Protecting Your Distribution Channel in a NET-Centered World 4 Steps you can take to protect and expand your distribution channel by helping your distributors adopt Web 2.0 band social media!
By Don Philabaum
December 15th 2007 $49.95
Protecting Your Distribution Channel in a NET-Centered World You may not realize it, but your distribution channel is at risk of changing, crumbling, or possibly going away! If it does, how would that affect your profitability? The Times, They Are A-Changing. Come gather ’round people, wherever you roam And admit that the waters around you have grown And accept it that soon you’ll be drenched to the bone. If your time to you is worth savin’. Then you better start swimmin’ – or you’ll sink like a stone For the times they are a-changin’. Come writers and critics who prophesize with your pen And keep your eyes wide, the chance won’t come again And don’t speak too soon for the wheel’s still in spin And there’s no tellin’ who that it’s namin’. For the loser now will be later to win For the times they are a-changin’.
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Bob Dylan wrote “The Times, they are a-changing” in 1964 – five years before man first walked on the moon and perhaps even before your average customer or distributor was born. However, the words ring as true today as they did when the song was written. While this song was written when American youth, who are now the managers and owners of organizations and companies around the world, were expressing their independence and the country was struggling to become a country that actually lived the words the nation was built on, today the changes we are facing are significantly different! Living standards are higher, more people own homes, minority representation has increased in nearly all aspects of life. Technology has advanced from portable FM radios, TV’s, and stereo’s that played records to cell phones, iPods, wireless Internet connectivity anywhere and any place. All of this technology is converging on the Internet. This massive change is altering the behavior of consumers worldwide. So what do you do? We’ve identified four simple steps you can take to prepare your company and your distributors for the coming changes.
1. 2. 3. 4.
Recognize YOUR Customers’ Behavior is Changing Recognize the Internet could Disintermediate YOU! Put Internet at the CENTER of your company Help your distributors develop an Internet strategy
In the next section we’ll look at each of these in detail.
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STEP ONE
Recognize YOUR Customers’ Behavior is Changing It wasn’t that long ago that most of the people you knew barely “surfed” the Internet and corresponded by email. Today, most consumers are shopping online, researching purchases via search engines, reviewing comments others have made on the products and services they are looking for, entertaining themselves, and communicating with others. A study by the IBM Institute for Business Value surveyed 2,400 households in the United States, the United Kingdom, Germany, Japan, and Australia focused on usage and adoption of new multimedia devices and media and entertainment consumption on PCs, mobile phones, portable media players, and more. The study’s findings overwhelmingly suggest that personal internet time now rivals TV time, IBM said:
Among consumer respondents, 19% stated spending six hours or more per day on personal internet usage, versus 9% of respondents who reported the same levels of TV viewing. 66% reported viewing 1-4 hours of TV per day, versus 60% who reported the same levels of personal internet usage.
This behavior change is going to forever alter the way you and your distributors do business with your mutual customers! In my book, Internet Dough, Make More Dough Marketing Online; I outline a number of industries that have been changed by the disintermediating effects of the Internet. The industries we’ve all heard about include the travel and music industry. The airline industries, desperate to find dimes (pun intended) hidden under the rug literally decimated the independent travel agency business by adopting Internet technology and taking advantage of changing consumer behaviors. They recognized that consumers were willing to make their own reservations if it saved them $10 to $30. Today, the music industry continues an eight year struggle to come to terms with the typhoon effect Fawn Shanning, then a high school student, started in 1999 when he founded Napster as a way to share music. The concept frightened the recording industry enough to immediately have the American judicial system declare that Napster violated
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United States copyright law and begin a long campaign to sue individuals who continue to share music. The recording industry reacted quickly to the changes as the Internet threat was quick, real, and pervasive. Reading the “tea leaves” available to them, music industry executives correctly predicted Shawn’s concept would have a threatening effect on their business. And rightly so. A report by Jupiter Research finds digital music will grow from about $1 billion in 2006 to $3.4 billion by 2012; however, the report predicts that will not compensate for shriveling CD sales, which still almost reached $10 billion in 2006. The report cites record industry statistics that showed US CD sales were down 13 percent in 2006 and an additional 19 percent in the first six months of 2007. This information portends a potential tipping point for the music industry where consumer behavior has now fully embraced technology is making it part of their everyday lives. If this is the case, the music industry is going to see a continued dive in CD sales. In an interview with Lynn Hirschberg, a reporter with the New York Times, Rick Rubin, founder of Def Jam Records and now e Co-President of Columbia Records said, "Either all the record companies will get together or the industry will fall apart and someone like Microsoft will come in and buy one of the companies at wholesale and do what needs to be done," he said.. "The future technology companies will either wait for the record companies to smarten up, or they'll let them sink until they can buy them for 10 cents on the dollar and own the whole thing." So, as you are reading this, you are saying, this won’t affect our business, we sell (fill in your product here). Think again!
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STEP TWO
Recognize the Internet could Distintermediate YOU! The travel agent industry was one of the first casualties and didn’t see what was happening to them until it was too late to adapt. The recording industry recognized almost immediately the problems they faced and have been struggling for eight years to develop a solution. While their struggle has been to hold on to business as usual, in reality, they are going to have to “go with the flow” and adjust to become a different kind of company, because business models built in the 50’s will not survive in a globally connected Internet era. In this Internet centered world, your competitor will come out of the blue. It might be a foreign company who copies your product and ships it in on low cost 747 freight carriers or it might be a company who offers your product as a loss leader. More importantly, as this report is suggesting, it might come as a result of the complete failure of your distributors who are “squeezed” out of the business due to consumers buying from new online merchants with distribution deals with competitors. Industries that are looking over their shoulders today include:
Yellow pages Real-estate industry Banking and Finance Movie industry Education TV Newspaper Advertising agencies
So why should you feel so secure? With so much to risk, you should immediately develop a task force that includes customers, staff, and trusted advisors who can look at this situation objectively and identify risk and opportunities. It should be clear that we are suggesting ALL businesses will be affected in one way or another. Some will outright be disintermediated and potentially find themselves in a “checkmate” situation struggling to survive. Businesses will either have to adopt Internet
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technology to provide service enhancements to stay competitive or they will need to adopt Internet marketing techniques to expand their customer base, retain existing customers, and engage customers to buy more products and services. Companies who rely on independent distributors to sell their products and services are more at risk then they realize. I interviewed a local company while doing research on social media marketing who shared with me a fascinating business story. The Akron Novelty Company was founded by Bill Hargrove. After two decades of business, he saw his sales begin to plummet as the big box retailers picked up his line of products and the customers changed their shopping habits from buying from his normal distributors. As the local “mom and pop” grocery stores, pharmacies, and small shops where the churches, schools, and youth association shops were quickly pushed out of business, he quickly realized he was either going to follow them and close up his business or find another way to distribute his products. The Internet turned out to be his salvation. Today, by learning how to adeptly manage search engine optimization, he now receives 75 percent of his revenue via the Internet. More importantly, he doesn’t have to send sales agents to visit his distributors to maintain loyalty and product placement. With the Internet Bill and his son, John can sit comfortably behind their computer and drive business to their website. The point that I’m driving at is your distribution chain could be at risk from this same effect. To drive my point home, look around your house or those across America. The way consumers gather their news, information, and entertainment is beginning to center online. Subscriptions to magazines and newspapers are dropping. Viewership on TV and the radio listening audience are both declining. Advertisers are watching these phenomena and they are migrating their advertising dollars online to follow consumer behavior. In a speech to a group of Microsoft’s top advertising customers in late spring 2007, Bill Gates, Chairman of Microsoft, suggested that the advertising channels they (Microsoft) spend the most on will begin to fall apart faster in the coming five years as consumers’ acceptance of the new interactive delivery systems and targeted advertising takes hold. "We're saying newspapers will go online, and there will be massive innovation that comes out of that. We're saying that TV, the biggest ad market in the world, will completely go online and have the kind of targeting interaction that you only get out on the Web today," he said. "As dramatic as things happening on the Web are, that's actually what all advertising ... will be in the future."
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Gates prediction is based on the fact that consumers’ use of the Internet has dramatically changed in the last five years. Consumers today are much more Internet savvy, and businesses are daily introducing easier ways to engage them. The changes that are coming in the next five years will come faster and be more revolutionary than what you saw in the previous five years. It doesn’t matter if you are a part of a Fortune 500 company or if you run a pizza shop, the way you reach your customers in the future is going to change. Consumers are hearing less of the estimated 3,000 ads they see/hear/touch in any given day, and they are looking to “people like themselves” for recommendations and suggestions on what to buy. You need to learn how to engage the new realities of social media marketing.
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STEP THREE
Put Internet at the CENTER of your company You need to be doing something today to:
Develop a comprehensive corporate Internet strategy Design a program to help your distributors develop an Internet strategy
A comprehensive corporate Internet strategy is doing more than developing or creating a website that has ecommerce capabilities or tools that help your suppliers or distributors do business with you. A comprehensive Internet strategy will take a holistic look at how your organization should be using the Internet. According to Steve Ghelen, President of the Internet Strategy Forum, a Portland membership organization: “The Internet is becoming an incredibly important management position in companies around the world. In fact, nearly every day, we are hearing more talk about adding an Internet Strategist position to the C’ level of companies. In the near future, we’ll see a significant number of companies add a Chief Internet Strategist to the CEO advisory level.” Steve has been working hard to remind companies that instead of being considered the tail, the organization has to put the Internet at the head of the discussion and build a comprehensive Internet strategy that intertwines into the fabric of the company. At the same time, you will need to look at how you can help give your distributors the skills they need to survive the coming changes within the industry. You will need to teach them how they can use the Internet to acquire, engage, and retain customers. More importantly, you need to show them today, before they don’t have time to react. The story I shared about Akron Novelty is an example of what could happen to your distributors. You may feel comfortable with 3,000, 6,000, or even 10,000 distributors today, but what would happen to your profits if 10, 20, or 30 percent of them went out of business? 9 Your distributors have relied on traditional marketing techniques to build their business base. Many today have built a successful business by providing customers with a variety of high quality products and services. What would happen if consumers were able to buy
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those services via Internet sites and stop coming into their store? How many products and or services could they afford to lose to competitors without affecting their profitability?
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STEP FOUR
Help your distributors develop an Internet strategy Over the past two years, my research has lead me to develop a program based on proven Internet strategies and concepts that will give your distributors the ability to survive the “times that are a changing.” The program “Distributed Internet Marketing Engagement (D.I.M.E.)” is an educational program firms can provide their distributors that teach them how to use Web 2.0 technology and social media marketing. Organizations who adopt D.I.M.E. understand that traditional public relations, marketing, and advertising are going through significant changes brought on mostly through the changing behaviors of consumers. D.I.M.E. has two primary goals: 1. Teach your distributors how to develop a comprehensive Internet strategy. 2. Show your distributors how to use Web 2.0, Social Media, and Online Community to increase sales and profits. Let’s take a quick detailed look at each of these. 1) Help your distributors develop a comprehensive marketing strategy You should be focusing today on helping your distributors decide what part they want the Internet to play in their current and future business. We predict organizations who do not immediately develop a comprehensive Internet marketing strategy will find themselves facing new competitors that will make it nearly impossible to acquire and retain customers. Organizations who adopt D.I.M.E.work with their clients via conferences and webinars to help them understand the challenges they will face and provide them access to the tools and training they will need. 2) Show your distributors how to use Web 2.0, Social Media, and Online Community to increase sales and profits
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Customer shopping and entertaining habits are changing. They are learning how to accomplish and do more online. D.I.M.E will show your distributors how to integrate and adopt Web 2.0, social media, and online communities into their marketing plan. Too many organizations now rely on traditional marketing to generate business. They are content to hand over hard-earned money to advertisers as long as it brings in new business. We help them understand how they can use Internet strategies and technology to create their own marketing channel. The goal is to teach your distributors:
How to gather email addresses of prospects and customers Simple email marketing strategies Introduce easy techniques for blogs, podcasts, wiki’s Share techniques to use video for testimonials and education Use special interest online communities to engage customers Search engine optimization techniques
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Your Benefits! Sure there are risks, but there are also significant benefits! If the risk that the Internet could disintermediate your business by putting a large number of your distributors out of business, there are a great may benefits you will receive by adopting D.I.M.E. D.I.M.E. will help your organization: 1. 2. 3. 4.
Sell more products and services Increase distributor loyalty Distributors’ customers will drive your product development Educate their customers about your products
Let’s take a quick detailed look at each of these.
1. Sell more products and services You know the volume of business your distributors are currently generating for you. Now imagine the volume they could generate by adopting Internet marketing techniques that brings new customers and encourages existing customers to buy more. The upside is great! 2. Increase distributor loyalty Our research has shown companies of all sizes are interested in developing Internet strategies, but they just don’t know what they should be doing. We shared with you the way Akron Novelty adopted Internet marketing techniques to keep a 54 year old family business from folding. Bill Hargrove is now being sought out by area business leaders for advice on how they too can use Internet marketing techniques. In fact, the day before I interviewed Bill, he was contacted by an area butcher who wanted to adopt similar techniques to expand his market. By bringing this knowledge to your customers, the knowledge that could not only transform their business, but save it from the disintermediating effects of the Internet, could create a bond and sense of loyalty that would be extremely hard for competitors to break in the coming years. 3. Distributors’ customers will drive your product development
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When your distributors continue to evolve their comprehensive Internet strategy, they will gain increased access to their customers through the social media and Web 2.0 tools we’ll introduce to them. As they do, you will have an opportunity to reach out to their customer base and use them to help develop new products and improve existing products. In the past, you’d have had to spend tens of thousands of dollars on focus group studies and staff time, and you were never sure if you had the right idea. Lego used this approach after a very expensive product launch bombed. They went out to their most savvy product users and invited them to become part of an exclusive group to help them design their next product. This product, with the help of Lego users worldwide, became the number one blockbuster product ever! 4. Educate their customers about your products Another benefit you’ll receive from your distributors’ continually growing email marketing list is the ability to deliver educational information to them and share with them different uses of your products and services. We’ll share Push/pull techniques to your distributors that will drive their customers back to their website on a frequent basis. When they do, the Web 2.0 tools we suggest they use will engage their customers to learn more about your products and services via video, audio, discussion boards, surveys, and encourage them to share the different ways they are using your product. Not only will this increase demand, but it will start a process where you will connect and network your customers who want to learn other ways to use your products.
Is it worth investing some time and creative energy to ensure your leadership position in the marketplace?
If you agree, turn the page to learn how you can get started!
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YOUR Next Steps So now that you recognize there are going to be serious threats to your distribution channels in the coming years, what do you do about it? Simple, the first thing YOU should do is CALL us! We’ve developed a proven methodology that will design an Internet strategy for you and your distributors that aligns with your current goals and future expectations. 1. The first thing we’ll do is a market analysis to share with you the potential threats you and your distributors will face from a business environment that favors products research, bought and serviced via the Internet. 2. At the same time, we’ll put on a series of Webinars for your distributors to teach them how to use social media, Web 2.0 tools, and online communities to create their own marketing channel. The Webinars are built around the information we provide in the book, Internet Dough, Make More Dough Marketing Online, by Don Philabaum. 3. Next, we’ll take the assessment and work with you and your team to develop a comprehensive Internet strategy that will include the development of Industry specific Widgets and or eMarketing tools you can provide your distributors to include in their marketing and customer engagement strategies. We’ll also develop techniques where you can deliver educational content and information to your distributors’ customers.
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Summary Your company is at a crossroad.
The internet is rapidly changing how products are bought and sold Consumers’ consumption of news, entertainment, and information has shifted online
You have successfully developed a company built on marketing, promotions, and consumer behavior that is rapidly changing. You’ve weathered ups and downs in the market over the years by thoughtfully analyzing and reacting to those conditions. What you face today is a significant challenge to not only your organization, but to the loyal, supportive distributors who have been your backbone, pipeline, and profit center all these years. They too have worked hard to get to where they are today. They’ve invested long hours, tens of thousands of dollars to build their brand, successfully dealt with the public and kept them coming back, and they paid their bills, so you could pay yours. They have everything to lose if they are not prepared for the changes the Internet will force on them. There are kids to send to college, health benefits to pay for, retirements to fund, and the daily grind to manage the business. Your health is tied to their health. Spend some time evaluating how adopting D.I.M.E. will expand your sales and give your distributors the information and tools to protect everything they have! You will be greatly rewarded!
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About Internet Strategies Group The Internet Strategies Group helps groups and organizations understand how to use Web 2.0, Social Media, and Online Community to acquire, retain, and engage customers. The company provides training and consulting services. Don Philabaum is the founder and President/CEO of Internet Strategies Group, author, and has spoken at trade shows around the world since 1995 about the benefits of social networking. Referred to as the father of “online community,” Don will tell every business owner from a butcher to an undertaker they need to engage customers online! don@internetstrategiesgroup.com
White Papers by Don Philabaum 1. Six P’s of Successful Online Communities 2. Add LUCK to Your Online Community 3. Five Mistakes Online Community Builders Make 4. Create a NET-Centered Organization 5. Create an Internet Strategy for your Small Business 6. 97 Strategies to Engage Your Customers 7. Facing UP to the Facebook/MySpace Generation 8. Policing in the 21st Century using the Internet 9. The SHORT History of Online Communities 10. Protecting Your Distribution Channel
Blogs by Don Philabaum 1. Wiredcommunities.com 2. Onlinecommunity.com 3. Higherednetstrategies.com
Biographical Information on Don For questions, call 1-866-385-8084 or email phyllis@internestrategiesgroup.com 17
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Get your copy of: Internet Dough, Make More Dough Marketing Online - suggests all business from as small as a pizza shop to a Fortune 500 company need to adopt Web 2.0, social media and online community tools in order to acquire, retain, and engage customers. You will learn:
15 Successful Internet techniques that increase profits 7 ways to cut advertising AND increase sales 5 ways to retain and engage customers An easy to adopt plan to get your business on the Internet!
This book takes the mystery and confusion out of creating an Internet strategy. It offers a blue print your business can follow to create a repeatable, measurable, and predictable Internet strategy that generates new revenue and higher profits.
97 Strategies to Build Online Community is a significant workbook that provides your organization 97 different strategies to incorporate into your Internet strategy. This 200 plus page workbook provides hundreds of marketing stories that companies have successfully implemented using Web 2.0, social media, online community, and email marketing. You will find this “bible” immensely valuable. Not only do we share what works, but you’ll learn what doesn’t work too. All of this combined delivers to you:
Practical ideas you can implement Increase in profits, decrease in costs An Internet strategy that works for you!
You save time, money, and get a head start over your competition. Order both of these right now! 18 www.internetstrategiesgroup.com/specialoffer
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