Big Online Wins for B-Markets


Tim J. Smith, PhD
Founder and CEO, Wiglaf Pricing

Published August 1, 2006

Ever since the internet breached the boundaries of military and academic communications, its commercial application has expanded at a pace that appears only limited by mankind’s impediments against reorganizing social structures. While certain philosophical considerations are likely to be raised by these statements, we would prefer to get down to the more practical economic opportunities facing current business executives and marketers. That is: What can businesses do right now to exploit opportunities online.

By now, most every business has figured out how to manage their corporate website. Executives have determined how to use the website in communicating with their markets and other constituents. They have also made decisions regarding whether the company can effectively transact over the web, either through their own website or the services of an online market maker. These decisions and resulting actions were simply the first steps in the process of moving markets on the web and integrating them with the web: Hanging signs and making trades.

Right now, most businesses have either completed or are in the process of completing their transition towards using the internet for direct communications with their markets and other constituents. Executives have integrated email newsletters with other offline direct communications in managing constituents at various points in the sales and marketing cycle. They have also integrated the use of webinars lower-cost and broader-reaching forum to substitute for face-to-face meetings and hosting direct seminars. This was the second step in integrating society and markets with the web: Holding intimate conversations with one or more people.

These were good and necessary steps in moving businesses online and staying competitive. Yet, the web is far from finished in displacing or extending all other prior media. We are now in the thrust of another big shift.

The New Big Shift

As it should be obvious, the new Wall Street darlings, Google, MySpace, and YouTube, are facing stratospheric market capitalizations precisely because they are at the forefront of advancing and profiting from the next step in the evolution of the internet in displacing the legacy print and broadcast media. Specifically, they are improving the match between talent and audiences, and concurrently, the match between suppliers and customers.

In light of the new internet matchmakers, executives must again rethink their use of the internet as a media.

(As a side note, we encourage readers not to be misled by sensationalism reports found in other periodicals concerning the rise of new stars. The ability to make money on the internet by being the talent remains similar to the ability to that of talent in other forums. Most artists, writers, and entertainers must hold other positions while pursuing their craft in order to provide sustenance, while a minute minority receives timely market rewards.)

Your Big wins

Currently, there are two specific areas that executives should be exploring, if not exploiting. Both are related to leveraging the new media in communicating their sales and marketing message. The first is in directly placing advertising orders with search-engine companies. The second is in leveraging affiliate programs to place advertisements in specific forums and media.

Advertisement placement markets created by search engine companies, such as Google, Yahoo, Ask, and others, enable every marketer to place advertisements specifically with viewers that are interested in the subject related to the advertisement. For instance, an electronic component design firms can place advertisements that appear when the keywords “VLSI Design” appear just as easily as GE can target “turbine” searches or Unilever can target “stain removal” searches. In these new online advertising markets, executives should be experimenting and measuring results to develop exploitable approaches for significant short-term gains.

Affiliate programs enable websites to select specific firms to represent on a pay-for-performance basis. Through affiliate programs, marketers can set the price they are willing to pay for a qualified lead or an acquired customer. Alternatively, they can implement a revenue sharing program where the media is provided a commission on all subsequent sales of clients that they send. For these affiliate programs, executives should determine their willingness-to-pay for qualified leads and commissions, and then determine which firms are best positioned to outsource the administration of their affiliate program.

Rich Media Interactivity + Analytical Horsepower

The internet is displacing other media for consumers largely because of its low price, user interactivity, and rich media (sound, colors, and movement). For marketers, it is also enabling a path in which other media could only crudely provide guidance.

In advertising, it has long been an accepted truth that marketers waist 50% of their budget on ineffective media. However, the internet holds promise of reducing that wastage precisely due to its digital nature.

Marketers can capture detailed information regarding who views an advertisement, the actions they take based upon that advertisement, and sometimes the revenue they generate. Likewise, media middlemen are able to identify the demands and desires of individuals and then provide specific advertisements which would more likely help them reach their buying goals.

In short, because of the analytical horsepower that can be put behind digitalized information, and the draw of the internet created through its rich media and interactivity, marketers are at the precipice of being able to narrowcast their sales messages to specific prospects with the willingness and ability to purchase.

While the internet as a media has yet to be fully developed, marketers cannot afford to sit on the sidelines anymore. Sufficient advances have been made. The time to fully engage the online advertising markets has been declared.

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About The Author

Tim J. Smith, PhD, is the founder and CEO of Wiglaf Pricing, an Adjunct Professor of Marketing and Economics at DePaul University, and the author of Pricing Done Right (Wiley 2016) and Pricing Strategy (Cengage 2012). At Wiglaf Pricing, Tim leads client engagements. Smith’s popular business book, Pricing Done Right: The Pricing Framework Proven Successful by the World’s Most Profitable Companies, was noted by Dennis Stone, CEO of Overhead Door Corp, as "Essential reading… While many books cover the concepts of pricing, Pricing Done Right goes the additional step of applying the concepts in the real world." Tim’s textbook, Pricing Strategy: Setting Price Levels, Managing Price Discounts, & Establishing Price Structures, has been described by independent reviewers as “the most comprehensive pricing strategy book” on the market. As well as serving as the Academic Advisor to the Professional Pricing Society’s Certified Pricing Professional program, Tim is a member of the American Marketing Association and American Physical Society. He holds a BS in Physics and Chemistry from Southern Methodist University, a BA in Mathematics from Southern Methodist University, a PhD in Physical Chemistry from the University of Chicago, and an MBA with high honors in Strategy and Marketing from the University of Chicago GSB.