Marketing a Small Business Today

Here’s how I created my first small business: Two years out of law school I was fired by the boss from hell. (Her reason? I didn’t “write well enough.” Unbeknownst to her, I was about to have my first book published, and if you think I wasn’t petty enough to autograph a copy and send it to her, you’d be wrong.)

Anyway, I made a profit the first month and never looked back. My business grew because I marketed the heck out of it using all tools available to me at the time: newspaper classified ads, networking at chamber events, seminars, cable TV ads, newspaper display ads and direct mail.

Modern Marketing For a Modern World
But here’s the deal: Today there are far more effective–and economical–ways to get the same, or better, results. While my strategy would be the same (advertise and market a lot, and then do it some more), I’d replace my “archaic” tools with these:

Craigslist instead of classified ads: The growth of Craigslist is evidence of how powerful a classified ad can be, and most Craigslist ads are free. That’s hard to beat.

Twitter, LinkedIn and Facebook instead of the chamber mixer: Networking the old-fashioned way was a bit of a drag–making small talk with people who may or may not be interested in what you do or sell. Yawn.

Social networking is a revolutionary improvement because, while you are still networking, it is faster, broader, more direct, and you can meet and influence a far greater number of people. Rubber chicken lunches be gone!

Podcasts instead of radio ads: I still love radio advertising in the right circumstance, but being able to create and broadcast your own original content is a great advantage.

YouTube videos and webinars instead of seminars: The value of being in front of the public is that you get to be known as the expert–the one pontificating, entertaining and informing others. With online video and webinars, you can craft that image easier, cheaper and more professionally. That you don’t have to rent a conference room at the Holiday Inn is a nice bonus.

Pay per click and pay per impression instead of cable TV and newspaper ads: If immediate sales are your goal, then a Google pay-per-click campaign can make more sense than a TV campaign. You only pay for qualified leads–people who like your ad enough to click on it–and as such you will spend far less because you won’t be paying to reach thousands of eyeballs who will never be buying from you. If branding is your goal, than a pay-per-impression campaign can yield fantastic results for much less money than TV, too.

E-mail instead of direct mail: Traditionally, direct mail has been considered successful if it creates around a four-percent response rate. But you have to buy lists, pay for postage and packaging, etc. E-mail marketing, on the other hand, costs almost nothing and usually yields better results.

As they say, everything old is new again…fortunately for us.

Steve Strauss is American Express OPEN Forum small business expert and author of the best-selling Small Business Bible. He can be reached at sstrauss@mrallbiz.com.

M-Commerce–Where to Start

The 2010 consumer is way ahead of any national retailer’s marketing department. The consumer is leveraging their phone as a “mobile mouse” to click, search and explore in the mall and in the aisle.

The retail CMO is looking for some new-fangled, high-tech way of engaging with this itinerate shopper. The sage truth, however, is that the marketing department is chasing shadows.

Instead of focusing on the consumer and how they are leveraging mobile in their stores, they are investigating widgets and apps that have little to no reach or frequency within their consumer base.

There are two simple things that I would suggest to the retail or manufacturer CMO:

Learn From History
Let’s look at the then-emerging trends of the mid-’90s Internet, remembering that history tends to repeat itself:

The web browser was becoming standard on the desktop in the mid-’90s. During this period of enormous growth, businesses entering the Internet arena scrambled to find consumer models that worked. Many companies were lured into thinking that developing applications on the desktop would give them marketshare and consumer mindshare. They did neither.

The desktop became too fragmented and difficult to navigate. As the PC browser matured and the capacity of the Internet pipes expanded–increasing browsing speeds–server-side solutions that functioned inside the browser (e.g., ASP Applications) became standard fare.

Isolated in the browser, these in-browser solutions needed a communication channel to engage and re-engage the subscriber. ASP applications used e-mail for these purposes.

Presently, we find ourselves reinventing the wheel with mobile.

With the smartphone revolution, apps are the rage. “I-want-one-too” CEOs are running to their agencies and IT departments and developing applications that only five percent of consumers are returning to after a lonely month on the phonetop.

So what are mobile consumers using?

Learn From Your Consumer
Take an undercover trip to your local store, peer through your security cameras and watch the consumer. They are doing two things with their mobile devices in your aisles: browsing and texting.

Is the consumer opening the browser to find tips and information to help with their shopping experience? Are they messaging home for the shopping list? Possibly.

But the shopper is certainly not scanning 2D codes with their phones. They are not opening the security on their Bluetooth settings for inbound offers. They are not all downloading your app to their phones. The consumers’ toolkits are relatively simple: they are using both their browsers and messaging as the first data-click. Focus on these channels.

These mobile channels are so powerful because both are standard on any phone nationally, the consumer is already on board and they are proximate to purchase intent and POS.

The CMO should start where the consumer is. What is your text CRM strategy? What is your mobile web strategy? Solve these and you have the ultimate last-mile retail solution.

Gary Schwartz is CEO of Impact Mobile and chairman of mobile for the IAB. He can be reached at gary.schwartz@impactmobile.com.

Managing Interchange Fees

A recent Wall Street Journal story reported that U.S. banks collected $45.3 billion last year from credit- and debit-card fees charged to merchants. About 75 percent of this came from interchange fees set by the two major card brands, Visa and MasterCard. Interchange fees, long a part of the card acceptance system, are the fees that a merchant’s bank (the “acquiring bank”) pays the card-using customer’s bank (the “issuing bank”) as cards are accepted for purchases. Set by the card brands and typically updated twice each year, there are more than 400 interchange categories for the two major brands combined. Over the last several years, regulator inquiry and merchant clamor across the globe have turned the spotlight squarely on the costs associated with card acceptance.

Know what you pay to manage interchange
For the majority of merchants, interchange fees make up the largest component of processing costs. For card-not-present merchants, it typically represents more than two percent of each credit card transaction. Managing these fees, particularly for card-not-present transactions, can save merchants thousands–perhaps millions–of dollars annually depending on their transaction volume. Qualifying for the best interchange rate on a per-transaction basis is a complicated process and it starts with knowing what you’re paying.

Typically, there are two different ways merchants are billed for processing, which includes interchange costs. The first is a “discount rate,” whereby the processor charges a percentage-of-sale discount on gross sales. These arrangements may also include a fixed per-item fee for each sale, as well as card brand assessment fees and the processor’s own fees. The second method is via a “pass-through” (often called “cost-plus”) basis, which distinguishes all sets of fees that you are being charged. Discount rates can obscure actual costs and make it impossible to know if you are qualifying for optimal interchange fees for your transactions.

Opting for pass-through billing allows merchants greater visibility into their true interchange costs. For instance, many transactions–for one reason or another, and usually associated with the quality and amount of data provided for the transactions–suffer from so-called “downgrades.” That’s to say, they don’t qualify for the best (i.e., cheapest), interchange rate. Sans specific breakouts of interchange fees in their billing and reporting, merchants have no idea when they are losing dollars because of downgrades. And, given the sea of qualifying rates, this is a critical point of breakdown for many merchants on the interchange fee front.

The pass-through model and a complementary reporting platform that specifically accounts for interchange costs is a good start to navigating the thousands of pages of regulations that guide major card brand interchange qualification. Most merchants have neither the time nor the resources to master the rules and regulations of interchange qualification. Their processors and processing platforms, however, should have both.

The following are some important keys to saving on interchange fees:

• Choose a pass-through rather than a discount rate;
• Scrutinize your processor’s set-up protocol before you begin sending transactions through a new platform. How have they categorized your business? By using “Merchant Classification Codes” or MCCs? Are you transmitting transaction data in the best formats?
• Ensure full, complete and accurate data transmission (bad data and inaccurate formats are the first steps toward downgrades and lower interchange qualification rates); and
• Make sure to establish accurate benchmarks and then analyze the data (if your interchange rates are increasing or decreasing over time, you need to identify causes and solutions).

Choosing the Right Payment Platform
The complexity of card acceptance is lost on most of us. Interchange, in and of itself, is extremely complicated and most merchants feel powerless when trying to minimize their interchange costs. This makes it essential for a merchant to partner with a trusted, educated payment processor whose expertise is in their area of commerce and whose platform is designed accordingly. For example, expertise in large-scale point-of-sale (POS) transaction processing is not the same as expertise in card-not-present (CNP) direct-to-consumer sales. Interchange rules and regulations vary significantly between and among commerce categories, and the orientation of both your account leaders and their platforms should be wired to your interests.

Here’s a summary of a few important best practices to keep in mind:

• Understanding your interchange costs starts with the manner in which you are billed and the reporting you receive (pass-through over discount rate);
• Benchmark and analyze constantly;
• It’s all about the quality and accuracy of transaction data; and
• Select processors and platforms on the basis of commerce-category expertise.

Partnering with your payment platform provider gives back to merchants some of the power to understand the sea of interchange rates, making it possible to manage, control and minimize the fees associated with card acceptance.

David Burrows is vice president, product management for Massachusetts-based Litle & Co., a leading card-not-present merchant account, processing and services provider. He can be reached via e-mail at dburrows@litle.com.

Online Video Trends for 2010

Q1 is here again. It’s the time when companies of all stripes strive to put their strategies into place for the new year. Budgets are set, marketing plans are approved, product roadmaps are locked in and headcount allocations are finalized.

For those of us in the digital advertising industry, the start of 2010 and of the new decade is no exception. So what will be the major story for the kickoff of the new decade in online advertising? For me, 2010 will be focused on video.

More Screens, More Content, More Eyes, More Dollars
At the Consumer Electronics Show (CES) conference earlier this year, one of the most dominant topics of discussion was the introduction of the iPad and other new tablet PC form factors along with other larger-screen mobile devices. Together with advancements in the smartphone market and their increased video capabilities, tablets will continue to move the needle in the total consumption of online-based video content. The introduction of these new hardware options and the increase in available content will be the core growth driver of digital video advertising inventory. Wherever consumer eyes wander, you can be sure that advertising will follow–and the rate at which consumers are watching video on their PCs, their mobile devices and internet-based TVs is growing rapidly. According to the Nielsen third quarter Three Screen Report, online video usage is on the rise, with Internet users watching 53 more minutes of video online in Q3 ‘09, a 34.9-percent increase from last year. In addition, the number of people watching mobile video has grown 53 percent year over year.

With more video being consumed on these alternative-screen devices, brands will find new ways of advertising around or during this content, and will subsequently continue to spend more on video-based ad formats. Forrester predicts that video will be the fastest growing area of display advertising over the next five years.

Ads Need to Get in Touch with Their Interactivity
As the inventory for online video ad placements has increased, advertisers have been quick to fill it with simple in-stream ads (pre-roll, mid-roll and post-roll). As a result, a customer experience issue has arisen–and the viewing experience is critical to users consuming online and mobile video content. This is a different beast than your traditional cable or broadcast viewer. Online consumers are driving innovations in our industry with the power of their clicks and engagement. Don’t expect them to sit through 15- or 30-second in-stream spots that have been repurposed from your broadcast campaigns; online consumers are demanding and expecting more.

In 2010, advertisers, publishers, agencies and technology companies will continue to push the innovation curve with advancements in online and mobile formats by focusing on developing highly customized, interactive and engaging video-based ad formats. Premium content publishers like ABC, CBS and NBC have had huge success enabling their premium full-episode player environments with custom, immersive advertising experiences. In 2010, look for new technologies, formats and features that truly engage consumers and offer opportunities to do way more than just watch the seconds count down until their video resumes.

“True” 3D–Coming Soon to a PC Near You?
3D movies like “Avatar” and “Up” have been a hot topic over the past year, with ticket sales reaching record numbers as audiences have lined up at theaters for these incredible movie experiences. One of the questions spurred by the technological advancements in production of films like Avatar is where this 3D technology will take us next. Will 3D make its way into our TV and PC viewing experiences in the near future and will advertisers be forced to hop aboard the 3D train?

The topic of 3D can be a confusing one as it relates to the interactive world, when compared to the “stereoscopic” 3D world of movies like Avatar that we see in IMAX theaters. Digital technology companies like my own are pushing the envelope with rich media technologies (like Papervision3D) that enable the delivery of real-time, rich, three dimensional online and mobile ads.

You’ll certainly hear a lot more about 3D in 2010, but 3D comes in many shapes and sizes–especially in the online advertising world. I wouldn’t be surprised to see companies emerge with software and hardware solutions for online stereoscopic (”Avatar-like”) video in the future, but I wouldn’t hold my breath if you are waiting to see it in an ad near you in 2010.

HD Online–Gaining Some Traction
High-definition content has become commonplace in our living rooms. The question for online advertisers is, “why haven’t we seen the same adoption curve in online video content?”

The simple answer lies in the economics. The cost of serving an HD video file over the web is still much higher than a standard-definition video file. This, along with the variability of serving cost when offering users the choice between HD and standard video viewing, has made advertisers reluctant to expand heavily into HD video for their ads. In 2010, look for continued reductions in serving costs and alternative pricing models that will begin to empower advertisers to explore options for HD video ads.

Continued Online/ Offline Integration
Now that video is completely digitally based, it seems inevitable that the two distinct advertising operational structures that we see today across advertisers, agencies and publishers will eventually converge and realize efficiencies of a truly unified model for video-based ad operations across traditional broadcast/cable and online/mobile platforms.

Integration is definitely a hot topic. According to a recent Forrester 2010 Predictions report, online technologies and processes are “seeping into television media. Television buyers and sellers should spend 2010 learning from their online brethren how to target, optimize and automate bid-based buys in order to be ready when the television upfront takes a backseat to the ‘online-like’ rules of order.”

The reality is that there are a lot of factors that will prove to be influencers of, or barriers to, this convergence. There is not yet a consensus in our industry on truly how much these two video workflows should converge, or how. In 2010, I expect that the following trends will continue to make this topic one to watch:

• Growth in the prevalence of online video (in terms of both content and consumption);
• The continued shift in budgets being allocated toward online and mobile video-related media buys;
• The desire for more robust and consolidated metrics and analysis around video campaigns across mediums;
• Economic conditions and the forced reduction of staffing models employed by agencies, publishers and advertisers; and
• Technology advances in TV, mobile, cable and PC hardware.

From online consumer trends to ad interactivity, 3D and HD technologies and innovations and online/offline integration–2010 is shaping up to be the year of video for the digital advertising industry.

Bryan Hjelm is vice president of marketing at Unicast, a leading rich media and video ad server and service provider. He can be reached at bryan.hjelm@unicast.com.

Tips For Dealing With Bad Data, Fraud Prevention and Detection, Dispute Resolution–and Remedies. The Second in a Series.

By Greg Sater and Benjamin Alexander

As most of us have learned the hard way, online advertisers are susceptible to a number of fraudulent practices that can cause them economic harm and–in some cases–even regulatory liability, including–among other things–ad stacking, invisible and rotating banners, click fraud, syndication fraud and cookie stuffing.

In this article we, as industry lawyers, will address some of the ways in which well drafted online marketing contracts can address some of these issues. We’ll also touch upon some of the legal battles that can arise in the space.

Advertising Requirements
The first line of defense is expressly prohibiting in the contract illegal, fraudulent or misleading practices–and doing so both in general terms and in language that lays out specific examples of prohibited practices. These prohibitions are generally aimed at eliminating three distinct (though often related) harms:

Directly defrauding the advertiser by attempting to collect a fee when there is no consumer at the other end of the ad. Examples: bogus leads or click bots.

Indirectly defrauding the advertiser by attempting to collect a fee when the consumer at the other of the ad either has no interest in the campaign or was tricked into responding. Examples: through incentives or deceptive copy.

Attempting to collect a fee when the consumer was already interested in the advertiser before the campaign ran. Example: syndication fraud.

Exposing the advertiser to regulatory or third-party liability for violating advertising laws, regulations or guidelines or infringing a third party’s rights. Examples: e-mail campaigns that violate the CAN-SPAM Act or using competitors’ trademarks to generate search results. Note: breaches of these prohibitions, in addition to creating regulatory or third-party liability, generally result in ads being delivered to uninterested consumers.

Examples of language aimed primarily at preventing the direct defrauding of the advertiser include contract clauses prohibiting:

• Activating ads or inflating the number of impressions, clicks, or transactions (or allowing or causing others to activate ads or inflate the number of impressions, clicks, or transactions) through any deceptive or misleading practice, method or technology;
• Using spyware, adware, devices, programs, robots, Iframes, redirects, spiders, computer scripts or other automated, artificial or fraudulent methods designed to appear like an individual, live person performing an action; and
• Generating actions from public or open proxy servers, from IP addresses that have bot activity or from pay-per-view or pay-per-surf programs.

Indirect defrauding of the advertiser can be limited by prohibiting:

• Incentivizing traffic through sweepstakes, rewards points or other methods of compensation;
• Taking control of a user’s computer by delivering ads or other material that a user of a computer cannot close without turning off the computer or closing all sessions of the Internet browser for the computer;
• Serving ads or driving traffic to ads with downloadable applications;
• Delivering non-US traffic; and
• Using any technique that generates organic or paid search results based on any brands or trademarks of the advertiser.
• Exposing the advertiser to regulatory or third-party liability (and related indirect defrauding of the advertiser) can be limited by prohibiting:
  • Ads that include content that is deceptive or misleading or otherwise fails to comply with applicable federal and state consumer protection laws;
  • Ads that infringe on the personal rights, trademark, service mark trade dress, trade name, logo, publicity right, copyright or other intellectual property of any third party–specifically using third party trademarks to drive traffic;
  • Ads that don’t comply with all applicable privacy laws or regulations (including California’s Online Privacy Protection Act and the new Massachusetts Privacy Law);
  • E-mail campaigns that violate the CAN-SPAM Act;
  • Advertising to wireless devices or portable electronic devices by text messaging in any form (including SMS, Smart
  • Messaging, EMS and MMS) or e-mailing to any e-mail address associated with a wireless domain name on the FCC list; and
  • Using any technique that generates organic or paid search results based on any brands or trademarks of the advertiser’s competitors.

Besides prohibiting illegal, fraudulent or misleading practices, advertisers should retain contract rights to exercise control over marketers, such as requiring the marketer to use functional elements and creative provided by the advertiser or to direct traffic to landing pages that the advertiser controls or supervises.

To limit the functional elements that a marketer can use, contracts can include provisions such as the following:

Advertiser will provide Marketer with access to advertising including, without limitation, banners, buttons, text-links, clicks, pop-ups, pop-unders, e-mail, graphic files and other similar online media (collectively, “Elements”). Advertiser may change or revise the Elements made available hereunder at any time, in its sole discretion, and Marketer agrees to use only the most recent versions of the Elements that are posted or otherwise made available to Marketer by Advertiser. Marketer shall not alter, modify or otherwise change the Elements in any manner. Marketer may only use Elements and other creative material that is supplied by Advertiser in connection with the Campaign.

Landing pages can be controlled by requiring that Marketer must direct all traffic responding to an Advertisement to a landing page at a website address hosted by Advertiser.

Alternatively, an advertiser may combine the two approaches and allow marketers to build landing pages, using functional elements and creative supplied by the advertiser and subject to the advertiser’s review and all of the other requirements discussed above, by using language such as this:

Marketer must direct all traffic responding to an Advertisement to a landing page at a website address hosted by Marketer, which landing page must include functional elements and creative supplied by Advertiser. Any functional elements or creative included on such landing page not supplied by Advertiser shall be approved in advance by Advertiser and such landing page shall comply in all other respects with the advertising requirements set forth herein.

Additionally, in part as a means to hold parties more accountable, affiliate marketing contracts often will limit cross-publishing rights, prohibit cross publishing altogether, allow cross publishing only one level deep, or allow cross publishing only upon approval of the sub-affiliate by the advertiser. If cross publishing is allowed, it can be conditioned upon subs agreeing to abide by the terms of the primary agreement.

Finally, don’t neglect to design your campaign in a way that maintains as much control as is practical. We had one CPM contract for a post-sale interstitial upsell where the advertiser wasn’t concerned at all with the marketer’s accurate reporting of impressions; instead of providing the marketer with the ad, the marketer was redirecting to the advertiser server to deliver the ad each time, allowing the advertiser to maintain the count.

Payment Terms
Payment terms are typically the primary protection for the advertiser (or network). To provide protection, the payment terms generally allow the advertiser a great deal of latitude in determining the payment to be made. A marketer often will attempt to negotiate less discretion on the advertiser’s part or, at least, a short payment cycle–if the advertiser abuses the payment discretion, the marketer at least can learn that quickly and move on. Often, that is the marketer’s only meaningful recourse.

Here’s an example of a general payment clause that provides discretion to the advertiser:

In the event Marketer disputes the Payment Data, it must notify Advertiser in writing with supporting documentation within ten (10) days of receipt of Payment Data or else the Payment Data will be deemed accurate and accepted as such by Marketer without further right to dispute the accuracy of the Payment Data. Advertiser shall in good faith, consider such documentation, but shall have the final authority in determining the amount of Payment.

We’ve also seen more aggressive payment clauses demanded in online marketing contracts, such as this beauty: All determinations made by Network in connection with the Ad Codes, Actions and any Payments shall be final and binding on Affiliate.

Specific payment requirements can include:

• That the traffic comply with all the advertising requirements described above;
• That the advertiser has documentation to support payment;
• In the case of networks, that the advertiser has paid the network; and
• For lead generation, that the lead was not fraudulently obtained and isn’t a duplicate.

Audit Right
Advertisers typically will seek the right to audit relevant books and records of marketers for a short period–generally, 90 days to one year after the termination of the agreement. Advertisers pay for the audits, but if the audit reveals that the advertiser has been significantly overpaying because of fraudulent or bad data, the cost will be shifted to the marketer.

Governing Law and Venue
If in the future there is a lawsuit or arbitration arising from or relating to the agreement, it will be resolved according to contract law. That law, however, varies from state to state. To avoid litigation over which state’s law applies, agreements typically specify this in a “choice of law” clause. The choice of law usually isn’t a deal-breaker because, when it comes to contract interpretation, conventional wisdom is that there aren’t too many material differences between the different states’ laws in that regard–but, that said, significant differences can occur. Some states have, shall we say, “quirky” laws. It’s well worth a discussion with your lawyer.

Of more practical concern is the venue selection clause: the language that says where a future lawsuit or arbitration will be adjudicated. Nobody wants their contract to provide that future disputes between the parties will be heard in the state where the other side is based, especially if the parties are on opposite sides of the country. Litigating three thousand miles from your home state, in the other party’s “home court,” is no fun! Moreover, the reality is that if a particular state’s venue is specified in a contract, then realistically that state’s law probably will end up being applied to any dispute arising out of the contract. A judge or arbitrator sitting in Louisiana is more likely to apply that state’s law because he or she knows it. For these reasons, think about the venue clause.

Attorneys’ Fees
Unless the contract provides otherwise, if there is a lawsuit or arbitration in the future, generally both parties will have to pay their own lawyers regardless of who wins. That rule favors the party who can afford to gamble more on litigation. Some contracts have a “prevailing party” clause, providing that the loser of any future lawsuit or arbitration pays the winner’s legal fees. Typically, the less well financed party, who otherwise might not be able to enforce its legal rights, will try to negotiate to obtain a prevailing party clause.

Greg Sater

Greg Sater and Benjamin Alexander are partners with Rutter Hobbs & Davidoff, based in Los Angeles. They can be reached at (310) 286-1700 or via e-mail at sater@rutterhobbs.com or balexander@rutterhobbs.com.

Subjectivity is the Key to Driving Site Search Success

By Dr. Scott Brave

If your site search is failing both you and your customers, you aren’t alone. Marketers, website managers and search professionals across all types of organizations struggle every day to produce sets of meaningful search results that truly help their user base–rather than inundating them.

Enterprise search has long been the de facto standard for websites and corporate knowledge databases, predominately employing text-matching algorithms. While statisticians might be impressed with the outcomes, users who initiate searches find themselves drowning in a sea of homogenous data.

Search professionals and merchandisers are in no better position, with product catalogs and content that is constantly growing and changing.

Site search has come a long way over the past few years, and some traditional vendors are even making impressive strides to improve relevance without having to rely as much on manual tuning. Even so, the single most important ingredient to produce relevant search results is still often lacking: subjectivity. In other words, typical search engines still have no reliable way of accurately interpreting users’ intent or determining what results are actually useful in your ever-growing sea of content.

“What exactly is so wrong with objectivity?” you might ask.

For one, the critical information needed to determine relevance is simply not in our content. The content that makes up our websites–whether HTML, flash, video, PDFs or some other type–seems like the best place to discover a match to a user’s search terms, but often it’s not. Frequently, there’s a mismatch in how a user phrases his or her query and the words content creators use–and that’s just for content that the engines are able to spider.

If we make an assumption that the content is in a format that’s spiderable and that it contains the user’s search terms, it still doesn’t mean that the documents that are returned in the results are truly relevant. The key is to understand what content is useful, when it’s useful and who it’s useful for. However, that critical information is in users’ heads, and it’s based on their experiences and needs. That’s why introducing subjectivity into search is so important.

The best approach for surfacing this subjective insight might seem to be to explicitly ask the users. This approach seems good on the surface, but upon further scrutiny it’s flawed from a standpoint of coverage, bias and inaccuracy. Some enterprise search providers are beginning to move in this direction, but have generally failed to recognize a fundamental rule: actions speak louder than words. As social science has taught us all along, if you really want to understand people, you need to watch what they do, not what they say.

A few players in the enterprise search space have even figured this out. That’s the good news. The bad news is that they neglect to look beyond search. What users are doing in search only skims the surface of what’s really going on. Anytime someone comes to your website, they are looking for something. Many times they will have done a search on Google before they came to your site. Their Google search terms are your first clue. Once they get to your site, not all users search. And even if they do, there are many steps and actions that they take after the search is performed. Every action, be it search, navigation, engaging with content–or even all of the above–is providing you with valuable clues about what’s useful, why it’s useful and who it’s useful to.

Consequences of Objective Search
Site search is one of the single most important features on websites, and a primary method for your users to find the products and content they need. The consensus among analysts is that while there have been great improvements in site search technology, the current options aren’t making the grade–on the user experience side or the search manager side. To really move the needle on the search experience, companies will have to look at new methods that fall outside of the traditional search technology realm. Independent analyst firm Gartner predicts that by year-end 2013, more than 30 percent of the most popular websites will use search technology to better target content by adapting to the user’s context.

Poor search experiences aren’t just an inconvenience for users, they are also costly. Marketing budget is spent attracting visitors to your site. Opportunity cost is sunk into the hours spent manually tuning search results and content. Customer service costs rise as users pick up the phone or send e-mails. Revenue is lost as prospects and customers abandon your site in frustration. This clearly isn’t lost on companies. A recent study by Internet Retailer reports that 35.9 percent of online retailers have plans to upgrade their site search.

Creating a Personalized Search Experience
Improving site search isn’t just about producing better search results. It’s about personalizing the search experience to each user based on their specific needs. It’s about making search subjective.

If continuing on with the status quo is no longer an option because of both the negative impact on customer experience and the high associated costs, then you need some concrete, objective points to consider when looking for a solution to the search problem:

Think not only about content, but also about context - Users come to sites with intent. That intent might be indicated in a Yahoo or Google search that brought them to your site. After reaching your site, they might then express intent or context in the pages they visit and engage with, the links they click and maybe the site searches they perform.

What else are they doing to express intent and even engagement on the site? Consider how long their mouse hovers over a piece of content. Are they engaging with multimedia content? Do they spend time comparison shopping, hopping back and forth from one document to the other? This expression of interest may span multiple searches and actions, and finding content that engages them and holds true value for the user’s specific intent or context may also take multiple steps.

By paying attention to the context of users’ visits, you can begin to fine-tune their search experiences and identify what web pages and content will be most relevant to them.

Make search social - In recent years, explicit user actions such as click-throughs, ratings and feedback were introduced to solve the issue of search relevancy. We’ve seen this on the likes of YouTube ratings, Yelp reviews and Amazon product commentary.

However, today’s advanced social search techniques have evolved to take into account how humans search for, find and consume information and products in the physical world. In this sense, the implicit feedback users are giving you as they navigate both the web and your site are much more important and telling than explicit feedback–on many levels. These implicit actions take into account all traffic, not just a small percentage. They also include information such as how a visitor arrives at a site and every action they take once they arrive, including navigation patterns, search behavior, browsing behavior and even interactions with non-spiderable content like video and PDFs.

Remember, actions speak louder than words or, in this case, search queries as well as navigation on the web and throughout your site. It’s amazing what a little listening will tell you about your visitors and what will interest them.

On a larger scale, you should also consider the macro data that can be collected and analyzed from all your website visitors. As this data is continuously distilled, virtual communities of like-minded visitors begin to emerge. Actions, patterns and tendencies associated with these communities form the basis of a collective prospective that you can use to deliver better search.

Automate the fine-tuning process - When companies do find flaws in their search results, the approach most take is to manually tune and tweak the search algorithms or the content. With this approach, companies can only focus on the most popular products and content, and they miss out on the highly profitable long tail. Simply put, it isn’t timely, scalable or all-inclusive.

Furthermore, search administrators are rarely subject matter experts and possess little knowledge about how visitors think about a company’s products and services, making it difficult to establish rules to actually help users. When subject matter experts are deployed to tune the content, it takes valuable time away from more high-value activities they could be focusing on, and still only addresses the most popular searches.

Companies need a solution that automates the fine-tuning of results in real-time, and allows the site to change the results as the behaviors of visitors themselves change, continuously optimizing the conversion potential of search.

Give online marketers “community plus control” - If we rethink how we approach fixing search and let our users or online community automatically surface the right content in the right context in real-time, we can really take our sites to the next level. Yet with that automation, companies still need the capacity for control.

Automation should do the heavy lifting for marketers, but it must have flexibility built into it. Online marketers and merchandisers will still need to create business rules to augment and sometimes even override what the community is doing.

Think outside of the box engine – Remember, search should be more than just a box. The engine is just one piece of the navigation framework that guides visitors to your products and content–no matter where the content lives or the format it takes. Perhaps it’s on the homepage, internal product pages, customer support areas, a microsite or elsewhere. It could be HTML, multimedia, a PDF or even some other format.

If companies begin to accept the limited nature of search engines and the concept of intent, they can do much more than fix search. They can start recommending products and content the second they see users expressing intent. When companies create these personalized experiences–be it personalized search results or personalized product and content recommendations across the site–they create a user experience that is engaging at every touch. And driving users to the best content every time they visit ultimately improves sales and reduces costs.

Dr. Scott Brave is co-founder and CTO of Baynote. He holds a Ph.D. in Human-Computer Interaction from Stanford University. Dr. Brave can be contacted at scott@baynote.com.

Use Display Ads To Get More Out of Search

If you’re advertising online, you’re probably paying for search clicks that don’t convert and display ads that don’t drive sales. To solve both of these problems, find a way to make your search and display ads work better together.

I’m speaking specifically of search retargeting. Here’s how it works: after users search for a term that’s relevant to your business, they arrive at your site. But many searchers leave before ever converting. Historically, these visitors would have represented wasted clicks–end of story. But with retargeting, advertisers can drop a tracking cookie on the visitor’s computer and use this cookie to follow that visitor across the Internet. Consequently, advertisers can re-ignite the conversation with these former visitors, drawing them back to the advertiser’s site to finally drive a conversion.

This process increases the possibility that a conversion from a previously lost or abandoned click will occur. It also means driving display ad spend toward users who–through their search activity–have declared themselves as being interested in the kinds of things your company sells.

In addition to the ad agencies that offer retargeting services of various kinds, a number of ad networks offer systems with similar functionality. For example, Yahoo’s Smart Ads system dynamically targets ad offers to Yahoo users based on the activities they’ve performed across the entire Yahoo network.

So, for instance, a user who lives in Los Angeles, plays poker in Yahoo games, reads about poker in Yahoo sports and searches for flights to Las Vegas, is quite likely to be more than a casual Las Vegas searcher–he or she is probably a very serious candidate for receiving ads for flights to Sin City.

Yahoo might serve this user ads with special offers on Los Angeles to Las Vegas flights and these ads might appear anywhere on the Yahoo network.

While different vendors offer different flavors of search retargeting, the common thread is clear: web users spend their lives across the entire Internet. To target them best and to make sure advertisers stay engaged with them, advertisers need to maintain conversations with them across as much of the web as possible–through display, search and the many consumer touchpoints that lie in between.

Mark Simon is vice president, industry relations at Didit, a digital ad firm specializing in search marketing and targeted display ads. He can be reached at mark.simon@didit.com.

Live Chat: No Longer a Novelty

I’ve heard time and again that live chat tips the scales of success for e-commerce businesses. I’ve spoken with e-retail entrepreneurs about how the technology catapults conversions and I’ve participated in management conversations with multinational corporations about how live chat delivers superior customer satisfaction at a fraction of historic costs. But I still talk to companies that aren’t convinced–that still believe live chat software is a novelty, a cute feature to be filed in the “nice to have” column.

Until recently, my only retort was to summarize what I’d heard from our customers. But now I say something different. Something like this: “Quantitative data from the industry’s first benchmarking report shows that by adding live chat to your website, sales will go up by anywhere from four to 86 percent. What other initiatives are you working on that will deliver that kind of return?”

This is the story of how a few anecdotes have led to an industry standard.

THE ANECDOTAL
Live chat has grown over the last decade and is finally becoming recognized as a critical customer communication channel. Initially thought of as strictly a customer service tool and relegated to the bottom of “Contact Us” pages, live chat has evolved into an important sales channel appearing at the top of leading e-commerce websites everywhere. Website visitors use live chat to ask questions, find out more information and seek advice. They ask FansEdge.com about color and size selection for the perfect ball cap. They ask Allergy Buyer’s Club about the most space-saving air purifiers. They ask ApplianceZone which water filter fits their LG refrigerator. They want to know whether the Dean and DeLuca tote bag comes with the “Road Trip” gift basket.

These interactions aren’t just simple pleasantries; they have a real and significant impact on the bottom lines of e-commerce businesses.

Abt.com has informed us that chatters convert at 20 times the rate of normal website visitors. A long-time customer of ours, Exent Technologies, tells me they reduced support costs by more than 25 percent. Jim Allen, the CEO at ApplianceZone, is riding a rocketship of growth by engaging more than 11 percent of website visitors in chat. Credit Alliance Group is using live chat to help people who are facing mounting debt and has increased sales by 22 percent. The Source, a Canadian electronics retailer, proactively invites website visitors to chat when they enter the shopping cart–more than 20 percent accept and engage in conversation with an agent.

THE ACTUAL
While the results these customers have experienced are impressive–if not downright enviable–they are admittedly anecdotal. One thing they are not, however, is rare. I used to go on and on describing similar examples from other Internet retailers, but often, it didn’t matter. Prospective customers still wanted to know, “what will live chat do for me?” We’ve spent the last 18 months tackling this question and putting statistically relevant arrows in our quiver. Some time was wasted trying to find secondary sources that proved live chat’s efficacy. When it appeared that nobody was looking quantitatively at live chat, we decided to.

Many companies dismiss live chat under the assumption that if a visitor wants to communicate, they’ll just pick up the phone. For our first foray into this investigation, we went directly to the source and asked the Internet shoppers themselves. Our quantitative project with over 250 regular e-commerce buyers revealed several findings, including some that surprised us.

Under several shopping and customer-care scenarios, we asked respondents to indicate their preferred method of communication. To be honest, we thought the phone would win; after all, it does have a 130-year head start. We were shocked, however, that in every scenario presented, the phone was never the number-one choice. It was, we admit, a close race. But the fact is that live chat won every time.

We learned some other things, too. For example, while 58 percent of the entire sample said that live chat positively influences their purchase decisions, the percentage rises significantly with more regular shoppers.

WE’VE SEEN LIVE CHAT FROM BOTH SIDES NOW
Despite everything we learned, skeptics remain. There are those who criticize our research based on the assumption that what consumers say and what they do are sometimes quite different. So we ventured into new territory. Because our products are provided through a software-as-a-service model, our infrastructure includes aggregated data from one of the world’s largest live chat user communities. We decided to interrogate this data in order to illuminate the real experiences of businesses actually using live chat on an everyday basis. What we found is quickly becoming the de facto standard in the industry.

Here is just a sample of what we uncovered:

• Adding live chat to a website increases purchase conversions by between four and 86 percent.
• The average website can expect to have six percent of their proactive invitations accepted.
• The average website can expect to engage between one and 21 percent of its visitors in chat. One of the biggest determinants is the overall traffic volume of the site in question.
• Placing a chat button on multiple pages increases chat volume by 53 percent.
• Repeat visitors are 64 percent more likely to engage in a live chat.
• Seventy-nine percent of visitors fill out post-chat surveys and, overwhelmingly, live chat interactions are given high satisfaction ratings.

BEATING THE BENCHMARKS: ALLERGY BUYER’S CLUB
Allergy Buyer’s Club is an online retailer of healthy-home and allergy-relief products such as air purifiers, specialty vacuums and dehumidifiers. A long-time believer in live chat, the company has spent years measuring and tweaking their implementation in order to turn it into a major sales channel. Robert Scott, the company’s chief operating officer, has led and managed the effort with results that, by and large, exceed the benchmarks. In November 2009, the beginning of their busy holiday season, we pulled some interesting data:

• Live chat increased conversions by about eight percent for Allergy Buyer’s Club.
• Visitors who engaged in live chat with a representative during this month were about eight times more likely to buy.
• Allergy Buyer’s Club’s use of rules-based proactive chat increased their overall chat volume by a multiple of five in November.
• During this same time, repeat visitors were 70 percent more likely to accept invitations from Allergy Buyer’s Club agents.

Scott and his entire team are able to beat the benchmarks for two primary reasons. The first is their impressive and continuous improvement processes. Allergy Buyer’s Club is constantly applying and re-applying website analytics in order to maximize chat’s effectiveness.

The second explanation for their success is due to their superlative focus on customer service manifested by their extensive live chat agent training. Their focus on developing an implementation that is customized and works specifically for their needs has truly paid off.

I like to believe there’s a third reason that Allergy Buyer’s Club succeeds so impressively. It’s the fact that for them, live chat isn’t a novelty but a primary sales channel worthy of considered measurement and executive-level support.

Ross A. Haskell is director of marketing for Bold Software, a web communications solutions provider. He can be reached at ross@boldsoft.com.

Next Generation Recommendations

Now that we’ve entered the New Year, online retailers are taking a close look at their holiday sales and overall business results from 2009. And with new 2010 budgets in place and a more promising economic environment ahead, retailers are likely evaluating what new e-commerce technologies they need to meet the growing expectations of today’s savvy online shoppers and to outperform their competitors in 2010.

What’s on your “must have” list for 2010? Is it social network integration? Marketing or site optimization? Better ratings and reviews?

What about personalization?

It’s certainly not a new topic. Personalization has been around for many years and has many types and nuances, including both “explicit” (user-controlled) and “implicit” (automated). It is the automated variety of personalization–the technique of personalizing the shopping experience for each shopper automatically based on his or her unique interests–that has caught fire of late. Also called “predictive analytics” or “micro-targeting,” the goal is to harness available knowledge about each customer to automatically show the right products to the right shoppers at the right time. The benefits? More engaged shoppers, higher conversion rates, increased order values and rich behavioral analytics to help inform merchandising strategies.

The good news for online retailers is that automated personalization technologies have evolved and matured. The bad news is that there are dozens of approaches and solutions to consider, each with strengths and drawbacks. The goal of this article is to explore automated personalization–how it has evolved and where it is today–to help you decide whether it should make your wish list for 2010.

Initial attempts at personalization began early in the decade with online cross-sells. Online merchants–using their in-depth knowledge of the product catalog and consumer purchase behavior–added cross-sell suggestions to product detail pages and to the shopping cart.

Yet merchants quickly realized that cross-selling in the online world–while valuable–was difficult and time-intensive. With large, rapidly changing catalogs, constant inventory changes and lean merchandising teams, most online retailers could only realistically apply cross-sells to their most popular products. Even then, cross-sells were not personalized to each shopper’s tastes or current interests.

Over the past few years, automated recommendations engines burst onto the scene. The first true implicit personalization technology to use real-time data analysis, recommendations engines were marketed as smarter, more efficient alternatives to “one-size-fits-all” cross-selling. Using click-stream analysis, collaborative filtering and statistical modeling, recommendations engines automatically display personalized cross-sells and product suggestions for each shopper, making it possible to cross-sell the entire catalog or the “long tail.”

As recommendations engines matured, online retailer adoption increased. Analyst estimates vary, but most suggest that 20 to 30 percent of electronic retailers today employ some type of automation for product cross-sells (either their own technology or a commercial solution). Sites like Amazon and Netflix have brought recommendations to the forefront and a growing number of commercial solutions have made the technology available to virtually all online retailers, regardless of size.

So where does that leave us today? Are automated cross-sells the end game, or just the beginning? Why aren’t more retailers utilizing recommendations? And can the predictive targeting technology underneath recommendations engines be applied to other aspects of online merchandising across the site and beyond it?

THE FEAR OF AUTOMATION
One reason for slow adoption of recommendations may be the “fear factor.” Many solutions rely solely on click-stream analysis or past-purchase behavior to recommend items. As a result, their relevancy is often off the mark. Suggesting items shoppers aren’t interested in buying is a waste of virtual shelf space. Other solutions can’t easily be controlled and often unknowingly violate merchant strategies, such as showing a certain brand of product with a competing brand, or showing an out-of-stock item.

Here’s a simple analogy that helps explain this fear of automation. Ask yourself if you’d trust an in-store associate to recommend products to shoppers solely based on what similar shoppers in the store looked at and ultimately bought. Or, would you ensure that the associate fully understood your products and merchandising goals, so that the products he or she showed and recommended to each customer matched the customer’s interests as well as your business’s interests? Most online merchants want the latter if they are to automate recommendations–and rightly so.

Fortunately, automated recommendations technologies have matured. Next-generation solutions have more predictive relevancy, deeper catalog understanding and more fine-tuned control. As a result, the products they show to each shopper are both more relevant and more aligned with merchant strategies.

AUTOMATION PLUS MERCHANT CONTROL
Innovative online retailers are using these next-generation technologies to push the personalization envelope and exploit their recommendations engines in new ways. They are building sophisticated, automated merchandising “campaigns” that blend the power of automation with merchant control and strategy.

One top-100 retailer, for example, has more than a dozen, finely tuned, automated cross-sell campaigns on its site. On certain product detail pages, recommendations are limited to products that cost less than 50 percent of the price of the product in view. When a shopper’s gender is identified, recommendations are limited to items only for that same gender. When a shopper is browsing in certain categories, recommendations are focused on that category, or from like categories; when a shopper is looking at a sale item, recommendations are limited to other sale items. In all of these campaigns, out-of-stock products are excluded automatically, and some high-inventory products are pushed more than others. Clicks, conversions and cart values resulting from each campaign can be analyzed to optimize results.

Another retailer is using its recommendations engine to automate its online best-seller and gift-guide sections. Sophisticated, automated merchandising campaigns instruct the engine to select and display the best-selling products or gift suggestions most relevant to each shopper. If I were shopping on this site, I’d see best-selling products and gift suggestions more tailored to my tastes and needs, while you would see products tailored to yours–making both of us more likely to find and buy the right product or gift. In addition, the site’s merchandising team has more time to focus on data analysis to make sure its assortment and gifts are relevant to customers.

If implicit personalization, micro-targeting or automated recommendations are on your list for 2010, you understand the value and importance of differentiating your online store by personally engaging each online shopper. As you begin your evaluation, keep an eye out for solutions that don’t just automate, but which also give you the power to control and guide that automation to align with your strategies and meet your business goals.

Ryan Hoppe is the director of marketing for ATG’s e-Commerce Optimization Services. He can be reached at rhoppe@atg.com.

Creating Persuasive Video

Everyone is experimenting with online video these days, which means that if your company’s clips don’t convince viewers to take action, fast-fingered cybersurfers will simply finish watching, hit “close” and cruise on over to another video. “If you’re spending time and money on online video, you’d better make sure you’re using persuasive strategies to get people to continue watching and responding,” says Colin Martin, marketing manager at business and marketing consultancy Antion and Associates in Virginia Beach.

AVOID ONLINE COMMERCIALS
Where most marketers go wrong in their quest to persuade via online video, says Martin, is by treating the clips like commercials. “It’s OK to use outrageous statements or graphics to lead into the video and grab attention (a search engine optimization firm, for example, might use a statement like, ‘We can get your company on Google’s front page’),” says Martin, “but you also need to follow that up with real results–proof.” Marketers also tend to drag out the videos too long, and wind up losing the viewer’s attention. “The idea is to keep the person engaged for three or four minutes at the most,” Martin says. “If you go longer, people will get bogged down and grow weary of it.”

Baiting viewers and leaving them wanting more also works well when creating persuasive clips, says Martin. “Show the viewer what you do and/or what you’re offering, but do it in a way that only provides a few key points,” he explains, “so that the viewer will want to learn more.” And don’t forget to tap into the persuasive nature of the video genre itself, the simple fact that moving pictures in and of themselves allow you to create very relevant content for a targeted audience.

“Being able to show the product or service in action goes a long way toward keeping the audience engaged,” says Martin, who points to Blendtec’s online videos for the Total Blender as a good example of this strategy in action. “The shows where the host puts iPods and other objects into the blender are meant to be humorous,” Martin says, “but they also plant in the consumer’s head the idea that this blender’s performance is as fantastic as the company claims.”

Service-oriented companies can use a similar approach. The firm that specializes in life coaching or business consulting, for example, can pull together a number of real-life testimonials to feature in the online video, thus cementing the fact that people use–and are pleased with–the firm’s services. When developing the testimonials, be sure to zero in on customers who are similar to the market that’s going to be watching the video. Then, let the moving pictures tell the tale. “Written testimonials can be faked, but video testimonials are far more legitimate,” says Martin. “They build trust and close the anonymity gap between companies and their customers.”

FRONT-END PLANNING
Christy Wise, vice president of marketing at Los Angeles-based online marketing firm Fanscape, Inc., says companies that want to develop persuasive videos must combine a solid call to action (a statement or offer that makes the consumer get up and do something) with content that is compelling and relevant. Getting there requires careful planning at the outset, says Wise, who advises companies to clearly define their goals instead of pulling out their camcorders and shooting randomly.

“Look at what your target audience is doing on Facebook and blogs before you create the content,” Wise says. “This will help you come up with videos that are truly relevant to your audience.” To get the most mileage from those videos, make sure they are sharable, and that they’re posted on public portals like YouTube, for maximum exposure. “You can’t just put a video online and sit back and wait for people to click on it and respond to it,” says Wise. “It’s up to you to make sure people see it.”

As for just how many people will see and react to your persuasive video efforts, Wise says: “Be realistic.” Only a small percentage of videos ever make it to YouTube’s 100,000-views milestone, she says, unless they become one of the lucky clips to go viral and get spread across the web like wildfire.

Rather than setting the bar at an unreachable height, develop realistic goals (such as attracting X number of new customers during the 30-day period that the video is posted online) and measure your results.

Martin says the company that comes up with an integrated plan (which includes traditional advertising, a website, online video and other elements) that keeps viewers engaged stands the best chance of succeeding in the online video space.

“You want people to view your videos, see the testimonials, meet the staff and then investigate your product or service even further,” says Martin, who advises firms to use a service like Google Analytics to measure the effectiveness of their online videos, and to hone their strategies.

“The key to getting your audience to react like you want it to is by closely identifying exactly who that audience is and what they want,” says Martin. “Build a rapport with them and create calls to action that get them to sit up and take notice.”

Timothy R. Hawthorne is founder, chairman and executive creative director of Hawthorne Direct, a full-service DRTV, print, mail and digital ad agency founded in 1986. A 36-year television producer/writer/director, Hawthorne is a cum laude Harvard graduate.