the problem to go away doesn’t mean that we can will it away — but filters are working better by the day (did everyone catch this posting about Postini this week?), false positives can be managed down by vigilant clients working with vendors like Return Path, and whitelists, whenever they start really working and charging money to clients to guarantee delivery, will still leave email as the cheapest medium for targeted commercial messaging out there.

Naive belief #1. Spam has harmed email, but blogs/RSS are immune to the same problems.  I’m sorry, do you think the bad guys, or as Fred always calls it, the Internet Axis of Evil (spam, viruses, spyware, DNS hacking, phishing, and the like) are going to leave blogs and RSS feeds alone?  Not a chance.  The bad guys are already hard at work expanding their Axis of Evil.  There’s already comment spam for blogs (or blam, as some call it).  People have and can hijack RSS feeds (no cool name yet).  There’s Instant Messenger spam (spim).  Last week, I heard about a new one that blew me away, which is that someone figured out how to hijack a Voice Over IP phone call and insert an audio ad/porn into the call (spip).

Naive belief #2. Blogs are truly interactive.  Other than a couple of very popular blogs during the height of last fall’s election, I just don’t think this is true for the mainstream.  There are certainly some people who have a little too much time on their hands who spend hours every day blogging, but most people skim most blogs as one-way communication.   While there are mechanisms for commenting, there aren’t ready mechanisms for publishing comments back to the blog audience (thank goodness), so this medium hasn’t turned out nearly as interactive as people had hoped at the onset.  RSS feeds, in case the writer/speaker was confused in this argument, are completely non-interactive.

Naive belief #3. People will read blogs with an agenda of marketing specific products and services.  The beauty of the blog is that it’s not corporate, and it doesn’t have marketing spin on it.  Blogs are much more journals and publishing tools than marketing vehicles.  Who the heck is going to read a blog on Coke?  Or Nike?  Or Microsoft?  Sure, I might read Howard Shultz’s blog if he had one (his book was good enough), but that’s very different than reading the Starbucks official blog.  Why bother?  Where’s the value there?

Ok, I’m done with today’s rant.  As I said, I love blogging as much as the next guy, but puh-lease!  And for the record, I do believe that RSS feeds and maybe even IM from marketers/publishers will supplement email and in some cases maybe even replace it, but email just isn’t going away any time soon.

A New VC in Town…Sort of

My friend and Board member Fred Wilson just announced last week the formation of his new VC firm, Union Square Ventures, along with his partner Brad Burnham.  Brad Feld beat me to the “way to go” posting, so while I chime in with my congratulations to Fred and Brad and assert to the rest of the VC/tech blogging world that this firm will succeed famously, I thought I’d comment on two other aspects of Union Square Ventures’ formation.

First, NYC has long been a haven for later stage private equity and buy-outs, and there’s a big need in the NYC area (even the DC-Boston corridor more broadly) for top tier early stage venture capital players.  While there are fewer core techonlogy companies in the area, there are an increasing number of application and service companies that are building great businesses in this part of the country, and there are not enough great VCs to keep up.  West coast VCs are often (but not always, as I’ve seen in my investors Brad from Mobius and Greg Sands from Sutter Hill) allergic to east coast deals, and sometimes it’s just good to have one of your main investors walking distance away.  Fred and Brad have the reputations, track records, and networks to at least partially fill this void.

Second, as Fred noted in a subsequent posting on Flatiron and its remaining portfolio companies (including Return Path), Fred and his former partners from JP Morgan are not abandoning their prior investments.  This speaks volumes about the kind of people they are and the commitment they have to their entrepreneurs.

I’m sure Union Square Ventures will be successful, and I’m glad I have the opportunity to see it up close.

Everyone’s a Direct Marketer, Part II

(If you missed the first post in this series, it’s here.)

So, all companies are now direct marketers — their web sites and email lists make it so, they can’t effectively reach their fragmented audience without it, and consumer permission demands it.  Why is this new to some companies and not others, and what lessons can companies who are new at it learn from traditional direct marketers?

First, the quick answer — it’s new because it’s being driven by the new technologies the Internet has brought us in the past 10 years.  Those technologies have opened up the possibility for 1:1 communication between any company and its customers that was previously unaffordable to many industries with low price point products.  You never received a telemarketing call for a movie, because making the call costs $3, and all you’ll spend on the movie is $10.  P&G never sent you a glossy direct mail piece for toothpaste, because they’d spend $1 at a small chance you’ll buy their $2.25 product.  But the cost of a banner ad or a given keyword or an incremental email is so low (virtually zero in some cases), that everyone can afford a direct presence today.

What lessons can companies who are new at it learn from traditional direct marketers?  There are many, but four things stand out to me that good DMers do well that are different from the skills inherent in traditional marketing/advertising:

1. Take the creative process seriously.  Just because you can dash off an important email to your staff in 30 seconds doesn’t mean your marketing people should do the same to your customers.  Put your email campaigns or templates through a rigorous development and approval process, just as you would a newspaper ad or radio spot.  There’s just no excuse for typos, bad grammar, or sloppy graphics in email or on a web site.

2.  Use live testing and feedback loops.  It’s hard to test two versions of a TV commecial without incurrent significant extra cost.  It’s impossible to test 20.  But with today’s software, you can test 10 versions of your home page, or 100 versions of your email campaign, almost instantly, and refine your message on the fly to maximize response.

3. Make transparency part of your corporate culture.  Just as you can have a 1:1 relationship with your customers, your customers expect a 1:1 relationship back.  If they want to know what data you store on them, tell them.  If they want you to stop emailing/calling/mailing them, stop.  If they want to know more about your products or policies, let them in.  Think about marketing more as a dialog with your customers, and less as you messaging them.

4. Merge content with advertising.  Old-school advertisers didn’t have to worry about this one, because their ads were always surrounded by other people’s content (TV, newspaper, radio, magazines).  But in direct marketing, your message is sometimes the only message around.  Make it interesting.  Make it entertaining.  I always think the prototypical example of this as the old J. Peterman catalog, which was trying to sell clothing and accessories by creating stories and mystique around each product.  But there are tons of other examples as well, especially around email newsletters.

Next up in the series:  What does this mean for the way companies will be structured or operate in the future?

Doing its Part

Fred had a good posting on spam today, riffing on a New York Times article that  is very “doom and gloom” on spam and how it’s taking over the world.  I’ll buy the Times’ argument that there’s an increasing amount of spam out there these days, but as with Fred, I still maintain, as I did in this earlier posting, that we’re out of crisis mode and are on the path to resolution as improved filtering technology and false-positive identification services trickle down to broader usage.

What I think is interesting, though is the amount of criticism that the CAN-SPAM legislation is getting, including in this article from the Times.  It’s not a perfect law — what law, exactly, is perfect? — but it’s starting to do its part.  People in the industry joke that CAN-SPAM means “you can spam,” meaning that the law makes it easier for people to spam legally.

But the reality is that you can’t regulate something until you’ve legalized it, and CAN-SPAM is a good first step in the process.  In the Times article is yet another example of how the legislation is starting to work — Microsoft’s latest law suit (one of many filed by Microsoft and others in the past 12 months) against a known spammer.

No one ever said solving the spam problem was going to be easy.  And no one ever thought there would be any silver bullet — certainly not a legislative one!  But I argue that CAN-SPAM is doing its part through the enforcement mechanism if nothing else.  And while I certainly hope the next step in the legislation around spam IS NOT a do-not email list, I do hope that there is a successor piece of legislation after another 6-12 months of observing the spam situation and the impact, strengths, and weaknesses of CAN-SPAM.

In the meantime, let’s use the tools at our disposal and keep suing spammers…as well as working on industry-based solutions to spam that bring the problem further under control, from filters to authentication to reputation to accreditation.

The Rumors of Email’s Demise Have Been Greatly Exaggerated, Part III

Now it’s Groove Chairman Ray Ozzie saying that email is toast, since his kids use IM as their preferred channel, relegating email to something to be avoided since it’s only from parents or teachers.

Um, ok.  What about bosses and clients and colleagues?  You may not want to hear from them, either (especially that pesky boss), but I’m still struggling with the argument that because kids aren’t addicted to the medium, it will surely die.  Kids eventually grow up and do things differently than they did when they were kids.  Perhaps email is one of those things you have to grow into when life isn’t (regretfully) just about chatting with your friends?

VC Wisdom du Jour

Two good ones today:

1. Brad on what makes a great Board meeting (hint: it’s not going through the materials you send out ahead of time).

2. Jeff Nolan/Dispatches on 10 questions to ask a VC.  Remember, when you’re raising money, you must do active due diligence on your prospective investors, not just the other way around.  These questions are a good guide.

Everyone’s a Direct Marketer, Part I

I had breakfast a few weeks back with John Greco, the new CEO of the Direct Marketing Assocation, and was telling him why I felt it was essential that interactive marketing be included in the DMA’s mainstream mission and not regarded as separate.  The substance of my argument was that the Internet has turned every company into a direct marketer, whether they know it or not, whether they like it or not, and whether they care to act like one or not.  I was happy that John agreed with me!

I’m going to write a three-part posting on this topic.  First topic:  Why is this happening?

1. The mechanics are now ubiquitous.  Every company’s web site, every keyword to drive a customer to the site, every link to a customer service rep, every email that goes out to a customer list — they’re all direct marketing mechanics that pre-Internet, only specific categories of companies like catalogers or fundraisers employed to drive business.  Now, every company has or does these things as a cost of being in business.

2. Mass marketing is no longer quite so mass.  Audiences are becoming fragmented across hundreds of TV channels and millions of web sites.  I heard a great speech the other day by Strauss Zelnick, one of Return Path’s investors and the consummate media executive, which crystallized this point for me with the following example:  20 years ago, a mass marketer could reach 80% of American women by running a commercial on ABC, NBC, and CBS at the same time at certain times of the day.  In order to achieve that same reach today, a marketer would have to advertise on 120 channels (and I’d add, thousands of web sites).  This fragmentation means that marketers have to get increasingly microtargeted and innovative in order to reach customers and prospects.

3. The balance of power has shifted to consumers.  Don’t like that ad?  Use TiVo to skip it.  Hate popups?  Install Google’s toolbar to block them.  A company you’ve never heard of is emailing you?  Report them as a spammer to your ISP.  Hate phone calls from telemarketers?  Sign up for the Do Not Call List.  Permission is here to stay, and companies that “get it” will win the day with massive databases of customers who have requested to be marketed to via email or other channels.  But all of that’s direct and not very reliant on the mass advertising machinery that propelled companies and products to greatness in the past.

Next up in the series:  Why is this new to some companies, and what lessons can companies who are new at it learn from traditional direct marketers?

Ratcheting Up Is Hard To Do (or Boiling the Frog, Part II)

I’ve had to ratchet down business several times over the years at Return Path.  Times were tough, revenues weren’t coming as fast as promised, my investors and I were growing weary, the dot com crash, etc. etc.  We had layoffs, consolidated jobs, cut salaries multiple times, made people wear 8 hats to get the job done.  It’s an awful process to go through.

In the last year or so, business has finally started going much better.  We’ve been fortunate in many ways that we’re still around, with products that work really well, with a good customer base, and with good and patient investors and employees, as the business climate has improved.  We’ve grown from 22 people (at our low point) up to almost 75.  But what that has meant for our organization is that we’ve had to quickly "ratchet back up," adding people, adding new functions that were previously one of many hats worn by a single person, operating at a different level.  While ratcheting down is a nightmare, it turns out that quickly ratcheting back up is in many ways just as hard on the organization.

Some examples:

– IT (internal email and servers) has been run by a part-time resource and "off the side of the desk" of our product development engineering department.  Now it is almost completely broken, and it turned out we hired a very talented IT manager, probably about three months too late.

– Staffing up is particularly tough without a dedicated HR function and with a legacy of missed budgets.  HR has been done off the side of the desk of me and my executive assistant, and we can’t keep pace any more with all the recruiting, hiring, training, and development planning.  Now that we feel like we need and can afford more staff, we need to hire an HR manager to handle it all, but we need someone in place and trained today, not three months from now.

– A 22 person company can function brilliantly as a network of Individual Contributors who loosely coordinate with each other.  But now what we need at 75 is a a few hardcore Managers that can build systems and processes so that the whole machine runs smoothly.  We don’t necessarily have those people in-house, and if we bring them in from the outside, I’m left wondering if the Individual Contributors will feel like their years of hard work aren’t appreciated if there’s a new layer of management surrounding them.

I hope we never have to ratchet down again…but part of the reason why now is that I never want to have to ratchet back up, either!

Thanks to my COO and business partner Jack Sinclair for his help with this posting.