“…trust me…”

We’ve talked a lot about direct marketing, specifically the benefits of RSS and permission based networks. One development we’ve been following in the US is the growing popularity of two companies, Return Path and Goodmail.

Essentially, what these companies are proposing is a “sort of FedEx for e-mail…for a penny or less per message, the sender gets guaranteed delivery for mail and the promise that it will stand out in the user’s mailbox” writes Esther Dyson in an op-ed piece she wrote in today’s NY Times about Goodmail. Esther continues,

Goodmail, in my eyes, does not raise moral issues. It simply wants to make the Internet a better place — and yes, make a little money along the way

We understand that Goodmail’s solution is meant to help filter out the bad e-mails from the good e-mails by labeling e-mail with a “certified e-mail” icon and thus making the Internet a safer place but we don’t believe this model is going to work as it is intended or promises. Truth be told, the only way to absolutely filter out bad e-mail is to build a closed network where individuals need to be individually certified by the person they are looking to contact (Linkedin.com, anyone?)

So, if Goodmail isn’t the solultion, what is? Could the answer be a permission based marketing (i.e. “I give Yahoo! permission to only e-mail me marketing info about green spotted frogs”) model? We don’t think so as permission based marketing (“PBM”) is about filtering out unwanted/random e-mail spam; the promise of permission based e-mails is to provide marketers exceptional measurable results while rewarding customers for playing.

You might be thinking, “so what the heck is your point, get on with it already” or “all this yelping about PBM and yet you fail to realize you’re comparing apples [Googmail] to pears [PBM]…”

Here’s our point: We believe Goodmail (and Return Path) further pollute the direct marketing environment by incentivizing corporates to turn up the volume on unwanted spam under the guise of safe, certified e-mail (“truuust me, dear customer, you’ll love this spam mail…”).

We truly believe this is the worst possible path for direct marketing to take as it approaches the problem of “spam” not from the end-users pain point (“dude, stop the spam”), but rather from the corporate/aggregator/ISP’s (e.g. AOL, Yahoo!, etc) monetization pain point (“man, I wish I could earn US$0.01 for ever time some joker used my network to send spam, a network of users that is costing me some bucks to maintain and support”).

We look at the issue of paid e-mail from the inside out, in other words, we’re advocates on not only rewarding the corporates (i.e. measurable results), but also rewarding those consumers who want to be contacted by advertisers (all the while leaving those consumers uninterested in “spam” alone).

In trading, when a guy has a strong opinion of the market’s direction we say “he’s talking his position” which mean he’s positioned to make money if the market plays out that way. And in this sense, with regards to permission based marketing and loyalty rewards, we are talking our position, however when you’re right, you’re right. Yeah?

I met this American, Thomas, from Mooers, New York the other night while waiting for the bank manager at Pudong Development Bank to open the ATM that just eaten our bank cards. It turns out he has been in China for, get this, over 20 years as a marketing director and country manager for some of the largest consumer goods manufacturers on this planet, such as Coke Cola, Nestle, and P&G.

He started talking about what Shanghai looked like in 1982, where to get the best straight razor shave, and of course, his adventures in marketing. The last bit about marketing in China was the most interesting.

According to Thomas, branding in China isn’t about branding at all, it is all about logistics, price points and samples. From his experience he believes that before you can even build/develop a brand you’ve got to get the products into the hands and mouths of the Chinese consumer. And thus, “flashy advertising gimmicks” take a back seat to “cold hard logistical planning.” I’ll try and paraphrase what he told me:

“…not only are you building a proprietary distribution network (well oiled distribution channels are a serious competitive advantage) but also you’re dealing with suppliers unaccustomed to Western standards of quality and time constraints. That fact that consumers can see and physically touch your product might be the best, most effective marketing tool multinationals have at their disposal…

The fact is most China based marketing teams look at the branding approach the wrong way, they come at it from the direction of building short-term demand rather than building a sustainable presence. As a marketer you need to understand how the goods get to market, where products are placed, and at what price people are willing to pay for them. In China, I believe some of the best marketers are also brilliant engineers; most people disagree with this assessment…

It took Dove candy bar almost 8 years to understand this. They came into China with a large Western size candy bar, yet it was too expensive for average Chinese to afford; furthermore, they were not accustom to the rich chocolate taste. The solution was to sell sample size (or bite size) bars but this meant reengineering the entire production and distribution network, not to mention positioning and pricing.”

Well, I’m not sure I completely agree with Thomas on all of this as China’s consumers have gotten a bit more sophisticated; and yet how can you argue with someone who has been in the business about as long as I’ve been alive? I do think he makes a very interesting point about the power of samples and the importance of logistics in branding.

Anyhow, after that conversation I wanted to find out how wide spread sampling was in Shanghai, so I went into a Lawson’s, looked around, and was like, cool, lots of Western brands do in fact use sample size packaging. And, then I thought, gosh, sampling must be really expensive, at what point will manufacturers stop sampling and just go back to exclusively selling regular size products? And the I thought, in the States we are crazy about super sizing, getting biggest bang for our buck, but in China people are kind just figuring out what they like and don’t like…interesting, huh?

We’ve been meaning to write a post about the impact of cultural dynamics on branding in Asia/China – last week (2/27), Stuart Biggs, a journalist from Hong Kong’s South China Morning Post, interviewed Miles Young, Chairman of Ogilvy & Mather Asia Pacific, discussing this very topic – the article is titled, “Advertising chief spins culture into the branding mix”.

Miles concludes that Japan, as a result of zaibatsu legacy, is less accepting of single product branding (e.g. Bluebird), instead Japanese managers seek to promote the branding of the corporation (e.g. Nissan) – whereas in China, there is a “religious” acceptance to the concept of branding largely because Chinese manufacturers see branding as a defense against foreign product penetration.

We’ve transcribed a section of the article below (the article is password protected on SCMP website):

Until recently, the zaibatsu legacy – giant corporations such as Mitsubishi founded with political patronage in the late 19th century to industrialize Japan – had overshadowed more – western concepts of product branding.

“It didn’t matter what industry you were in as long as you were large and the brand was therefore the same as the corporation…separate product brands underneath that corporate umbrella were very difficult for them to grasp.”

The same is not the case in China, where Ogilvy has benefited from the “religious” acceptance of the concept of branding.

“What has driven the belief in China is that the market has opened up, so branding is seen as a defense against foreign products coming in. It is connected with how to defend market share and you certainly don’t just want to do that on price.”

Ogilvy’s clients have developed from state-owned enterprises insecure about working with foreign agencies 10-year ago, to more progressive companies such as China Mobile – “as dynamic and marketing savvy as any of its international peers”

Definitely some useful commentary from the front lines, and while we do not pretend to know more than Miles on this subject, we bid Miles a “beg-your-pardon” on the China front – branding in China is definitely not as widely accepted as we are let to believe in the interview.

Well, if you consider hypnotic messaging (e.g. Focus Media 10 sec spots repeated 1,000 times a day) or tent shows in large shopping plazas brand building, then yes, it is widely accepted, but we don’t (from a cost-benefit-measurability standpoint).

While it is true to a couple major brands turn to branding to protect their turf from foreign competitors, the fact of the matter is, until very recently, local Chinese neither had access to nor could afford foreign brands; furthermore most foreign companies entered China as joint ventures, often branding under the local’s brand, for example Gillette purchased Shanghai based Eagle razors.

More to the point, joint ventures between foreign and local manufacturers always had support of the local government and/or a state owned enterprise (SOE) – automobiles, electronics — and thus it has always been in the interest to promote the branding of these joint ventures (yes, in many cases locals “borrowed” technology and went off and did their own thing).

The real brand battle isn’t so much foreign v. local, but rather it is local v. local. If someone can afford a foreign brand, they will buy it because the quality/service is better, not because they recognize the brand, per se. Until Chinese products and services (at least higher end goods/services, we aren’t talking about soap or socks) met or exceed that of foreign offerings, branding will never be an issue.

Last week, China’s Ministry of Commerce gave Avon Products the thumbs up to resume door-to-door direct sales in China. In 1998, Beijing outlawed direct sales after a rash of “pyramid schemes” surfaced. This move paves the way for other companies to resume direct marketing operations.

Victor Mallet, a Financial Times reporter, published an article on Tuesday titled, “The flight to Asian cities needs managing not curbing” suggests:

…there will be an additional 300m to 500m people, equivalent to the entire population of western Europe, are expected to move to towns and cities from the countryside by 2020…

At last count, Avon had a global sales force of five million independent reps; Avon expects the addition of new China based reps will ratchet this number significantly higher over the next decade.

In some bizarre twist of fate (and this might be a stretch, but here goes) the resumption of direct marketing in China might not only elevate entrepreneurial spirit but also (in some small measure) help stem the flow of x number of migrants running to the cities for employment – it reasons that the sheer number of direct marketers needed to serve a nation of 1.3 billion people must number in the millions – mass hirings by direct marketers (e.g. Avon) in the larger towns/villages might keep a portion of these migrants at bay (i.e. “I have a regular client base near my family…”) or at the very least, increase the number of traveling salespeople constantly on the go (i.e. “have sample bag…will travel”).

We dislike being predictable, but since we don’t have a creative bone among us (queue popular Chinese proverb) :

“Give a man a fish, and you’ll feed him for a day. Teach a man to fish and he’ll sit in a boat and drink beer all day…”

Woops, wrong Chinese proverb…try this one:

“Give a man a fish and you feed him for a day. Teach a man to fish and you feed him for a lifetime…”

In other words, Beijing has either found an interesting tool to reduce the number of urban migrants or just created a nation of fast food eating, Motel 6 sleeping, traveling salespeople…

With all of the above noted, what happens to this sales force with the proliferation (er, what proliferation?) of ecommerce? It may not be an issue today but 5 to 10 years down the line it might just very well be…gosh, predicting future trends in China is so confusing…

Steve Rubel is SVP at NYC based PR firm Cooperkatz agrees with us that RSS is the New New Thing in direct marketing:

That’s all folks. The door has officially closed on email marketing. Maybe this will drive more companies to start up opt-in RSS feeds and blogs that facilitate dialogue.

And so does Polarman:

Fred, please change the business models from email to RSS. It’s time Email gives way to RSS. Everything that a email delivered service can do should be done by RSS.

But, Elliott Ng, an Executive at Intuit, gave us a different opinion:

I think RSS itself is a feature, but the larger story is about how customers and companies engage with each other, and how companies have a difficult time managing those dialogues.

Regardless where you stand on the RSS v. Email marketing debate (if in fact there is one and we aren’t making a mountain out of a, well, non-issue) one thing is certain: RSS marketing will have a major impact in China where two of the largest email service providers, 163 and Sina, already block thousands of smaller email servers — some good (permission based marketing) and some evil (spammers) — getting your company off their black lists and onto their white lists reeks of favoritism…

From my hometown, Boston (USA), comes “WiFi Pulse Points”, the Boston Globe writes:

They allow individuals [with wireless] to connect to a network, but not to the Internet or e-mail. Rather, these Pulse Points connect individuals to their location—and each other. They create a “situational community” of people who are connected simply because they are in the same place at the same time.

Content, content, content…

For the record, we’ve been in favor of leveraging RSS feeds for “permission based” direct marketing for some time. This is what they’re doing at 1Diantong, a Shanghai based direct marketing/loyal start-up.

However, not everyone is happy that advertisers are piping marketing down RSS, for example, Joanna Hicks, a blogger running Empyreal Environs, is a bit, well, pissed-off at Major League Baseball (USA) for taking “advantage of RSS for advertising purposes“.

Okay, I can understand that unwanted adverts are intrusive (that’s why I don’t have any on my site), however to say RSS, as a channel, should not be used for direct marketing is going too far.

Pumping permission based marketing campaigns through RSS feeds is brilliant, especially when organized in an aggregator, such as NewsGator. Think of how an OPML Reading List is organized – same same but slightly different…

Two days ago, we touched upon AOL and Yahoo’s move into paid email spam with Goodmail — as a follow-up, today, Brad Feld from Mobius Venture Capital talks about this as well — his post is a bit more detailed and insightful.

As a word of caution, Brad is an investor in Goodmail’s competitor, Return Path. Things are spicing up!

Today, Kevin Newcomb wrote a ClickZ article (okay, its a press release) titled “AOL to Implement E-mail Certification Program” discussing how AOL will implement Goodmail’s cryptographic CertifiedEmail program and phase out its IP-based Enhanced Whitelist (which is, more or less, reputation based).

In October, Yahoo said they too would roll out Goodmail’s product.

This sort of gets away from the whole permission based marketing thing, doesn’t? I can only see this as a bad thing moving forward for both consumers and the industry…

I am working to on a new logo for Ymer – I thought the most difficult part of the process would be coming up with a funky, creative, meaningful design – Wrong!

Surprisingly, the most challenging aspect of this process has been the positioning and font size of Ymer’s Chinese name. I never realized what an explosive/sensitive area this is…

The non-Mainlander perspective (inclusive of Hong Kong ren) is English should be the most prominent feature of the logo – if the Chinese name couldn’t fit, so be it.

The Chinese Mainlander perspective is English and Chinese should be on the same line and the same size – if the Chinese name couldn’t fit, make it fit.

What surprised me the most was how immaculately consistent these views were – in other words there were no exceptions – group stratification was absolute.

What does this say about cultural subtleties? I’ve been in Asia for over 10 years and it never occurred to me that this would be an issue – in fact, it never occurred to the Hong Kong ren living across the boarder, either.

This begs the question, can a non-Mainlander truly understand/relate to Mainland Chinese? Or is the question, can Mainlanders come to grips with the fact the not everything breaching China’s boarders will be localized/sterilized to satisfy local sensitivities – and that size doesn’t matter – it’s only a logo.

The net result of the conversations above is the logo below:

I haven’t decided if Ymer will go with the above design or with the logo the “way cool” and talented designers at US-based Sukamishi are working on. If you care, stay tuned…

FeedBurner has a new Feed For Thought article titled, “How feeds will change the way content is distributed, valued and consumed” that I think is really worth reading…

Here is a bit of the article:

Today, feeds are largely considered the output of content management systems. You create an article, an Atom/RSS version of that article gets generated, and that’s it. Visitors to the site see an html view of the content, and subscribers to the feed get some rendering of the same content (derived from the feed) in their aggregator.

Since the feed data is semi-structured, it is possible to enhance the feed with 3rd party services in a generalized way. Meta-data can be readily incorporated and other content can be spliced into the feed based on easily parsed feed elements…like meta-data additions (Media RSS, iTunes tags) and content splicing (links and photos) for some time now….

We can leverage the benefits of feed structure to allow publishers to provide a feedback loop to the Web site; the feed can become input to content on the site. There are unique capabilities that can be provided to the site as a function of performing transformations and enhancements to the feed derived from that web content.

I am totally convinced that there is a killer direct marketing/targeted email model that specifically leverages feeds…this includes developing a direct marketing feed aggregator…

The team at Shanghai based 1Diantong also think so, and thus they are working to integrate feeds into their distribution channels…it is going to be fun to watch how this plays out…

Follow-up to post below “Internet indispensable for young people” is Adam Green’s posting on how 2006 will be year Internet explodes , he notes:

The explosion I am talking about is the shifting of a website’s content from internal to external. Instead of a website being a “place” where data “is” and other sites “point” to, a website will be a source of data that is in many external databases, including Google. Why “go” to a website when all of its content has already been absorbed and remixed into the collective datastream.

The obvious leaders this space are del.icio.us and GoogleBase, which will evenutally make their way to China (i.e. mainstream). We’ve talked about del.icio.us before, but not GoogleBase:

Google Base is a place where you can add all types of information that we’ll host and make searchable online. You can describe any item you post with attributes, which will help people find it when they search Google Base.

I wonder how this will impact the traffic flow to China’s Internet portals where “entertainment” (e.g. gaming, MP3) is a key driver of traffic and not news and information as it is in the US or Europe? MP3 can definitely get distributed by RSS, but you can’t do that with gaming…

I do think this will have a major impact — though, perhaps not an explosion — on China’s advertising industry, specifically on the direct marketing side of the equation; my money’s on the company that can: (1) build the deepest/richest user database; and (2) aggregate information from other websites and leveraging this data to generate dynamics adverts.

Come to think about this sounds a lot like Matrix meets the Truman show

If you had any doubt about the importance of the Internet in China, have a read of the latest results from an Internet usage survey conducted by Social Survey Center of China Youth Daily.

Below are some bits:

I can’t imagine a life without the Internet,” said Lin, a junior of Southwest University of Finance and Economics of China.

Some 19 percent of the 4,032 respondents said the Internet “can take the place of everything.”

About 62.2 percent of the Chinese netizens often play games online, 56.5 percent often download music and 53.5 percent download entertainment information from the Internet

I had a chat with Bryan Ellis from Bertelsmann’s Book Club in Shanghai. Bryan is somewhat of an expert in direct marketing and loyalty programs; he was kind enough to pass along some interesting insights and lessons he has learned over his 8+ years at Bertelsmann, such as his acid test for weeding out the “players” from the “non-players” in the loyalty universe.

Bryan’s acid test is made up of three parts:

a. Who are the partners in the coalition?
b. How can a new member leverage this network?
c. What is the spread (buy v. sell)?

He noted that in China, most companies get some derivative of part “a” and part “b”, but no one has every been able to nail the economics of the business…or what he calls the spread…

Last week, Eric Tilenius and Steve Markowitz were in Shanghai visiting, etc. I had the chance to sit down with with these two loyalty and direct marketing thought leaders and chat about what makes a good loyalty program worth investing in.

Their core message was that any loyalty program worth its salt will work to achieve the following four goals/benefits:

1. Acquisition
2. Activation
3. Stimulation
4. Retention

Makes a lot of sense…funny thing is that 99% of these programs are okay at the “acquisition” part but fall dramatically short of the latter bits; most likely this has to do with an underdeveloped network/partnership and flat direct marketing campaigns…

I’m talking from experience: In 2000, I was a Director at Hong Kong based online brokerage, Boom.com and one of the most time consuming yet ineffective services we offered was a loyalty program called “Boom Points”. The idea was to give Boom Points to our customers each time they placed a trade; the amount of points were based on the size (value in HK$/US$) of each trade.

Some of the places we went wrong was in the following ways:

1. Trade sizes were not large enough for customers to earn nearly enough points to make it worth their while; they would have had to make institutional size trades

2. Because each Boom Point represented a $ amount, customers could calculate each points exact worth; in other words, what incentive did you have to trade more if you knew you could purchase the same radio Boom offered at Fortress for 30% less?

3. We didn’t offered any perishable goods, such as airline tickets ( high perceived value, yet low marginal cost); and thus we lost real money each time a customer redeemed points

4. Customers could only earn points at Boom; we should have build a platform or leveraged our branding to build a network effect

5. We didn’t create any impactful direct marketing campaigns to stimulate or enlarge our network

Hard lessons, for sure, but lessons nevertheless…I’m waiting for a company in China or Hong Kong to come along that can successfully address the four points Eric and Steve waxed on about…