We've been around for quite a while—there are even a few gray-haired gents among us—so it's no surprise to us that the dot.com era is bust. Back in 1999, the venerable [and perhaps today vilified] analyst Henry Blodget wrote: "Unlike with other famous bubbles…the Internet bubble is riding on rock-solid fundamentals, perhaps stronger than any the market has seen before. Underlying the crazy price increases are the foundations of what could become the early 21st century's leading growth companies…Just because the Internet stock phenomenon looks like a bubble, it isn't a given that the bubble will burst." Of course, anyone reading this will think Mr. Blodget was fool-hearty at best, but we surmise that his statement stands correct. It's the dot.com bubble that burst; the Internet era by contrast, is just getting started.

So fear not all ye slow-movers out there who were told by both VC and analyst alike that only first-movers get the prize. It might be true that up until the spring of 2000 many a Netrepreneur made millions on paper by rushing to get the FMA (first-mover advantage), to do it FBC (faster, bigger, cheaper) and to GBF (get big fast) just in time for the IPO. But as we've seen over the past several months, a business with buzz but no true marketing cannot continue to thrive.

What happened? According to Lynne Pepall, a Tufts University economics professor who studies models of competition, "When there is a lot of uncertainty about costs and technology, there are real advantages to waiting and then figuring out how to do things." Duh! The Internet is all about uncertainty. Just ask the founders and investors of eToys, Women.com, Eve.com, Wine.com, and the infamous Boo.com. Each of these companies were considered "pure-plays" who were inventing their business on the fly, basically from scratch.

Just a mere two years ago, the following headline appeared in Time: "Silicon Valley/The Second Wave: What does it take to launch the next Internet megabusiness? The new entrepreneurs can do it in 90 days—with a lot of effort, money, and some caffeine." 90 days? It takes the average American 5-8 months to buy a house, 120 days to buy a car, and 9 months to have a baby—what were we thinking?

Or try this one on for size. In its prospectus, Utek, a business development company that finds, acquires, develops and finances university technology for its customers, actually stated, "Our management has limited experience operating a business, has had no experience in managing and operating a business development company, and has little or no experience in corporate finance and corporate mergers." Who on earth made the decision to fund this company?

The best of course, is Boo.com. The following appeared in their prospectus: "We sell a substantial portion of our products at very low prices. As a result, we have extremely low and sometimes negative gross margins on our product sales." And exactly how were they planning to make money?

It's easy of course for us to sit back and poke fun at the dot.com debacle. Even easier still, for us to claim we never would have made such foolish mistakes. Yet what's important is to understand why these companies failed. Particularly since many of the original business ideas remain valid today. What they neglected to do is master the fundamentals of running a business—sorry folks, a dot.com business is no different than a brick and mortar. For instance, we now know that speed branding—the idea that with enough money, you can build a brand in record time—doesn't work. And that high awareness does not translate into profitability. Imagine trying to get away with the following antics today: in October 1999, streaming media company Pixelon launched with a $16 million Las Vegas coming out party, eating up 80 percent of their latest round of financing. [Well OK. maybe it was worth it; they did get The Who to reunite for their bash.]

Although few of us remain bewitched by the Internet's hype and possibilities, its potential as a marketplace, channel of distribution and information medium is unquestionable. From a marketing perspective, the Internet has essentially three objectives: focusing on direct sales to Web users (e-commerce), strengthening the relationship with customers (brand building), and shifting existing business functions, like customer service, to the Web to shave costs (operational efficiencies), or some combination of the above. The problem of course is that first-movers eschewed these objectives for big buzz, rave parties and overblown marketing budgets. But their adage "it doesn't matter what we do, as long as we do it first" has proven false.

Back in June of 1999, Candace Carpenter, founder and CEO of iVillage told Fortune magazine: "This is a land grab. You want to put your stakes in the most valuable property you can as fast as you can because it's not going to be there tomorrow." Who knew how right she was. But fear not. In next month's issue, we'll show you a crop of second-movers who bypassed the FMA craze and have in turn reaped major financial rewards.

For a great laugh (or for some of you, a good cry), check out eCompany Now's list of the 101 dumbest moments in e-Business history, http://www.ecompany.com/edit/0,2088,11274,00.html

We knew spending on advertising by B2B marketers was growing rapidly, but after reading about Accenture's $175 million and Computer Associates' $100 million planned campaigns, we decided to take a closer look at where and on what these companies are spending their money. Here's what we found:

• Where are they spending? Surprisingly, the top 100 advertisers, which include the likes of Microsoft, Nortel Networks, Sprint, and Verizon, spent nearly $5 billion—nearly 75 percent of their total ad budgets—in consumer media in 1999 and about the same percentage in 2000, with most dollars going to TV.
  
  In analyzing press releases announcing new B2B campaigns, companies most frequently cited building awareness for the company or a rebranding effort as their reasons for advertising, and reaching the broadest business audience possible as the rationale for selecting certain media, particularly television.
  
  
• On what kind of executions are they spending their money? We took a look at the print and television advertising executions of a cross-section of B2B marketers of products and services and found a wide-array of approaches to describing the company, product or service, from emotional to humorous, straightforward to complex. About half of the print executions had very specific calls to action such as "Call now" and "Visit www…," but very few communicated a positioning for the company.

Forgetting about positioning is a mistake. As we've discovered over and over again, a clear positioning message is the sine qua non of highly effective advertising.

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Despite all the talk about customer-centricity and the data overload created by customer relationship management systems, most companies do little to address real customer needs, problems and pains. The early 20th century manufacturing paradigm—if you build it, they will buy—still persists.

So what comes first, the customer or the product/service and marketing campaign? Even though the majority of marketers today will proclaim they have found religion and embraced the customer as their spiritual center, they still churn out products and services first and figure out which customer group will find the product appealing second. The targeting decision gets made in about five minutes and then it's full-steam ahead onto the marketing campaign. Marketers offer a variety of reasons why the product and marketing campaign come first. Some will say they lack the time to talk to customers. Egotistically, however, they believe they really don't need to —they already have a feel for what appeals to their customers.

McDonald's believed it knew what its customers wanted. With seemingly little consumer research, the fast-food company invested more than $1 billion in its "Made for You" program, consisting of a just-in-time food production system, new crew uniforms, a new red and white outside restaurant facade, and a major advertising campaign to promote the changes. But did the food production system, uniforms, or paint job compel customers to buy more and more often? Not really. In order to just break-even on the $1 billion investment, McDonald's U.S. sales had to rise 5 percent for the year. Already behind with a 4 percent increase in sales in the first quarter of 2001, McDonald's announced plans to revamp its marketing strategy just a few weeks ago.

To be successful, marketers must not treat customers as an afterthought in their product/service development and marketing planning process. Recognize there's less risk [and quite often less investment] involved when you take the time upfront to test assumptions. In other words, truly let the customer drive your marketing decisions.

Edward Jones, the venerable retail brokerage, for example, looked to its customers to guide its decision about whether or not to offer an online trading service. The company divided its customers into three segments, and noticed 50 percent of its commissions came from its "Retirees" segment. In talking to this group, Edward Jones realized that most were conservative investors focused on preserving rather than accumulating wealth.

Additionally, they were not interested in online trading, preferring instead to utilize the highly trained and experienced Edward Jones broker network. After several months of consideration, rather than risk offending their broker network with a competitive online service that the majority of its customers did not want, the company made the very unconventional choice to not offer online trading.

What happened? As the market became more volatile, close to one-half of the customers who closed their accounts with Edward Jones to move online have come back to the firm and revenues grew 30 percent last year.

As you proceed through your next product/service introduction and marketing campaign, take the time to get it done right the first time. Understand whether [or not] what you have to offer will attract and retain customers. In so doing, perhaps you can avoid the lost billion-dollar investment McDonald's is seeking to recoup.

For more insightful marketing discoveries, visit http://www.copernicusmarketing.com/discover/index.htm

Have a hot discovery for our next release? Contact us at ami.bowen@copernicusmarketing.com

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"Provocative, high-impact insights into how to measure and manage technology readiness." ~Kevin Clancy, Chairman & CEO, Copernicus

Do you know what customers really think about your technology? With breakthrough research and case studies of leading technology marketers, Parasuraman and Colby illustrate how the attitudes and beliefs that influence the adoption of technology differ from those that influence the adoption of other types of products and services. The authors present their typology of technology customers, offering important insights and marketing strategies for technology companies. The techno-readiness quiz and "Techno-Ready Marketing Audit" also offer important tools for improving the success of new technology products and services.

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Disturbed by what we see as the total absence of a clear and compelling positioning among B2C and B2B marketers and a serious decline in the effectiveness of television advertising, we have undertaken a study to test our theory that most companies and their advertising lack positioning.

We asked study participants to watch a combination of news, comedy, and dramatic programming and answer a series of questions about the ads they see. Specifically:

• Did the ad mention a specific company, brand, or product?
• Did the ad communicate a clear positioning for the company?
• Did the ad communicate a clear message about the product or service?

Stay tuned for our results and their implications in next month's Copernicus Mzine.

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