Response From Catalog Choice: Marketing Strategy

The direct marketing community expressed considerable interest in yesterday's post, entitled "Catalog Choice: You Decide What Gets In ... Except When They Market Catalog Choice Webinars To You". This essay is one of the most read articles of 2008, and has been forwarded via e-mail at a rate far greater than the typical article. Many of the world's largest catalog brands frequented the site today to read about a Catalog Choice webinar marketing strategy that is, for all practical purposes, the same strategy they are encouraging the catalog marketing community to change.

A response from Chuck Teller of Catalog Choice can be read in the comments section of the original post. If you have interest, please review the response (click the link above) and offer our community of nearly 1,200 daily catalog, multichannel, e-mail marketing, online marketing, and web analytics subscribers your thoughts on the topic. Thank you to Catalog Choice and Mr. Teller for offering a comment.

Catalog Choice: You Decide What Gets In ... Except When They Market Catalog Choice Webinars To You?

Catalog Choice has been a blessing for consumers who do not wish to be marketed to via catalog advertising. When my clients ask for advice, I recommend they partner with Catalog Choice. Honoring customer requests is a good thing! Catalog Choice is like a "widget", if you will, and can be used to make the opt-out process easy.

This past week, Catalog Choice used marketing techniques that are very similar to those employed by catalog marketers. Allow me to explain what they did. I will ask you for your thoughts at the end of this essay.


Thursday, June 19: I receive the following e-mail from Catalog Choice. Please click on the image to enlarge it.


There are several things that are unique about this e-mail marketing message / webinar invitation.

1. I did not opt-in to receive marketing messages from Catalog Choice. They chose to send this marketing message to me without previously obtaining my permission to receive marketing messages from them.
   
2. The "from" line of the e-mail message is from an individual at a PR agency. The subject line does not mention Catalog Choice. The body of the e-mail message is from a staff member at Catalog Choice. I'm not sure where this stands from a can-spam standpoint. At minimum, the strategy is not aligned with standard e-mail marketing practices.
3. The PR agency employed by Catalog Choice graciously agreed to answer my question about how they received my e-mail address (they visited my website and copied the e-mail address), an act I appreciate.
   
4. The e-mail message does not offer me a link with the option to opt-out of future Catalog Choice e-mail marketing campaigns.
5. The privacy policy at Catalog Choice suggests that they may collect information on users, should the user ever send an e-mail to Catalog Choice (I previously responded to an e-mail from Catalog Choice. and may have sent an e-mail to Catalog Choice in the past). Catalog Choice offers an individual like me the opportunity to opt-out of marketing communications by e-mailing them at a unique e-mail address. Catalog Choice offers the following language, regarding volunteered PII: "Limitation of Liability By providing us with any PII you expressly and unconditionally release and hold harmless CatalogChoice, and our subsidiaries, affiliates, directors, officers, employees and agents from any and all liability for any injuries, loss or damage of any kind arising from or in connection with the use and/or misuse of your collected PII."

Wednesday, June 25: I received a phone call from Catalog Choice, asking if I was planning on attending their webinar.

1. I never gave my phone number to Catalog Choice.
   
2. I never gave Catalog Choice my permission to market webinars to me via telephone.
3. My phone number is part of the national do not call registry, though I give it out to my clients, family, and to potential clients at business-related conferences. It is probably true that .org brands can market to the do not call registry.
   
4. Catalog Choice volunteered to me that they obtained my phone number from a presentation I gave in early 2007, a presentation they found via a hyperlink online. My thanks to Catalog Choice management for being honest and forthright about answering my questions.
5. Catalog Choice did, via e-mail and during the phone call, offer to remove me from future marketing campaigns, good for them!
6. I did not get to have a say (in advance) in the marketing frequency employed by Catalog Choice. In other words, I did not get to say whether I wanted one or two or seventy marketing messages. This is comparable to the practices of the Catalog industry.
   

Why Is This Important?

Catalog Choice goes by the tagline ... "you decide what gets in". When it comes to catalog marketers, Catalog Choice aims to give consumers control over what goes in their mailbox. When Catalog Choice markets to me, the marketing strategy is comparable to the practices of the Catalog industry, practices Catalog Choice are hopeful to change within the Catalog industry.

We also know the following:

1. Catalog Marketing requires that forests be harvested, potentially damaging the environment.
2. E-Mail Marketing uses electricity and plastics (computers/servers), often sourced from coal and petroleum, potentially damaging the environment.
   

Obviously, Catalog Choice has a right to run their business model as they wish, a business model that benefits consumers, catalog brands, and the environment --- win/win/win.

Here is my question to you, the e-mail, online marketing, multichannel, and direct marketing leader who subscribes to this blog:

• Is it reasonable for an organization to strongly request that the Catalog industry institute permission-based marketing, yet in their own marketing programs execute the very strategy that they are trying to get the Catalog industry to stop?

I am torn by this topic, since I have always recommended Catalog Choice to my clients. I genuinely believe that Catalog Choice means no harm. It is my opinion that they simply did not think through the parallels of their strategy and the very catalog marketing strategies they are trying to influence, making this an honest mistake. My hope is that the Catalog industry and Catalog Choice can have a strong, collaborative, and beneficial relationship. My hope is that, in the future, Catalog Choice employ marketing strategies consistent with those they wish to encourage Catalog marketers to adopt.

I'd appreciate your thoughts in the comments section of this post. Please forward this post to your colleagues, as the topics outlined are worthy of general discussion in the direct marketing community.

Does This Work?

You are sitting in your cubicle or lushly furnished corner office. Marty from the mail room delivers your daily dose of good news, courtesy of the post office.

This postcard is in the stack.

Do you turn the postcard over to learn more about the marketing message, or do you toss this in the garbage can?

Is there a "right" way to execute B2B postcard marketing?

Paid Search And Catalogs

So many of my Multichannel Forensics projects now include both referring URL information and catalog / e-mail promotional history.

When you have this type of information, you quickly notice that customers blend advertising strategies into a slurry of confusion that results in the same purchase the customer used to place with you fifteen years ago.

This caused our industry to dive head first into matchback analytics. We try so hard to allocate every order that happened in the past.

It might be time to view the future.

In other words, we can measure past relationships, modeling them to see what a customer might do in the future.

For instance, I notice that some customers use paid search and catalogs as a combined effort, then use paid search and e-mail as a combined effort, then use paid search, then simply purchase without the benefit of any advertising.

Identify these customers, mail fewer catalogs to them, and focus ad spend on customers who require various forms of marketing to place orders.

Mistakes Happen

One of the more difficult challenges when having a public voice is knowing when to be humble, and when to criticize.

All of us, at one time or another, critique brands for their failures. Big brands have more employees, making them infinitely more likely to make mistakes.

When you are a small business or sole proprietor, mistakes are much less frequent. But every once in awhile, you go and unintentionally do something like Andy did.

Before we pick up the aluminum bat and club big dumb brands over the head (something I've done) for their foibles, we need to be very wary of the day when we ourselves blow up in an epic manner.

E-Mail Marketing Gurus: Your Thoughts On Williams Sonoma

The e-mail marketing blogosphere has been buzzing lately, suggesting that we minimize campaign based blasts in favor of targeted, relevant, personalized messages that the customer eagerly anticipates. Sounds good to me!

And then a few weeks ago, Williams Sonoma mentioned that they have eighteen million opt-in e-mail addresses, across all of their brands.

So my question to all of us who share a belief in relevant, targeted e-mail marketing is this: How would we accomplish this feat for eighteen million unique customers who have multiple relationships and multiple e-mail addresses across multiple brands and multiple channels and multiple stated preferences?

And if we can answer the question effectively, how do we do this when we don't have the systems infrastructure to do what we want to do? It's really easy to blast big brands for their silly practices. How would we solve the problem when faced with real life constraints?

Discuss.

Matchback Bias

You're probably partnering with your list organization, data warehouse vendor, or co-op on the never-ending scope of matchback analytics.

The goal, of course, is to prove that catalog marketing is a vital piece of the modern marketing puzzle. You're trying to truly understand the ROI of this activity. That's why you try so hard to attribute every online order back to one of the dozens of catalogs you mailed in the past year.

Now let me ask you this.

Do you go through the same effort to attribute every phone order back to the original online source?

You don't?

I met with a business that is doing just that. They combine their web analytics tool and their matchback analytics platform to attribute phone orders back to the online marketing activity (which is usually organic/natural search) responsible for driving the phone order.

Why is it that our industry is so bent on proving that catalog marketing drives online orders, but doesn't invest the energy to prove that online marketing drives phone (and store) orders?

Our view of the world is biased, folks. And that bias favors co-ops, printers, the USPS, the paper industry, and the list rental/exchange industry.

Your thoughts?

Geek Alert!! Channel Preference And The Hyperbolic Tangent Function

The final step of most of my Multichannel Forensics projects involves predicting channel preference.

This is an important step, because customers that are likely to purchase from self-serve channels in the future (online, stores) may require less advertising than customers who purchase from full-service channels (catalog ordering over the telephone).

A handy mathematical transformation for estimating channel preference in a two-channel situation is the "Hyperbolic Tangent Function" (this was used extensively at Lands' End in the early 1990s to isolate customers likely to return most of their merchandise, allowing us to suppress mailings from these folks).

In the modeling process, you assign your dependent variable a value of -0.999 (telephone), and the other channel a value of +0.999 (online). If a customer splits dollars across both channels, the value is 0. If the customer splits dollars 2/3 phone, 1/3 online, you do a weighted average, yielding -0.333.

Then you transform the dependent variable ... (0.5)*LN((1+x)/(1-x)), where x is the value listed above.

Now you run your ordinary least squares regression against the transformed dependent variable, predicting the channel customers will purchase from in the future.

The current customer file is scored using this model. Once each customer has a score, you transform the score back to a numerical value ... (EXP(2*s)-1) / (EXP(2*s)+1), where "s" equals your score.

Customers with a highly positive prediction are likely to buy online (in this example), and therefore, may not need catalog advertising.

This works for e-mail marketing as well. If you are an online pureplay, -0.999 represents customers who do not ever buy from e-mail marketing, +0.999 represents customers who always buy because of e-mail marketing. Score the file, identify those likely to require e-mail marketing to purchase, and market accordingly.

The typical process employed by many online and catalog marketers these days involves the following steps.

1. Run a Multichannel Forensics analysis on the customer file to determine channel migration patterns.
   
2. Predict the probability of purchasing in the future using Logistic Regression.
3. If the customer purchases, predict future spend per purchaser using OLS Regression.
4. Multiply Step 2 by Step 3, yielding future spend.
5. Calculate future ad spend per customer, or model the relationship ... the relationship is built on the incremental value generated by advertising, not all demand spent by the customer.
   
6. Calculate future profitability by individual customer.
7. Use OLS Regression and the Hyperbolic Tangent Function to calculate channel preference.
8. Given profitability and channel preference, create a contact strategy for each customer.

When done well, the online or catalog brand can identify ad savings that can be re-allocated to customer acquisition activities.

Audience Development: Here's A Mistake I Made

Back in November, I asked readers what they wanted to learn about. I received many responses from folks who wanted to learn more about my thoughts concerning Catalog Choice.

So I spent a lot of time writing about Catalog Choice in December and January.

Traffic, and more important, subscribers, increased by almost 20%. Almost instantly!

Good for Kevin, right?

Wrong.

Audience development is all about cultivating the right audience. In my case, I attracted an additional two hundred subscribers, folks who were actually offended by some of the topics I wrote about. I received e-mails from individuals who challenged my integrity and knowledge of my industry. All of a sudden, a vocal minority didn't like me!

I developed the wrong audience.

I began to receive unsolicited e-mail from organizations friendly to Catalog Choice, asking me to help spread the word about various ecological issues (ironic, given that stopping unsolicited mail is the objective of the folks marketing to me --- but unsolicited digital mail was ok).

When I stopped covering Catalog Choice, subscriber counts plummeted. The unsolicited e-mail campaigns slowed, but to date, have not stopped. It takes a lot longer to correct an audience development mistake than it takes to build a non-congruent audience.

For direct merchants, building a productive customer file is probably second to merchandising in importance. And yet, we make mistakes comparable to the mistake I made all the time.

I purchased an item from a company six months ago, at full price. Since then, nearly every e-mail campaign sent to me by this brand offers me up to sixty percent off my next purchase, if I use the code offered in the e-mail campaign. Clearly, this brand is trying to develop an audience that enjoys the thrill of "x" percent off merchandise offerings.

An executive recently told me that his e-mail marketing list of over a million individuals only responds to free shipping, buying more than four times as much merchandise if free shipping is offered than if it isn't offered. He developed an audience that only responds to free shipping. He cannot get away from free shipping unless he develops a new audience. It won't happen by wishing, only by hard work.

I've made countless mistakes developing an audience that enjoys and participates in Multichannel Forensics. Let's learn from our mistakes, let's develop audiences relevant to the niches we serve.

E-Mail Marketing And Customers Who Return A Lot Of Merchandise

Sometimes, our instant access to metrics cause us to screw up.

This happens to most of us.

1. We execute an e-mail campaign on a Tuesday morning at 9:00am.
2. By 10:27am, we have a forecast for how well the e-mail campaign will perform. We know open rates (or render rates as the experts now say), click-through rates, and conversion rates. We may even know $ per e-mail.

Three weeks later, twenty percent of the customers who purchased from the e-mail campaign returned their merchandise for a refund.

Did the e-mail marketing campaign work?

One of the things we can do is identify customers who are "high returners". I've done this analysis for many companies. Typically, a small subset of the audience (maybe 1% to 5% of your twelve month buyer file) are responsible for a disproportionate amount of returns.

An easy way to address this problem is to identify customers with a high return rate, and see if those customers will have a high return rate in the future. If so, you run a profit and loss statement on future sales. You talk to your folks in finance, folks who know the actual cost to process each item returned to a company.

At Eddie Bauer, we knew that if a customer had ordered at least three times in the past, and returned two-thirds or more of the merchandise she purchased, she would be unprofitable to market to in the future.

In e-mail marketing, this one is a slam dunk! You simply create a suppression list for this tiny subset of the customer file, and don't send e-mail marketing campaigns to this segment.

And then you bask in the glow of the increase in profit you obtain because of your strategy.

You are likely to see a drop in your metrics --- high returns customers are typically your most active customers --- they open e-mails, they click-through to the website, they buy stuff. And given your returns policy, you should let them buy stuff. However, there is no rule that says you must also market to the customer. So generate additional profit for your company. Stop e-mailing customers who return too much merchandise!

New Catalog Marketing Blog From Belardi / Ostroy

For those of you who enjoy catalog marketing, here's a new blog from the folks at Belardi / Ostroy, called "Directly Speaking". Give it a try!

Attention Catalogers: Co-Ops (Abacus) And Matchbacks

If you do customer acquisition via catalog marketing, you undoubtedly elected to drink the co-op kool-aid. And why not? Based on our reporting (sometimes provided by co-ops like Abacus), co-op lists outperform outside lists.

I've mentioned this before, and I want to mention it again, because the topic keeps coming up in various projects I work on. Co-op customers tend to be more likely to purchase over the telephone than rental/exchange customers.

And since phone orders are nearly 100% attributable to the advertising vehicle sent to the customer (whereas online orders are at best semi-attributable if matchback analytics are performed properly), co-op names may "appear" to perform better simply because of the channel preference of the customer selected by the co-op.

This has long-term implications for the brands we shepherd. If co-op names work "best", with co-op customers more likely to order over the phone, we then "have" to mail catalogs in the future to get the demand. And by having to mail catalogs, we have to keep feeding the entire catalog ecosystem --- printers, merge/purge houses, USPS, the paper industry, and the co-ops.

By feeding the catalog ecosystem, we anger some customers and prospects, which feeds the rampant growth of Catalog Choice.

We create our own problems, folks!

If you are a heavy user of co-ops, please consider extensive matchback analytics. At minimum, use the Migration Probability Table as outlined in Multichannel Forensics to understand future channel preference of co-op sourced names. You're in for a treat if you do!

Effective Use Of Your Database

At some point in the past five years, you probably invested in your customer database.

Maybe you built a series of normalized tables ... elegantly designed in a way that would make any IT professional proud. Maybe you hooked up Business Objects or MicroStrategy to the database, believing that you could answer any question you could think of.

Maybe you integrated your web analytics tool with your centralized customer data warehouse, expecting lightning bolts to appear from the sky about the casual visitor who browsed eight important landing pages before buying something in the store.

Or maybe you outsourced your database to a quality vendor who specializes in said activity.

I'm guessing that you're still dissatisfied with what you have.

You've probably learned the following equations:

• People > Database Design
• Database Design > Software
  

In other words, when crafting your database marketing platform, you focus on people first. One gifted query analyst or statistician means far more than any database you'll ever design. Far more!!

Database design means more than software. You need a series of summarized tables for campaign management. Don't ever let your software vendor or IT leader tell you not to store detail-level data (one row per item purchased, one row per page viewed). Your data expert needs the detail-level data to answer all the questions that cannot be answered by summarized fields.

Once those two aspects of the equation are solved, get good software.

Effective use of a database requires us to realize that people are more important than database design, and that database design is more important that software. This spring, many of you are communicating to me that your organizations view this the other way around ... you are outsourcing your analytical staff to India, you are outsourcing control of your databases, and you are relying on simple BI tools to query against summarized fields that don't adequately answer questions.

Let's turn this trend around!!

Rebuild Your Database Marketing Department: Wrap-Up

Lather, Rinse, Repeat

Once you're knee-deep into year two, you'll realize that not everything went the way you thought it would go.

Your web analytics expert quit, leaving you in a bind.

Your e-mail vendor was bought out by another company, causing a temporary reduction in service and a new account manager to be assigned to your team.

Paper and postage costs required you to reduce catalog circulation by thirty percent.

You over-invested in e-mail marketing frequency, actually causing a loss, not the profit increase you promised.

You listened to the pundits and started a blog, only to be told you are behind the times and that you should be on Facebook, only to be told you are behind the times and should be on Twitter, only to be told you are behind the times and must be on Plurk ... all in a six month period of time!

Keyword inflation caused you to have to increase your paid search budget, and that increase caused you to not invest in your customer information systems.

A sour economy caused you to have to downsize your team by fifteen percent.

By the end of year two, nothing looks the way you thought it would. The world changed. It is your responsibility to change with it.

This means you have to start the rebuilding process all over again.

Given what you and your team learned the first time around, you'll be much better at the process this time.

This time, delegate the majority of the process to the leaders who work for you. They'll be tired of your antics if they have to implement your ideas all over again, just two years after starting the process. Put them in charge of the process, and where possible, embrace their ideas.

Life has a way of repeating itself every two or three years in the direct marketing world. There are natural business cycles. People have unique career interests. Systems need to be refreshed. Technology causes us to re-work our processes. The rebuilding process begins anew.

Hopefully, this series provided you with a framework for thinking about how to navigate challenging times.

Lather, rinse, repeat!

Rebuild Your Database Marketing Department: Org Structure

The third most asked question is "how should I structure my database marketing department?"

Too often, we're served an endless array of pap about abandoning "silos". You know all about silos. Silos are the org structure where functional areas work together and sit together, working sometimes without knowledge of what somebody else is doing. The e-mail marketer doesn't know what the catalog marketer is doing, the web analytics expert doesn't know when an important telemarketing campaign is happening, yadda yadda yadda.

You don't solve these problems by putting all of these departments under one individual. I've observed horrible problems created by a centralized and powerful team that "make the rules". I've also observed horrible problems created by silos.

So what's the answer?

Try hiring somebody (and give this person the authority to make decisions) who collaborates between silos. Think about States. Here in Washington, we have different laws than the folks in Oregon have. Yet as a loose federation, States have rights to do things their way, but theoretically benefit from a centralized government in Washington, DC, where they receive proportional representation (house) and equal representation (senate).

We can debate about how government is mucked-up. But the concept of having somebody coordinate activities between "silos" works. The individual must have the right personality --- an extrovert who gets folks to do things without direct reporting relationships is hard to find.

In instances where I've seen different marketing disciplines get along, there is always somebody who "makes this happen". This person is seldom the actual leader of any given team --- it is usually somebody who simply takes responsibility. She might be a circulation manager who gets the e-mail folks to talk to the web analytics team (I see this all the time). He might be the business intelligence Director who needs to get the retail marketing folks to talk to the paid search team (I see this one too).

If you're looking for a career niche, this is one that will need highly qualified individuals over the next five years.

I'd focus on finding a person who fills this role more than trying to identify the perfect org structure.

Executive Comments From Leading Brands

Williams Sonoma:

• "We froze our merit increases for the year for our associates, while at the same time we reviewed every associate's compensation with the market and if they were not in line with the market, we did correct that." KH: Try being an employee with no salary increase and fuel costs rocketing skyward. Long-term, employees nationwide will have to find a way to organize or to gain leverage.
  

• "What we are always doing is looking at the productivity of the last catalog mailed versus the next dollar that we can spend on paid search, and over the past couple of years, we have been able to intensify the efforts in search and reduce some of the marginal catalog mailings."

• "We have eighteen million customers who have opted-in and given us their e-mail address". KH: To the e-mail community --- how do you craft an e-mail program, individualized for eighteen million customers? Any ideas?
  

Costco

• "We and Sams continue to be fiercely competitive ... and we are both in each other's warehouses more than once a week shopping key items."

Ann Taylor

• "Internet is a very profitable business segment for us. Within the Ann Taylor division it represents about 10% of the total division’s sales and something less than that for Loft."

Limited Brands

• "Although the Direct business is $1.5 billion, it is the fastest growing channel. We will continue to see growth out of that channel. What you are going to see is within the catalog business. We will not mail as many catalogs or pages. It will still be a heavily integrated web-based business. The community piece is continuing to build and how do you play within the community, which is a new marketing target for us. I think also how do you think about step size, like VS - you know we have VSPink.com and how we are linking that back to the mother ship, and there is some exciting things there. We started to test mobile commerce, and it is just beginning touching in the water so, it may not be a great experience but you get on your mobile phone and you can place orders and through Catalog Quick Orders. It is amazing how many people have already responded to that test. You are starting to see a lot of that in Japan. As our technology and zones continue to upgrade in the United States, I still think that there is some interesting opportunities there."

Urban Outfitters

• "Direct to consumer sales surged by 34% with just 3% additional catalog circulation, with all three brands contributing meaningfully to the result."

• "All three brands continue to innovate in direct to consumer business. For example, Anthropologie began shipping internationally last quarter, Free People introduced product reviews and Urban Outfitters expanded its use of video, generating more than 17,000 YouTube views on its most successful clip."

Macy's

• "The key there is that Bloomingdales.com has a huge potential and we think that that is where we should be investing our resources as opposed to the catalog, and it will have a minor impact on sales and no impact on profit as we discontinue that in 2009. ... We are expecting to do $1 billion this year in volume in our direct businesses and we expect it to continue to grow significantly from there."

Hillstrom's Multichannel Secrets At Lulu.com:

What Is Most Important In Web Analytics?

RSS/E-Mail Subscribers: Visit the homepage and take this month's survey:

What Is Most Important In Web Analytics?

• Great Software
• Great Analysts
• Best Practices
• Great Database Integration With Other Data Sources And Channels
• Sr. Management Uses The Findings To Improve Profit

Rebuild Your Database Marketing Department: KPIs And People

Two questions come up all the time. Let's talk a bit about them.


Question #1: What are the two or three key metrics, KPI's (key performance indicators), that I should track in order to make sure that my business is being managed successfully?

Answer: Two or three? Try two or three hundred! I'm frequently asked about the half-dozen metrics that should be included in a management dashboard. Our businesses have become complicated, folks. In fact, they were always complicated, we just didn't have the proliferation of channels to help us understand how complicated they were.

Sr. Management seems to like monitoring two or three metrics, so make life easy for them. I personally monitor rolling twelve month buyers (new and existing), orders/buyer, items/order, price/item, repurchase rate. These metrics seldom steer you wrong. I also like creating a "comp customer" segment --- a definition of customers that does not change over time (though the customers in the segment change all the time). I monitor comp customer segment performance each month, reporting it like one reports comp store sales changes. This is the indicator I look to, to understand the health of my merchandise assortment.

But honestly, there are two hundred or three hundred metrics all of us should be tracking, across all advertising micro-channel, all physical micro-channels, and across all functions in the company (inventory management, creative, human resources, you name the department, there are metrics that should be tracked).

I'd have a notebook of hundreds of metrics, only sharing the ones that "tell a story" about why the business succeeded or failed that month.


Question #2: Can you tell me if my analytics person, e-mail marketing manager, web analytics leader, or circulation manager is talented enough to do the job?

Answer: This is the request I receive most often. And in almost every case, the answer to the question is "yes". Management, however, is asking the wrong question.

There are two questions that underlie the asked question:

• Can my analytics person translate technical facts into actionable tidbits that Sr. Management can use to run the business?

• Is my analytics person creative enough to find actionable tidbits not requested by Sr. Management?

In many cases, the answer to each question is "no".

Regardless of the field (e-mail marketing, catalog circulation, web analytics, paid search, business intelligence), technicians speak a "code" language unique to the profession (example: "I used the mean function within the aggregate procedure in SPSS to calculate the annual repurchase rate, so I know the metric is correct").

The code language does not translate to Sr. Management, folks who are looking for clear, concise language that reveals actionable steps to success. Without a mentor, folks struggle with this level of translation. Heck, I met a former EVP of Marketing colleague at the ACCM conference who told me, and I quote, "Your consulting business probably stinks because nobody can understand a word you say, everything you say is so complicated."

So unless we figure out how to talk to business leaders, using their language, we're sunk.

The question about creativity, however, is far more important. There are three types of database marketers.

• Those who do what management tells them to do.
• Those who creatively focus on topics not asked for by management, topics that are not going to be actionable within the current corporate climate.
• Those who creatively focus on topics not asked for by management, topics that are going to be highly actionable to management.

You might surmise that the middle database marketer is the one you don't want to have on your team, or want to mentor toward success.

Management frequently believes that the best database marketer is one who does exactly what they are told to do. Unfortunately, this person is simply the easiest person to work with.

The best database marketer is the one who finds solutions to problems that management will ask about in the future, but does not have the context to ask about yet.


People are the number one problem I run across in my profession. Management thinks they don't have the right database marketing staff. Staff don't think management are asking the right questions. In general, there isn't an easy answer for resolving this disconnect without both sides giving way a little bit.

If you're tasked with rebuilding a database marketing team, spend a lot of time working on fixing this disconnect.

Rebuild Your Database Marketing Department: Part 7 (Salary Information Included)

Create A Career Path

Near the end of your first year, you know your people, you know them really well. Some have "it", that special intangible skill that enables them to become Executives. Some have "that", that special technical skill that allows them to be a subject matter expert at what they do. And then you have all the valuable employees who are needed to make sure the company keeps running.

You'll need to have multiple career paths for folks.

Folks will need to know what it takes to have your job.

Folks will need to know what it takes to have another leadership position in another department.

Folks will need to know what it takes to become the imperial wizard, the subject matter expert revered by all.

All three paths require "the juice", a combination of compensation, recognition, autonomy, authority, and accountability. "The juice" must be clearly stated, must be good enough for folks to stretch themselves to strive toward. And you must follow-through on "the juice" --- it isn't a carrot you dangle in front of folks forever.

You'll partner with Human Resources to develop the career paths. And if your Human Resources team (or Executive Leadership) fail to provide you with the authority to compensate folks, promote folks, or given them what they need, you need to communicate this fact to your staff --- allowing them to make decisions that are in their best interests.

Too often, the Human Resources / Compensation department carry out the wishes of Sr. Management --- by suppressing expense. How is a 3% cost-of-living increase going to pay for the gas required to get you to work? They aren't on the side of your employees --- YOU have to be on the side of your employees, defending their interests.

Part of the career path includes compensation. Entry level analysts will probably fetch $40,000 to $60,000 per year. Sr. Analysts and Managers might fetch between $60,000 and $100,000. Directors could earn $100,000 to $150,000 per year, and might command a 20% bonus. A well-qualified Vice President probably earns between $150,000 and $225,000 per year, with a 30% bonus.

The challenge is to create a career path for non-management folks, one that can get them into six-figure territory without having to manage staff. One might consider a significant incentive-based salary, one that depends upon the incremental profit the individual contributes to the organization.

So create some sort of career advancement plan that benefits them, be on their side!

Rebuild Your Database Marketing Department: Part 6

Hit The Road, Jack!

Now that you have a strategic plan in place for year two, you need to tell EVERYBODY about it!

If you work for a retailer, this means you visit stores if necessary, to communicate your catalog, e-mail, and paid search marketing strategy.

If you work for a cataloger, this means you visit the call center and distribution center. You tell every employee why you are doing what you are doing, you share with them how these strategies will benefit them. If you are an e-mail marketer, when is the last time you went outside your department, and clearly explained to all of your co-workers what you do or what your strategic direction is? How about those of you who are paid search marketers?

If you work for an online pure-play, you meet with every functional department in your company, explaining how customers behave, explaining why you have to make the changes you are making.

You meet with all the folks who you put a firewall between nearly a year ago, explaining why the information you learned shapes the direction you're taking your department in.

You visit your vendors. You communicate with them how their input in the "conferences" you held early in the year shaped this strategy. You remind them that they are an important part of your team.

And you LISTEN. Listen to what people have to say. Their input could influence changes in your strategic plan.

Hit the road, Jack!

Rebuild Your Database Marketing Department: Part 5

Create The Strategic Plan For Year Two

You are ten months into your rebuilding project.

You know your team, their strengths, their weaknesses. You know what your company needs. You know the capabilities of your vendor team. You picked up all of the low-hanging fruit.

It is time to set your strategic vision for year two of your rebuilding project.

This requires you to collaborate with many audiences.

• You need input from your Executive Leadership Team.

• You need input from key employees in the company.

• You need input from your leadership team.

The strategic plan for year two outlines what you will be working on, what you need resources for, and outlines how the company benefits from the investment they will make in your team.

You have thoroughly measured everything about customer behavior --- this knowledge is the basis for the strategic plan.

You'll probably need a significant investment in systems in order to accomplish your goals. The strategic plan tells folks why systems must be improved, and is defended by facts about your customers. If you don't get "x", the company fails to generate profit totaling "y".

The strategic plan tells your team what they need to focus on in the upcoming year. The strategic plan tells your Executive Co-Workers what you will be focusing on. The strategic plan informs the company what your team will do to drive the bottom-line.

Rebuild Your Database Marketing Department: Part 4

Know Everything About How Your Customers Behave

By now, you're six months into your rebuilding project. Your staff largely resent you, your vendors think you're about to fire them, and leaders in other departments want you out because you've blocked access to the folks they used to manipulate.

You probably know something about the skills of your team. You probably have an idea of how your team can contribute to the success of the company. You probably need ammunition to fuel the objectives you're going to set next year.

It is time to know everything about how your customers behave.

If you don't have the internal staff necessary to do a good job, hire somebody from outside the company. Execute a thorough mining of your customer base. Understand everything about the loyalty of your customers, their future value, their propensity to shop via multiple channels or multiple advertising channels, their migration patterns through different merchandise divisions.

This information will become the basis for your objectives next year. The information will determine how you invest in systems, how you invest in advertising, how you invest in people, how you invest in advertising. It means everything. Get this done by month nine, if you can!

Know everything about how your customers behave.

Rebuild Your Database Marketing Department: Part 3

Put Up A Firewall

All around you, well meaning Executives, Directors, and Managers have their own agenda for your team. In fact, they've always had their own agenda for your team. It is one of the reasons you must rebuild your database marketing team.

You have that Director in the Information Technology department who thinks your KPIs aren't appropriate for your business. He's working behind the scenes with a select group of leaders to create the customer information infrastructure that he believes will drive the business into the 21st century --- and he will have his team answer the customer questions asked by management (hint, this happens all the time, folks).

You have the EVP of Merchandising who wants to dictate to your team the catalog and e-mail marketing targeting strategy. Heck, her job is on the line, and she's not going to let your team ruin her ability to keep her job.

Part of rebuilding a database marketing department involves letting your co-workers know that this is YOUR AREA OF RESPONSIBILITY!!

You don't tell your merchants what merchandise to source from China, do you? You don't tell the Information Technology folks which online order entry platform they must use, do you?

Conversely, nobody should dictate the work your team does except for you.

This requires you to walk a fine line. You must allow others to ask questions of your team, and you must allow your team to answer those questions independent of your leadership. And yet, you must make it clear to every person in your company that you set the agenda, you determine the priorities --- and if their request isn't a high priority, it won't get worked on.

You will communicate to the company what the top priorities are for the fiscal year. You will report, on a periodic basis, the successes and failures your team experience. You will set the agenda for the direction your department takes.

Too often, the database marketing department is being run by forces outside of the database marketing department. This leads to a rudderless ship, a fractured team working for the special interests of folks outside of the database marketing team. You'll never have a winning database marketing team when there are eight cooks in the kitchen, with seven coming from other kitchens!

Put up a firewall!

Rebuild Your Database Marketing Department: Part 2

The Vendor Conference

Now that you've put the fear of God in your team by demanding that they meet your high expectations (things like working a full work day or not tearing into each other), it is time to find out what everybody is made of.

In each functional area, invite the vendor that supports that area for a one day or two day conference. You pay the vendor for their time. You invite the staff that manage the functional area to participate --- everything is transparent, you don't betray trust by having a hidden agenda.

The conference is designed to illustrate what your staff know about their functional area. It is also designed to illustrate what your vendor knows about their area of expertise. Your staff are required to present their processes and results to the vendor. The vendor is required to present "best practices" to you and your staff.

More than anything, you get to see if your staff have what it takes to succeed. You get to see if your vendor is capable of being a "strategic partner". You get to benchmark yourself against competitors.

Don't be stingy --- invite every vendor you have, be it your co-ops, your e-mail vendor, the folks you outsource your database to, your catalog request fulfillment house, your paid search vendor, your statistical modeling joint, bring 'em all in.

It will probably take three or four months to get through your "conferences". Your staff are likely to rebel against you, suggesting that since you set such high expectations, they don't have time for this garbage. Your vendor is likely to not meet your expectations --- they may send the sales force instead of sending the CEO or EVP that you really need to meet (hint, that tells you something about the vendor).

Your job is to gather information, information that will shape the future of your database marketing department.

Rebuild Your Database Marketing Department: Part 1

Set High Expectations.

You've been handed a department that you believe is broken. People don't get along. Your staff fail to obey "best practices".

You can fix this problem by forcing everybody to do everything your way. How often have you seen this happen? The new boss comes in with her own "system", and requires that everybody do things her way.

A weak leader demands that everybody do things a certain way. A weak leader tells you to put the shopping cart in the upper right hand corner of an e-mail marketing campaign. A weak leader demands you participate in every catalog co-op. A weak leader demands that a spreadsheet be formatted a certain way, with certain columns populated a certain way.

A strong leader sets high expectations.

Here are some of the things the new database marketing leader might do in year one.

• Demand that all employees work a full work week. Don't demand the location they work from.

• Demand that all employees get along, or they will not keep their job.

• Demand that all employees attend at least one industry conference, and implement at least one thing they learned at their conference.
  

• Demand that all employees submit a career advancement plan to you, and it is perfectly fine for the employee to tell you that he is happy where he is.

• Demand that the entire department spend the first six months of the year calculating the profit they contribute to the company on an annual basis, and then demand that in the second half of the year, the department increase total profit by ten percent.

These are simple objectives.

More important, you aren't telling anybody "HOW" to do them. You are simply setting expectations that create a winning culture.

And then, you're going to HOLD people to these objectives. If they don't follow them, they don't get a raise. If they fight against the objectives and act in a subversive manner, they don't work in your department anymore. You act consistently, showing favoritism only for the folks who enthusiastically embrace the objectives and improve profitability. This is hard to do, and it is painful. But you do it.

The first step in rebuilding a database marketing department is setting high expectations. The second step is to follow through.

In my first six months at Nordstrom, in 2001, my expectations drove eight of ten employees out of the company, via retirement, via quitting, via being let go. It nearly cost me my job. But the rebuilding process made 2003, 2004, and 2005 among the best years I've seen a team have.

Set high expectations. This process begins and ends with YOU, not with software, not by implementing a system, not by hiring the right people. It starts with your leadership.

Rebuilding Your Database Marketing Department

The Seattle Mariners have a huge payroll. They also have the worst record in the American League. It is time for the ballclub to "rebuild", to start over, to find a new way to be successful in the future.

In sports, the system of metrics make it easy to know when it is time to rebuild. Wins and losses, divisional titles, playoff wins, championships, player statistics, fan attendance, television and radio ratings all tell a compelling story. In sports, the "KPI's", if you will, make decisions easy.

Now let's fast forward to your database marketing team in the year 2008. What are the metrics that tell you that you need to rebuild your database marketing team?

It isn't easy to identify the metrics, is it? Are your e-mail marketing campaigns generating $0.12 per delivered e-mail? Is that bad? And if it is bad, is it the fault of your e-mail marketing manager? How would you ever know if your web analytics expert is doing a good job? How would you ever know if your catalog circulation manager is transitioning your customer file to one that no longer needs catalog marketing anymore? How would you ever know if that should be your strategy?

We really don't have outstanding metrics to evaluate the performance of database marketers, do we?

This week, we're going to talk about rebuilding a database marketing department. Enough of you share with me that you perceive your database marketing efforts are broken, so the topic is worth discussing. We'll explore people, data, metrics, and vendors, all in the search for a highly functioning database marketing department.

We are not going to explore software. You don't succeed because you chose Coremetrics over their competition. You don't succeed by outsourcing your database to Abacus vs. building it in-house. You don't succeed by working with Return Path vs. CheetahMail, or by choosing SAS over SPSS. You don't succeed by having perfect KPIs perfectly presented on a management dashboard for all to see.

You succeed when you create a great environment that allows brilliant people to thrive, to be creative.

We'll find that this analysis series comes up short. I don't have all the answers. I do want to inspire you to do better, to be successful.

Tomorrow, we begin.

Audience Development

Back in 1990 at Lands' End, our circulation department was called "Customer Planning and Development".

Now we read (thanks DMNews) that Circulation Managers are becoming known as Audience Developers.

I had numerous meetings at the recent ACCM conference with individuals about the evolution of jobs from "circulation" to "audience development".

Audience Development takes many forms.

• Renting or Exchanging names/addresses (with customer permission, right?) with competitors.
• Renting or Exchanging e-mail address (with customer permission, of course) with competitors.
• Developing audiences on Facebook, MySpace, Blogs, Forums, Twitter, etc. via audience participation, giving the audience something so that they have a relationship with you prior to having a need for your products/services.
  

Nine out of ten folks at ACCM offered blank stares when this topic was discussed. Lots of heads nodded with approval of the concept ... lots of head scratching over how to implement the concept.

Five or ten years from now, we'll be halfway through our transition from marketing to lists to developing audiences. Until then, this is a magical period where trial and error are the norm, a period where experimentation is highly encouraged.

More On Giving Away Books Before They Are Available To The Public

I didn't expect a lot of feedback when I shared the results of free downloads of the book vs. paying for the actual copy. I was wrong! E-mails were flying this afternoon!

First of all, I am not grumbling. More than anything, I want to share facts, metrics that others wouldn't share with you. I want to be as transparent as possible, transparency is one of the things you tell me you appreciate about this forum. I want for folks to learn how new marketing techniques work. And I sincerely appreciate all of you who e-mailed me to say that you got a free copy and purchased a copy of the book, much appreciated!!

Let's assume that 100 units have been distributed, to-date. Here's the distribution (as of this afternoon ... the metrics changed since the last post due to incremental paperback sales):

• Free Draft Of Pre-Published Book = 72%.
• $7.95 Download Of Finished Product = 14%.
• $14.95 Paperback Copy = 14%.

If my only purpose were to sell books (which it isn't), revenue per unit would be (0.72*$0 + 0.14*$7.95 + 0.14*$14.95) = $3.21. Net profit per unit would be about $1.80.

The $3.21 net revenue per unit metric is probably most compelling. Comscore's disputed statistics in the Radiohead promotion suggested 60% of the units were free downloads, and suggested that the weighted average net revenue per download was about $2.50.

So you can see that there's a level of directional similarity in the numbers. Hey, I have something in common with Radiohead!!

The books are not written for the sole purpose of selling books. They are part of what I would call a "micro-channel" strategy to running my business. There's a ton of free information available on this blog. I speak at conferences. I offer free spreadsheets. I write books for fun and to document important (and theoretically more-valuable-than-free) concepts.

I have learned that, as of today, the most effective strategy in growing my business is the combination of a transparent and informative blog, coupled with books that offer increased insights and sophistication. So if we allocated book costs and revenue across actual projects that were sourced from the blog/book, book sales are "sizzling"!

And that's what makes this whole thing so interesting. The giveaway doesn't work on a "linear" basis --- measuring sales as a function of each unique marketing strategy. A whole slurry of micro-channels work together, and at the end of the day, the whole is FAR greater than the sum of the parts. The giveaway as a sole marketing channel wasn't highly effective. The entire strategy is highly effective.

That's probably the takeaway I needed to share in the original post!

Now go buy the book!

Does Giving Away A Draft Copy Of A Book Help You Sell More Books?

You can't throw a rock in the book blogosphere without hitting a pundit telling you to give away your book prior to releasing it, in an effort to build momentum for the release of the book. Heck, Suzy Orman and Oprah gave away versions of Ms. Orman's already-published book, and it worked! So the strategy HAS to work!

Recall that I attempted this strategy with Hillstrom's Multichannel Secrets. I freely gave away a copy of the draft version of the book to anybody who asked for a copy.

I am here to tell you that the strategy created buzz. It created anticipation. It got folks talking about the book. I gave away a boatload of free draft copies of the book.

One month into the release of the book, I have metrics that tell me whether the strategy worked.

To date, I gave away nearly three times as many books as I sold.

Imagine if I had done this with the money a publisher invests in a new book? Self-publishing allows you to trade-off popular strategies with financial rewards.

The internet is filled with success stories, filled with interesting hypotheses. It isn't always filled with acknowledgement of failure. In my case, the strategy of giving away draft versions of a book to help sell the book failed miserably. The next book will have a very different marketing plan!

Social Media, Competitive Intelligence, And Web Analytics

Have you ever wondered why I occasionally write obtuse articles like this one on free shipping at Lands' End (check the organic/natural results for Free Shipping Lands' End on Google).

Or this article about Williams Sonoma and Multichannel Growth?

Or an article about Abacus, a popular co-op in the multichannel catalog world?

All are part of a strategy to gain what I call "Competitive Intelligence".

Maybe you noticed that Father's Day is just around the corner? There's a veritable plethora of folks who are interested in getting Dad a lightweight coat from Lands' End. They also want free shipping. Because I wrote the article about Lands' End free shipping, Google sends visitors to my site. In kind, I use Google Analytics and SiteMeter (here are my site statistics) to understand the rhythm around free shipping for Father's Day. I get to see the build-up prior to Father's Day, the days customers are most interested in obtaining Free Shipping, and the drop-off prior to shipping cutoffs.

Now if I can do this with my humble little blog, imagine what L.L. Bean could learn about Lands' End, Eddie Bauer, Orvis, you name the competitor, by hosting comparable content? And imagine how much more effective these brands would be, given their scale, compared to my humble efforts?

Miller Brewing Company accomplishes this style of competitive intelligence with their "Brew Blog", writing about their competitors on a daily basis.

This stuff isn't rocket science.

For me, the Lands' End example is more fun than anything else. More important is the work I do to understand my competitors.

For instance, I frequently write about matchback analysis, especially as it relates to co-ops like Abacus. Because Multichannel Forensics indirectly compete with matchback programs from companies like Abacus, it is a good thing for me to have folks searching for matchback solutions, searching for products from Abacus, to visit my site.

I get to track the evolution of terms that folks use. Catalog marketers use the phrase "Lifetime Value" to understand the long-term potential of customers. Online marketers and E-Mail marketers seem to prefer the term "Return on Investment" or "ROI". If I want to partner with online marketers on long-term customer value studies, I won't attract them to my site by writing about Lifetime Value.

I also have numerous competitors, folks who provide similar products and services to those offered by yours truly. By writing about these folks, or by hosting their RSS feed on my site, I get occasional visitors from Google who are searching for information about my competitors. I assure you, this information is very enlightening!! I get to see who the companies are that want to hire my competitors. I get an idea for the type of service the company has a need for. If necessary, I adjust my content, products, and services accordingly. I get to see the articles you like, ones written by my competitors.

Once, a competing organization fired a long-standing and high-ranking employee. The company announced the firing on a Tuesday. One day earlier, I had numerous visitors who arrived via Google searches that combined the competing brand name and the name of the individual who was fired. If I wanted to, I could have fact-checked the story and "scooped" the mainstream media.

Hosting a blog is so much more than the social media pap spewed by the punditocracy. The competitive intelligence gained from this effort means everything to a small business like mine. And best of all, the tools needed to obtain the competitive intelligence are free. FREE!

Now imagine for a moment what your brand could accomplish with a combination of Social Media, Competitive Intelligence, and Web Analytics?

Great Moments In Database Marketing #1: Incremental Value

Our top rated Database Marketing moment takes us back to 1993 - 1994. Yeah, way back then, people were doing sophisticated work. Honestly!

Way back in the early 1990s at Lands' End, we had seven different business units that marketed to customers, either through standalone catalogs, or though pages added to catalogs.

As growth became more and more difficult (pay close attention online marketers ... your world is heading in this direction), management elected to mail targeted catalogs to targeted customer segments.

In other words, a Mens Tailored catalog concept was developed, with a half-dozen or more incremental catalogs mailed to customers who preferred Mens Tailored merchandise. A Home catalog concept was developed, with nine or more incremental catalogs mailed to customers who preferred Home merchandise.

Seven concepts were developed. Each concept was growing.

But the core catalog, the monthly catalog mailed for three decades, was not really growing anymore. And total company profit (as a percentage of net sales) was generally decreasing over time.

Something was amiss.

We studied the housefile, and learned that the "best" customers were being "bombed" by catalogs ... upwards of forty a year. Every business unit, making independent mailing decisions, mailed essentially the same customers. And all of our metrics, when viewed at a corporate level, indicated that customers were not spending fundamentally more than they spent several years ago when the new business concepts didn't exist.

So we developed a test. We selected ten percent of our housefile, and created seven columns in a spreadsheet. We randomly populated each column with the words "YES" or "NO', at a 50% / 50% proportion. Each business unit was assigned to a column. When it came time to make mailing decisions for that business unit, we referred to the column assigned to the business unit. If the word "NO" appeared, we did not mail the customer (if the customer qualified for the mailing based on RFM or model score criteria).

In statistics, this is called a 2^7 Factorial Design.

There are two reasons for designing a test of this nature.

1. Quantify the incremental value (sales and profit) that each business unit contributes to the total brand.
2. Identify, across customers segments, the number of catalogs a customer should receive to optimize profitability.

What did we learn?

1. Each catalog mailed to a customer drove less and less incremental increases in sales. If a dozen catalogs caused a customer to spend $100, then two dozen catalogs caused customers to spend $141, and three dozen catalogs caused customers to spend $173. The relationship roughly approximated the Square Root Rule you've read so much about on this blog.
2. Each business unit, on average, was contributing only 70% of the volume that company reporting suggested the business unit was contributing. In other words, if you didn't mail the catalogs, you'd lose 70% of the sales, with customers spending 30% elsewhere.

The latter point is critical.

Take a look at the table below, one that illustrates the profit and loss statement reported by finance, and one that applies the results of the test.

Test Results Analysis		Finance	From
		Reported	Test Results
Demand		$50,000,000	$35,000,000
Net Sales	82.0%	$41,000,000	$28,700,000
Gross Margin	55.0%	$22,550,000	$15,785,000
Less Marketing Cost		$9,000,000	$9,000,000
Less Pick/Pack/Ship	11.0%	$4,510,000	$3,157,000
Variable Profit		$9,040,000	$3,628,000
Less Fixed Costs		$6,000,000	$6,000,000
Earnings Before Taxes		$3,040,000	($2,372,000)
% Of Net Sales		7.4%	-8.3%

The test indicated that what appeared to be highly profitable business units were actually marginally profitable, or in some cases, unprofitable. In this example, the business unit is "70% incremental", meaning that if the business unit did not exist, 70% of the sales volume would disappear, while 30% would be spent anyway by the customer, spent on other merchandise.

Imagine if you were the EVP responsible for a business unit that appeared to generate 7.4% pre-tax profit, only to have some rube in the database marketing department tell you that your efforts are actually draining the company of profit?


Why Does This Matter?

This style of old-school testing (which is more than a hundred years old, with elements of the testing strategy now employed aggressively in online marketing) tells you how valuable your marketing and merchandising initiatives truly are.

Catalogers fail to do this style of testing, not realizing that a portion of catalog driven sales would still be generated online (or in other catalogs). In 2008, most catalog marketers are grossly over-mailing existing buyers. Catalog Choice, in part, exists due to catalogers mis-reading this phenomenon.

E-mail marketers seldom execute these tests, not realizing that in many cases almost all of the sales would still be generated online. E-mail marketers, ask your e-mail marketing vendor to partner with you on test designs like the ones mentioned in this article. You may be surprised by what you learn!

Online marketers are more likely than most marketers to execute A/B splits at minimum, with some executing factorial designs. Many online brands evolve in a Darwinian style, fueled by the results of factorial designs. Online marketers know that you make mistakes quickly, and you correct those mistakes quickly.

Web Analytics folks have the responsibility to tell management when sku proliferation no longer contributes to increased sales. It is important for Web Analytics folks to lead the online marketing community, shutting off portions of the website in various tests to understand the incremental value of each additional sku.

What are your thoughts on this style of testing? What have you learned by executing tests of this nature?

Great Moments In Database Marketing #2: Multichannel Forensics

We've talked an awful lot about Multichannel Forensics on this blog. Maybe you noticed? Many of you purchased the book on Multichannel Forensics. Close to four thousand of you read the Multichannel Forensics white paper. In just the past year alone, I've put about forty brands through the Multichannel Forensics filter. Who knows how many you've analyzed?!

The reason we spend so much time talking about this topic is because it can be a challenge to understand micro-channels without having a tool that identifies how customers migrate between micro-channels.

E-Mail marketers typically evaluate the performance of their marketing strategies across only customers who click on an e-mail campaign. Catalog marketers are obsessed with allocating online orders back to catalog marketing. Web Analytics experts are focused on visit-specific conversion rates. Retailers focus on customer intelligence that drives comp store sales increases. Online marketers care about online marketing channels. Few people focus on long-term customer value. Almost nobody at your company can tell you what the five-year sales trajectory of your brand looks like, by product, brand or channel.

So many of you found Multichannel Forensics valuable because it provides a framework for understanding how customers interact with advertising, products, brands and channels.

Multichannel Forensics were born at Eddie Bauer in the late 1990s, when we tried to understand how markets evolved as new stores were opened in combination with the birth of e-commerce.

Multichannel Forensics allowed us to demonstrate that catalog marketing wasn't needed at Nordstrom, that e-commerce and stores interacted in a way that benefited the customer (customers evolved from catalog to e-commerce, then e-commerce to stores).

As micro-channels continue to proliferate, Multichannel Forensics will be the preferred method for understanding how customers migrate through the many "touchpoints" a brand possesses.

Is Your Business Down 42%?

When you're lamenting the fact that your business is down 5% or 12% or 20%, be glad you aren't working in the Recreational Vehicle industry, with industry-wide sales expected to be down 42% this year.

Ok marketers, what do you do when your industry is ravaged by the price of gasoline? How would you take care of your employees, how would you devise a plan for the long-term health of our business?

Great Moments In Database Marketing #3: Micro-Channels

A small number of marketers are doing an exceptional job of evaluating micro-channels. The focus on micro-channels yields actionable and strategic insights that are not part of the mainstream marketing conversation.

These folks are linking data from various systems. These folks don't care whether they have 100% coverage or not, they simply link what they have. If they can't link visitation information to every purchaser in the database, they don't. They work with what they have.

These folks maintain a customer database with fields like these:

• Months Since Last Purchase, Life-To-Date Purchases, Life-To-Date Items, Life-To-Date Demand/Sales, Life-To-Date Returns, Twelve-Month Purchases / Items / Demand / Sales / Returns
• Total Company
• By Physical Channel (Mail, Telephone, Internet, Retail).
• By Advertising Channel (E-Mail, Catalog, Google Paid Search, Yahoo! Paid Search, MSN Paid Search, Portal Advertising, Affiliate Marketing, Shopping Comparison Marketing, By Most Popular Blogs).
• By Merchandise Division.
• By Store Or Region
  

• Months Since Last E-Mail Click-Through, Total E-Mail Click-Throughs, Total E-Mail Twelve-Month Click-Throughs.

• Website Visitation Data
• Months Since Last Visit
• Number Of Life-To-Date Visits, Number Of Twelve-Month Visits.
• Average Time Spent On Site Per Visit.
• Number Of Pages Visited.
• Months Since Last Visit By Key Landing Page, Merchandise Division, Key Links.
• Months Since Last Shopping Cart Abandonment, Number Of Carts Abandoned.

• Outbound Marketing History
• Catalogs Mailed, E-Mails Mailed, Telemarketing Calls, Direct Mail Pieces.

• Self-Service Marketing Initiated By Customer
• RSS Subscriber And Items Subscribed To.
• Paid Search And Natural Search Activities.
• Visits From Key Blogs, Facebook, MySpace, Social Media.

When I speak with the marketers who maintain this information, they most important thing is to simply accumulate what you can accumulate. Then, you get busy analyzing the information!!

I've worked on a few projects with data of this nature. The findings are fascinating.

• Websites are a separate channel from e-commerce. There is an information element to the website that supports other channels. There is a social element to a website that allows customers to interact with each other. There is an entertainment element to a website that causes customers to visit again. And there is an e-commerce component to the site. Customers self-segment themselves into one of these micro-channels.

• E-commerce customers have unique dynamics.
  
• Those from paid search have a very different relationship with your brand ... unless they use another form of advertising (e-mail, catalogs) in combination with paid search.
• Once the catalog customer tries e-commerce, they become unlikely to go back to ordering over the phone.
• Once the e-commerce customer purchases in a store, they become less likely to go back to ordering via the internet. This does not mean they become unlikely to use the internet --- in fact, they become information/entertainment/social users.

• Trigger-based e-mail marketing is ideally suited for customers who last visited the website within ten days.

• You learn that you have a couple hundred important micro-channels, combinations of advertising, self-service activity, and purchase channel. You learn not to "force" customers into micro-channels --- instead, you let customers self-select themselves into a micro-channel, and work with the customer based on her natural, subsequent behavior.

• Customers evolve across micro-channels, often migrating to a "most popular" micro-channel over time.

Examples of micro-channels:

• E-Mail click-through customer who visits website frequently and buys merchandise in-store.

• Paid search customer who does not subsequently repurchase.

• Rural customer who buys online after receiving a catalog.

• Customer who visits site after reading a blog post about merchandise, visits frequently, does not buy merchandise.

• Customer visits site after seeing portal ad, signs up for e-mail marketing.

• Customer buys in-store only.
  

• Customer only shops via landing pages (i.e. needs a merchandising assortment presented to her).

• Customer only shops via site search (i.e. a self-service customer who picks and chooses what she wants).

From what I've observed, the future of database marketing is the identification of micro-channels, the classification of customers into micro-channels, and then market / no-market decisions based on micro-channels.

The folks I've seen do this style of marketing are producing very interesting results.