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The failure of dot.com advertising shows
importance of bringing in PR people who can think strategically, Ries says. "Strategy may not be
strength of traditional PR firms. Many of them are totally focused on getting publicity in
media. But getting coverage is not what it's about. They even measure
value of a story by
amount of money it would cost to advertise in comparable print inches or minutes of air time. That's ridiculous."
For example. Ries explains,
introduction of New Coke is said to have gotten over a billion dollars worth of publicity but
product was a complete failure. "The PR firm should have told them they were crazy to mess with
formula for
most successful soft drink in history. From a traditional PR point of view I'm sure it looked like a plum of a story, but strategically it was a disaster. The best strategists don't take what a client says they are going to do at face value. They question name, price, distribution, and slogan. The best PR strategists would have told them not to launch
product."
Good strategy will give way to better business models that will change with
times. Adapting to
Internet age doesn't necessarily mean you need to launch a web site, Ries says, but you may need to change
way you do business. He predicts it will be 50 years before
full impact Internet-fueled change is fully understood.
BUSINESS MODELS MUST CHANGE Ries rails against bricks and mortar companies trying to become bricks and clicks companies. Putting an Outernet company online dilutes
brand, he maintains, and that's a sure recipe for failure. A far better strategy for changing with
times is to give
online venture a new name or a new function.
For example, he says, Home Depot has a low price strategy in their stores. Their Internet strategy is to warn suppliers that if they catch them selling
products on
Internet they will drop them, Ries notes. "They're in a squeeze because suppliers could make more selling their products online."
In order for both Home Depot and its suppliers to thrive, Home Depot could shift its store strategy from price to a more service-oriented approach, perhaps giving classes in plumbing and carpentry. Then they could launch a web site under a different name, and
suppliers would be able to sell to Home Depot and through their own Web Sites.
Low price is
driver in
Outernet, Ries maintains, but that will change. Research shows, he notes, that
Number One reason people give for buying in retail stores is price. But
Internet soon will offer
best buys and
Outernet will be forced to make great service its main selling strategy. There is a high end, but it's a tiny share of market.
"The Number One retailer in America is Wal-Mart. Their theme is 'we sell for less.' Because of
Internet Wal-Mart could potentially be in trouble strategically. They have to move toward service because Internet companies will be able to sell
same products for less money because as a result of their lower overhead."
INTERNET CAN'T PROVIDE A HAND SHAKE Observers say that many shoppers will use
Internet for research but make their purchase at an Outernet store. Ries concurs. The consumer's ability to get instant price comparisons on
Internet will force most Internet retailers to have a price orientation.
"If all you want is
low price, you have to go to
Internet. The Internet can't provide one thing that people still want: to touch and try
product."
A recent study by
London-based by Economist Intelligence Unit (EIU) drew
same conclusion. It reported that instead of
Internet crushing traditional dealerships, car buyers are likely use Web sites for finding information, but not for completing deals.
Projections were that 60 percent of car sales would be made over
Internet by 2005, says Ian Robertson, director of
EIU's automotive group. In reality,
report shows people using
Internet to gather information and intelligence on prices, but to conclude
deal they are still searching for
reassurance of that traditional handshake you can't find over
Internet," Robertson told Reuters.
Some may insist that Internet businesses will provide low price, convenience and service. Others will note that
trend toward one-hour delivery by companies like http://www.kozmo.com will add
element of instant gratification now missing from
online experience.
To those we say: Ignore Al Ries at your own peril.

B.L. Ochman is president of whatsnextonline.com, a full-service marketing agency that builds global traffic and sales for Internet businesses. Subscribe to our weekly marketing tactics newsletter, What's Next Online, at http://www.whatsnextonline.com 212.385.2200 BLOchman@whatsnextonline.com