E-tellers are facing fierce competition to attract the new customers and make them purchase. But In the near future only those companies will survive who are able to reduce the customer acquisition costs. The research reveals that Shadows by developing multifaceted, integrated customer acquisition strategy was able to understand the economies of online business. The problem with banner Ads Jason and Matthew created Coded in Pennsylvania to provide music buyers with knowledgeable recommendations, convenience and large selection.
With the emergence of Web as a platform for commerce, like many other E-tellers, Coded also saw Banner Ads as a great way to promote its site to the Web surfers. Early online selling efforts were conducted by magazine salespeople who actually thought banner ads in the same way as they thought of a 30 second television spot or a print ad in a magazine. Hence, they sought to base their prices on the number of people who would see an ad I. E. Often referred as exposure-based cost per thousand pricing (CPM) where M stands for Roman numeral 1000.
This CPM was the conventional eradicating which was Just a new medium of advertising and nothing more. It proved salary to advertising as full page ad on magazine and a banner ad on web. Coded realized this approach did not capitalize the unique advantage of Internet as this could track only the amount of advertising delivered not the amount being consumed. Coded thought to follow a prospect who clicked on banner ad to Coded website and to actual purchase in a way that was impossible in traditional media.
But soon, they realized that there was no guarantee on click-through and impressions to purchase in spite of the some sort of guarantees by Web Publishers. For the sake of argument, let’s consider the Web publisher demanded Coded $70 for every 1000 visitors who were exposed to its banner ads. This meant Coded was paying $0. 07 I. E. Scents for each visitor exposed to ads. Let’s also assume that only 1% of the people who saw ad clicked through to Shadows website. This meant that Coded was paying $7 for every violators of site ($70 for 1%off visitors; I. E. Visitor costs $7). Now, let’s also consider 1% percentage of visitors who vaulted, actually purchased. On calculation (1% of (1 %off) visitors cost $70), we conclude that Coded had to pay 700 for acquiring new customer which is quite expensive. On to Affiliate Marketing To overcome this, Coded tried to explore new ways to attract buyers to their site that could eventually take better advantage of the Internet. In November 1994, Coded thought to bring a new concept in web called Buy program which is now referred as affiliate or associate marketing programs.
Gaffe Records was operating as a promoted the artists and their recordings through a Website. This Company wanted to provide the fans an easy access to buy music but no internet in building fulfillment operation. So, Coded was called upon and these two companies agreed that Gaffe would put links on Its site to carry fans directly to the Web pages devoted to Gaffe artists at Shadows site. Coded realized the concept underlying Gaffe arrangement had much broader Implications as a marketing tool as the sales were higher than before.
There was always an option for Coded to start a program that would motivate born Buy Web, the Web’s earliest and arguably the most successful affiliate program. The Webby drove a few hundred of members by the end of 1995. To increase the raze of the market, Coded brought a concept of revenue-sharing arrangement. The arrangement was such that when a customer clicked through from affiliates Website to the Coded Website and purchased, Coded would pay 3% of revenue from the sale.
This actually encouraged the member to continue its membership and also make them realize that they were having opportunity to make money on Internet. For example: Websites like Lair’s Dreamy World and Mass Confusion Music placed links next to their music reviews, this definitely increased the probability of visitors buying the products from Shadows site. As a result, Coded turned its affiliate -marketing partners into a virtual commissioned sales force. Coded evolved Webby into Cosmic Credit targeting the low-volume, non-professional sites of music fans and Cosmic Music Network was placed top on the credit program.
Here the unsigned artists were allowed to put up a Web page at the Coded site, upload music that fans can download for free, and link their work to more well -known bands on Coded store. Today, Coded pays 7% to 15% to referring sites when visitors make a purchase on Coded store. This Cosmic Music Network has many advantages. Firstly, it drastically increases the potential marketing partners. Second, it not only eliminates the burden of buying advertising on all sites but also encourages the members to sign themselves for it. Hence, this network automatically expands.
Third and the most important unlike banner ads, Revenue -sharing. This brought the analysis of customers in wider view. Meaning that with the Cosmic Music Network, Coded can now know how many visitors arrive from each member’s site and how many visitors are converted into buyers. As a result, Coded could estimate the bedtime value of customer by source of acquisition and measure the effectiveness of all its marketing efforts. An integrated strategy As the Coded gained fame and more capital, it went after potential customers in the physical world which involved traditional media- radio, television ads, etc.
Coded calculated the lifetime value of a customer to work out how much of its resources it could afford to invest in more risky gamble of traditional marketing. These traditional medias are the most expensive way which paid off reaching the widest possible market. So, Shadows ads targeted national television commercials during the Grammas and the American Music Awards, print advertising in music related publications such as Rolling Stone, Spin and Variety and Radio spots on Howard Stern show.
Although link between banner advertising and sales is highly indirect, one could buy banner ads on sites of popular sites like CNN interactive, AOL,etc if this could be achieved in some reasonable price. Coded also has strategic alliances with American Online and other powerful Internet content which are more efficient than general banner ads as this privileged it to place integrated links to Coded store on certain pages of AOL though Coded pays $4. Million over 2 years.
As Word of mouth involves no direct costs, it is the most powerful source for acquiring new customers. Free Links also benefited Coded to acquire untagged customers. The traditional public relation also helped to generate word of mouth which in turn raises the sales. It is always important that company should afford those expenditures as lifetime value of its customers. Revenue-sharing advertising will surely be more effective that follows directly from the many-to-many communication model underlying the Web and is in fact a rich source of exploration.
Pay for performance arrangements like Shadows affiliate program are very important for e-tailors because they suggest a new business model for Web-based commercial efforts. Also, the revenue sharing agreements allows commission rates to change according to the market. Unlike short-term tactical investment in advertising, results-oriented marketing focuses managerial attention on the development of a long-term marketing strategy. Day by day, the internet marketing is evolving and new experiments are carried out. So, it’s nearly impossible to Judge what the best marketing strategy is.