Seth Godin, founder and president of Yoyodyne Entertainment Corp., delivered a warning Tuesday to bankers who see the Internet primarily as a tool for taking costs out of traditional processes.

Using the Internet just to improve efficiency will "come back and bite you," he said. "I fear banks are about to cost-reduce themselves out of business."

Mr. Godin, whose company specializes in Web-based relationship marketing programs, said the Web's core strength is its ability to improve companies' ties with customers, but banks have yet to capitalize upon this.

In an entertaining address kicking off the second day of American Banker's OnLine '98 conference, Mr. Godin outlined the problems companies face in reaching customers, and how the Internet can be used to surmount them.

The central problem facing modern marketers is clutter-too many companies running too many ads have made the public numb to most traditional forms of advertising and promotions. It was not always so: When, during his speech, Mr. Godin said, "Winston tastes good" and stretched out his arms for a response, the audience promptly chanted back, "like a cigarette should." This ad, he said, last ran in 1963.

Over the years, though, consumers have grown weary of getting "poked" by unwanted ads and marketing material. Mr. Godin's remedy: permission-based marketing, which uses the interactivity of the Internet to let consumers have a say in what promotional material is sent to them.

A most basic permission-based marketing campaign would send an e-mail asking if a customer wants information on a particular product. If the customer responds affirmatively, the bank can send the information. The benefit to asking permission is that once it is given, a company can have some confidence that its message is wanted and will be read.

Mr. Godin compares permission-based marketing to dating. If a company conducts itself well in its first contact with the consumer, it will build trust that encourages the consumer to open up more and more on subsequent "dates."

The ultimate goal is to receive from the customer what Mr. Godin jokingly calls "intravenous permission"-the kind of freedom-of-discretion a doctor possesses in administering drugs to a comatose patient.

Mr. Godin outlined several hard rules of permission-based marketing:

Permission is nontransferable. The information and permission a bank gathers must not be sold, exchanged, or used in a way that betrays the trust built by the program.

Permission can be revoked at any time. "Once someone says 'no more,' it's instantly over," said Mr. Godin. He noted that America Online is learning the hard consequences of violating this rule. The world's leading consumer on-line network has been using pop-up ads that "poke" users, and the practice is alienating customers, Mr. Godin said.

Permission must be nurtured. It is a two-way street. If consumers are to take the time to read material, they must get something in return, such as a discount coupon or an entry into a contest.

Summing up, Mr. Godin predicted, "We're going to see a small oligopoly of companies that have large amounts of permission." These will be the winners in the on-line world.

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