Similar to what we are experiencing today, 1996 was a year of change for the direct response industry. There was a plethora of new media outlets, increased accessibility to the Internet, and big changes in how people were consuming media. Sound familiar? Just as we are experiencing a shift in the marketplace today, this new way of reaching consumers threw everyone for a loop.
This article originally appeared in the 1996 July/August issue of NIMA News.
America Online (AOL) Services President Ted Leonsis said at a NIMA International conference last year, “Someone here will understand how these industries (infomercial, interactive media, etc.) should come together, and the result will be revolutionary.”
Revolutionary change has been a constant factor in the growth of electronic retailing. NIMA and its members have dealt with changes in: direct response television (DRTV) formats, creative formulas, increases in media costs, breakup of mass-viewing audience, new products, participation by brand name marketers, and in the attitudes of the news media and consumers towards infomercials.
NIMA is in the midst of a revolution with creative and technological pressures driving our culture to a more interactive age for consumers. NIMA needs to take steps now to incorporate the interactive culture into its organization, membership, lexicon, communication, coalition building and programs. Thus, NIMA can help broaden the identification of what constitutes “electronic marketing” and lead its members to new markets and new electronic retailing arenas.
As NIMA Executive Committee member Mark Hershhorn said at the NIMA Spring meeting this year, “We [the infomercial industry] are at the convergence of television, on-line and interactive. We are a viable revenue stream to that world of [interactive] buying.”
Catching the Next Wave
Recent research, commissioned by the Coalition for Brand Equity, indicates that infomercials and online-media (interactive media, CD-ROM, etc.) were judged to be better at building consumer relationships than traditional advertising. Traditional advertising agencies are expected to spend five to ten percent of ad budgets on so-called “new media” formats, with the growth expected to increase. Jupiter Communications reports $54.7 million was spent on on-line advertising in 1995 [Electronic Retailing, March/April 1996]. Another firm, Forrester Research, Inc. reports 1995 on-line advertising sales at $37 million [Newsweek, April 1, 1996].
The top ten World Wide Web sites took in $9.3 million in advertising for the fourth quarter of 1995 [Response TV, February 1996]. The largest Web advertisers were Internet Shopping Network, AT&T, Netscape, American Airlines, MCI and MasterCard. Last year, 1-800-Flowers, with sites on several commercial on-line services (AOL and CompuServe, etc.), added approximately $24 million in sales, or 10% of their total revenue, from on-line transactions [Catalog Age, March 1996].
Interactive Media- Back to the Individual
Creating a “pull” or consumer interest on the internet or an on-line service is critical to success. Just as it is for infomercial and DRTV marketers who are experts at drawing and maintaining the interest of television consumers. On-line consumers must want to access the site/information again and again. Keep in mind that intrusive, spot-awareness advertising is counter-culture to the typical on-line surfer; the more advertising, the less successful the on-line service [Direct, March 1996].
The new key to marketing is “personalized” information and building that one-to-one relationship. Database engines can now take registered users to a site (they are asked to register on the first visit), read their password, and direct them to their personal areas of interest at the site. Every password is tracked over repeated visits and a user profile is automatically developed [Direct, March 1996].
According to NIMA member Budd Margolis, president of MIT, an international electronic and digital shopping consultancy, “tracking user activity, or ‘data mining,’ is the most important aspect of interactive marketing.”
The New Media Formats
There is a need to expand the definition of interactive marketing formats to include infomercials, DRTV spots, and television shopping networks, Web sites, commercial on-line services, CD-ROMS and kiosks. The following brief outlines on the new media provide a picture of today’s environment in interactive electronic retailing.
Kiosks: There interactive point-of-purchase consumer information platforms have immediate impact on buying decisions and on-line potential. They are aesthetically appealing, and are often found in heavy traffic area of retail shopping malls.
CD-ROM Disks: These are available to anyone with a computer and a CD-ROM drive. CD-ROMS blend text, graphics, and video, as well as couple the direct mail format with interactive capabilities, offering the consumer complete information and on-line potential. Studies estimate growth in computers with CD-ROM drives to rise from 5.17 million in 1993 to 12.5 million by 1997 [Electronic Retailing, May/June 1995].
The Software Publishers Association reports that first quarter 1995 CD-ROM sales for educational, entertainment and business-to-business use (employee training, etc.) increased 186% over first quarter 1994, with sales of $249.6 million for 6.86 million units [Electronic Retailing, January/February 1996]. While every major mail order company has launched CD-ROM catalogs for interactive consumer retailing, examples such as Contentware’s “Shopping 2000” have not been able to catch hold in the marketplace.
Internet and the World Wide Web: Access is available through computers with connections to a commercial on-line service, or through an Internet service provider’s browser software. Today, the Web serves mostly as a business-to-business marketing tool (other users are predominately government and acadamia or college students). A distant last for now, are consumers, confirms Find/SVP, a technologies research group. It reports that only 19% of all Internet users have made on-line purchases [Informercial Marketing Repost, May 1996].
Jupiter Communications reports on-line consumer sales reaching $575 million for 1995. However, almost half of those on-line sales came from airline tickets sold to business travelers who make their own reservations. Another large percentage of on-line consumer sales are from computer hardware and software merchandise [Washingtion Post, FFWD, May 1996]. However, consumer retailing on the Internet and with certain Web sites has begun. America’s Choice Mall, operated by NIMA member Guthy-Renker is averaging 300,000 hits per month since it began on the internet in February, 1996. Receptive Marketing Inc., brings to its Netplaza Web site two dozen merchants with virtual storefronts, ranging from Brookstone to Sunnyland Farms [Response TV, July 1995]. Catalog 1, another Web site for multiple catalogs, received 2 million hits per week last year. And just last month, IBM announced it will launch a website shopping service called “World Avenue” [USA Today, June 12, 1996].
Commercial On-line Marketing services: These are also available to anyone with a computer, but users must subscribe to a service. They contain news services, bulletin boards, information exchanges, electronic catalogs and shopping malls. AOL has several national retailers that have made impressive sales gains capturing the interactive consumer. The Sharper Image reports that sales through its site on AOL have jumped from $250,000 for all of last year to an annualized rate of 3 million through May of 1996, a ten-fold increase [Interactive Age Daily Media and Marketing Report, May 20, 1996].
However, all is not rosy in the cybergarden of commercial on-line services. Other research by Find/SVP found that of 27,000 on-line users, 5 of every 6 can’t find information easily on the Internet; 3 of every 4 are not pleased with the process necessary for returning to a previous site; and only 1 in 10 are very satisfied with the speed at which files are downloaded [USA Today, February 26.1996].
Everyone is at the Beginning
Many experts say we are 10 to 15 years away from significant on-line consumer shopping and marketing. This will occur when regional and global alliances are made between regional Bell operating companies (RBOCs), cable providers, on-line services and long distance carriers. And, only after they have completed global integration with the Internet. Many believe the current hype and rush to use the Internet is just a bridge over the next decade until digital interactive television with an Internet connection is in mass deployment. Prior to 1996, only one to 10 of the population was involved with consumer trails of interactive television across the country. In 1996, RBOCs and cable companies will increase the number of participants significantly. From 1996 to 2000, it is expected that 10-to-45 percent of the population will have the capacity for interactive media [Electronic Retailing, May/June 1995].
The Interactive Consumer Age has Begun
Even with the long lead-time projections, the beginning of the interactive consumer age is upon us. ASI Market Research, Inc. predicts that on-line, interactive technology will have a penetration of the total U.S. population that will increase from 20% in 1996, to 30% by 1998, 40% by 1999, and 50% by 2001.
According to Forrester Research, growth in on-line services in the U.S. will rise to 15.8 million subscribers by 1998, while the number having direct access to the Internet will grow to 32 million from the current five million today [USA Today, February 26, 1996].
As a result of this tremendous access to the Internet, Forrester Research predicts that interactive retail will grow from roughly $518 million in sales in 1996, to $66 billion by the year 2000.
As this new age of interactive marketing takes hold, NIMA must position itself as the cutting edge resource and “voice” for an entirely new wave of business marketing to a brace new world of interactive consumers.