E-Business Commentary -- Virtual Marketing Escapes Dot-Com Bomb

Dec. 21, 2004
Manufacturers connecting to customers online.

Despite the dot-com bomb and the U.S. economic malaise, many manufacturers are staying the course when it comes to e-business. Some makers of consumer products, eschewing sales over the Web, are finding it a better vehicle for communicating with customers. For instance, Nestl USA wants to build relationships and trust with a special group of customers it calls "most valuable consumers." These are people the company has identified as being especially loyal to Nestl brands, purchasing a greater percentage of the company's products per household than others. "We want to have an interactive relationship with our consumers," says Nick Riso, vice president of e-business at Nestl USA, the Glendale, Calif.-based subsidiary of Nestl SA. He calls this "consumer relationship marketing," the idea being to tailor online messages to people willing to receive them. For example, Riso says his firm has identified households that would be most likely to use products that Nestlmakes, such as nondairy creamer. "Wouldn't it be better to focus on those who have the potential to buy our CoffeeMate product?" he asks. The company also wants to influence the buying decisions of consumers by providing them with useful information about baking and recipes for dishes that use its products. "This is not just advertising," Riso says. "We have a dialogue with these consumers. The idea is to use the Internet to solve problems for consumers. It's value-added content-not advertising-that builds that relationship with the consumer." Similarly, Procter & Gamble Co. (P&G), Cincinnati, is not using the Web to sell directly to consumers but rather to gauge consumer tastes vis- -vis new products. Instead of using labor-intensive consumer surveys that can take weeks, P&G uses the Web to perform surveys in a matter of days at a fraction of the cost. P&G used a television and print-based ad campaign to attract purchasers of its Crest tooth-bleaching product to its Web site, where the company was able to learn more about them so that it could tailor advertising to their needs. P&G also is weighing the possibility of changing the taste and feel of the product as a result. Not surprisingly, there is no shortage of software companies, outsourcers and consultants ready to help manufacturers get savvy to e-marketing. Digital River, an e-commerce outsourcing firm with 13,000 business customers, not only helps companies design and build their Web sites, it also helps them with virtual marketing efforts. "On the Internet, direct marketing is an accelerated process for which we can monitor response rates and modify the offer as a result," says Joel Ronning, CEO of Digital River, based in Minneapolis. "The client can make a special offer to certain e-mail lists of good customers." In the case of companies using Digital River, online marketing can be made to pay its own way. Ronning's firm has struck numerous deals with clients whereby it receives a commission on every dollar of increased online sales that result from Digital River's virtual marketing techniques. One manufacturer that has used the service is Sargento Foods Inc., a specialty cheese maker in Plymouth, Wis. With help from Digital River, Sargento created a whole new brand and line of products under the Sargento Reserve name, accessible to consumers via the sargentoreserve.com Web site. The cheesemaker also has gotten help making links to other high-traffic Web sites from Ovation Marketing, a LaCrosse, Wis,. e-business firm. Sargento was able to target its key customer base that had been previously identified over six years of e-mail and Web site contact with the firm. "We promoted Sargento Reserve products via direct e-mail to our database of consumers who have opted to receive information from us," says Kevin Delahunt, senior vice president of e-commerce at the cheese manufacturer. What's the bottom line for Internet-based marketing? While most manufacturers may not want to sell direct to the end customer, possibly upsetting distributors and retailers in the process, they certainly want to know more about their customers' demographics, buying habits and personal tastes. The Web offers an ideal means to make the connection, gather the data and execute marketing decisions based on it. As Nestl USA's Riso put it, "This is an evolution of the way marketing will be done in the future."

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