Thursday, September 9, 2010

eCommerce RULE #1: You must build a brand, but not through brand advertising

The ultimate goal for any consumer offering--and the goal that will frame the remaining nine rules--is to build a brand. If your brand becomes synonymous with a particular category (e.g. books for Amazon, DVDs for Netflix) you gain tremendous leverage in your marketing spend. But exactly how you build a brand has changed a lot in the last decade.

Forget sock puppets and pricey Super Bowl ads. So 1999! Brand strength today is built penny by penny (and order by order) with effective direct-response advertising that can be quantified and measured. In some categories your marketing campaign can attract customers for as little as $10 apiece. If your offering works (more on that later), those customers you snag will generate more than $10 (say, $30) of profit over their lifetimes. Then, you can reinvest that $30 in more online marketing. Rinse, lather, repeat.  You have a growth (and profit) generation machine.

Once you get big enough that you’re spending millions of dollars on direct-response advertising, you can think about more traditional brand advertising. When you can afford it, brand marketing will help you finally convert customers that you probably have touched before with your direct response advertising, but just need an extra nudge. Essentially, if done right, brand marketing becomes yet another form of direct response advertising.

Consider this: Zappos, the online-shoe retailer scooped up by for $847 million last year, didn’t run its first television ad until 2008, even though it was founded in 1999. Clearly CEO Tony Hsieh and his crew knew how to build their company’s brand penny by penny. By the time Zappos went on TV, as many people in the U.S. were searching for Zappos by name on Google’s search engine as were searching for Adidas, a globally recognized brand.

Another tip: As you scale your online marketing spend, run lots of marketing experiments of at least $10,000-20,000 apiece. These might include using different marketing channels like certain comparison-shopping sites that you’ve never worked with, vertical-ad networks or even new advertising techniques like retargeting. Measure the results on a multi-attribution basis and invest in the ones that work well. You may be surprised where the best return-on-investment comes from. Certainly, monitor your ROI and tweak as necessary.

Finally, it’s important to point out that penny-at-a-time advertising doesn’t guarantee you will actually succeed in building a brand. We touch on some of the critical elements of successful brand building in the remaining rules (especially Nos. 4, 5, 8 and 9). While there may not be a clear and concise formula for building a great brand, we’re certain about one thing: It’s virtually impossible to build a brand through excessive marketing. So don't try it. All of your marketing should be measurable and profitable. If you follow the rest of our ten laws of e-commerce, and steadily increase your marketing expenditures in a profitable way, you'll lure more and more consumers to your store--and eventually, your brand will emerge. If it doesn’t, you’ve almost certainly been ignoring several of our other rules.

--> Rule #2.

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