Webonomics Essay, Research Paper
Introduction
Webonomics, by Evan I. Schwartz, is a practical, strategic tool for positioning and growing your business in the today?s exploding World Wide Web economy. Schwartz addresses the unique problems and rewards businesses can expect to encounter when conducting business in cyberspace. He also dispels some of the most common misconceptions about doing business on the Web. More importantly, Schwartz targets the key to business success on the Web: understanding consumer behaviors and expectations.
From scores of case studies, Schwartz has formulated nine guidelines for growing your business on the Web. Schwartz?s analysis of these cases clearly explains why some businesses thrive and others fail miserably on the Web. To illustrate Schwartz?s nine principles of Webonomics, this synopsis includes only a handful of his case studies.
To apply his nine principles, Schwartz warns that we must first understand the motivations behind four main groups involved in the Web economy: The consumers, the content creators, the marketers, and the infrastructure companies (3). The consumers are in the driver?s seat. They expect to make the Web a place of their own, a place of customized information and relationships. The content creators are those ventures that inhabit the Web and attempt to inform and amuse visitors. Content creators attempt to enhance their brand image and somehow make their Web sites profitable ventures. The marketers represent the thousands of companies that are promoting and selling products and services. The marketers who use a traditional approach to advertise, market, and sell their product on the Web will fall short of success. Finally, the infrastructure companies are selling the tools (hardware and software) to reach this digital landscape. Keeping these four main groups in mind, we now examine Schwartz?s nine principles of Webonomics.
Principle 1: Quality of Experience, Not Quantity of Visitors
Web surfers base the quality of their experience on the total experience of visiting a Web site. The visitor to a site wants a place where he or she can identify and communicate with others who have similar interests. Schwartz refers to this as ?community.? The goal is to offer something that causes visitors to return repeatedly to your site; something that grabs and keeps their attention.
One of the most common misconceptions about the Web is that sheer numbers are proof that your site is successful ? that all you have to do is run up big numbers, then sell advertising space on your site to marketers who want to reach your audience (36). But reliance on sheer audience size is a recipe for success on television (mass media), not the Web. For content creators, the top priority must be to form a lasting bond with individual consumers and making sure that they are satisfied enough to return again and again. If consumers pay a subscription fee for some of your content, this serves as tangible proof that you are providing a quality Web experience. The Wall Street Journal is one of the few content sites on the Web that actually manages to do both ? attract a large audience and provide a high-quality, interactive experience to a core group of consumers.
To illustrate the importance of a quality experience, Schwartz contrasts two adult Web sites: Playboy and Bianca?s Smut Shack. Given its well-known brand name, it is easy to understand how Playboy?s site has as many as 100,000 visitors daily. In contrast, Smut Shack attracts only a quarter of the number of daily visitors experienced by Playboy?s site. But numbers do not necessarily equate to success or quality!
Here are some of the reasons: The average Playboy visitor spends eight to ten minutes at the site, while the average Smut Shack visitor returns ten times per month and spends an average of an hour each time (25). However, it is unknown how many of Playboy?s daily hits are repeat visitors because of information not disclosed by Playboy Enterprises. Essentially, Playboy?s site has very few interactive features that allow visitor participation and the site is only updated an average of twice monthly. The Website, which allows visitors to view a few photos from its magazine, is mainly an advertisement for its print edition.
On the other hand, Smut Shack is built around the ability to let people interact and contribute to the ambiance through its many interactive features (26). Visitors choose an online name and can become part of the intimate activities in different ?rooms? on the site. Visitors have an opportunity to actively participate in ongoing bulletin board discussions and chat sessions with other people hanging out there at that moment (24). Unlike Playboy?s site, Smut Shack?s site is constantly changing, which enhances the total experience and induces people to return to the site.
One of the main draws that attract people to the Web on a daily basis is news (27). Because news is an ?easy-to-come-by commodity? on the Web, news groups must do something more to attract Web surfers? attention (27). Adding value to news is essential. To illustrate this point, Schwartz contrasts USA Today and San Jose Mercury News. The first mistake made by USA Today was charging a subscription fee. Even after removing subscription fees, they were unable to add enough value to the basic news, therefore falling short of what Schwartz describes as a quality experience.
In contrast to USA Today, Mercury News adds value in several ways. First, this newspaper has the natural advantage of being the local paper in a region that the global high-tech industry calls home (31). Second, because the printed edition is not circulated nationally, readers can only get the news online. But on the Web, those readers can feel a part of that community, getting news and the inside poop on an industry that interests them (31). Third, Mercury News also offers a subscription service ($4.95/month), called NewsHound, which customizes the news to readers? specific topics of interest. NewsHound, a news-filtering program, then searches thousands of stories from the paper and wire services, selecting the stories that meet the subscriber?s criteria. Every hour, the NewsHound sends whatever it fetches right to the subscriber?s electronic mail address. That is adding value ? something with which USA Today is still struggling. Even though USA Today attracts ten times the Web audience of Mercury, Mercury?s smaller audience has a better browsing experience. Editor & Publisher, an industry magazine, selected the Mercury Center as the best newspaper Web site. And NewsHound won the award for best original feature on a Web site (32).
Principle 2: Marketers Shouldn?t Be on the Web for Exposure, but for Results
Contrary to what some people believe, the Web is not a mass medium. Unlike network television during prime time, you will never find a significant number of the tens of millions of people surfing the Web in any given place (27). The Web will never enable marketers to achieve the kind of exposure they have achieved with mass media (50). Therefore, marketers must throw conventional marketing practices ?out the window? and harness an interactive approach that appeals to a target market.
According to Rich Everett, manager of interactive communications for Chrysler Corporation, there are four steps to landing a customer ? tell, sell, link, and think. A traditional ad, he says, will ?tell? you that a product exists and ?sell? you on its benefits. The Web must pick up where traditional advertising leaves off. If the company does its job right on the Web, it will ?link? qualified and interested buyers into a room and give them enough information and interactive tools to ?think? whether they are actually going to purchase the product or service (51).
Many marketers believe that a banner ad will get the same results as a TV ad. In reality, banner ads typically entice only about two to five percent of the people who see them to click on them. However, a Web surfer who spends time returning to his or her favorite content site again and again is going to be more receptive than someone who visits just once and never returns. These repeat customers will be more likely to click through to promotional sites (56). We can understand why establishing a bond with individuals becomes crucial, especially for marketers.
The relationship between marketer and consumer gets reversed on the Web. Web surfers have complete control over what messages they choose to interact with and how they interact with those messages (57). Ads as we know them do not exist in the Web economy. Old media pushes messages at us an average of 3,000 advertising messages per day. In the new media, consumers pull the information and choose what messages they want to hear or see. Because the new generation of consumers is more sophisticated, marketers are unable to manipulate them as easily (58). Marketers have a new goal of identifying and responding to consumer needs. Consumers finally regain control!
Mass marketing will never go away, but its dominance is declining. The Web is accelerating this trend dramatically. Schwartz sites four main reasons for the declining dominance of mass marketing. He calls it the four C?s: clutter, clicking, cynicism, and competition (60). With the onslaught of 3,000 advertising messages per day, there is clutter. Therefore, each additional message has minimal impact on the consumer. This forces marketers to create ads that are more outrageous and have to be run more often. This is a textbook example of the law of diminishing returns. Since the arrival of TV remote control, people have been clicking around channels during commercials to escape the ads. Of course, not everyone channel surfs. It?s safe to say that some people are avoiding some commercials some of the time (60). Hence, mass marketing becomes marginally less effective than it once was. Commercialism has finally taken its toll on those who have grown up immersed in it. Consumers now see it for what it is and no longer believe advertising claims. The result is consumers demonstrating high levels of cynicism. This rings true not just for mass media and advertising, but also for the political process and the judicial system. Finally, the mass marketing impact is diminished by competition. The direct-marketing industry diverted the attention of millions of consumers away from mass marketing. Cable TV hacked away at the dominance of network TV ratings. Now the Web is proving to be a more powerful competitor, pulling consumers away from TV altogether. In fact, children with PCs are spending as much or more time on their computers than they are watching TV.
With all of these forces against marketers, how do they tell the world about their Web site? Schwartz states four main ways to promote a Web site. First, mention the Web site in newspapers, magazines, TV ads, brochures, mailings, and other promotional materials. This invites consumers who are already receiving your marketing message to interact further with your company. Second, try to get attention in the press. If you cannot catch the media?s attention, hire a PR firm to spread the word. Third, you could trade hyperlinks with other sites on the Web. If someone from the other site really likes your Website, they may place your hyperlink on their site without asking for anything in return. The fourth, and most complicated, is purchasing banner advertising and hyperlinks on the most popular sites. In the early days of the Web, this was a popular means of advertising a Website, but is now considered only one of the many promotional tools available to marketers. Like a human salesperson, a marketer?s web site must achieve results?by learning about a customer?s preferences, providing service, retaining loyalty, and ultimately landing future sales (71).
Principle 3: Consumers Must Be Compensated for Disclosing Data About Themselves
Tens of millions of people worldwide are searching the Web in search of surprises, cheap thrills, knowledge and entertainment, timesaving services, plus information on products that they hope will enhance their lives (20). These people, consumers, are the focus of the third and fourth principles of Webonomics. These two principles put the consumer in the driver?s seat, and steer them to find benefits and information on the Web.
The third principle focuses on the idea that a consumer is not going to disclose information about themselves unless there is a great benefit in return. Web surfers run across millions of sites that ask for registration of personal information that ranges from: name, address, gender, phone number, interests and the like. The chance of consumers actually taking the time to disclose this information for nothing in return is highly unlikely. By requiring consumers to disclose their data as the price for entry into a site, you put up a barrier that causes some consumers to take a detour around the site. The key to this point for web sites is to provide enough value in return for information so that consumers gladly enter into the bargain. Some of the benefits that are suggested to provide value are the use of coupons in which Ragu partakes, free online time in exchange for data, discounts on products, paying consumers money and gearing sites to the interest of the consumer. The benefits must outweigh the cost of providing information. Consumers know that their personal information is valuable, so marketers must make the benefits rich in value.
Another concern about disclosing information on the Web is to acknowledge the actual use of the information. Some companies use the information to help develop their sites into a user-friendlier environment, yet others sell the information to marketers. In order to make sure that consumers information is handled correctly CASIE, an industry coalition formed in 1994, has specified how to handle personal data. CASIE states that if a marketer seeks personal information that they should do two things: inform the consumer whether the information will be shared with others, and give the consumer the option to request that their personal information not be shared (89). Under these rules, consumers can feel safe about disclosing their information. As long as consumers are compensated for disclosing their data, as long as they are properly informed about how such data will be used, consumers can decide for themselves what information to give out and to whom (91).
Principle 4: Consumers Will Shop Online Only for Information-Rich Products
Not only do consumers choose whom to give their personal information to, but they also choose what information they receive from the Web. Many consumers will look on the Web for what is called information-rich products, ones that are wrapped in sheaves of facts, news, knowledge, wisdom, and advice (92). Some of the products that are considered information-rich include: music, books, computers, cars, software, travel packages, houses, and gift items. When consumers are debating on buying an information-rich product they will go to many links to seek out the best buy. Some of the ways that consumers get help in making a decision are to ask advice, research the product and ask friends for recommendations; all of which can be done on the Web. In order for companies to entice consumers to buy products on the Web, they must supply consumers with sites that have facts, news, knowledge, and advice about products (116).
Many companies that are following this route are seeing an increase in the usage of their sites. One example is Virtual Vineyards, an online wine store. The site contains valuable information on the quality, taste, ratings, reviews, and recommendations of good wine (97). The site is successful because of its ability to convey specialized information. Once consumers discover and trust the value of the information that they are receiving, they will become a return visitor. Thus showing that information-rich sites do have an impact on the consumer-to-company relationship.
The idea of shopping the Web for information-rich products will never replace the experience of in-person shopping. Instead, it will force stores to add entertainment to the whole shopping experience. Adding entertainment to stores is an attractive way of distinguishing themselves from online shopping (105). Physical stores and virtual stores do not have to be split they can work off of each other. By the two working in tandem and supporting each other through the process of winning over customers, ringing up sales, and maintaining brand loyalty they can help compensate for the weakness of the other (105)
Principle 5: Self-Service Provides for the Highest Level of Customer Comfort
Self-service is becoming mandatory in many industries?as consumers demand increased comfort, control, and convenience (137). A bank that builds a user-friendly, graphical user interface on the Web can invite millions of consumers and business clients to help themselves to a wide array of financial services. A bank that fails to design such an interface will not be in business for very long. Like the Web itself, the bank of the future will know no borders in the global ?marketspace?. Yet, such an entity can forge intimate relationships with individuals, reaching into your home and taking your money with the nicest smile that software can simulate.
When you compare the way people bank today with the way they used to bank, you see an enormous difference. In the olden days, consumers chose their bank based on where it was located. You had to conform to what is known as ?banker?s hours?. Now, automated teller machines (ATMs) have got the public in the habit of servicing themselves. We now see that the focus of choosing a bank has changed to the location of automated teller machines of the bank. The banks tend to view the ATMs like a blessing. ATMs reduce staff, resources, and service costs. Suddenly, local banks saw a whole new world of opportunities, while also experiencing an increase in competition.