Zip Code Marketing: Top 10 Most Productive Direct Marketing Customer Regions

Based on the current version of Hillstrom's Zip Code Forensics (read about and buy here), I present you with the top ten most productive direct marketing customer regions --- the places where zip code marketing is likely to be most effective.

Number 10 = Eastern New Jersey.

Number 9 = Wyoming.

Number 8 = Boston / Providence / Cape Cod.

Number 7 = Southwest Colorado.

Number 6 = Southern Maryland.

Number 5 = White Plains & New York City.

Number 4 = New Hampshire.

Number 3 = Northern Virginia.

Number 2 = Connecticut.

Number 1 = Vermont.


Yup, good 'ole Vermont is the most productive area for direct marketing in the United States. In fact, outside of portions of Colorado and Wyoming, the East Central and Northeast United States, and New England are the most productive (demand per household) in the United States.

In fact, these regions spend 2.5 times as much per capita as do any other region in the United States.

Of course, this is actionable at a zip code level, because there are significant differences in spend by zip code and channel preference by zip code.

It does make one wonder about all of this multichannel marketing stuff. It becomes more and more clear that there are customer-specific micro-channel preferences and geographic influences that override multichannel best practices.

Another Day In The Life Of A Multichannel Marketer

7:33am: You open Microsoft Outlook, and are greeted with 64 e-mail messages since you logged off at 10:41pm last night. At 4:06am, your CEO sends an e-mail to the Executive Team, asking all "hands on deck" for the big "Rocktober Magic" campaign that begins October 15. At 4:16am, your EVP of Marketing assigns you the task of coordinating a multichannel marketing effort for this campaign.

7:39am: The next twenty-two e-mail messages deal with variations of the promotion. Everybody has ideas!

9:16am: A meeting of the Multichannel Marketing Task Force has been convened for 2:00pm today.

2:13pm: You call the Multichannel Marketing Task Force meeting to order. This is a room full of heavy-hitters, and you're leading the pack!

2:15pm: Anita in Inventory Control wants to offer up a Halloween Costume for the promotion. Her team accidentally purchased eight hundred Halloween Costumes, and only sixty-five have sold so far. She thinks a BOGO promotion (buy one, get one free) coupled with free next-day shipping would qualify as "Rocktober Magic" and really bail her out of a dilly of a pickle. Anita believes this promotion could be "blasted" to the e-mail marketing list, and thinks marketing could help out by participating on Halloween blogs, generating a groundswell of interest that would make Charlene Li, Mack Collier and Seth Godin proud ... after all, look at what Dell and Southwest Airlines have been able to accomplish?

2:17pm: Besty in Merchandising doesn't think anybody wants to pay $49 for two costumes, much less one costume. She read a Forrester Research report suggesting that multichannel customers are the best customers. Betsy thinks a "marketing blitz", featuring best sellers that provide great value, but the "marketing blitz" should only be targeted to best multichannel customers, and should offer free shipping with a $100 hurdle --- the hurdle would protect profitability while generating volume.

2:18pm: Dale in Business Intelligence asks the team to define what a "best multichannel customer" really is? This stimulates some chatter. Howard in the Web Analytics department says that returning customers visit the website four times a month and have a 3.47% or better conversion rate. Anita in Inventory Management thinks best customers should have at least one purchase in each of the past five years. Dale reminds the team that the new Oracle database only houses three years of purchase history, and in spite of independent research and opinions, best customers truly are 0-3 month dual-channel customers with 5+ orders and an average order value of $100 or more --- fitting nicely into RFM segment #26. Independent Marketing Consultant Vic Montana tells the team that Williams Sonoma might have the best multichannel marketing database in America, and points the team to a recent Pottery Barn e-mail campaign that had a nice call-to-action.

2:22pm: Felicity in E-Mail Marketing wants to blast three campaigns, every-other-day, leading up to the start of the promotion, but wants to surgically target only customers who purchased items similar to the products that Anita wants to clear. Dale in Business Intelligence says that he can only pull product-level purchases that are ten days old or older, because the update cycle of the database is not in real time. Howard in Web Analytics can confidently pull the 1,432 customers who viewed that item in the past month and have a valid e-mail address, but worries that with 62% e-mail address coverage, we might be missing out on a real opportunity with the remaining 38% of the database who viewed the item in question. Dale in Business Intelligence questions this strategy, because customers have multiple e-mail addresses, and the company doesn't have a valid strategy for de-duping records across multiple e-mail addresses. Howard thinks Dale's apartment-level name/address de-duping leaves something to be desired, because his niece, Kayla, received three catalogs in her dorm room last week on the same day.

2:29pm: Celeste in Creative Services volunteers to provide an aspirational presentation strategy that puts the consumer in the middle of "Rocktober Magic". Felicity suggests that the company avoid an aspirational presentation in e-mail marketing, because aspirational presentations violate the tenants of e-mail marketing best practices. Celeste reminds the team of the aspirational presentation strategy used in 1999 to promote the July 4th "America's Birthday" bounceback promotion that worked so well.

2:31pm: Abe in Public Relations asks who owns the Social Media strategy for this campaign? Dale in Business Intelligence and Howard in Web Analytics both agree that without a proven set of KPIs, nobody is going to be able to measure the effectiveness of any Social Media strategy, so maybe it is better for the team to focus on proven ROI-based tactics like postcard marketing? Besides, blogs are so 2006! Celeste in Creative Services volunteers to promote the campaign via Twitter and asks if the company could support a 25% off promotion exclusively for Twitter users? Shannon from the Call Center says that the order entry system can only accept offers ending in a "0" percentage. Betsy in Merchandising reminds the team that Forrester Research recommends that all multichannel campaigns be executed in an integrated manner, so let's all make sure that we use the same percentage off promotion in all cross-channel marketing activities, making sure it is either 10%, 20%, 30%, or 40% off, in accordance with the limitations of the order-entry system.

2:34pm: Rick in Catalog Marketing reminds the team that the catalogs have already been printed, and will be delivered to customers next week. Abe in Public Relations questions why catalogs are even sent to customers anymore --- how many customers buy from those things anyway, one in fifty? Abe recommends sharpening up the catalog targeting strategy next time, focusing only on customers who like the product offered in the catalog. Abe recommends cutting half of the circulation for the next catalog, and recommends that he send a press release communicating this new "green" marketing strategy. Abe thinks this will create a lot of buzz, and the buzz will drive the "Rocktober Magic" marketing campaign while protecting hundreds of trees in Northern British Columbia.

2:35pm: Rick in Catalog Marketing leaves the room for a moment. Felicity in e-mail marketing asks the team why Rick "disengaged" from a healthy conversation?

2:37pm: As Rick from Catalog Marketing re-enters the room, Independent Marketing Consultant Vic Montana asks Rick if he could quickly get access to 500,000 names and addresses from the Abacus synergy model, and send them a digest sized catalog that features a couple dozen key items that the company could really get behind? If this could be done in the next ten days, it would get around the fact that the catalog has already been printed. Rick reminds the team that it takes months to produce catalogs. Independent Marketing Consultant Vic Montana suggests that there are print-on-demand solutions that could speed this process up considerably, heck, he just purchased a book from Lulu.com and it arrived in five days. Rick from Catalog Marketing excuses himself from the meeting again.

2:39pm: Adam in the paid search marketing department wants $125,000 to really "blow out" the most important keywords. He believes that stiff competiton from Celebrate Express and Chasing Fireflys will limit the ability of the team to drive online volume without a significant and meaningful investment. He cites past campaign metrics that indicate that his ad-hoc bidding system yielded a cost per new customer of just $4.33, coupled with a lifetime value of over $29.00. He can promise a cost per new customer of under $22.00 with a $125,000 investment, an investment that will pay for itself within just nine months. The room stares at him, confident that he's on to something, but not really sure what he's on to. Besty in Merchandising wants to know if lifetime value information could be integrated with her daily flash sales merchandise selling reports?

2:40pm: Stephen from the CRM / IT team thinks an automated phone messages to best customers would provide an instantaneous bump to the campaign. Howard in Web Analytics reminds the team that Coremetrics will not be able to accurately measure the influence of offline marketing strategies on the website. Dale in Business Intelligence reminds the team that he can measure the effectiveness of the offline marketing strategy, but will not be able to link it to data from Coremetrics due to systems limitations. Stephen from the CRM / IT team says that there is an "SR" (Service Request) that will link offline and online data sources in early 2011. The room groans with disapproval, though Stephen reminds everybody that the members of the room are responsible for assigning priorities for all projects. The room groans even louder! Independent Marketing Consultant Vic Montana tells the team that Williams Sonoma does a nice job of linking together data across brands and channels, that he recently returned a $173 latte machine and received a marketing e-mail within just six days of the return, and he never even had to opt-in to that program! Felicity squirms, realizing this is a clear violation of e-mail marketing best practices. Anita in Inventory Control asks if we could start an e-mail marketing program for customers who return merchandise?

2:46pm: Your CEO stops by for a quick visit on her way to the Supply Chain Efficiency Task Force Meeting. Oh, the marketing ideas are flowing ... the members of the room cannot stop talking over each other as they share what can be done within each channel. Your CEO is so pleased that everybody "has skin in the game", and offers your meeting as a shining example of how Congress could work together in a bipartisan manner to pass bailout legislation. The room applauds as your CEO exits at the same time that Rick from Catalog Marketing re-enters the room.

2:49pm: The room, exhausted from such a productive conversation, looks to you for leadership and resolution.

What would you recommend as an appropriate multichannel marketing strategy, given the feedback you've heard from your team?

Direct Marketing: Money, Money, Money, Mo-ney ... MONEY

Maybe you noticed that the economy is in dire straits, and that Main St. is upset with Wall St. I now start my day at 6:15am on the West Coast by turning on CNBC to listen to the pundits describe seemingly unfathomable financial scenarios.

Here in the humble world of direct marketing, we've participated in an unregulated world, propping up our profit and loss statement using funny money.

Think I'm wrong? Let me offer you a few examples.

An EVP of marketing told me this, paraphrased: "It's all about a value. We surgically offer discounts, promotions, and pricing opportunities to customers in different life states. The prospect gets a cheaper price than the established customer, along with free shipping. The lapsed customer gets 20% off their order of $100 or more. And best customers participate in our loyalty program."

An e-mail I recently received: "What are the best promotions and wording in the subject lines of e-mail campaigns --- we need to boost performance?"

An owner: "Should I use marketing dollars to subsidize free shipping?"

A blog subscriber: "What are the three or four really easy things I could do today that would dramatically improve the performance of my business?"

A business leader: "Who has the best algorithm to improve paid search results?"

Another business leader: "They keep sending me catalogs that say this is the last catalog I'll ever receive. And then they keep sending me catalogs. They just lie to me."

Funny.

You Google "Best-Practices Marketing Promotions", and you get 264,000 results. If you Google "Best-Practices Merchandising Strategy", you're rewarded with 77,000 results.

We, the direct marketing community, may not be much different than Wall St. We sell our customers money, not merchandise, and we use algorithms to do the work for us. We shy away from the fundamentals of our business, which take a lot of time and discipline to master, instead focusing on the packaging of money to drive results this quarter. Would you like a savings of up to 55% on this order? How about free shipping if you use this coupon code? And this month only, take an additional 20% off of your order with your store credit card (next month, you'll take 25% off of your order). Or earn $10 off your next purchase if you buy this week. Buy one, get one free!

We're selling money. We attempt different schemes, all looking for ways to get a customer to fork over hard earned wages so that we hit our short-term sales targets. When we find ones that work, we call them "best practices". Zappos raises prices, then offers free shipping, a new best practice. Amazon offers free shipping at different hurdles, and different annual pre-payment levels --- a new best practice.

Regardless, the marketing of money erodes gross margin. And when gross margins erode, profit becomes a challenge. So we outsource everything we can, in an effort to improve margins. We source merchandise from China. We eliminate jobs in America (but expect those same Americans to keep buying from us). We merge our operations with other brands.

I worked at Lands' End from 1990 to 1995. We never offered promotions. The DNA of the brand didn't allow for free shipping, or %-off offers. We worked hard to clear excess merchandise the old-fashioned way. We were wildly profitable. Now take a look at the e-mail campaigns you receive from Lands' End, fully owned by Sears. You cannot keep up with the discounts and promotions.

I worked at Eddie Bauer from 1995 to 2000. Everything was a promotion. The brand imploded.

I worked at Nordstrom from 2001 to 2007. Promotions and gimmicks were few and far between. It was all about merchandise and customer service. EBIT averaged around 10% my last four years.

Selling money is a lot like adding cream to coffee. Coffee (merchandise) is black. When you initially pour the cream in, you don't really notice much of a difference. But eventually, the cream blends with the coffee, and you cannot separate the two.

And algorithms are dangerous ... necessary, but dangerous. Ask somebody on Wall St. to explain the financial products they created, and you'll have a hard time getting feedback you can clearly understand. Similarly, ask any direct marketing CEO to explain the bidding algorithm used by a paid search vendor, or ask the CEO to explain the way that Abacus chooses half of their customer acquisition prospects, or ask the CEO to explain the statistical algorithm used to select customers for mailings, and you're likely to get a blank stare.

We've created a layer that goes between the customer and the merchandise. We marketers placed money and algorithms between the customer and the merchandise. By doing so, we gave up so much control.

America is about to begin the process of separating the cream from the coffee. Will we, the direct marketing community, follow suit?

Ann Taylor Credit Card Program: Multichannel Marketing Best Practice?

Ok all of you multichannel best practice mavens, here's one for you to chew on.

Ann Taylor introduces a credit card program, with direct mail and e-mail marketing of the card provided by Alliance Data Systems Corp.

Read the article, then let the audience know if you think it is a best practice to have a third party market a credit card for a brand like Ann Taylor.

Remail Catalogs

Many of you who in the audience who are not catalogers may not realize that catalogers send you the same catalog, over and over and over.

This strategy is called a "remail" strategy.

It is a labor-intensive process to put a catalog together. It may be ten times harder to paginate a catalog than it is to construct a hundred landing pages. In saddle-stitched catalogs, you have to physically coordinate the merchandise on pages 2-3 as well as pages 78-79, since they are technically produced on the same piece of paper.

So catalogers figured out a way to be sneaky. We replaced the cover, back cover, and the inside pages associated with those pages with new creative and merchandise. However, what appears inside the remainder of the catalog is fundamentally the same.

This allows the cataloger to avoid having to pay the costs of producing new pages, often costing between $500 and $5,000 per page.

Of course, loyal customers indirectly realize that catalogers are fooling with them. We can see this, because the productivity of the "remail" catalog isn't as good as in the first release.

The table below illustrates what typically happens when a company sends a pair of remail catalogs to a customer, following new creative.

Catalog Remail Strategy
	Release 1		Release 2		Release 3
	$ per Bk	Profit	$ per Bk	Profit	$ per Bk	Profit
Segment 1	$8.00	$2.05	$5.60	$1.31	$3.92	$0.72
Segment 2	$5.00	$1.00	$3.50	$0.58	$2.45	$0.21
Segment 3	$3.50	$0.48	$2.45	$0.21	$1.72	($0.05)
Segment 4	$2.75	$0.21	$1.93	$0.02	$1.35	($0.18)
Segment 5	$2.50	$0.13	$1.75	($0.04)	$1.23	($0.22)

Notice that each time a catalog is mailed, it performs at 70% the level of the first mailing (in this example, your mileage will vary).

However, the productivity is usually good enough in subsequent releases that it allows the cataloger to mail the second and third release to many customers. In this case, the cataloger would not mail the catalogs to customers who are losing money. So, the best segment (segment 1) and the next best segment (segment 2) receives all three mailings. The third and fourth segments receive releases one and two. The fifth segment only receives the first release.

This strategy worked really well in a pre-Google world. Today, the fixed costs associated with producing new creative can be minimized in a veritable plethora of ways. And if the fixed costs can be minimized, new creative drives up productivity --- and causes customers to not feel like they are being duped. Further, with e-commerce sites changing often and e-mail marketing campaigns featuring fresh merchandise on a weekly basis, it makes less sense to stick to this old-school marketing strategy.

Until the profit and loss statement looks different than what is illustrated above, you'll continue to see catalogers execute this strategy. And it fuels a self-fulfilling prophesy --- customers feel exasperated when they keep getting similar catalogs in the mailbox, so they keep throwing them out.

Multichannel Forensics A to Z: Zendik

A "zendik" is a heretic, one who does not conform to an established attitude, doctrine or principal.

An open mind and Multichannel Forensics may well lead one to become a zendik.

I read an article this week, from an individual representing a vendor selling multichannel products and services. The individual, without providing any facts, stated that "it is now generally accepted that multichannel customers are the best customers". Ugh.

Some catalogers observe the following: Customer was a catalog customer, then customer uses the catalog to purchase online, then customer shops online independent of receiving catalogs, then cataloger wastes $$$ sending catalogs to this customer, compromising profitability. Is the alleged multichannel customer actually multichannel? And is the alleged multichannel customer the most valuable?

Here's another one. Retail customer doesn't find what she wants in a store, so she goes online to place her order. Retailer collects e-mail address, then pummels customer with an endless array of 20% off and free shipping offers that the customer doesn't want. Customer opts out of e-mail marketing program. Retailer simply ticks off the loyal one channel customer, because the retailer perceives the customer is multichannel.

STOP IT!

STOP IT!

STOP IT!

Stop trusting the pundits who are not concerned about the health of your business. Start analyzing your own customers --- actually figure out how customers move from step A to step B to step C, actually calculate the profitability of moving through these steps.

Stay away from the simplistic queries that dominate our industry --- queries like pulling out any customer purchasing from multiple channels, summing sales, then comparing those customers who buy from a single channel.

Be a zendik.

Credit Customers, Lifetime Value, Eddie Bauer

Some of you might have noticed talk in the media recently about our failing financial industry.

So it might be instructive to consider the role of credit within a retail brand.

Back in the day, in the late 1990s, I worked at Eddie Bauer. In the late 1990s, Eddie Bauer was a $1.6 billion dollar multichannel brand that routinely churned out ninety million dollars in pre-tax profit --- not outstanding performance, but not too shabby.

Eddie Bauer was owned by Spiegel, the century-old catalog brand out of suburban Chicago. Spiegel owned a bank, FCNB. That bank provided credit to credit-worthy consumers.

Retailers adore proprietary credit. There's no better way for a retail brand to extract an extra ten percent out of a $100 order than to encourage the customer to make $10 payments for a year at 24% interest.

The theory, then, is that after administrative expenses, proprietary credit can be responsible for nearly doubling the profitability of a customer, as long as the customer fails to pay down their debt in a timely manner.

	No Credit	With Credit
Demand	$100.00	$100.00
Net Sales	$70.00	$70.00
Gross Margin	$38.50	$38.50
Less Marketing Expense	$20.00	$20.00
Less Pick/Pack/Ship Expense	$7.70	$7.70
Variable Profit	$12.30	$12.30
Add: Interest Revenue	$0.00	$10.00
Less: Banking Expense	$0.00	$1.50
Net Contribution	$12.30	$20.80

On paper, the profitability of a proprietary credit customer looks too good to be true. The fairy tale drives a brand in a new direction.

If we know that the proprietary credit customer is this profitable, then we want to aggressively market credit to the customer, right? And we especially want to market credit to new customers. If credit customers are worth more, then we can prospect much deeper, increase sales, and on the surface, significantly increase profit. In the short term, this is all good.

At Eddie Bauer, we closely monitored the percentage of sales that were generated via proprietary credit. And we were strongly encouraged by Spiegel to amp that percentage, because a higher percentage of sales on proprietary credit resulted in more interest revenue, and theoretically, more profit.

So we amped-up our credit push. New customers were strongly encouraged to sign up for credit. Existing customers were given in-store, catalog, and e-commerce incentives to sign up for credit. Credit customers were offered promotions to take advantage of credit.

A funny thing happens when you focus on credit. You attract a customer who needs credit.

Not surprisingly, this customer is fundamentally different than bank card customers. The proprietary credit customer buys a slightly different merchandise assortment than does the bank card customer. This causes the merchandising division to chase merchandise preferred by the proprietary credit customer, not to chase merchandise preferred by quality customers.

Within two or three years of a consistent, relentless credit push, the brand has been fundamentally changed. Well, the brand has not been fundamentally changed --- the brand is the brand. But the customer file has been fundamentally changed, and the core of the brand, merchandise and customer service, has taken a back seat to proprietary credit.

Ultimately, the brand reverses direction. Instead of selling merchandise to the customer, the brand uses merchandise as a teaser to sell credit to the customer. Eventually, customers max their credit limits. Our analysis suggested that when a customer got within $100 of their credit limit, the customer stopped purchasing. Some customers failed to pay their debts.

When the credit "channel" begins to fail, the whole house of cards crumbles, bringing down everything.

The lessons are clear. By focusing on merchandise, by focusing on serving the needs of a customer, one can build a healthy business. By focusing on selling money to a customer, we don't sell anything of long-term value. Admittedly, we boost short-term performance. Essentially, we push long-term profit into a short-term window, paying a long-term price for the benefit of goosing short-term numbers.

At Nordstrom, credit was viewed in a different light. During my time at Nordstrom, credit was never the primary mechanism for a customer relationship. Strong credit leadership (Kevin Knight), and strong executive leadership (i.e. the Nordstrom family), prevented the business from going down the path that Eddie Bauer took.

Eddie Bauer is still trying to dig out of this problem, nearly a decade later.

And now our nation will attempt to dig out of a period of time when we gorged ourselves on credit.

The Customer Is In Charge

On a sale from 1 to 5, where a one implies that we are simply feckless consumers bowing at the knees of commerce giants, and a five suggests that commerce giants are at the mercy of a Web 2.0 empowered shopper who gets to call the shots, where do you think the customer stands, here at the end of 2008?

After the events of the past few weeks, my vote is for a "1". And I have an endless array of anecdotes to back up my position.

The Death Of Catalog Customer Acquisition, Coupled With Database Marketing And Best Practices

It's funny. If you read the pages of DMNews, Multichannel Merchant, or Catalog Success, you won't read a word about one of the biggest headaches facing the modern catalog brand (and online pureplays are going to deal with this soon, in a different way, when Google and online growth stall). And you won't find our industry leaders talking about this, either. Why? I don't know.

Folks contact me about this issue all the time. I field a lot of questions that sound like this:

"Hey, what are you seeing out there in terms of customer acquisition performance? Our performance continues to get worse, and we don't know how we'll acquire enough customers, long-term, to grow, or to simply stay in business. Where can I find a scalable source of new customers if catalog customer acquisition no longer works?"

Catalog customer acquisition, as we know it, is dying a slow and painful death ... especially if you are an established catalog brand.

Best practices (a term I despise, as you know) used to require you to rent and exchange names with competing companies. In the early 1990s, this was the primary way to grow a brand, especially for smaller companies, folks who could obtain productive names from larger brands. Larger brands benefited by having deep enough pockets to rent/exchange names with numerous small companies. Customers, not having access to companies they didn't know existed, didn't protest against the sale of their name and address the way a few million customers protest today.

Then Abacus changed the world. By having companies pool names in a database, companies could essentially take advantage of cross-company buying habits. Abacus modeled the names, harvesting those that are most productive across brands. Catalogers initially resisted the co-op model, but eventually learned that these names performed better, and were half as expensive as renting the same name from a competitor.

Abacus did so well that a handful of competitors arrived on the scene. The competition resulted in lower prices. The combination of competition, lower prices, and declining performance severely damaged the list rental/exchange industry. Now, the established best practice is to use co-ops for maybe a third to two-thirds of customer acquisition circulation, a major deferral of business responsibility from the catalog CEO to the co-op statistician.

Over the past three years, the world changed. Social Media and third-party catalog opt-out pundits will tell you that "the customer is in charge". And they are right, to some extent (would you suggest that the customer is in charge of financial products ... nope, the taxpayer will foot the bill), though the issue is far greater in scope that the pap-like structure of that sentence, so great, in fact, that we don't have time to discuss it here today. Maybe we'll address that topic tomorrow.

Make no mistake, maybe a third of the customers who used to shop via catalogs now look elsewhere when deciding to make a purchase decision for the first time. Oh, they may still purchase from our brands, but are now much less likely to do so because we sent them a catalog when they hadn't purchased previously. The customer uses other tools, and doesn't always welcome the intrusion in their mailbox.

The economics are clear. As performance degrades, the cost to mail so many prospect catalogs becomes prohibitive in comparison with the long-term value generated by a new customer.

The big brands are observing this, and are inventing new best practices. Some companies are aggressively building their own internal co-op style of database. Based on what some of you tell me, some big brands import data from their competitors, use the information to augment their own customer information, then make names/addresses available to the competitor submitting the information.

All of this is semi-futile, as name/address paper-based marketing slowly dies.

At this time, there are several paths companies are going down to address the death of catalog customer acquisition.

1. Partner heavily with co-ops, leveraging their matchback algorithms and results programs to manage both retention and acquisition circulation. This boosts results in the short-term, helping companies make the p&l for this quarter, or this year.
   
2. Big companies are building their own in-house prospect databases, looking to bypass the co-ops altogether, holding more information.
3. Small companies are being gobbled up by private equity firms, allowing the companies to leverage names/addresses from sister brands.
4. Folks are greatly expanding the use of paid search, and are finding that they cannot recoup the losses observed in catalog customer acquisition, and cannot scale paid search to replace paper-based customer acquisition.
   
5. Others are trying numerous social media strategies, finding that these micro-channels do not scale at the level that catalog customer acquisition scales, even when executed exceptionally well.
   

The reality is that the days of a nice, big, mass audience that can be marketed to via catalog customer acquisition strategies are ending. People are going to expend energy and see success in catalog customer acquisition --- but over the next ten years, performance will trend down --- some ups, a lot of downs.

So what? What do we do about this?

Well, I'm not a fan of building an internal prospect database, adding data from other companies to complement my marketing strategies. Put yourself in the seat of the customer. Do you want Big Brand "X" combining your purchase from Little Brand "Y" to their database, then use that information to market to you differently? You don't like the thought of Google knowing everything about your online habits, so I doubt you like the idea of big brands knowing everything about your offline habits.

Over the next three years, we have no choice but to dramatically expand our testing opportunities in every possible micro-channel that exists. We are losing a sure-fire source of most of our new customers. Now we begin the hard work of exploring a hundred or five hundred or a thousand micro-channels that will eventually replace the one big macro-channel we've used for a hundred years.

This won't be easy. It could be fun. If we don't do it, we face a significant downsizing.

Plow & Hearth Tree Planting Campaign

Plow & Hearth sent an e-mail communicating their efforts to plant trees. You can view the e-mail here.

Their e-mail suggests that they plant two seedlings for every tree they cut down to produce catalogs. And at http://plowandhearth.com/trees, you can monitor their efforts to reach a million seedlings in one year --- customers who order at Plow & Hearth automatically get a seedling donated with their purchase.

Sure this represents an expense for Plow & Hearth --- a wise expense, a good use of public relations marketing.

One way to quell those who believe we represent a wasteful industry is to replenish the resources we consume.

CEO Comments: September

Barnes & Noble on in-store music sales, online sales growth, and offering e-commerce exclusive items (weren't we supposed to have the exact same experience across all channels?).

PetSmart profit was down --- and there was a comment about the customer database, at least twice. Notice the comment about using the database to focus on profitable promotions, ugh.

Kenneth Cole takes a bath, will shift focus from fashion items to basics. Isn't this a classic trend that repeats (upswing = fashion, downturn = basics).

Zales drives a 6% comp store increase, but with a margin reduction, sees a huge drop in profitability. Clearance represented 20% of sales. Wow. Direct marketing and catalogs reflect the "brand position", with less density (always an interesting strategy --- less density). E-commerce is +30% for the year.

Long Island: Hillstrom's Zip Code Forensics

The Northeast United States is a direct marketing hotbed unlike any other, as validated by Hillstrom's Zip Code Forensics (read about and purchase here).

As marketers, we need to think about the differences we see in geography. This map shows outstanding performance in Manhattan, marginal performance in Queens and The Bronx.

Then we head out on Long Island, and we find a multichannel hotbed of customers who prefer both e-commerce and catalog marketing.

Finally, we get out to the Hamptons, and we find a veritable plethora of Catalog Crazies and Catalog Fans. We see a similar trend as we move north toward White Plains.

Repeatedly, we see suburban customers who are focused on e-commerce, exurban customers who are potentially appropriately called "multichannel" customers, and rural customers near urban areas who prefer catalog marketing. Our marketing practices can adapt and respond to these realities. Remember, Catalog Crazies and Online Bliss customers spend nearly twice as much as the average customer.

It Never Rains In California: Hillstrom's Zip Code Forensics

Another fascinating geography, illustrated by Hillstrom's Zip Code Forensics (read about and purchase here), is the area between San Francisco and Lake Tahoe / Reno.

There are dramatic differences in customer preference as we move from west to east!

North of wine country, we have a catalog hotbed, with countless Catalog Crazies and Catalog Fans zip codes. In fact, you can follow the coast all the way up through Oregon, you'll find folks who love catalogs and spend $$$!

In the Bay Area, you predominantly find Online Bliss and Online Spend segments. The stereotypes of this geography hold true, these folks enjoy e-commerce.

You'll also notice lower productivity in the inner city zips of Oakland and San Jose, consistent with much of the country.

The valley doesn't have a lot of productive zip codes. But follow I-80 from Sacramento to Reno, and you see an e-commerce hotbed that is surrounded by multichannel zip codes to the north and south. Once again, as we head into mountain areas, we find customers who love direct-to-consumer commerce.

We have opportunities to alter marketing strategies based on customer behavior. Customers north of the Bay Area, along the coast, are not likely to be "multichannel". Why treat them that way? Customers in the Bay Area are likely to be e-commerce fans --- use search and social media to collaborate with these folks. And even our highway system plays a role in customer behavior --- I-80 from Sacramento to Reno spurs development, housing, affluent customers, and e-commerce spend.

Colorado: Mountains In Hillstrom's Zip Code Forensics

Hillstrom's Zip Code Forensics (read about and purchase here) clearly indicate that mountain states are direct marketing hotbeds.

Colorado might be the most interesting of the mountain states.

Looking at this map, we see several unique trends. Eastern Colorado has e-commerce potential, especially along I-70. Denver, like many major metropolitan areas, is not an e-commerce or direct marketing hotbed.

Move to the suburbs and exurbs, and you see a bunch of Online Bliss and Online Spend zips, the most productive online zip codes that exist.

And then we head west, into the Rockies, away from Denver. There, we find a ton of Catalog Crazies and Catalog Fans. This is interesting, because marketing best practices tell us to have a full multichannel offering for our customers --- yet the customers in Western Colorado love direct mail and catalogs, and use the telephone to place their orders. This is traditional catalog marketing at its finest.

When we think about catalog marketing, e-mail marketing, and search marketing through the perspective of Hillstrom's Zip Code Forensics, we think about many ways to customize and personalize our marketing to the folks we are communicating with. We don't send an e-mail marketing message offering buy online / pickup in stores to a customer in the Rockies of Colorado, do we? We don't necessarily scale our catalogs down to 48 pages to drive web traffic to a customer who lives in the Rockies of Colorado, do we? And we might think about social shopping when considering customers who live in Boulder.

Multichannel Marketing: A Weekend In Wisconsin

When you spend a morning in rural Wisconsin, you understand how messed-up multichannel marketing has become.

The interstate highway system transformed many small towns. In Wisconsin, I-43 was built along the old US-141.

Think about US-141 as the old school world of catalog marketing.

Think about I-43 as e-commerce.

Today, I drove along the old US-141. Here, we see a dramatically different world than we see along I-43, even though I-43 is just a third of a mile to the east. We see small towns. There are handmade signs for accountants, for bakers, for the Friday Fish Fry at the local tavern, for the farm implement. The buildings are old. Social Media doesn't exist here, though walking through the reception line after church is technically a high-octane version of Social Media!

Every mile or so, there is a blue sign pointing travelers to the Interstate Highway. This is like the best practice of e-mail marketing, or of using the catalog to direct the customer to a larger merchandise assortment online. I think there is irony in that the signs are blue --- blue representing a colder, more efficient form of travel.

Eventually, I-43 replaces the old US-141. Now I'm forced on to the Interstate Highway. This is like e-commerce at its finest. Everything moves fast. If you're not interested in a Friday Fish Fry, don't worry, you won't be pointed to one. There are big blue signs preceding every exit --- offering big brand choices for Gas, Food and Lodging This is a lot like paid search, you buy your way onto these signs, and by doing so, you gain a competitive advantage over the fools that cannot afford to advertise on the big blue signs.

There are few signs of life along I-43 --- the job of I-43 is to quickly transport you between Green Bay and Milwaukee without interruption, sort of like the role Google plays online. If you want to find somebody to bake a cake, you'll need to get off the freeway.

In the past thirty years, these two roads, the old US-141 and the newer I-43, evolved differently.

Along the freeway, commerce congregated near exits, creating a big box version of paradise suitable for any individual who needs to stay at a Super 8 motel, get gas at Shell, and eat lunch at Burger King.

Along the old highway, localized commerce thrives. And as expected, most of the signs point to I-43. Sure, there are signs on the freeway that point to the towns on the old road. But the real purpose of the freeway signs is to point you to the brands that are now between the freeway and the old road.

So here is where multichannel marketing is all messed up. If I-43 and the old US-141 followed multichannel best practices, we'd have a complete mess. All of the businesses along each highway would have to be the same. Travelers would be encouraged to spend equal time on each road, right? And those travelers would be the most valuable travelers. Everybody would want those travelers to spend equal time on each road, buying from local business and the brands along the freeway. Heck, we'd set up roadblocks on the local road (though not on the freeway, we don't do that with e-commerce), forcing travelers on the freeway so that they could support the brands along the exits.

We'd give these travelers incentives, like ten cents off a gallon of gas if the customer simply drove from the local road to the freeway to fill up. We would purposely build a church along an exit, then offer incentives for folks to visit the new church. We'd obsess about measuring the cars migrating from the old road to the new road, questioning each individual about the exact reason they got off the old road, trying to match back the localized activity that drove the traveler to the freeway.

In the real world, it doesn't work like this, does it? Nope, the freeway was built, local businesses died, brands saturated the exits, and a seismic shift in the makeup of the businesses along the local road was needed to allow the old US-141 to survive.

So why do the pundits continually force us into a box on multichannel business models? Why can't we let all of our micro-channel evolve in a manner best suited for each micro-channel --- well, not for each micro-channel, but for the way the customer wishes to use the micro-channel?

Listen to the pundits, because they have valid insights.

But move beyond the insights. Have vision. Consider how each of our micro-channels might best serve a customer. Leverage the strengths of each micro-channel, minimize customer exposure to the weaknesses of each micro-channel.

For catalogers, there are many weaknesses. The catalog is no longer relevant to a third of the audience it used to be relevant to. We keep mailing them, however, hoping for results to improve, and this is killing the profitability of our brands. E-mail is nothing short of a pointless disaster for so many of us --- driving a nickel or dime of revenue per e-mail. This has more to do with template-based best-practice design, redundant offers and promotions, and a scorched-Earth saturation of similar messages within and across brands (Up To 40% Off, LIMITED TIME ONLY) than it has to do with e-mail marketing as a micro-channel.

And then we have Social Media. Social Media micro-channels can be used to warm up the cold, efficient, Google-dominated world of e-commerce. But the pundits are ruining Social Media, too. Blogs are dead, conversations now happen on 140 character micro-blogging applications that have almost no business relevance whatsoever (unless you are a fan of customer service, then micro-blogging platforms are invaluable --- hint hint!). We were told businesses had to go down this path --- and once we became convinced we had to do this, the Social Media pundits all left to have their own tiny little discussions in the world of micro-blogging.

Maybe we should stop listening to all of these pundits, stop trying to prove the effectiveness of Social Media, and simply use Social Media to warm up the cold, lifeless world of e-commerce --- making it more like the old US-141 in Eastern Wisconsin. Maybe that's the best way to serve a customer.

Multichannel Forensics A to Z: YouTube

YouTube is a proxy for video. One day in the not-to-distant future, you'll utilize a lot of video on your website.

When we talk about micro-channels, video will likely become the most important entertainment micro-channel.

And entertainment micro-channels will become very important to brands that are, in the vernacular of Multichannel Forensics, in Acquisition Mode.

Home retailers are often in Acquisition Mode, with fewer than forty percent of customers purchasing again within the next twelve months. For these brands, what reason could the customer possibly have to come back and visit your website, when she has no need for the merchandise you offer in the short-term? Heck, she just purchased a couch and a rug, she's not likely to buy anything again anytime soon.

Acquisition Mode brands may use entertainment micro-channels like video to keep customers visiting the website in-between purchases. Think of it as the awareness-style advertising automobile companies use to keep their brands top-of-mind in the five years between car purchases --- except that the content is hosted on their own site, or on YouTube, where it serves as a customer acquisition vehicle.

Multichannel Forensics A to Z: XXL

If you are an apparel marketer, then you know all about the importance of extended sizes.

Visit your local retail store, and you're not likely to find a broad assortment of size 14 dresses or XXL coats. Go online, and you can find absolutely anything you want.

The apparel marketer uses Multichannel Forensics to understand the unique behavior of the extended size customer.

From a marketing standpoint, you don't necessarily waste resources pushing the extended size customer into your store ... in many ways, you are limiting the ability of this customer to be a multichannel customer due to your assortment and merchandising strategy.

Extended size customers can be fiercely loyal to a brand when they find something that is fashionable and comfortable. Extended size customers can also be "leading indicators" of problems with your merchandise assortment, if loyalty wanes.

Analysis of extended size customers is easy --- simply identify, by size or sku, the items that are considered extended size items. Track customers who buy these items different than all other customers.

Appalachian Mountains: Hillstrom's Zip Code Forensics

Another interesting outcome of the beta of Hillstrom's Zip Code Forensics (read about and purchase here) occurs in mountain areas.

This map shows trends from Washington, DC to Atlanta.

As we leave Washington, heading southwest, we migrate from Online Bliss to Catalog Fans. In Southwest Virginia and Western North Carolina, there are many productive zip codes in the Catalog Crazies and Catalog Fans segments.

As we approach Atlanta, the focus shifts, with many productive zip codes northeast of Atlanta, mostly in the Online Bliss and Online Spend segments.

Mountain areas tend to be very productive regions for direct marketers. As you get closer to cities, e-commerce is prevalent. As you get farther away from cities, traditional direct marketing and ordering over the telephone becomes important.

Urban, Suburban and Rural: Hillstrom's Zip Code Forensics

One of the unique validations of Hillstrom's Zip Code Forensics (read about and purchase here) is the consistent difference in behavior between Urban, Suburban, and Rural zip codes.

This map features the Chicago, Milwaukee, and Madison markets. Look closely at Chicago and Milwaukee.

The inner city zip codes perform well below average. As you move out from the inner city, into the suburbs, you see e-commerce take over, with many Online Bliss and Online Spend zip codes.

Moving beyond the suburbs, and we begin to see Catalog Fans, and even a few Catalog Crazies.

Repeatedly, across the United States, we observe this behavior. Direct Marketing is a uniquely suburban, exurban, and rural practice --- something the marketing experts who preach multichannel strategies may not have ever had the data to validate. And this makes sense, folks! You go back to the early days of Montgomery Wards and Sears, and you'll see that the catalog was the commerce lifeline to rural folks.

You think differently when you know that many urban areas, retail hotbeds, are not always direct marketing responsive. You think about e-mail marketing differently when you think about targeting a suburban and exurban customer. You think about catalog marketing differently when you think about targeting an exurban or in some cases a rural customer.

Hillstrom's Zip Code Forensics: Download The Paper

The vast majority of the work has been done in the beta version of Hillstrom's Zip Code Forensics!

Hillstrom's Zip Code Forensics classify each zip code in the United States on the propensity for residents of that zip code to shop via traditional direct marketing (catalogs) or via e-commerce. Furthermore, the segmentation strategy classifies zip codes on the basis of overall productivity, illustrating zip codes that are highly productive, and those that are generally unproductive. The segmentation strategy is based on nearly a billion dollars of sales across a dozen leading direct marketers.

There are six segments in Hillstrom's Zip Code Forensics. From Catalog Crazies to Online Bliss, you'll see your business in a whole new light, having the ability to filter out unproductive names from your marginal segments.

If you are interested in participating in and purchasing Hillstrom's Zip Code Forensics and wish to learn more about the six segments, please download a paper on Hillstrom's Zip Code Forensics here.

Feds Set To Bail Out MineThatData

Washington, DC: In an unprecedented move, The Federal Reserve Board announced this evening that it will, for the first time ever, bail out a highly profitable sole proprietorship.

Seattle based MineThatData, a consultancy that helps CEOs understand the complex relationship between customers, advertising, product, brands and channels, will be the recipient of nearly $300,000,000 of free money, courtesy of an unprecedented taxpayer bailout.

"It's only one dollar per person living in the United States" groaned a noticeably exhausted Treasury Secretary Henry Paulson. "We just finished taking ownership of AIG, and now we're faced with having to bail out a highly profitable sole proprietorship. Where does this end?"

The announcement was met with an enthusiastic roar of approval at the Shop.org Annual Summit in Las Vegas. Attendee Maya Pemberton, Sr. Pay-Per-Click Analyst at Dell, told anybody who would listen that the announcement provides much-needed stability in the emerging field of Multichannel Forensics.

"We just realized that our online customers were in hybrid/transfer mode, rapidly migrating to our retail offering at Wal-Mart. We couldn't possibly take our strategy to the next level without assistance from the Feds." mentioned Pemberton, who then ran her badge under the bar code scanner at a social media vendor in the exhibition hall, earning her a free ballpoint pen and a chance to win an iPod shuffle.

Wall St. did not react positively to the announcement, with the Dow Jones Industrial Index plummeting 1.4% in after hours trading. We were unable to solicit a comment from management at MineThatData.

Note: Various, if not all elements of this story, have been fabricated. No taxpayers were harmed in the writing of this story.

Metrics That Matter

How many of you know how many of last year's customers will purchase again this year?

All the business intelligence pap about dashboard reports sells software. A few key metrics, metrics that I used to see printed out on green/white tractor paper back in 1991, will give you insight into where your business is heading. Let's review a few simple tables that many direct marketers produce.

This table analyzes existing customers. These were prior customers, acquired more than a year ago. For the 2008 row, these customers were acquired in 2006 or earlier, and placed at least one order during 2006.

Last Year Existing Buyer Performance
	Households	Rebuy Rate	Spend/Rebuy	Volume/HH	Tot. Demand
2008	124,384	53.7%	$274	$147.14	$18,301,613
2007	135,048	56.1%	$283	$158.76	$21,440,626
2006	117,349	52.4%	$249	$130.48	$15,311,228
2005	110,841	51.9%	$208	$107.95	$11,965,508
2004	119,439	50.9%	$203	$103.33	$12,341,274
2003	117,430	54.9%	$201	$110.35	$12,958,283
2002	102,843	55.8%	$200	$111.60	$11,477,279

This is direct marketing's version of "comp store sales". The marketer reviews the volume per household column, to understand if performance is improving over time. In this case, performance is down significantly in 2008, because the repurchase rate and spend levels are down. Also notice what happened back in 2005 --- metrics improved, but total demand decreased, because of a lack of file momentum coming out of 2004.

Direct marketers produce a table of this style for existing customers. A comparable table is produced for customers who were newly acquired in the prior year. This helps the direct marketer understand if newly acquired customers are holding up their end of the bargain.

Another table sums new and reactivated customers. Any customer who did not purchase in 2007, but purchased previously, and purchased during 2008, is included in the table, as are all new customers. The table looks something like this (each row replicating prior years).

New/Reactivated Buyer Performance
	Households	Rebuy Rate	Spend/Rebuy	Volume/HH	Tot. Demand
2008	53,941	100.0%	$188	$188.00	$10,140,908
2007	47,204	100.0%	$215	$215.00	$10,148,860
2006	42,048	100.0%	$203	$203.00	$8,535,744
2005	50,884	100.0%	$189	$189.00	$9,617,076
2004	48,778	100.0%	$185	$185.00	$9,023,930
2003	45,224	100.0%	$183	$183.00	$8,275,992
2002	39,005	100.0%	$180	$180.00	$7,020,900

In this table, we observe that 2008 hasn't been a bad year for new/reactivated buyers. Of course, your analysts will keep close watch on cost per new/reactivated customer, but from a dashboard standpoint, buyers are up, demand is down, yielding about the same amount of demand as last year.

These three tables tell the Executive an awful lot about the health of the brand. You can run the tables by channel or merchandise division if you wish. For many direct marketers, these metrics help diagnose the health of the business.

E-Mail Marketing: Fixed And Variable Costs, And Why They Matter

I'm sometimes criticized by the e-mail marketing community for my belief that e-mail marketing is essentially "free".  This audience points out that it takes human beings to create e-mail marketing campaigns, and those human beings cost money.

This audience is correct --- it does take human beings to create e-mail marketing campaigns, and it costs money to pay those human beings to execute the campaigns.  Please be advised, however, that all forms of marketing have fixed costs, costs proportionate to the effort to produce marketing.

Sometimes, however, we miss the subtle difference between fixed and variable costs.  This subtle difference causes other forms of marketing to be far more productive than e-mail marketing is.

Fixed costs are expenses that do not change, regardless whether you execute one or a hundred or ten million of some activity.  Your $54,000 a year e-mail marketing manager gets paid that sum of money, regardless whether the e-mail marketing list grows by one percent or ten percent.  Your computer, or the chair you sit in in your office, are fixed costs.

Variable costs are expenses that change as you increase or decrease marketing activity.  This is where e-mail marketing is fundamentally different from most forms of marketing.  When you send one catalog, you spend maybe $0.75.  When you send a million catalogs, you spend $750,000.  Now you have e-mail, where it costs maybe $0.003 to send one e-mail message.  When you send a million e-mail messages, you spend $3,000.  See the difference?  There is essentially no variable cost to e-mail marketing.

This is great, because it makes e-mail marketing affordable for anybody.

This is terrible, because it creates a giant disincentive to ever make e-mail a viable sales generation tool.

In 2008, the average cataloger might generate $3,000,000 demand if a million catalogs are mailed.

In 2008, the average e-mail marketer at a catalog brand might generate $400,000 demand if a million e-mail marketing messages are delivered.  Yuk!

When it costs a significant fee to do something, you work very carefully to make sure that you've done everything right (aka "best practices"), so that you get a suitable return on investment.  When something is close to free (aka e-mail marketing, on a variable cost basis), the discipline is different --- not bad, but different.

The best thing that could ever happen to e-mail marketing would be some sort of tax, a fee placed on each e-mail marketing message delivered to a customer.  

Let's say there was a five cent tax placed on every e-mail message sent to a customer, with the tax going to fund prosecution of spammers and for development of inexpensive nationwide high-speed wi-fi access (I know, I'm nuts, but play along).

As marketers, would we not completely re-think every e-mail marketing campaign we execute?  Would we not develop more complex segmentation strategies, or implement statistical ranking models?  Would we not develop numerous versions of each campaign, with targeted merchandise assorted for audiences that buy that merchandise?  Would we not explore trigger-based campaigns more thoroughly?  Would we not carefully study response to every link, or understand the relationship between response and heat maps?  Would we not measure profit, instead of measuring metrics like open rates and click-through rates?  Would we not integrate all of your systems to properly understand the impact of e-mail across channels? Would we not execute mail and holdout tests?

Variable costs completely change how we look at the business.  Until recently, direct marketing was all about variable costs --- the brands that were most profitable executed flawlessly, and knew exactly how to manage variable costs.

Now, direct marketing is a hybrid of fixed and variable costs.  Websites have a fixed component, catalogs are often highly variable in nature.  E-mail marketing is generally a fixed-cost business.  E-mail marketing could be so much better if it had a significant variable component --- variable costs demand discipline.  

And by the way, it is the same lack of a variable cost component that is killing social media.  Without an apparent variable cost for each post, or each comment, or each interaction, the overall quality of the discipline suffers.

Multichannel Forensics A to Z: WWW.

Few letter changed direct marketing more than WWW.

Prior to the mid-1990s, we pushed our message to the customer. And if we didn't push our message to the customer, the customer didn't buy from us unless she specifically requested a catalog.

Though it has been nearly fifteen years since the first e-commerce websites appeared, our evolution into the realm of "www." has been comparatively slow. Think about it. Our websites were drill-down oriented websites built by technical individuals, not by shoppers.

Once the infrastructure was built, we learned that modifying the infrastructure was hard work. Marketers wanting to make changes had to submit projects to a "book of work", where projects were prioritized based on available resources. Never before had marketers been so hamstrung. Catalog marketers were used to doing whatever they wanted, limited only by the constraints of the printing process. Online marketers require that information technology bridge to be successful.

In the past five years, it seems like the customer became frustrated with the slow pace of change in multichannel marketing. She no longer trusts us, and probably for good reason. We've failed her with false guarantees and marketing gimmicks. Now, she looks to her peers for advice. She looks at customer reviews of products, not the copy written by somebody paid to entice the customer into purchasing goods and services.

The future of Multichannel Forensics is not within any one brand, but between brands that sprawl across the internet. Our job will be to understand how our customers interact with other shoppers, websites, and brands. We'll demonstrate that Facebook is in Transfer Mode with Google, and that customers who come from Google are loyal to Google, not loyal to us. We'll use the Multichannel Forensics framework to make sense of the World Wide Web, a complicated entanglement of sites independent of each other. We will understand our place in this complicated "web".

Who is going to lead this charge?

Multichannel Forensics A to Z: Variety

If there is one customer you want to acquire, it is a customer who participates in a variety of activities within your brand.

Multichannel Forensics projects repeatedly indicate that customers who exhibit a variety of behaviors are customers that are worth watching.

If you are an e-commerce pureplay, segment customers who visit a lot of departments or landing pages. Segment customers who visit your site frequently. Segment customers who search your site. Segment customers who visit due to natural or paid search. Segment customers who visit because of social media. Segment customers who buy vs. browse. Segment customers who visit due to e-mail marketing. Segment customers who leave items in their shopping cart. Segment customers based on days since last visit, or last purchase.

And pay particular attention to the customers who exhibit a variety of behaviors. Use Multichannel Forensics to see what happens if one of the variety of behaviors is removed from the equation. What happens if you stop e-mail marketing? What happens if you take away key landing pages?

Often, removal of one factor impacts all the other factors, when customers exhibit a variety of behaviors.

Micro-Channel Consultant Success Stories

This image is of the Libey Economic Outlook. Don Libey is a multichannel direct marketing consultant. Once a month, he mails a newsletter filled with topics and parables relevant to the catalog-based direct marketer. When this document arrives in the mail, my first priority is to set down what I am working on, and read the publication.

Lenser marketing also has an e-mail marketing newsletter, though I tend to read the newsletter online. The online newsletter doesn't allow comments, though honestly, it doesn't need to facilitate a conversation.

The Rimm-Kaufman group hosts a blog. I almost never visit their website, though I am an avid reader of their information when it arrives via Google Reader. Their articles are among the content I most appreciate receiving. The blog does accept comments, allowing for a conversation to happen.

John Hagel is lucky to publish a handful of articles each year on his blog, but when he publishes them, they are must reads. I also read his articles via RSS Feed.

The next image is from Amy Africa's E-mail newsletter, called "Thinking Inside The Box". This newsletter has stories and is full of best practices to help struggling marketers improve performance. You can subscribe to her monthly newsletter here.



What's the point of all of this? Each example represents a specific use of a micro-channel, a preferred method for these folks to communicate with their audience.

Sometimes we're led to believe we have to do everything in order to be successful. We have to do direct mail, and e-mail, and have a website, and host a blog, and participate in social media.

Maybe we're better off focusing on fully capitalizing on a fusion of micro-channels that are appropriate for the audience we want to speak to? None of these folks are doing everything --- instead, they are specializing (and, by consequence, excelling) in specific micro-channels.

Increasingly, we have an opportunity to be excellent at one or two things, rather than being good across multiple channels. We have a chance to stand for something.

Debunking An Article/Study: Response From Abacus / Chad Elmendorf

From Chad Elmendorf, Manager of Customer Communications at Abacus, in response to "Debunking An Article/Study: Catalogs Still Rule". This was left as a comment to the original post where I mistakenly assumed that Abacus tossed the DMA a few bucks to underwrite the survey --- my error in assuming what the term "underwrite" meant:

"First off, Abacus supports the DMA and their efforts to provide catalogers with industry research. That being said, I wanted to clarify Abacus' involvement with the DMA State of the Catalog Industry Report. As a sponsor of the report, Abacus promoted participation in the survey to our clients through a client newsletter to support involvement. The survey was completely conducted, and the results compiled, by the DMA. Abacus had absolutely no involvement with compiling the data from the survey or giving the DMA survey data. The DMA survey results are from survey respondents only. Abacus supplied the DMA with the executive summary from our annual Multichannel Trend Report which is printed in it's entirety as an appendix in the State of the Catalog Industry report under the title "Industry Trends According to Abacus Multi-Channel Trend Report. If you would like to receive a copy of the executive summary from our Trend Report please email me directly at chad.elmendorf@epsilon.com. The executive summary is available to anyone who requests it (current client or not) whereas the complete data findings included in the full report are for the exclusive benefit of current Abacus clients."

ESPN: Multichannel Becomes Overwhelming?

From ESPN's own ombudsman, via Pro Football Talk:

"... a degree of multiplatform corporate synergy that often feels so relentless and all-encompassing that ESPN's heaviest viewers go berserk from time to time."

This is a danger of being "multichannel". The punditocracy keeps telling us we need to have common platforms across all channels, using e-mail to promote catalogs, using catalogs to promote store events, having online landing pages align with catalog mailings, having PPC campaigns integrate with store events, using blogs to promote new product launches that also appear in print campaigns.

It never ends. And it can be too much for our best customers. If fragmentation forces us to have three hundred micro-channels, there's nothing wrong with being different and unique across micro-channels.

E-Mail Cannibalization

Our industry doesn't talk a whole lot about e-mail cannibalization.

We do spend a lot of time talking about declining performance. Interestingly, performance declines can be correlated with increased campaign frequency.

Take a brand that used to send one e-mail campaign a month, generating $0.25 per e-mail delivered. Then they began sending one e-mail campaign a week, generating $0.19 per e-mail delivered. Then they began sending two e-mail campaigns per week, generating $0.13 per e-mail delivered.

An Executive might grumble about declining performance. It is the responsibility of the e-mail Marketing Director, however, to illustrate what is really happening. And we don't illustrate this with simple metrics like open rates and click-through rates and conversion rates.

A negative view of the world:

• E-mail campaigns used to generate $0.25 each.
• Then e-mail campaigns generated $0.19 each.
• Then e-mail campaigns generated $0.13 each.

A positive view of the world:

• E-mail marketing used to yield $0.25 of demand per customer per month.
• Then e-mail marketing generated $0.75 of demand per customer per month.
• Then e-mail marketing generated $1.04 of demand per customer per month.

Because of the non-existent cost of e-mail marketing, it is ok to look at demand per customer per month as an appropriate metric. As long as opt-out rates don't consume incremental demand, this is an acceptable way to view the business.

Now let's get back to the volume we observed.

As contacts increase, volume increases at a decreasing rate. This is a classic relationship. Some call it cannibalization --- each additional e-mail eats away at the productivity of existing e-mail campaigns. Others view this as diminishing returns. Either way, the concept is the same.

In the old school world of catalog marketing, cannibalization was critical to understand, because the incremental demand didn't offset the cost of delivering a catalog.

With e-mail, your cannibalization costs are based on customer frustration --- how many contacts until you no longer get enough revenue to offset the folks who opt-out of your campaigns? You can answer this by executing simple contact strategy tests.

September 11: Red Cross Landing Pages

Sometimes, a big shock causes us to change behavior.

In the days after September 11, many e-commerce brands instituted a Red Cross landing page, asking for donations. Brands suspended commerce in favor of a greater cause. E-mail marketing campaigns advertised Red Cross donation opportunities.

Funny, you don't read a single thing from the e-commerce and e-mail best practice community about Red Cross landing pages, or about giving, do you? And you didn't read anything about it prior to September 11, 2001 --- you would have been considered a moron to suggest anything so odd as the diversion of potential e-commerce sales to the concept of giving --- that's like encouraging shopping cart abandonment!

It took a few folks with a unique combination of sensitivity and horse sense to understand that e-commerce would not be compromised and doing good could be promoted, given the circumstances of September 11. Then the masses followed, and for a brief moment in time, you had a new best practice.

There are a lot of things that were surreal about that day. I drove to work at 6:30am and found that my local radio station was simulcasting radio from NYC, that was odd. I couldn't get into any media websites from work that day. We had employees who were stranded in NYC. Military ships patrolled Puget Sound. Co-workers missed meetings, crying, worried about loved ones who were in New York, or who were currently on an airplane. We let employees leave the office at about 1:00pm.

It was just as surreal to see e-commerce suspended in favor of a new best practice called "giving", followed by the anthrax scare. Then it was the holiday season, and we stepped back into the world of e-commerce, trying to protect annual profits, reverting back to what we used to do.

For a brief moment in time, e-commerce changed, best practices changed. I think everybody in America changed after that day. In some ways, it is a shame that the changes in e-commerce were not permanent.

Clarifying My Position On Catalog Marketing

My e-mail inbox is split 50/50 with feedback this week.

• Feedback Category #1 = "I've been thinking that the articles we read are terribly biased as well. Thanks for pointing out the propaganda we're being fed."

• Feedback Category #2 = "You are a rube. There are tens of thousands of catalogers out there who serve a hundred million catalog buying homes. Catalogs are alive and well, you're the one who is out of step, spewing propaganda."

Make no mistake, folks. I love catalog marketing, and I love the folks who work in the catalog industry. Catalog marketing requires the merchant to tell a compelling story that resonates with a customer. It requires exceptional merchandising and brilliant creative presentation and well-executed operations and leading-edge database marketing. I adore it, all of it. Catalogers are among the most humble individuals I've worked with.

Catalogs are a vital part of the shopping experience for many brands and customers, especially brands that have a female customer over the age of fifty who lives in a exurban or rural area or live in New England or the Mountain States.

In general, I have two criticisms of the catalog industry.

1. The vendor community can take a stance that promotes the well-being of the vendor community, not the well-being of the brand/customer relationship. This is the basis for my critique of the recent Multichannel Merchant / DMA / Abacus article. This is the basis for my rants about Best Practices.
2. My industry was quick to see the benefits of e-commerce. My industry is way behind in the evolution away from catalogs and toward what I would call "social shopping". We continue to mail catalogs to customers who no longer want catalogs, who no longer find catalogs relevant to their life. This practice gives power to third party opt-out services, folks promoting an agenda that may be planet friendly.

Never for a minute think that I believe that catalog marketing is no longer relevant. It is highly relevant ... for brands who cater to a demographic that is catalog friendly. I will continue to promote catalog marketing to that audience, and I can save you $$$ by helping you avoid catalog mailings to audiences who no longer find catalog marketing relevant. I will also continue to debunk any agenda that misleads our industry for the benefit of the folks promoting the agenda.

Who Gets Credit For The Order?

Your customer purchases in a store on September 2. She received an e-mail campaign on September 1, a catalog mailing on August 25, and visited your website on August 31 after conducting a Google search for a branded keyword.

Who gets credit for this order?

Who cares?

So many folks are arguing about how to allocate orders. An Executive recently told me "I don't care what anybody says, we execute marketing campaigns, we're a campaign company, and we have to prove whether they work or don't work."

Of course, the allocation process is futile. Parsing orders based on fractional allocation assumes that the marketer knows how marketing tactics interact. We marketers know that we don't know how we truly make our own purchase decisions, so what makes us think we can fractionally allocate orders based on business rules?

You're going to see more folks leaning toward a holistic profit scorecard for each segment of customers. Here's what a holistic profit scorecard might look like for one segment of buyers, spanning the past five years --- go ahead and click on the image for a better view:



You can allocate the living daylights out of transactions, or you can perform a holistic review of customer performance. What does the table tell you about customer behavior?

1. Catalog pages are down significantly over time, yet demand has generally held.
2. Google, Google, Google! Website visits are increasingly driven by Google. What does this mean for the future of your brand?
3. Looks like e-mail marketing frequency has gone berserk, with a modest increase in sales.
   
4. Paid search expense continues to increase over time. This is expense that, in some cases, you don't necessarily control. Your customer decides to click on the keywords you're willing to pay for.
   

Let me be clear --- this holistic view requires the Web Analytics community to amp-up their game. The holistic view of customer behavior demands that Web Analytics tools fully integrate with the customer database. This means that the Omniture and Coremetrics folks need to partner with the e-mail marketing folks. And once this partnership has been cemented, you'll need to go get those old-school catalog marketers, incorporating tehir results. That should be fun. But not as much fun as when you go pull in the SAS programmers who have access to every piece of customer data in the company --- and if you don't have a SAS programmer, you have a SQL programmer who can do the same thing for you.

Get 'em all together, and start viewing customer behavior in a holistic manner!

Presidential Election: Three Issues For Database Marketers

Sure, it is interesting to consider whether lipstick comments are or are not derogatory. While Anderson Cooper considers divisive topics that guarantee viewership and advertising revenue, we need a few questions answered ... from either candidate, regarding issues important to database marketers.

Here are three issues facing Database Marketers. Add your issues in the comments section of this post.


Issue #1 = Privacy: Where do any of the candidates stand on the issue of your personal information? Should Google be able to assemble a profile of you that spans search and advertising and blog visitation habits and browser preferences and video viewing habits and spreadsheet interests and RSS feeds consumed and e-mails sent to folks overseas? Should Abacus know what you purchased at a hundred or more retailers, then sell your information without your consent? At a much smaller level, should Restoration Hardware be able to know that you looked at drawer hinges online and then purchased a lamp in the store two days later? How far do each candidate think marketers can go before violating the privacy of a resident of the United States? Your career hinges on their opinions.

Issue #2 = Do Not Mail: Eco-friendly organizations strongly believe you shouldn't be able to use direct mail to market to consumers without consumer consent, using a separate issue (consumer preference) to further their agenda (forest protection). The government already took telemarketing off the table, direct mail is not far behind (and maybe it shouldn't be far behind, I don't know). And when direct mail falls, Google should be worried, because they are next. Did either candidate offered a stance on this issue?

Issue #3 = Work From Home: I have the ability to communicate with and work with folks in the UK in real time, from the comfort of my home office, using e-mail, phone, and Skype. So what does this mean for the individual who trudges into Bag, Borrow or Steal each day? How does the workplace change if a database marketer only needs to physically be in the office two days a week? How do our energy consumption habits change, and how much money does the garden variety database marketer save by not commuting each day? How does productivity change? Do either candidate believe you should be able to work from any place that allows you to get your job done?

Those are three issues that are relevant to database marketers. What issues should the candidates be discussing, issues that are important to you?

Multichannel Customer Evolution

Reading the marketing literature, we learn all about how we have to be "multichannel". We need to be all things to all customers.

We don't read much about how customers behave as the migrate through the multichannel maze.

Across a veritable plethora of Multichannel Forensics projects, we get a good view into the evolution of customer behavior. Let's review different stages that frequently repeat themselves.


Stage 1 = Online Shopping Via Direct Marketing. This is the classic stage that the marketing folks talk about all the time. In this stage, the customer that was always responsive to direct marketing becomes responsive to direct marketing via the online channel. Here are six customers, before this transition, then following the transition.

Before Transition
Customer 1 = Telephone Shopper
Customer 2 = Telephone Shopper
Customer 3 = Telephone Shopper
Customer 4 = Telephone Shopper
Customer 5 = Telephone Shopper
Customer 6 = Telephone Shopper

After Transition
Customer 1 = Telephone Shopper
Customer 2 = Telephone Shopper
Customer 3 = Telephone Shopper
Customer 4 = Online Shopper Via Direct Marketing
Customer 5 = Online Shopper Via Direct Marketing
Customer 6 = Online Shopper Via Direct Marketing


Stage 2 = Paid Search, Social Media, And Branded Visitation: This is a transition that direct marketers born prior to e-commerce are struggling with. In this stage, traditional customers evolve to online shopping, while online customers begin to not use traditional direct marketing (catalogs, e-mail).

Before Transition
Customer 1 = Telephone Shopper
Customer 2 = Telephone Shopper
Customer 3 = Telephone Shopper
Customer 4 = Online Shopper Via Direct Marketing
Customer 5 = Online Shopper Via Direct Marketing
Customer 6 = Online Shopper Via Direct Marketing

After Transition
Customer 1 = Telephone Shopper
Customer 2 = Telephone Shopper
Customer 3 = Online Shopper Via Direct Marketing
Customer 4 = Online Shopper Via Direct Marketing
Customer 5 = Online Social Shopper
Customer 6 = Online Social Shopper


This is the transition we are going through right now. This transition is a tough one for traditional direct marketers, because the tools and techniques we always used now only work among 2/3 of the audience. Couple that with an economic downturn, and there's trouble brewing.

The real challenge comes in when adding retail to the equation. When a brand adds retail stores, all bets are off. Some customers migrate to retail, some customers migrate to retail while using the online channel for research purposes. Other customers are true multichannel customers, using all channels.

Stage 3 = Addition Of Retail Stores. Let's see what this looks like.

Before Transition
Customer 1 = Telephone Shopper
Customer 2 = Telephone Shopper
Customer 3 = Online Shopper Via Direct Marketing
Customer 4 = Online Shopper Via Direct Marketing
Customer 5 = Online Social Shopper
Customer 6 = Online Social Shopper

After Transition
Customer 1 = Telephone Shopper
Customer 2 = Retail Shopper Via Direct Marketing
Customer 3 = Retail Shopper Who Buys Online (True Multichannel Buyer)
Customer 4 = Retail Shopper Only, Not Responsive To Direct Marketing
Customer 5 = Online Social Shopper
Customer 6 = Retail Shopper Who Uses Online Micro-Channels For Research Purposes


Look at the six customers at the end of this transitional period. Six homogeneous customers become six independent customers, all exhibiting different behavior. This is the mystery of customer behavior that we're not quite comfortable with. We want to lump all six of these customers into the multichannel bucket, then execute old-school marketing and new techniques. This can anger a customer who doesn't want to hear via e-mail, blogs, catalogs, postcards, and search that you have a sale where the customer can save up to twenty percent. We'll stop marketing the same programs to all customers at some point --- we don't necessarily have the tools to do so today.

In reality, these are not multichannel customers. The customer is in a stage of transition --- the customer migrates through channels, instead of belonging to all channels. Our worldview will change in the next few years.

Debunking An Article/Study: Catalogs Still Rule?

Multichannel Merchant published an article titled "Print Catalogs Still Rule, Survey Shows". The first sentence says "If you think the print catalog is a dying channel, you better think again." Sounds like an agenda will be shared. Let's explore this article, which is an advertisement for the DMA's State Of The Catalog Industry Report, 2008 Ed, a $245 article for members, $445 article for non-members.

Quotation #1 = "Of 106 merchants polled by the Direct Marketing Association". Who was polled? Is the polling representative of all catalogers? We don't get to know in this article.

Quotation #2 = "And our data suggests a consensus among successful marketers that there are consistent and integrated standards across all channels". Could we get a definition of a "successful marketer"? Bloomingdales just killed their catalog division. Nordstrom killed their catalog division, and enjoyed the most profitable years in the history of the company. Is that success?

Quotation #3 = "And despite buzz to the contrary, the number of print catalogs in circulation has actually increased since 2003." Ok, let's assume you are right. Tell me what has happened since 2006? In the past two years, you have a postage increase averaging about 30% that wreaked havoc, an economic downturn that is shredding circulation, and the implosion of catalog customer acquisition. None of those points are mentioned in the article. From 2003 to 2006, we enjoyed the buoyancy of the home equity piggy bank.

Quotation #4 = "The survey estimates that total annual housefile circulation reached about 15,463,891 while total annual prospect circulation reached about 5,536,424. That's up significantly from the total annual housefile circulation of about 5,169,011, and total annual prospect circulation of 3,423,389, recorded in 2003." What does this mean? Are these total numbers in the survey, or are they averages per survey respondent? And how about the word "about", bantered around in the quote? What does "about" mean? Does it mean that 5,536,424 is really 5,536,429? Or does it mean that 5,536,424 really means 2,536,424? Help us understand!! Finally, let's assume these numbers are accurate, representing an average cataloger. Let's ask a question. Have you tripled your housefile circulation in the past five years? Have you nearly doubled your customer acquisition circulation in the past five years? Ask Talbots, or J. Jill, or Nordstrom, or Lands' End, or L.L. Bean, or Eddie Bauer, or Bloomingdales, or Lillian Vernon, or Hanna Andersson if they tripled their housefile circulation in the past five years. If the numbers are accurate, this suggests that the sample of respondents are small catalogers that are growing rapidly. Heck, I know of several small catalogers that are growing rapidly --- that's the nature of a young, growing brand. These businesses rent/exchange names with big companies, growing from the hard work of the larger brands that preceeded them, while big companies already have all the names available. Catalogs are wonderful for small, growing catalog brands.

Quotation #5 = "The findings are also based on a detailed analysis of billions of transactional records from 100 million households in the Abacus Alliance database, maintained by marketing firm Abacus, a division of Epsilon, which helped underwrite the report." Ah! So the DMA did a survey, Abacus kicked in a few bucks to complete the study, and results were merged together so that the reader does not know in this article which statistics are from the study and which statistics were paid for by Abacus. Why doesn't the mystery author honestly tell us which stats are from the study, and which stats are from Abacus? And how come the information in the article is so glowingly positive? How come there is no discussion about the true hardships facing catalogers, including but not limited to declining response rates across housefile and especially customer acquisition segments? And why isn't the fact that Abacus contributed metrics and underwrote the study not mentioned in the title of the article --- the title of the article says this is a survey?

Why do our industry leaders continue to offer us misleading information? This style of writing/selling is exasperating to me, a sales pitch to continue to execute the practices that make sure the DMA and Abacus stay in business.

Or am I way off base? If I'm off base, please use the comments section to defend the article ... I'll even publish your responses as a complete post if you wish. What do you think?

Multichannel Forensics A to Z: Uncoded Demand And Orders

In a perfect world, we'd know the source of every penny of revenue we receive.

For those of us who don't live in a perfect world have to make assumptions. One of our challenges occurs when we have to allocate "uncoded demand" to the source that theoretically drove the demand.

Nowhere is this a bigger challenge than in online orders that appear to have been generated out of thin air.

Catalogers love to create a vast array of business rules to attribute orders to one of a veritable plethora of prior catalog mailings. Catalogers frequently take too much credit for online orders.

E-mail marketers completely miss the boat here, by and large. Open rates and click through rates and conversion rates, via e-mail analytics tools and web analytics software seriously over-count or under-count orders.

Search marketers also fail to attribute orders properly. A Google query resulting in a paid search visit on a Monday that results in a purchase on a Wednesday is seldom attributed properly in the online marketing world.

This brings us to the topic of Multichannel Forensics.

Orders are categorized into theoretical "micro-channels". The phone order attributed to a catalog is a micro-channel. The online order with a catalog key code is a micro-channel. The e-mail order is a micro-channel. The paid search order is a micro-channel. The natural search order is a micro-channel. The affiliate order, shopping comparison site order, the banner advertisement order --- they're all separate micro-channels.

And yes, uncoded online orders are a separate micro-channel.

The key is to see what customers using one micro-channel do next. What is the behavior of customers who placed uncoded online orders? Do they use paid search next? Do they use a catalog key code next?

Subsequent behavior can help you understand how uncoded orders are really being sourced. If you find that subsequent orders are attributed to e-mail marketing, you have a strong sense that e-mail marketing is playing a role in the generation of uncoded orders.

Multichannel Forensics A to Z: Transfer Mode

In Multichannel Forensics "Transfer Mode" is a situation caused by customers moving from one product, brand or channel to another.

These are the situations that disrupt established business models. Customers transfer from CDs to MP3s. Customers transfer from SUVs to small hybrid vehicles. Customers transfer from newspapers to internet-based news sources.

Our job is to evaluate trends that are in Equilibrium Mode, evaluating the repurchase indices for persistent increases. Persistent increases suggest a growing trend, one management is wise to heed.

Imagine if record labels had embraced file sharing and MP3s? Imagine if newspapers embraced new media instead of holding on to paper? Imagine if GM or Ford had their version of the Prius before Toyota?

Transfer Mode is the most frightening of the modes in Multichannel Forensics. It also offers the most opportunity for those who have the vision to see how trends might play out.

Kidbits from CWDKids and Heaven Of Tea from Teavana

Here's a couple of ways that catalog brands execute a social media strategy

1. The kidbits blog from CWDKids.
2. Heaven of Tea from Teavana.
   

Humanizing e-commerce is a good thing!

An Open Letter To Abacus, Experian, I-Behavior, NextAction, Prefer Network, Alexa, and Wiland

Dear Abacus, Experian, I-Behavior, NextAction, Prefer Network, Alexa, and Wiland Direct:

It is time for a change in the direction of your database strategy. The world is clamoring for catalogers to stop stuffing catalogs into the mailboxes of customers who want to decide for themselves who they purchase from, without interruption from marketers. The eco-based world is demanding that catalogers change, now.

Your clients tell me they want to know more about the names you provide for them. They tell me they don't understand your models, they don't truly understand what they are getting. They do tell me that they like the performance, on average, of the names you provide.

Here's what I would like to see happen.

When my clients pull another 274,399 names from your database, I'd like for my clients to see a profile of the names as follows:

• Traditional catalog buyers who use the telephone to transact orders.
  
• Catalog buyers who transact online.
• Online buyers who combine online marketing, search, and catalog marketing to place online orders.
• Online buyers who prefer social media, buyers no longer interested in direct marketing.
  
• Multichannel buyers who skew toward retail stores.
• True multichannel buyers who equally prefer phone, online, and stores.
  

When my clients get the 274,399 names from your database, I want the names split into these segments. I then wish to analyze performance across these segments. Which segments are most responsive? Which segments are BECOMING most responsive? Why are you sending my client unproductive names? Thank you for sending my clients productive names!

I want to overlay my twelve month customer file against these segments, observing changes over time. I want to overlay my lapsed buyers against these segments, observing changes over time. I want to dissect miserably performing segments to see if their behavior is evolving away from direct marketing preferences.

I want to overlay my e-mail customers across these segments, using the data to create targeted campaigns that speak to the interests of my e-mail marketing list.

I want to overlay my telephone customers across these segments. This is where remail marketing makes sense.

I want to overlay my online buyers across these segments. I want to overlay my paid search buyers across these segments. I want to analyze merchandise preferences across these segments, and analyze the segments various merchandise purchasers fall into. I want to analyze seasonal purchase activity across these segments. I want you to mine the internet for social media behavior for these customers, incorporating that information into the segmentation scheme.

I want you to provide my clients the consumer intelligence necessary to alter the future trajectory of my business. You have key insights about a hundred million households, yet my clients don't get to know hardly anything, even though they contribute the names that pay your bills. I want for you to build upon the segments listed above, and do much, much better than what I am suggesting. I know you're capable of doing so, you have gifted employees working for you.

I want you to lead my clients into the future. I want you to play an active role in the growing transformation of customer behavior toward non-direct-marketing-related purchases. I want for you to be trusted advisers. I want for you to help keep catalogs away from customers who don't want paper polluting their mailbox. I want for you to lead!

I'm able to do this at a zip code level. You are able to do this at a CUSTOMER level. Wouldn't Yahoo! or MSN benefit by integrating your future segmentation strategy into their search and portal advertising strategies, if you were able to sell them on the idea?

I also want for you to figure out a way to compensate the customers you mine information from to earn the profit that pays your salary and benefits. These customers deserve something from our industry, given that our industry profits from their information without their verbal or written consent.

Go make this happen.

E-Mail Marketing: Discounts And Promotions

I recently reviewed a profit and loss statement for a marketer that conducts e-mail marketing programs. This marketer offered significant savings on the items offered in the e-mail marketing campaigns. This marketer offered the savings in every campaign!

When asked why the marketer discounted the merchandise so significantly, the marketer showed me a profit and loss statement that looked something like this:

	Up To 60% Off	No Promotions
E-Mails Delivered	100000	100000
Click-Through Rate	6.30%	3.40%
Conversion Rate	6.90%	4.70%
Total Response Rate	0.43%	0.16%
Total Orders	435	160
Average Order Size	$165	$160
Demand	$71,726	$25,568
Net Sales	$57,380	$20,454
Gross Margin	$31,559	$11,250
Less Marketing Cost	$500	$500
Less Discounts	$14,345	$0
Less Pick/Pack/Ship	$6,599	$2,352
Variable Operating Profit	$10,115	$8,398
Profit As A % Of Net Sales	17.6%	41.1%
Ad/Discount To Sales Ratio	25.9%	2.4%
Profit Per Order	$23.27	$52.55
Profit Per E-Mail Delivered	$0.10	$0.08

The marketer told me that, by offering the promotions, response to e-mail marketing campaigns was almost three times better than when full-priced e-mail marketing campaigns were delivered to the customer. Furthermore, profit was a full twenty percent better when significant discounts were offered.

The marketer told me that "... we've built an e-mail file of customers who now demand discounts and promotions. They simply won't buy from us unless we do this."

So I ask you, the knowledgeable direct marketer, if the situation this brand is in is good for the brand? I mean, we see profit and loss statements like this all the time, so it seems like it would be a "best practice" to offer heavy discounts and promotions, right?

One thing that rings consistently true in Multichannel Forensics projects is that full-price customers will buy discounted merchandise, but discount customers aren't thrilled about paying full-price for merchandise. If that holds true for most brands, then this e-mail marketing best practice can alter the composition of the customer file.

Is altering the composition of the customer file a good thing? Do our practices alter the long-term trajectory of the brands we work for without management fully understanding what we are doing?

Your thoughts?

E-Commerce Preference In Suburbia

Sure, it is possible that I'm obsessed with geographic differences right now.

One way you can stop this obsession is by having a homogeneous customer base that behaves the same, regardless of geography. Until that happens, you'll be looking at maps!

We've been told what we "have" to do by a lot of folks.

• We "have" to be multichannel, having the same shopping experience across channels, even though the companies that do this haven't necessarily increased sales and profit at rates greater than those generated prior to multichannel integration.
  
• We "have" to be knee-deep in social media, or risk not engaging our customers --- even though it's awfully hard to find a case study that proves doing this increases sales, profit, and shareholder value.

Maybe we should listen to our customers. Geography is one proxy for the voice of the customer.

This map depicts Atlanta. In many cities, we see similar trends in other metropolitan areas. Suburban areas are e-commerce hotbeds, while rural areas begin to skew toward traditional marketing tools like catalog marketing. Urban areas are often retail focused.

Obviously, actual customer behavior is most important. If you have an urban customer who loves to shop over the telephone via catalogs, bless her with a steady diet of what she wants. If you have a customer in Minot, ND who loves shopping via e-mail campaigns, good for her.

Often, all you know about an individual is a name/address and e-mail address. Or all you know is that your co-op is shoveling you a hundred thousand names/addresses that you have no control over. Or the customer last purchased five years ago, and you want to know if you can reactivate this customer.

In these instances, geography matters. The suburban customer in Atlanta likes e-commerce --- so it may well be that a catalog mailing sourced by a name from a co-op isn't worth the expense, maybe an e-mail marketing message with merchandise tailored to the suburban Atlanta customer is the right way to go. You decide!