The rules of online marketing in a recession by Ken McCarthy, 17 October 2008

Wordtracker Academy asked me, as an experienced internet marketer, if I could offer some perspective on today's business and financial climate. They specifically wanted to know how it impacts internet marketers and others who use the internet to market online.

• What should small businesses be doing in the present crisis?
• How can small businesses take advantage of the credit crunch?
• How can they build it into their strategies and their web copy?
• How can they come out fighting when everybody else is cutting back?

In a 2005 report I sent to my System Club members called 'About Liquidity', I pointed out the following:

"Don't assume the entire reason you're doing well right now is because: a) You are a financial genius or b) You are graced by God.

"The liquidity explosion has helped us all by putting easy money in large quantities into our customers' pockets...

Think musical chairs - don't be the guy who has over-extended himself so much that when the music stops, he's one of the ones left without a chair."

I worked on Wall Street during the Crash of 1987. It made an impression on me. So did seeing many of my over-leveraged friends blow up when the dot-com bubble burst. I've also been very involved in the New Orleans reconstruction efforts, so major system failures are nothing new to me.

Today's crisis is much like 1987 and the dot-com bust. Financing got way ahead of reality and, as is always the case when such things happen, there was a retraction - and the retraction was painful.

You may be experiencing the effects of this merry-go-round personally. You may have family members who are experiencing it. You will certainly have customers and colleagues who are.

What should internet marketers do at a time like this?

Rule 1: Acknowledge reality

There is usually quite a bit of advance warning between the first signs of smoke and the undeniable reality that the house is on fire.

If you haven't already got the message - and I can fully understand why normal people would not - this is a real crisis, one that will not be going away any time soon, and the odds are it will get much worse before it gets better.

What's happening has nothing to do with 'the economy' or how hard-working or productive people have been. It has to do with what can only be described as mind-bending distortions in the financial system.

These things happen.

If you're from Eastern Europe, South America, Southeast Asia or Africa you may have already lived through a full blown banking crisis. If not, it's one of those things you just can't imagine until you've lived through it, are wise enough to read up on it or make inquiries about it from people who have.

So, educate yourself. Quickly. If all is well in the short-term, you'll have received an interesting education. If it's not, you'll be prepared in ways that not 1 out of 100, or even 1 out of 1000, will be.

You should also acknowledge reality in your marketing. If your products are particularly good value, make sure you emphasize that. If you have a long track record of providing stable service in all kinds of markets, let your prospects know. Consumer tolerance for baloney is at a low ebb right now and rightfully so.

The "rah rah" "let's spend like there's no tomorrow" mindset is over. Prospects want value for their money now - not razzle dazzle - and we're only at the very beginning of this trend.

Woe to any marketer who continues to play from the 2003 to 2007 playbook in his or her ad copy and positioning.

Rule 2: Cut waste and build reserves

Every household and every business has its extravagances and waste.

Once you understand the potential seriousness of the current situation, it's up to you as the leader of your group to explain the situation calmly to those you are responsible for and to enroll their support in aggressively hunting down waste and unnecessary expenses.

Now is not the time to take on big financial commitments or, worse yet, go 'bottom fishing' in these very treacherous markets. There will be plenty of time for that later for those who have preserved their capital.

One common area of waste I see in internet marketing is the less-than-rigorous management of AdWords campaigns. If you're spending any amount of money on pay-per-click advertising, I urge you to hire the services of a good AdWords consultant for an audit of your program.

It's not at all unusual to discover that you've been wasting anywhere between 10% and 40% of your pay-per-click budget on non-productive ads.

Rule 3: Build closer relationships with your prospects

Another area of truly horrendous waste in the internet marketing arena is the failure to capture opt-ins.

Even at this late date, many internet marketers are far too casual about maximizing visitor value.

The standard internet business model is to drive people to a page and then offer them things to click on: AdSense ads, affiliate links or an order button.

Revenues are enhanced by experimenting with different content areas (for AdSense), promoters (for affiliate marketers) or different products (for marketers who sell direct.)

This is all well and good, but if that's all you're doing, you're missing out on a huge piece of the internet marketing pie - creating targeted mailing lists.

I'll be the first to admit that generating, managing and maintaining the value of mailing lists is work. In fact, it's a lot of work. As work goes, however, it has to be among some of the best paying work there is.

Perhaps it's because I come from a direct mail background that I can't bear to see the value of an inquiry (which is in essence what a web visitor is) evaporate without a serious effort to capture that person's contact info and add it to a segmented list.

This subject is vast and could easily be a multi-day course all by itself, but in short, here's the principle:

You will make far more money, and have a much more stable business, if you create lots of targeted, high value, zero cost (free) virtual goodies to give away to your visitors in exchange for their name and e-mail address than if you don't.

Yes, the old 'bring them in and pass them on' model is much easier and will make the cash register ring, but building - and utilizing - targeted lists of prospects and buyers will build you a real business, and potentially make you rich.

I'm not speaking theoretically here. I have seen many of my students build seven and occasionally eight figure a year businesses by putting list-building at the center of their strategy. It's a tried and trusted approach, and in an environment in which customers are scarce, having a list of active buyers is as good as (some might argue today better than) money in the bank.

Rule 4: Above all - value will be king

Fortunes are made in good times. They're also made in "bad times".

The fact is that many very successful businesses were started in the depths of the Great Depression.

To test this for yourself, google the phrases 'started in...' and 'founded in....' and plug in the years of that period - 1930 to 1941. You'll be amazed at how many household names got their start then.

The strange fact is that assuming you have great value to offer and are militant about efficiency and cutting out waste, 'bad times' are very good times to start or expand businesses.

Why is this a good time for business builders?

1. Even in the darkest times business goes on. People buy and sell. It never stops. Things never go to zero. (Consider that there were underground millionaire entrepreneurs in the former Soviet Union when owning private property and employing people outside of the state system was a prison offense. Where there is a will, there's always a way.)

2. Costs are low. Media prices will go down. Rents will go down. There will be great deals on equipment. Talented people will be available for hire at reasonable prices.

3. Many of your competitors will fold - if not in practice, psychologically. They will attribute all their challenges to the 'bad economy' and give up, instead of actively seeking solutions and workarounds.

Entrepreneurs who use their minds - and their courage, not just their intellects - will find no shortage of opportunities in the coming months and years.

Warren Buffett has a saying about times like these that I've always liked:

"You only learn who has been swimming naked when the tide goes out."

The tide is going out and it will be the internet marketers who are relentless about efficient operations and providing value who will do very well indeed. Others who've depended on the unusual liquidity situation to cover their inefficiencies and the deficiency of their offerings, will have to make do with the leftovers.

For details on Ken McCarthy's internet marketing courses, go to: www.SystemIntensive.com

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