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Will you be with the force?

Monday 29th May 2000

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Eforce is banking on viral marketing to deliver 50,000 active customers. Good luck, says Dwight Whitney

James Woodhill is clearly not impressed.

"This site will be lucky to last a year," he crows on Eforce's chat site.

Who is James Woodhill? Not a learned cyber-commentator, nothing so profound. Woodhill is just an ordinary "netizen" - albeit one who, so far, hasn't liked what he has seen of the new consumer e-commerce portal, Eforce.

The portal is effectively a consumers' buying club: by aggregating thousands of shoppers, Eforce hopes it can negotiate cheap deals on consumer products and services like magazines, telecommunications and travel. Meanwhile, it can also sell its huge consumer database to advertisers and marketers.

If the vote of disdain proves prophetic, it signals early trouble for Eforce, the timber company turned Net start-up. For Woodhill and his ilk represent what the creators of Eforce need most: people - cyberspace's version of bums-on-seats. And lots of them. To reach breakeven on its "aggregated buying" venture, Eforce needs at least 50,000 active consumers - or, in the words of creative director, Paul Fairbairn, "the number required to really make the site hum".

Fifty thousand active customers is a lot. To give you an idea of how many that is, try these numbers: established magazines like North & South and Cuisine have circulations much less than that. The Golden Wing lounge has fewer going through every month.

Marketing experts, such as media analyst Chris Mules and ad man Stephen Pearson of Lowe Lintas (formerly Ammirati Puris Lintas), don't rate Eforce's chances. Pearson says Eforce lacks the killer punch that will force members to get involved. Fairbairn and company disgaree and are pinning their hopes, initially at least, on the same Web-based viral marketing techniques proven by such winners as Hotmail and Netcentives.

How to get 'em

An old shampoo ad best described viral marketing: "you tell two friends, and they tell two friends and so on, and so on, and so on".

Eforce's version is a 100-day recruitment drive, launched on April 12. It rewards new members with the chance of winning an iMac computer every day. By convincing a friend to sign up, you stand to win again, and so on. On the last day members could win a VW Beetle.

Using that approach, Fairbairn says, "based on the pre-launch sign ups of 150-a-day coming on board and bringing others, we could see the whole New Zealand online community as Eforce members within 16 days."

Yeah, right. But if Hotmail is anything to go by it is achievable. Starting with the compelling proposition of a free Web-based email service, Hotmail had signed up 12 million subscribers within 18 months. The pace has since quickened to where the service now has 34 million subscribers, averaging 150,000 sign ups a day. From product launch onward, the company (now owned by Microsoft) spent only $US500,000 on marketing. The rest was done using a "refer-a-friend" business model (the cornerstone of Eforce's strategy). At the base of each mail is the simple endorsement - "Get Your Private, Free Email at www.hotmail.com". Its rival for "king of the free email jungle" status is Juno, which has already spent more than $20 million on conventional advertising to try to close the gap. To date it's still eating Hotmail's dust.

The term viral marketing, was developed by venture capitalists Draper Fisher Jurvetson, and is employed by other Web businesses Mirabilis, Homestead, Netcentives, and the site Eforce has modelled itself closely on - Mercata. By early May - about one month into the TV campaign - Eforce had signed up about 21,700 members. Not a bad start.

How to keep 'em

But if creating a community of over 50,000 members sounds like a big ask, how about sustaining their interest and participation to keep on spending? Keeping the community "humming", Eforce believes, will come from the services the site offers members. Six are planned, three are either "online" or about to be launched:

  • Powerchoice: giving consumers an easy-to-use tool to compare the prices of power companies;

  • Cobuy: "pooling" community buying power to secure better deals - so far on things like magazine purchasing; and

  • GoNow: targeted, tailored and "dynamically" priced travel or holiday packages.

The idea comes from the unlikely pairing of Mark Fulton and Paul Fairbairn. A dry-as-nuts numbers man, Fulton has an MBA plus management experience, but took a year off to study the Internet. Fairbairn is founder of Imagic - a Christchurch-based Web design consultancy. He has been the force behind some major brands - including Air New Zealand, IBM, Harcourts and Merino NZ (winner of the supreme Marketer of the Year Award in 1999) - making the leap into cyberspace.

The two sold the idea to troubled, listed timber company, Paynter Timber.

Coming from two different fronts they came to the same conclusion: most successful e-ventures rely on having a credible, recognisable and sustainable brand. Close your eyes and words like Yahoo, Amazon and AOL will appear, they say. By being brand dominant you can achieve and maintain critical mass over any competitor.

Job one, says Fulton, is to very quickly: "establish connection with a large group of people who, in a sense, are the force behind our business. Our job will be to pull them together, and leverage their purchasing power across a range of products and services. We must also establish a co-operative flavour, a sense of community, but be mindful of what is driving their involvement - best price and best value."

Fairbairn agrees, but sees some other components that will be critical to success covering not just pricing, but the mechanism of access, convenience, ease and efficiencies and the "on site" experience.

The all-important brand development is happening on two fronts, Fairbairn says. Conventional media, formerly the mainstay of any programme, plays a small part. The spend is paltry - $33,000 on online banner advertising, $160,000 on off-line print and $110,000 on television. Its job is simple - to alert prospects of Eforce's existence and lure them to the site - created by Fairbairn to be "hip, cool, in keeping with the major demographic on the Web in New Zealand but still simple with a bit of retro feel".

The main front for brand development is, of course, viral: get their membership, get them participating, and turn their involvement not just into an "information making" machine but also a virus.

Jury is out

But will the viral marketing model, proven in overseas contexts, be workable in New Zealand? Eforce is also, through its amalgamation with Auckland-based Product Sourcing International and Fairbairn's Imagic (pending due diligence and shareholder approval in May), diversifying the risk and going after the even bigger spoils of business-to-business e-commerce.

However, Eforce's current energy is focused on making the online consumer portal the dominant player in the New Zealand infomediary/aggregated buying contest.

Are founders Fulton and Fairbairn - not to mention the parties at Paytner Timber who voted to divest their milling assets and recreate the publicly-listed company as a dot-com company - doing the right thing? They would argue, with 4000 members signed up even before the official launch on April 12, Eforce is on a roll.

Media analyst Chris Mules, with e-venture expertise gained in the United Kingdom, identifies the challenges but wonders whether Eforce is up to them. "Eforce looks to me to be trying to do an Amway on the Web: to build up a critical mass of 'club' members, and use this to get bulk-buying leverage over suppliers. The challenges are three-fold: to supply enough benefits in the initial stages to attract members; to sustain member enthusiasm by generating a sense of exclusive community and participating in something innovative and powerful; and then to deliver the sort of benefits that members will value."

Pearson has even more reservations. "Success in e-commerce depends on clarity of purpose, enough people identifying with that purpose, proof of delivery, sufficient [numbers of] eyeballs visiting the site and a compelling reason to take action once you've got there and then over and over and over."

Acknowledging Eforce is in early days, Pearson has some niggles.

The message: he gives it six out of 10. "The message is clear but not that powerful."

For sufficient people identifying with community: five out of 10. "Collectives, unions, car pooling and communal vegies haven't thrived yet, will Eforce do it better?"

Proof of delivery: two out of 10. "Calculations used for my Mercury Power bill were way off any of their options. Also, two other deals were magazine subscriptions for titles that seemed to be way off the reading matter of the target audience."

Sufficient eyeballs visiting: "Whatever they do to lead people to the site better be hot."

Compelling reason to take action: five out of 10. "Their seven reasons to join are weak - the first two are purely promotional, the last is that it's free. Please!"

But if it succeeds ...

Hard task, yes, but the logic of the idea and the rewards available are compelling. In essence, Eforce wants to become New Zealand's leading "infomediation" service. Once lured into active membership through constant offers and awards, consumers will be encouraged to think of Eforce as the "information factory" - the source of credible consumer information, deals and real savings.

In return, consumers provide personal information about their product and service preferences, hobbies and interests. Just the sort of information the providers of the original products and services are willing to pay for in either sizeable product/service discounts for the infomediator (say, 30%, which can then be passed on to members for 20%), or in money. This is a perfect application for the Internet and one being replicated in a host of different forms such as specialist guild-type businesses, for example, consultant site guru.com and consumer-to-consumer sites like eBay.

These days, information is the real commodity. If Eforce can convince enough suppliers and buyers to trade information on its site, clipping the ticket both ways could be a winner.

Dwight Whitney is an Auckland-based marketing writer

Bond Offer: Infratil Ltd, 7.2 year & 10.2 year unsecured unsubordinated bond


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