Seth Godin's company, Yoyodyne Entertainment, is all about fun and games. But its mission is serious business. Godin and his colleagues are working to persuade some of the most powerful companies in the world to reinvent how they relate to their customers. His argument is as stark as it is radical: Advertising just doesn't work as well as it used to - in part because there's so much of it, in part because people have learned to ignore it, in part because the rise of the Net means that companies can go beyond it. "We are entering an era," Godin declares, "that's going to change the way almost everything is marketed to almost everybody."
The biggest problem with mass-market advertising, Godin says, is that it fights for people's attention by interrupting them. A 30-second spot interrupts a "Seinfeld" episode. A telemarketing call interrupts a family dinner. A print ad interrupts this article. "The interruption model is extremely effective when there's not an overflow of interruptions," Godin says. "But there's too much going on in our lives for us to enjoy being interrupted anymore."
The new model, he argues, is built around permission. The challenge for marketers is to persuade consumers to volunteer attention - to "raise their hands" (one of Godin's favorite phrases) - to agree to learn more about a company and its products. "Permission marketing turns strangers into friends and friends into loyal customers," he says. "It's not just about entertainment - it's about education."
Yoyodyne, headquartered outside New York City, works with clients - which include AT&T, H&R Block, MCI, and Volvo - to create these new relationships. All of its campaigns use the Web, email, and other online media. All of them are built around game shows, contests, or sweepstakes. What do game shows have to do with permission marketing? Consumers give a company permission to send them messages in return for the chance to win prizes they care about. "The first rule of permission marketing is that it's based on selfishness," Godin says. "Consumers will grant a company permission to communicate only if they know what's in it for them."
Yoyodyne's techniques are catching on. The company has about 1 million active participants in its games database. It has sent more than 110 million email messages to influence consumer behavior. And it receives more email than any other company in the world. (Online services such as AOL handle more traffic, but those messages are destined for subscribers, not for the company itself.) More important, Yoyodyne's ideas are catching on. In an interview with Fast Company, Seth Godin described the future of marketing - and how your company can get there.
You've got a radical critique of conventional marketing. Why should companies listen?
We are entering an era that's going to change the way almost everything is marketed to almost everybody. Don't get me wrong. Advertising will remain a competitive weapon. Companies that advertise better will do better than companies that advertise worse. But advertising simply doesn't work as well as it used to. Do me a favor and finish this sentence: "Winston tastes good . . ."
". . . like a cigarette should."
Do you realize that the last time that commercial aired was almost 30 years ago? If you want to build a slogan like that today, if you want to burn a message into people's brains, it costs huge amounts of money. Companies spent $175 billion on "advertising" in 1996. But 42% of that money went into things like direct mail, not into what we traditionally mean by advertising. That's because marketers are desperate for better results in a world where the old tools are becoming more expensive and less effective.
What's different today from 30 years ago?
Marketing is a contest for people's attention. Thirty years ago, people gave you their attention if you simply asked for it. You'd interrupt their TV program, and they'd listen to what you had to say. You'd put a billboard on the highway, and they'd look at it. That's not true anymore. This year, the average consumer will see or hear 1 million marketing messages - that's almost 3,000 per day. No human being can pay attention to 3,000 messages every day.
The interruption model is extremely effective when there's not an overflow of interruptions. If you tap someone on the shoulder at church, you're going to get that person's attention. But there's too much going on in our lives for us to enjoy being interrupted anymore. So our natural response is to ignore the interruptions.
Television is unbelievably cluttered. Can you recall one TV commercial you saw last night? The Web is even worse! There are more than 250 million people in the United States, and almost all of them watch TV. And maybe 10 channels really matter. That's 25 million people per channel. There are 45 million people with Web access and 1.5 million commercial sites that are vying for their attention. That's only 30 people per site. The economics just don't work.
What's the alternative?
Interruption marketing is giving way to a new model that I call permission marketing. The challenge for companies is to persuade consumers to raise their hands - to volunteer their attention. You tell consumers a little something about your company and its products, they tell you a little something about themselves, you tell them a little more, they tell you a little more - and over time, you create a mutually beneficial learning relationship. Permission marketing is marketing without interruptions.
You still have to get people's attention in the first place, of course, and that still costs lots of money. But that's the beginning of the story, not the end. You have to turn attention into permission, permission into learning, and learning into trust. Then you can get consumers to change their behavior.
Does that mean big-budget TV ads go away?
Not at all. Mass-market advertising helps companies talk to strangers. Companies will always need to talk to strangers - to persuade people to pay attention for one brief moment. But after you do the very expensive job of getting people to pay attention, then what? That's where permission marketing comes in. People who've agreed to pay attention don't want you to waste their time with more handheld camera shots or snazzy animation. They want to get to know you. They want you to solve their problems. Permission marketing turns strangers into friends and friends into loyal customers. It's not just about entertainment - it's about education. Permission marketing is curriculum marketing.
Why would people be willing to give companies 'permission' to talk to them?
Permission marketing is built around rational calculations by both parties. Look at it from the customer's perspective: People have money to spend on products. What people lack are the time to evaluate products and the trust in the companies that make them. The first rule of permission marketing is that it's based on selfishness: Consumers will grant a company permission to communicate only if they know what's in it for them. A company has to reward consumers, explicitly or implicitly, for paying attention to its messages. That's why the Net is such a powerful medium. It changes everything. You can use email to communicate with people frequently, quickly, and unobtrusively - so long as they've given you permission to do that.
Now look at it from the company's perspective: One of the problems with interruption-based marketing is that you have to assume that "no" means "no" - when, in fact, it usually means "maybe." If people see a TV commercial and don't buy your product, or get a piece of direct mail and don't respond, you assume that they've rejected your offer. It's simple economics. If you send 100 people a letter and only 2 of them become customers, the cost of asking the other 98 why they didn't is exactly the same as the cost of contacting them in the first place. So you move on to the next batch of prospects.
What's so magical about the Net is that the cost of talking to the "no's" more than once is zero. With email, frequency is free. You can keep communicating with people, keep teaching them, keep trying to turn them into customers. And it doesn't cost you anything. That's so important. If you want to change behavior, you have to talk to people over and over again.
Is that why Web ads are taking off? Last year, for the first time, advertisers spent more than $1 billion on the Web.
No. Up to now, for most advertisers, the Web has been a phenomenal waste of money. Here are four oxymorons for you: "soft rock," "military intelligence," "taped live," and "Internet advertising." I guarantee you that by the year 2000, Internet banner ads will be gone. They don't work. Why? Because most companies are trying to reach consumers in this new medium by using the same model they used in the old media. Most companies use the Web to talk to strangers. They try to dazzle people with Web sites in the same way they try to dazzle people with TV ads. It's very expensive - and not very effective.
The Net is not television. It is the finest direct-marketing mechanism in the history of mankind. It is direct mail with free stamps, and it allows you to create richer and deeper relationships than you've ever been able to create before. The real killer app for marketers isn't the Web - it's email.
Ordinary people understand this, by the way, which is why they get so nervous about spam. The first time they get an unsolicited email, they say to themselves, "This message didn't cost the sender anything. If I let him get away with this, there will be thousands more just like him. Then my email box won't work, and the Web won't be fun anymore." But if you get permission to use email to deliver marketing messages, and if people agree to pay attention to those messages - well, you've changed the game.
What's an example?
H&R Block wanted to introduce a new service aimed at upper-income customers. It's called Premium Tax. None of those customers knew what this was before we started. First we had to get people's attention - and we had to get the right people's attention. So we used banners on various Web sites that said, "H&R Block: We'll pay your taxes sweepstakes." The only people who clicked on those banners were people who paid taxes and knew what H&R Block was. More than 50,000 people responded. In effect, they said, "Here's my email address - tell me more about this promotion."
Then these people became players in a contest. In return for the chance to have their taxes paid by H&R Block, they gave the company permission to teach them about its new service. Every week, they had to answer trivia questions about taxes, H&R Block, and other relevant stuff. They got three emails per week for 10 weeks. We gave them fun facts about the history of taxes or sent them to H&R Block's Web site to find answers to questions. Each email also included a promotional message about Premium Tax. The average response rate per message was 40% - meaning that, on average, every time 100 people got a specific email, 40 wrote back or took action. Over the life of the promotion, 97% of the people who entered the game stayed in it.
We did a survey at the end of the 10 weeks. We divided people into three groups: those who didn't participate in the game, those who participated but not actively, and those who participated actively. Within the first group, learning about Premium Tax was essentially zero - no surprise there. Among people who participated but not actively, 34% understood Premium Tax. For active participants, the figure was 54%. I think that's pretty cool.
We did something similar for Carter-Wallace, the consumer-products company. We created an online game around its Arrid XX "Get a Little Closer" campaign. We offered players a chance to win an all-expense-paid trip to the Caribbean. People found out about it through traditional print ads as well as through Web banners. We got more than 30,000 players. The average player received 24 emails over the course of the game. People had to read these messages to stay in the game. At the end of the game - 700,000 emails later - we did some research. The likelihood of purchase had doubled, from 24% to 49%. An astonishing 25% of players had already gone out and purchased Arrid XX during the game.
Those are two small examples. One of our first sweepstakes, the Million Dollar WebCrawl, was designed to persuade people to use AOL's search engine. We offered a prize of $1 million. Players had to visit specific Web sites and to register their email addresses at each one. This one sweepstakes attracted more than 350,000 players, and they made 2.7 million unique Web visits. Overall, we've created more than 100 online promotions - and the number of participants just keeps getting bigger.
Why contests and sweepstakes?
You can use lots of techniques to make it worthwhile for people to give you permission to talk to them. We use games because they work. Sweepstakes have been around for 700 years. Game shows were among the first programs on radio and television. Back in 1990, Prodigy asked us to create a game for it. The game's first run ended late last year, and we've started it up again. It's called Guts. Players get seven trivia questions a week. Each question is worth more points than the one before, and each is harder than the one before. You can stop at any time and keep your current score, and then come back the next week for another round. But if you miss one question, you not only lose the points from that week - you lose all your points for the whole game. So it takes guts to stay in. So far, more than 3 million people have played Guts. It's the most popular online game in history.
People love games. They're fun, exciting, engaging. We not only entertain people but also educate them - and we get paid for it! We create promotions in which the game itself involves information about products. People search for ads and read them because they have to find missing pieces of information to get the prizes they want. When's the last time you searched for a TV commercial?
How well is the concept of permission marketing catching on?
Just look at Yoyodyne's growth curve. Over the last seven years, we have sent out more than 100 million email messages - all to consumers who have given us permission to send them. Our "Get Rich Click" database, which is our core inventory of players, has 1 million active email addresses - of people who have given us overt permission to send them information we think they might want to know. Recently, during one five-day period, we processed 2.3 million email messages. In fact, we now receive more email than any other company in the world. So the idea is catching on.
That said, lots of agencies and companies resist such ideas. Permission marketing challenges some of the most cherished assumptions on Madison Avenue. People in this country are born thinking they have two inalienable rights. One is to become President of the United States; the other is to direct a major motion picture. Making a flashy TV ad is a bit like making a movie. That's what an ad agency is good at. That's why people want to work there. But an ad agency isn't equipped to figure out how to persuade customers to grant a company permission to communicate with them. People there don't want to do it.
Permission marketing also changes how companies evaluate their marketing campaigns. In this model, you don't care about cheap impressions. You care about deep relationships. Forget Nielsen ratings, clicks, hits, page views - that's all rubbish. How many consumers have given you permission to talk to them? How far does that permission go? Does every marketing piece you create invite consumers to "raise their hands," to volunteer to hear more?
There's one last barrier to overcome. If you get permission to talk to customers, you'd better have something to say. You need a marketing curriculum. The point of permission marketing is not just to entertain people (although it does need to be entertaining) but also to teach them about your products. And deep down, lots of companies don't really believe they can make a rational case for what they sell. They think they have to rely on style rather than substance.
Is the Net the only place where these ideas can work?
The Net is the ultimate tool for permission marketing. But the idea itself is more about mind-set than about medium. Many of the best-known Web companies don't get this. Yahoo! is a wonderfully successful operation. But every month, 25 million unique users show up at this site, and Yahoo! flushes those people down the toilet. Yahoo! doesn't know who they are, where they live, what they like - it's all anonymous. That strikes me as foolish. Why doesn't Yahoo! get permission to find out who they are, to learn more about their preferences, to lock in an overt learning relationship?
On the other hand, some companies with mundane products understand these ideas very well. I'm a baker. And I never use any flour but King Arthur flour. That's because every three months, the company sends me a catalog loaded with baking tools, recipes, and flours. King Arthur educates me. It talks to me in a language I understand. It has permission to send this catalog to me. It has permission to follow up with other mailings. In return, I learn a lot about its products. So I bake more often, I eat more flour - and the company makes a lot more money off of me than Pillsbury ever will.
Let's go beyond permission marketing and talk about marketing in general: What other changes are on the horizon?
I see three huge shifts. First, we're going to move from a world where companies sell products to one where they sell subscriptions. Do you know how much it costs America Online to attract one new customer? Something like $98. That's how expensive it is now to talk to strangers. But AOL can afford to spend that much because it's selling subscriptions, not a one-time service. So companies will focus more on creating deep relationships with existing customers than on attracting new customers. Marketing will become less visible - a private affair between consumers and the companies they buy from.
The business model I love most is the Book-of-the-Month Club. You give the company permission to make buying choices for you. Why can't lots of other companies operate this way? If I were advising Amazon.com, I would tell [CEO] Jeff Bezos to stop engaging in price wars with Barnes & Noble and to start his own version of the Book-of-the-Month Club. Instead of creating just one club, he could create thousands of clubs, each one tailored to the preferences of certain customers. I love business books. Once a month, in my email box, I should find a message about the four business books that Amazon.com thinks I should read. I'm willing to give Jeff and his people permission to make choices for me. In that sense, I am willing to subscribe to Amazon.com.
At the same time, Jeff's competitors will have to try to convince me to switch to them - as expensive as that may be. And this is the second big shift: Forget interruption marketing as we know it today. Tomorrow I'll have someone or something that negotiates on my behalf. Every time a company wants me to pay attention, it will have to offer some tangible benefits. Essentially, companies will have to pay me to listen to their ads.
The flip side of this change - and this is the third big shift in marketing - is that less and less content will be free. You will pay for things you don't have to pay for today, because interruption-based advertising will not be able to subsidize them anymore. And if you're not willing to pay for content, you'll have to put up with a world filled with even more interruptions. We're living with this shift already. You can pay $4 to see a movie without interruption, either on video or through pay-per-view. Or you can wait a year, see it for free on network television, and endure constant interruptions. More and more entertainment will end up working this way.