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BOOK EXCERPT

7.2.99  
How Technology Can Trump In-Your-Face Selling
Excerpts from Permission Marketing

Book CoverFive years ago, Don Peppers and Martha Rogers wrote a book that changed the marketing landscape forever, The One to One Future. It proposed that marketers increase their profits by selling more things to fewer customers. That led directly to the agenda behind Permission Marketing: Getting a new customer is expensive. It takes money to get his attention, and continuing effort to educate him.

Back in the old days, merchants had a limited supply of customers and worked to get the maximum revenue from each one. Now, with technology, companies can combine this Old World thinking with the ability to dramatically grow their customer base.

Most companies notice people too late. Like caterpillars turning into butterflies, prospects go through a five-step cycle: Strangers, Friends, Customers, Loyal Customers, Former Customers. Most marketers rely on a hodgepodge of randomly delivered interruptions and hope that from this primordial soup will rise a fully formed customer. Computers and Permission Marketing can change that. You can now choose whom you reach. When you reach them. The order of the messages. The benefits offered.

But you can't build a one-to-one relationship with a customer unless the customer explicitly agrees to the process. Everything from discovering a shoe size to building mutually dependent computer systems with a major vendor requires an overt agreement from both sides. By measuring the depth of permission you have with each customer (One may allow you to send merchandise "on approval," others may let you call them when a new product comes in), you can begin to track the benefits of your investment in Permission Marketing.

Frank Britt and Tim DeMello run a company called Streamline. Streamline capitalizes on the technologies and social shifts that are changing our lives, and they are building a fantastic business. They offer to save customers hours and hours of time each week by doing virtually all of their routine errands.

A call to Streamline leads to a customized sales pitch. And in a surprisingly high number of cases, that sales pitch leads to a first sale. Then Streamline comes to your house and installs a large wooden box and a refrigerator in your garage. Next, they ask to come into your house so that they can scan the UPC codes on every item in your fridge and food cabinet. They take down the name of your pharmacy and where you like your clothes dry-cleaned. Talk about permission! Then, using the Web, you log on each week and tell Streamline what you need. While you're at work, pick up what you need, and drop it off at your house.

Streamline does this for about $30 a month. And the more services they offer, the more permission they get from customers. In a single year, the average customer places forty-seven orders and spends more than $5,000 through them. By "owning" permission to market new services, and by using one-to-one techniques to know and remember your preferences, Streamline is creating a megabusiness for the next century. They're building an asset that has nothing to do with brand and everything to do with their relationship with you. Will Streamline find competition? Without a doubt. But once they've established permission with their customers, it will be extremely difficult for a competitor to dislodge them.

A more familiar example is Amazon.com. Ask most sentient humans, and they'll tell you Amazon is a bookstore on the Web. Yet if Amazon is determined to be a bookseller, they've got big troubles. They pay far more for books than Barnes & Noble because of their smaller size. Even if they overcome that disadvantage, other online sellers will doubtless be able to compete on price.

So why is Amazon so busy building its customer base, while losing money on each customer? Amazon appears to be building a permission asset, not a brand asset. Amazon has permission to track which books you buy, which books you browse, and to send you promotional E-mail. They are building special-interest communities about specific genres of books. The payoff comes the day Amazon decides to publish books.

A book costs about $2 to print and $20 in the store. Most of that money disappears in advertising, shipping, and the shredding of unsold books. Imagine that Amazon.com sends a note to the million people who bought a mystery novel from the site last year. They ask if you'd like to buy the next Robert B. Parker novel, a Spenser mystery, which will be available exclusively from Amazon. And let's say a third of those customers respond, "Sure."

Now, Amazon can make the following extraordinary offer to Robert B. Parker. "Write the book. We'll edit it, typeset it, and ship it directly to the 333,000 people who have preordered it. We'll deduct our costs and still have $1 million left over to pay you." That's a lot of money for a mystery novel. Yet Amazon will still earn more than $4 million in profit. Multiply that scenario by one hundred or one thousand books a year. Amazon can disintermediate the entire book industry.

That's the way to visualize the power of permission. Technology gives marketers perfect memory and the ability to customize correspondence on the fly and deliver it for free via E-mail. Combine that with a database of customers who expect to receive marketing messages because they gave you permission. By moving strangers up the permission ladder, from that very first interruption until the moment when the consumer gives you the permission to actually purchase products on their behalf, marketers are able to optimize their entire marketing process.

Seth Godin is vice-president for permission marketing at Yahoo! He founded Yoyodyne, an online promotion and direct-marketing company, and helped build it into a Permission Marketing pioneer before selling it to Yahoo! in 1998. Godin is a recipient of the 1998 Momentum Award honoring outstanding Internet industry accomplishments. He can be reached at Seth@permission.com.

Reprinted and excerpted with permission from
Permission Marketing
By Seth Godin,
Copyright 1999, Seth Godin
Reprinted with permission of Simon & Schuster
(www.SimonSays.com)
All rights reserved.
Available at the McGraw-Hill Bookstore and online bookstores

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