Multichannel Retailing: A Complex Marketing Ecosystem

Last month, I had an e-mail exchange with Jim Fulton, author of two of the most popular posts in MineThatData history. We were discussing whether the online channel was more similar to the catalog channel, or the retail channel. Earlier today, I had an e-mail exchange with fellow Green Bay Packers fan Jeffrey Hassemer about the ecosystem our catalog, online and retail channels currently reside in.

A similar theme from each conversation arose, the idea that our multichannel retailing environment has become a gigantic ecosystem, full of inter-dependencies that executives did not have to deal with a decade ago.

In 1994, a catalog executive had the illusion of control. She decided that she would have 17 in-home dates. She decided how many pages she would have in each catalog, she decided the merchandising assortment, she determined the creative treatment. Her decisions about when catalogs were mailed, circulation depth and list, page counts, and merchandise assortment yielded a predictable amount of demand, so predictable that a call center and distribution center could be reliably staffed on the forecast of volume generated from the catalogs. If the executive wanted her business to be a $100,000,000 business, only cash, the availability of quality lists, and the ability to forecast and acquire inventory stood in her way.

Let's assume that in 2006, the catalog executive is still in charge of what is now a business that is at least 50% catalog and 50% online, if not skewed more online than catalog.

A giant marketing ecosystem now controls her business. Our executive manages a catalog housefile, an online housefile, and an e-mail subscriber list. Twelve years ago, the catalog executive mailed one catalog that drove $5,000,000 in net sales. Today, she mails two catalogs, eight e-mail campaigns, one-hundred affiliate programs, two portal deals and various search programs to drive $5,000,000 in net sales. Couple that with another $3,000,000 in net sales that are organically generated via the website, and it is obvious that our former catalog executive is living in an out-of-control marketing ecosystem.

Maybe the most challenging transition that direct marketing executives have had to make is the trasition from being "in-control", to allowing the marketing ecosystem to be in-control. Twelve years ago, the catalog executive made decisions, and saw the cause-and-effect of her decisions within a few days of the catalog in-home date. Today, that same executive makes twenty times as many decisions across a veritable plethora of marketing vehicles, and achieves far less control over the outcome.

In the Pacific Northwest, we closely monitor the health of our Orca Whale population. These whales live in a complex and dynamic ecosystem. Their health is impacted by pollution, the quantity of salmon, weather, proximity of tour boats, the number of times our military hurt their hearing system with sonar, the number of transient Orcas passing by. By managing these factors, we can influence the health of the Orcas.

In a similar manner, we direct marketers now "influence" the health of our business. The marketing ecosystem is made up of numerous factors that interact with each other, causing unusual and unpredictable outcomes. No longer is a decomposition of each strategy reasonable. The combination of strategies cause interactions that impact our business. Executives who think in a linear, cause-and-effect manner might struggle in this multidimensional ecosystem.

Over the next several months, I plan on exploring the interaction of products, brands, channels and marketing strategies. Let's have a lively discussion about how direct marketing has changed, and what can be done to better understand our direct marketing ecosystem.