574 The Marketing Book
The affiliate marketing programme is all on-
line, so less audience wastage. Even now, many
TV viewers lack access to the Internet. Fur-
thermore, it is payment by results.
Many dotcoms have learned to their back-
ers’ cost that buying brand awareness on TV is
not an affordable way to drive prospective
customers to their websites. Accurate targeting
is one of the four elements of successful direct
marketing.
The case of buy.com
Buy.com launched on TV in the UK with a
massive TV campaign. But before being bought
by The John Lewis Partnership, buy.com was
already using on-line promotion only; buy.com
reported that customer acquisition costs had
fallen to £40.
Thirty-eight per cent of site traffic
(October 2000) was from buy.com’s affiliate
marketing programme. The cost of acquiring
customers from the volume affiliate pro-
gramme (i.e. the part of the programme in
which no tenancy fees are paid) was only £5.
(Data from e.Business, February 2001)The lessons learned by buy.com from costly
experience illustrate the importance of inter-
action, the second TICC element, as the chief
supplier of actionable marketing information.
The classic direct marketing method is to buy
this experience quickly and cheaply through
testing the most sensible-looking alternatives. It
is only because direct marketers record and
analyse the results of interaction that low cost
testing is possible.
After its expensive TV experience, buy.com
started to exercise rigorous Control of its
customer acquisition costs. Control is the third
TICC element.
At this time the company may not yet know
how much it can afford to pay to acquire a new
customer. The return on its new customer
investment will be learned through continuity
(the fourth TICC element) of customers’ busi-
ness. Forty pounds may be a reasonable price to
pay for a new customer but it may well be too
high. A lot may depend on how successful
buy.com is in satisfying customers and encour-
aging them to come back for more.
The experienced direct marketer begins by
making a calculation of how much he or she
can afford to pay to acquire a new customer
and this sets the target acquisition cost. The
direct marketer then tracks the newly acquired
customers to see if they are contributing the
same amount of business as expected. The
forecast of their lifetime value (LTV) will be
adjusted on the basis of their first and second
purchases.Lifetime value (LTV)
The lifetime value of a new customer is the net
present value of all future contributions to
profit and overhead from that customer.Is buy.com paying too much and, if so, can it
reduce its costs? Time will tell.
If only 38 per cent of buy.com site visitors
have clicked through from affiliate sites, where
have the others come from? Some will have
come through recommendation or idle surfing.
Many may have come from banners, inter-
sticials, site registrations or keywords. All these
terms are strictly new media and describe
opportunities that are exclusive to on-line
marketing.
You will remember that one reason why
interactive marketing is distinguished from
other direct marketing is that it has developed
its own vocabulary, being generally regarded as
an activity that is quite distinct from direct
marketing.
The second reason why interactive market-
ing deserves its own title is that the new media
scene is technologically far more advanced, and
offers the marketer challenges and opportun-
ities that are without parallel. The impact of