Consumer Experience In Permission Marketing Programs example essay topic

Godin (1999) has proposed a new idea- permission marketing. Here, consumers provide marketers with the permission to send them certain types of promotional messages. This is seen as reducing clutter and search costs for the consumer while improving targeting precision for marketers. This paper makes three contributions: First, a critical analysis of the concept and its relationship to existing ideas in the marketing literature is discussed. Second, a taxonomy of four models used to implement permission marketing today, direct relationship maintenance, permission partnership, ad market and permission pool, is presented. Permission intensity is seen as a key differentiator among models.

Finally, a comprehensive conceptual cost-benefit framework is presented that captures the consumer experience in permission marketing programs. Consumer interest is seen as the key dependent variable that influences the degree of participation. Consumer interest is positively affected by message relevance and monetary benefit and negatively affected by information entry / modification costs, message processing costs and privacy costs. Based on this framework, several empirically testable propositions are identified.

Introduction Permission marketing (also called invitational marketing) envisions every customer shaping the targeting behavior of marketers (Godin, 1999). Consumers empower a marketer to send them promotional messages in certain interest categories. Typically, this is done by asking the consumer to fill out a survey indicating interests when registering for a service. The marketer then matches advertising messages with the interests of consumers. This is a new idea.

Even though targeting appropriate customers has been recognized early on as a core marketing principle (Smith, 1956), most targeting today can best be described as "targeting on averages". The advertiser obtains the average profile of the consumer (e. g., a marketer may identify the proportion of a show that meets a certain pre-specified demographic or behavioral category using Simmons data) and chooses, say, a TV show that matches the target consumer profile most accurately 1. This leads to low targeting precision since not all consumers match the profile. Theoretically, direct marketing holds the promise of improving targeting 2. One-on-one marketing proposes thinking about a segment of size one (Peppers & Rogers, 1993, Pine, Victor & Boynton, 1993). Given the new capabilities of addressing each individual (Blatt berg & Dighton, 1991) the goal is to customize the marketing mix in accordance with the needs of a consumer.

Relationship marketing takes a long-term orientation in targeting as opposed to a short-term transactional orientation (Dwyer, S churr & Oh, 1987; McKenna, 1991, Sheth & Parvati yar, 1995). The idea is to understand the lifetime value of the customer and allocate resources in accordance with these values (Day, 2000). The emphasis is on retaining existing customers rather than on obtaining new ones (Mcmahan & Ghemawat, 1994). However, since one-on-one marketing and relationship marketing both propose marketer-initiated targeting, several problems arise. For example, consumers receive an excessive volume of proposals for relationships with firms, they do not perceive control over the terms of the relationship and do not perceive much value addition from such relationships.

As a result, these techniques breed consumer cynicism (Fournier, Dobsch a & Mick, 1998). This is especially a problem with the Internet because the marginal cost of sending an additional promotional message is nearly zero for the firm (Shiman, 1996). Our goal in this paper is threefold. First, a critical analysis of the concept of permission marketing and its relationship to existing ideas in the marketing literature is provided. Second, a taxonomy of business models implementing permission marketing today is presented. Finally, a comprehensive conceptual cost-benefit framework that captures the consumer experience in permission marketing programs is presented.

Based on this framework, several empirically testable propositions are identified that might serve to guide future theory-building and empirical research in this area. Permission Marketing and the Internet Clutter is a big problem on the World Wide Web ("Web" hereafter). The increased size of the Web- "an estimated lower bound on the size of the Web is 320 million pages" (Lawrence & Giles, 1998, p. 98) - has led to increased search costs. More recent estimates put this number much higher. For example, the "bow tie" research study by IBM, Compaq and Alta Vista reports sampling over 600 million pages ( web) and the search engine, Google, claims to index over a billion pages.

Debris on the Internet (e. g., pages that are no longer updated) further exacerbates search costs. Search engines (e. g., web) and Internet portals (e. g., web) were attempts at helping consumers navigate through this clutter. But when individuals search for information at these places, they are presented with hundreds of selections. Consumers will not go through all selections and are most likely to focus on the first few results. Hence, search-engine optimization has become an important research area (Brad low & Schmitt lein, 1999). However, due to heterogeneity in the algorithms used by search engines, it is not always possible for one's site to be featured in the top few.

Therefore, it is clear that search engines alone will not help consumers find sites relevant to their needs. Increasingly, search engines tap into smaller and smaller fractions of the overall Web (Lawrence & Giles, 1998) with no engine capturing more than 16% of the Web content (Lawrence & Giles, 1999). Individuals may cope with the increased search costs by focusing on firm reputation (Choi, Stahl & Winston, 1997, Chapter 6). For example, recently The Economist reported that 75% of all business to consumer e-commerce originates from five sites- Amazon. com, Buy. com, eBay, Yahoo and America Online (AOL). Hence, it is clear that these sites have established a reputation that is better than others 3. However, that does not necessarily ensure the delivery of relevant information since each of these sites contain a lot of information (For example, as of August 2000, Yahoo! had links to at least 1.5 million pages on its site- web) - not all of which is relevant to any single consumer.

Moreover, consumers may be interested in newer sites whose reputation may not be fully established. Banner advertising and sponsorships were tools that were considered to have the potential to provide consumers with relevant information. However, despite the early promise detailed in pioneering research (Hoffman & Novak, 1997), the click-through rates have not improved 4. Average rates are in the 0.5% range.

Banner advertising is also plagued with measurement problems. Getting a reliable estimate of the number of consumers who viewed a banner is a big challenge (Dreze & Zufryden, 1998) and so is reliably identifying the top websites globally. Moreover, a recent eye-tracking study presents troublesome evidence that Internet users may "actually avoid looking at banner ads during their online activities" (Dreze & Huss herr, 1999, p. 2). If this is true, then placing banners around web content may be a poor way of delivering the message. Permission marketing offers the promise of improving targeting by helping consumers interface with marketers most likely to provide relevant promotional messages.

Many permission-marketing firms (e.g. yes mail. com- now part of the business incubator, CMG I) claim customer response rates in the region of 5-20% and since most use e-mail, they are not affected by the measurement problems of banner advertising. Since the ads arrive in the mailbox of the individual, it is likely that more attention would be paid to them in comparison to banners. Even though permission marketing can be implemented in any direct medium, it has emerged as a serious idea only with the advent of the Internet. The two reasons for this are: (1) on the Internet, the cost of marketer-to-consumer communication is low (Hoffman & Novak, 1996; Shiman, 1996); (2) the Internet has enabled rapid feedback mechanisms due to instantaneous two-way communication (Hoffman & Novak, 1996). Another motivation for permission marketing on the Web has been the failure of the direct mail approach of sending unsolicited promotional messages. The prime example of this is unsolicited commercial e-mail or "Spam" (Cran or & LaMacchia, 1998).

Senders of spam realize three things- the cost of obtaining a new e-mail address is minimal, the marginal cost of contacting an additional customer is nearly zero (Shiman, 1996) and it is easy to deceive the consumer. Spammers can easily obtain new e-mail addresses from websites and Usenet groups using software programs that "troll" the Internet. Individuals provide their addresses at these places for other purposes and hence, this violates their privacy rights (Bloom, Milne & Adler, 1994). In addition, marketers incur similar costs if they send out 1 million or 10 million e-mails. Moreover, there are now programs that enable the large-scale use of deceptive practices (e.g. forged e-mail headers).

Due to these problems, Spam cannot be a legitimate form of marketing communication 5. Using it would lead to an excessive message volume for consumers, weakening of brand reputation and a slowing of the entire network. Hence, permission marketing is seen as a feasible alternative for Internet marketing communication. Permission marketing is now a large-scale activity on the Internet. A leading Internet business periodical recently noted that, "permission marketing was once a niche business. Now, everybody is doing it".

(Business 2.0, April, 2000, p. 176). In addition, permission marketing has been incorporated in leading texts on marketing management, e. g., Kotler's millennium edition. Literature Review Although the term "permission marketing" was coined by Godin (1999) 6, the general idea of customer permission in direct marketing had surfaced earlier in the marketing literature, mainly in the context of privacy issues in direct marketing. For example, Milne and Gordon (1993) discuss the role of customer permission along with volume, targeting and compensation in the context of direct mail.

However, their reference is to an individual's providing a direct marketer the permission to share his or her personal information with others. In other words, they see permission as a tool to establish privacy rights rather than to enhance targeting. Moreover, the privacy issue is different now since an infomediary (Hagel & Singer, 1999) retains all the personal information and supplies ads based on that information; the advertisers never see the information. Recently, Sheth, Sisodia and Sharma (2000) have proposed the concept of customer-centric marketing, which includes what they call co-creation marketing. Co-creation marketing envisions a system where marketers and consumers participate in shaping the marketing mix. In the authors' own words, "Co-creation marketing enables and empowers customers to aid in product creation (e. g., Gateway computers), pricing (e. g., priceline. com), distribution and fulfillment (e. g., GAP store or GAP online delivered to the house), and communication (e-mail systems) " (Sheth, Sisodia & Sharma 2000, p. 62).

Hence, permission marketing can be viewed as focusing on the communication aspect of a larger concept called co-creation marketing. Gilmore and Pine II (1997) had also earlier identified collaboration between marketers and consumers as one form of one-on-one marketing. The direct marketing literature has also pointed out the importance of consumers controlling the terms of their relationship with marketers. Phelps, Nowak and Ferrell (2000) point out that individuals like to control "how personal information about them is used by marketers, the kinds of advertising mail and catalogs that they receive and the volume of advertising mail they receive" (p. 29).

In this literature, direct mail is viewed as a social contract between the consumer and the marketer (Milne & Gordon, 1993). Moreover, there is recognition that what is necessary to improve direct marketing relationships is not just a reduction of privacy concerns of individuals, but rather an improvement in the consumer's trust of the marketer (Milne & Boza, forthcoming). Marketing scholars have long been disenchanted with the marketer-initiated approach to direct marketing. For example, in a critique on database marketing, Schultz (1994) noted If the database works for the consumer and not just the marketer, duplicate mailings should never exist. For the database to have value for customers, it should simplify and improve their personal lives, not just complicate them with unwanted offers or ridiculous solicitations. Also, if the database was really working for the consumer - and not just the marketer - privacy would not be the issue it is.

Perhaps the greatest concern about the value of the database is the one-way marketing systems that are being developed- systems that favor the marketer and are disincentives to the consumer (emphasis added). (p. 4) Hence, it is not surprising that several marketing scholars have begun to indicate their acceptance of permission marketing as a viable concept. For example, Petty (2000) proposes "shift (ing) property rights for soliciting and selling information about consumers to the consumers themselves thereby reducing the marketing costs imposed upon consumers without their consent" (p. 52). Further, he argues that "by bearing the costs of identifying disinterested customers, marketers get an audience interested in their message. Consumers get fewer messages and only ones that they are interested in receiving " (Petty 2000, p. 52).

Similarly, Sheehan and Hoy (2000) also suggest that permission marketing may be a technique to reduce privacy concerns of individuals. Even though they do not use the term permission marketing, Milne, Boza and Rohm (1999) propose that "opt-in methods (can act) as a trust-building alternative to more effective information control". Permission Marketing Business Models on the Web In order to understand how permission marketing is currently being practiced on the Web, we define a key construct: permission intensity. Consumers define the boundaries of their relationship with firms in such businesses. In some cases, they give the business tremendous leeway and in others the firms are held on a tight leash. Formally, permission intensity is defined as the degree to which a consumer empowers a marketer in the context of a communicative relationship 7.

Compare two scenarios.