The richness of information about individuals that can be gleaned from the Internet makes it an enormously powerful marketing medium. Consumers’ purchasing intentions, for example—information that was previously unavailable or difficult to secure—can now be collected with the aid of "cookie" and other technologies that record the web sites a user visits. And because the Internet is real-time and interactive, marketers can get constant, up-to-date insights into consumers’ opinions and develop stronger relationships with them more quickly.

The potential for strong online relationships is being threatened, however, by concern over privacy. Publicity about companies’ ability to collect information on users without their consent is prompting some individuals to take evasive action, such as turning off the cookie files in their browsers or logging in under disguised identities. The challenge for marketers, then, is to entice consumers into a "value exchange" by offering them something in return for the personal information they want.

Survey of web sites

It is a challenge few marketers have met. We surveyed the web sites of all the consumer companies in the Fortune 500 and found that many do not even try to gather information about individuals. Those that do tend to ask only for the kind of data already available through conventional market research, and no more than a handful give anything of value in exchange.

Of the 74 web sites in the survey, 65 percent asked for the user’s name and address. Only 35 percent asked for additional demographic information, and 34 percent asked for product usage information. A mere 24 percent used cookies; the rest wasted an obvious opportunity to build profiles of each user. Incredibly, 31 percent failed to provide an e-mail address, making it impossible for consumers to provide information even if they wanted to.

Value-exchange efforts were also limited. Sixty-nine percent of the sites surveyed granted something in return for information, although usually it was no more than additional product details and/or a promotional offer (which was then sent by mail, and was usually the reason for asking the consumer’s name and address). Only one site used any kind of artificial intelligence agent capable of manipulating the information gathered to offer users something of value. Twenty-seven percent of sites gave access to a discussion forum in exchange for information (Exhibit 1).

Smaller companies were even less sophisticated. We surveyed an additional 88 web sites (selected at random from Yahoo!’s directory of business sites), of which only 24 percent asked for demographic information and 9 percent set cookies. Thirty-seven percent offered some form of value in exchange.

Best practice

Best-practice sites, in comparison, scored highly in terms of the information they collected and the value extended in return (Exhibit 2).

Amazon.com (http://www.amazon.com), the web-based book retailer, asks customers which categories of books they like in order to notify them of new publications in those categories. Mitsubishi’s automotive web site (http://www.mitsucars.com) gives advice on which of the company’s cars fit individuals’ needs in return for their filling in a survey about their automotive preferences. Both companies promise something to the customer, and amass valuable marketing data for themselves.

The most effective information-capture sites often require users to register before they can gain access to the site, which users do gladly if it is worth their while. Lombard Brokerage, a discount brokerage firm that sells via the Internet, asks individuals to log in with their name and e-mail address if they want to reach stock quotes, research articles, and other financial information.

Cookies may be unpopular with shy consumers, but effective marketers use them widely. Doubleclick, a company that places advertisements on web sites, uses them to log the number of times its clients’ banner advertisements are viewed. It can then ensure that users are not annoyed by over-exposure to the same ad (thus also increasing the ad’s effectiveness). Travelocity (http://www.travelocity.com), a travel site owned by AMR, the parent of American Airlines, offers would-be travelers chat sites where they can meet others interested in the same destination. Cookies tag the wanderers.

Best-practice sites can also collect a broader range of data than is available through conventional market research. Firefly, an Internet start-up company that promotes agent technology (http://www.firefly.net), uses one of its sites (http://www.bignote.com) to ask members to rate their favorite CDs. Firefly then uses an artificial intelligence agent to combine the information and predict which new artists the member might like, on the basis of the tastes of other members with similar profiles. Firefly is not in the business of selling CDs. But what would a CD direct marketing company not give for such rich consumer profiles?

The best value-exchange sites also explicitly address privacy worries in order to build trust with consumers. Firefly, for example, reassures patrons that their data will be used exclusively within Firefly sites or affiliated sites and for no other commercial ends without their consent.

Value exchange

Value exchange is not an unrelated transaction whereby a company gives a coupon or some other "giveaway" in return for information. Instead, best practice companies use the very information that the consumer offers as the source of the value given in return. As such, value exchange is a way of building a relationship with consumers, providing marketers with what amounts to a non-stop focus group.

Not surprisingly, the best value exchanges are offered by companies that conduct their core business on line. Since the site is their sole source of customers, they have the strongest incentive to build relationships through it. They also have an advantage in that the information contained within the site is itself valuable to customers (Lombard’s stock quotations are an example). Conventional marketers, by comparison, find it more difficult to give their products online value and presence.

Those whose goods are not interesting enough to keep consumers coming back to a dedicated site might consider participating in, or leading the development of, a "virtual community." Procter & Gamble, for instance, participates in ParentTime, a web site for parents (http://pathfinder.com/parenttime) from which it probably captures more traffic than it does from its dedicated Pampers site (http://www.pampers.com).

Whatever the business, in an age in which consumers can increasingly decide who has what information about them, the task facing consumer marketing companies is to find online value exchange propositions that will enable them to capture consumer information and build stronger relationships.