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Advertising and marketing are increasingly costly, yet decreasingly effective. Marketing guru Jay Conrad Levinson says a consumer has to be exposed to an ad 27 times before it has the desired effect. Only 10 percent of viewers remember TV ads the next day, even those they've seen before (and never mind actually responding). Direct mail is considered successful if it draws a 2 percent response. And the advent of a plethora of cable TV stations and, of course, the Internet dilute the effect even further.
The problem is, we all suffer from an attention deficit, argues Seth Godin, marketing expert and permission marketing director for leading Internet portal Yahoo!, in his latest book, Permission Marketing: Turning Strangers into Friends and Friends into Customers (Simon & Schuster).
Interruption marketing, designed to capture attention for a moment, doesn't work like it used to. Godin says the only way for a company to break through the message clutter is to ask potential customers for permission to send carefully targeted messages--and give them an incentive to pay attention.
Permission marketing, which promotes cooperative interaction between companies and prospective clients, often produces astonishing results: It isn't unusual for 70 percent of an audience to read some of the messages, while 35 percent actually respond (and you can measure this precisely, unlike with most conventional advertising), says Godin.
But first you have to cultivate the potential customer, and ignore the attitude of interruption marketing, which says "Buy now or go away," Godin warns. He calls permission marketers farmers, while interrupters are hunters who go for the immediate kill. Agriculture wins big-time in the long run.
Godin's many years in the business world helped him form his marketing strategy. In 1982, he graduated from Tufts University in Medford, Massachusetts, with degrees in computer science and philosophy, and received an MBA from Stanford University two years later. Well-prepared as personal computers became part of daily life, he became brand manager at Spinnaker Software, where he led the team that developed the first multimedia products, working with such forward-thinkers as Arthur C. Clarke and Michael Crichton.
In 1995, Godin founded Yoyodyne, the direct-marketing pioneer acquired last year by Yahoo!. Along the way, he also wrote E-Marketing (Putnam), the first book about doing business online; The Guerrilla Marketing Handbook (Houghton Mifflin); and The Information Please Business Almanac (Houghton Mifflin), a ground-breaking reference book.
We recently discussed how to put "customize" into customer with the man Business Week has dubbed "the ultimate entrepreneur of the Information Age."
Scott S. Smith:As a proponent of permission marketing, are you actually able to use it to sell your latest book?
Seth Godin: After a long argument, the publishers agreed to put the first four chapters on http://www.permission.com This asks a low level of permission: Would you like something free? The key is to attach no strings. People avoid buying books because of a lack of time. I call their bluff: Anyone can take a quick look at four chapters. In this case, they get it 45 seconds after asking. This beats a glowing review--they can judge for themselves whether it's what they want.
The next question is, will they buy the book? I've had 24,000 hits on the site in the past four weeks, and a huge number have clicked to buy it. Compare that with trying to sell a book by taking out a $20,000 ad in The New York Times that hardly anyone sees. The same principles can be applied to other products. Give people an incentive to contact you and start a dialogue, then upsell with the permission they give you.
Every business has permission opportunities with customers. When you buy a burger, for example, you're asked if you want fries. Or you're in a store and the clerk asks if you would be interested in buying something on sale. You've already given them permission to sell you something, and that can be leveraged. It's more cost-effective to increase sales to existing customers than to run ads to find new ones, yet most businesses don't seem to appreciate the value of what they have.
Smith:Why is that?
Godin: The business owner hasn't calculated the lifetime value of the customer. Figure out what you think an average customer is worth in profit and what percentage of customers you're able to turn into lifetime customers. That puts a value on dialogue--if a customer's lifetime value is $200 and if you convert one out of 10, you have $20 for every interaction. You can easily evaluate your marketing program once you understand the real value of your customers.
Smith:You offered free chapters of your book. What are other kinds of incentives to get people to volunteer to be customers?
Godin: Don't start there; just be friends--give them something. It could be a video, information, coupons, even a chance to simply offer an opinion. Of course, it should be related to your business. For example, H&R Block ran a sweepstakes. The prize was that they'd pay up to $25,000 of the winner's taxes. Fifty thousand people enrolled and went to the firm's Web site to answer questions in a tax trivia game that took place twice a week for 10 weeks. [These consumers] were thinking about H&R Block all the time. You can't buy that kind of attention with traditional advertising. The company created a dialogue about its premium tax service.
Smith:What's the ideal type of permission?
Godin: The broadest is what I call intravenous. It's like you're in a coma and the doctor has permission to give you whatever he thinks you need, and to bill you for it. Ideally, your customers trust you to make decisions about their needs. You may have a similar arrangement with the guy who delivers heating oil. In its heyday, the Book of the Month Club had this level of permission. Internet companies are striving to get there.
Magazines don't look for readers for their articles; they create articles for their readers. Successful entrepreneurs in the next century will find products for their customers, not customers for their products. Know your customers and try to cover as many of their needs as possible.
Smith:Like a good salesperson.
Godin: That actually falls under the category I call personal relationships. According to the Guinness Book of World Records, Joe Girard is the best retail salesman in the world. In a good year, he sells almost 20 times as many cars as the average salesperson. He does it by sending a greeting card every month to each person he's met; everyone is willing to give him their address for that. He uses that to remind them he's focused on them and is fun to do business with. I have a financial consultant who has my permission to call me any time because he's shown me he has good judgment. However, personal relationships are slow to build and difficult to use to expand permission into new categories.
Cambridge Technology Partners [CTP], a high-tech consulting firm focused on e-business, has a way of building relationships with its entire target audience by inviting the chief information officers at leading companies to free seminars with major speakers. They don't try to sell them anything at the time. But when the CTP representative calls, they've earned a lot of attention.
Smith:In Permission Marketing, you mention the points-building program. Can you cite a good example of this strategy?
Godin: This is hard for small companies to do, except in the form of, say, frequency discount coupons, which are a much cheaper way of getting new customers than advertising.
American Airlines was one of the earliest and most successful practitioners of permission marketing with its frequent-flier program, AAdvantage. They have lots of opportunities to gather information about their customers. They provide them with so many special offers and affiliate promotions, customers look forward to getting their statement and monthly newsletter. They've leveraged the permission from being in the airline business to being in the loyalty business.
Smith:That also sounds like what you call brand loyalty, which would seem to apply only to big companies that can do national advertising.
Godin: Actually, you can build brand loyalty as an entrepreneur by using your uniqueness. I shop at a two-store grocery chain because they've shown me I can trust them to deliver good value with their house brand.
I'd also like to add something about sweepstakes, the essence of a points program. Even wealthy individuals will go to great lengths to have a chance at winning something. What's amazing is how [often] you enter a sweepstakes or send in a rebate slip, and the information is thrown away by the company afterwards. They don't follow up with any kind of contact. Large numbers of people have volunteered their addresses and shown an interest in the company and are ignored!
Smith:But you need to have interruption advertising to get the initial attention of potential customers, don't you?
Godin: Yes, but so much of it doesn't include a call for action, like an 800 number or a Web site address. There should be an opportunity to start a relationship in every element of marketing. You don't have to convert the audience to buying a product--you want them to give you permission to give them something for free, to open the door, then build the suite of messages to turn them from friends into customers, and then deepen the relationship. It's easy to get people to volunteer; how to capitalize on that permission is where you should put 90 percent of your focus.
Smith:How obvious do you have to make the request to start a long-term relationship with customers?
Godin: You want to get a dialogue going, but you can't be subtle. The benefit has to be obvious. You can't sell a mailing list of people who have given you permission to have this relationship, or you burn it. You have to make it clear that your ability to talk to them is strictly one-on-one. You want to build trust over time so you can expand your offerings as you get to know each other.
Smith:Does permission marketing work best with the Web because people can easily respond to its invitation?
Godin: You can use this anywhere, but it's really the only way to make money on the Internet. That's what the best Web sites are building toward, permission to sell a broad spectrum of products and services in the future, after the relationship has grown. They understand that the immediate sale is not important. Unfortunately, most of the 2 million corporate Web sites are poorly designed even to convey information. Visitors want to know immediately where to click, yet this isn't the case. Five years ago at Yahoo!, we realized how to do it right. Quit trying to make it cool and miraculous! Sites should be small, fast and simple--too many sites make smart people feel stupid.
Sites should collect e-mail addresses with the promise of a benefit. The Net isn't TV--it's a trade show with 37 million booths, and you want a card from each of them. You don't want comets that show up once; you want satellites that will keep coming back.
Scott S. Smith writes about business issues for a variety of publications, including Investor's Business Daily.