MAJOR ADVERTISING ANNOUNCEMENT

April 1, 2010 (April Fools Day): Major Consumer Support Vendors Announce Integration Alliance Designed To Enhance Consumer Experiences Across Multiple Channels And Platforms

Executives from six brands today announced an alliance that is expected to revolutionize the way that consumers and brands interact with each other.

The forward-thinking alliance includes leading organizations like Abacus, the offline data compilation organization; Coremetrics, the online data compilation measurement firm; Twitter, the iconic text messaging platform; Quad Graphics, a leading print vendor; Clear Channel, the dominant player in the FM radio business, and SpotXChange, the video re-targeting service.

The alliance, code-named "Harmony", will provide integrated multi-channel solutions to brands hoping to capitalize on the emerging world of what Abacus Vice President of Innovation Lyle Cartryte called "360 degree brand immersion".

Mr. Cartryte continued ... "By combining data, traditional media platforms, and social media, we have the ability to capture both offline and online customer interactions, and then create personalized advertising messages designed to better monetize the customer experience across vendor platforms! In particular, we'll be able to merge our offline data with online data culled from clients who use Coremetrics so that we have a 360 degree view of customer purchase activity, something that is very important to online brands given that 90% of purchases still happen in the antiquated, outdated, unpopular, and inefficient offline world of retail. By integrating offline, online, and social media interactions via Twitter, we believe we'll know more about your spouse than you know. If your spouse buys you flowers on February 13 in an offline retail environment, we will be able to use retargeting technologies from SpotXchange to offer your spouse the opportunity to purchase chocolates, make dinner reservations, or fill prescriptions, all of which significantly benefit you, the loving spouse while creating monetization opportunities for brands participating in 'Harmony'. Best of all, the alliance allows us to use print technology from Quad Graphics to deliver personalized, relevant, anticipated print-based messages, reminding your spouse that Easter is just around the corner. And if your spouse fails to buy an Easter ham, we can use Twitter to target this individual with relevant and anticipated tweets from trusted brands like Safeway. Just imagine a tweet from @safeway that says something like '@dude, OMG, WTH, you forgot to buy a ham, do you want one delivered to your home today?' And then on Easter Sunday, when your spouse tweets to his 37 followers that he forgot to pick up stuffing, we can use video-based retargeting technology to reach this consumer. Honestly, 'Harmony' represents the future of marketing, a beautiful future if I may be so bold. This is the unrealized promise of CRM. Traditional marketing is dead."

Kyle Larson, Vice President of Product Development and Synergies at Twitter, lamented the fact that 'Harmony' represents tight integration between various vendors and Twitter, but celebrated the fact that "... we're finally going to be compensated for our efforts ... seriously compensated!"

EVP Linton Pendleton of Clear Channel, a radio conglomerate and "Harmony" brand partner, believes that FM radio technology will be very complementary to "Harmony", especially when Hologram Marketing becomes a reality in 2014.

Mr. Pendleton said "... we plan on using the 'Jack FM' voice, known and beloved by radio listeners as 'Jack', to be the voice of the Hologram that will eventually deliver advertising messages to consumers via Holograms transmitted via FM radio waves. Listeners know that on 'Jack' radio stations, we 'play what we want'. Consumers will soon learn that in this advertising network called 'Harmony', we will 'advertise what we want', while building an infrastructure that allows us to use offline, online, and social media activity to target highly relevant ads to engaged consumers. It isn't far fetched to think that we can achieve our goal of having a mobile Hologram appear just above your left eye maybe seven dozen times a day, within your line of sight, using the voice of 'Jack' from 'Jack FM' to communicate brand-relevant messages like 'You appear tired, could I access your debit card and have a five hour energy drink delivered to your cubicle ... advertising what we want, Jack FM'. Then, after a suitable "latency period" elapses, like two minutes, the hologram would reappear in a non-obtrusive manner, saying something like 'People who recently tweeted about being hungry and who shopped at a QFC grocery store in the past week love getting coupons in the mail for carryout Chinese food from Safeway. Would you like for me to send you coupons via the mail and then access your debit card so that I can deliver hot 'n sour soup to your cubicle right now to satisfy your hunger, or would you prefer a Snickers Bar? ... advertising what we want, Jack FM ... this message was brought to you by Q13 Fox, where tonight you should watch the next episode of '24' because Jack Bauer discovers a terrorist plot, one where his very television series is canceled, causing him to want to blow up the FCC if his show is truly canceled. That's '24', tonight on Q13 Fox'. As you can see, we will be able to use integrated data across channels, platforms, and technology, to deliver highly relevant and anticipated brand messages that enrich the lives of many consumers via beloved Hologram marketing icons bearing the voice of 'Jack' from 'Jack FM'. And the experience will be fully personalized. You will be able to decide if the hologram appears above your left eye, above your right eye, or right in front of your face. You will be able to adjust the volume of Jack's voice. You will be able to decide if 'Jack' has dark hair, blonde hair, or a simple buzz cut. It's really going to be something! Think about all of the authentic social media conversations that we will be able to analyze, segment, and convert into highly personalized, non-obtrusive brand messages via Hologram marketing?"

Financial details were not disclosed. The transaction is expected to close today, April 1.

Point of View: Coach

When this post was written, the Coach homepage featured a zippy tune from Mandy Moore ("I Could Break Your Heart Any Day Of The Week) coupled with a brief video featuring shoes.

I've mentioned how e-commerce is likely to evolve ... becoming a hybrid of e-commerce, social, mobile, and media, with heavy emphasis on media. This is an example where media begins to become the dominant point of view.

Again, I'm not saying these strategies work or do not work. Instead, I'm asking you to think about how these strategies apply to the businesses that you manage.

Point of View: Cordarounds

Check out the website of Cordarounds, a Bay Area purveyor of pants.

This might be a business model that violates both the best practices of the catalog industry and of classic e-commerce home page design.

As you know, I'm not advocating that you should or should not execute the strategies of the companies I'm sharing with you. Instead, I'm asking you to consider if there are elements of these businesses that are appropriate for your business. Cordarounds is a business that clearly does things differently, including manufacturing of only a few hundred items before moving on to the next item.

What might you learn from their branding/positioning/execution?

Optimization: FAIL!

Think about this blog for a few moments.

There's nothing that gets less traction on this blog than the catalog marketing articles I write each Monday. Traffic is awful. The articles aren't ever shared on Twitter. And yet, whenever a catalog CEO hires me, s/he mentions those articles.

There's nothing that gets more traffic on this blog than the "Point of View" articles you've seen over the past few weeks. Oh boy. Those things spread like mad. The social media folks love 'em, the web optimization folks love 'em, the marketing pundits love ''em. Best of all, according to SiteMeter (one of my web analytics tools), retailers and online pure plays and catalog brands have staffers who love to read these articles.

Nobody, based on my ability to track projects, hires me because I point out what Best Buy is doing, free of charge. These articles drive traffic and create buzz and create engagement. They don't pay the bills.

In other words, if I optimize this blog based on what is popular, I get to reap the myriad benefits of an "Optimization FAIL!".

If I optimize this blog based on what matters, I make many compromises. I sacrifice traffic and engagement and buzz and comments and all that fluffy stuff the social media community tell you must exist for you to be a success ... I trade in all of that for the ability to make a living.

This brings us to your website.

What is your optimization criteria?

Is it a mythological metric like conversion rate? If so, optimize away. Prevent drive-by visitors from even viewing your website. Offer free shipping, heck, offer 25% off plus free shipping like some of the apparel retailers are doing. Don't do paid search, those folks convert at too low a rate. Heck, lock the computer the person is using until they place an order, that'll increase conversion rate!

Now here's a metric ... do you optimize on monthly profit per unique visitor? If not, why not? Isn't that what you are trying to accomplish, don't you want to maximize monthly profit per unique visitor?

Take two visitors:

1. Customer visits one time, is offered 25% off plus free shipping on a $100 order, customer leaves site, is targeted via a re-marketing program offering 30% off plus free shipping. Customer visits site again, spends $100. Total profit on the transaction is $10, after giving $30 of margin away and $15 of shipping revenue.
2. Customer visits website five times in the month, purchasing on the fifth visit. Customer spends $90. Total profit on the transaction is $50.

If you are looking to "optimize" your website, you'd execute the strategy that caused customer number one to purchase.

If you are looking to optimize monthly profit per unique visitor, you'd execute the strategy that caused customer number two to purchase.

Which strategy are you executing? The first strategy is a clear "Optimization FAIL!" The second strategy, while not satisfying from a traditional promotional marketing viewpoint, is clearly more profitable when measured via monthly profit per unique visitor.

Hint: Optimize around monthly profit per unique visitor.

Dear Catalog CEOs: Contact Strategy

Dear Catalog CEOs:

How often should you contact your customers?

Well, back in the day, the only way customers purchased was when you mailed them something.

Today, this relationship has been blown up by the internet. In the "multichannel era" (2001 - 2007), it was suggested that you had to mail catalogs or you wouldn't get any online demand. Many now use mail/holdout tests, and know that this is no longer the case. In fact, it is not uncommon to execute a mail/holdout test, and observe that half or more of the demand does not disappear when catalogs disappear.

To think that all of our measurement/matchback systems get this wrong, costing us a ton of profit. Hmmmmm.

If you want to greatly simplify this mystery, segment your twelve-month customer file into three groups.

1. Customers who ordered via the telephone.
2. Customers who ordered online, and previously ordered via the telephone.
3. Customers who ordered online, and only order online.

Customers in the first segment still follow the "old rules" ... meaning that you have to mail catalogs, or you won't get demand from these customers.

Customers in the second segment might follow the rules of the "multichannel era" of 2001 - 2007. Often, you can reduce contacts by 15% to 25% without detriment to the top-line.

Customers in the third segment follow rules that the catalog industry isn't used to. These customers tend to be less loyal (that has been known for a decade or more). These customers do spend money online without the aid of catalog mailings. These customers can be managed very profitably, in fact, total company profit can be increased by 15% to 40% simply by managing these customers in an appropriate manner.

How many other ideas do you have for increasing company profit by between 15% and 40%, right now?

And if you don't have any ideas for increasing company profit by between 15% and 40%, right now, why wouldn't you capitalize on this methodology? What are the reasons that limit your ability to capitalize on this methodology?

Most of my Multichannel Forensics projects focus on these three audiences, trimming mailings in order to increase profit. The money saved here is re-invested in customer acquisition and in online marketing (search, e-mail, re-targeting, mobile, and in some cases, social media).

As always, I'm here to help you through this transition --- e-mail me now for details.

Point of View: JCPenney

JCPenney has a whopping 782,000 fans on Facebook (vs. about 4,000 on Twitter).

One of the ways they differentiate themselves from others is their "Weekly Obsession", where Penney features certain items on a weekly basis.

Here's another tip. It's a lot cheaper to have a conversation with customers via Facebook than it is to tell customers what to purchase via a catalog --- assuming you have the ability to obtain a mass of fans on Facebook (hint: not easy, not easy at all).

It's interesting to see the evolution of marketing. JCP was the final holdout in the "Big Book" world of catalog marketing. Of course, today, the website is the "Big Book".

We've gone from big books to targeted catalogs, targeted catalogs to websites, websites to e-mail campaigns, e-mail campaigns to search marketing, search marketing to social marketing, search marketing to mobile marketing. Things are branching out, folks. We no longer have the luxury of marketing one message to one big audience.

Point of View: Banana Republic

Banana Republic, a division of Gap, is also moving in different directions.

The trend, of course, is away from the static, old-school classic e-commerce experience.

For instance, give this link a click. You see the embryonic beginnings of a shopping experience that merges media and commerce, a first step away from the information technology based drill-down experience that is complemented with search. Banana Republic is offering you their point of view, complete with brief commentary from those who know more about Banana Republic than anybody else --- Banana Republic employees.

I can learn about trends, chino, and a new store concept.

Certainly, there are things in this style of merchandise and creative presentation that resonate with your business. Keep learning, watch what other folks are doing, experiment!

Point of View: 1-800-Flowers

Think of the brand name "1-800-Flowers".

The name represents a version of direct marketing that is thirty years old. But they are doing things on Facebook that are worth paying attention to.

1-800-Flowers has a unique Facebook Shoplet that allows you to purchase your flowers without leaving the comfy confines of Facebook. You can click on any of the icons on the wall to shop, or you can click on the SHOP tab and purchase via the Shoplet.

E-Commerce won't be about your website in ten years. E-Commerce, like many other things, will move "into the cloud", if you will. It seems to me like this is a really good time to test different strategies.

Six Marketing Strategies

In so many ways, it is 1996 all over again.

I worked at Eddie Bauer in 1996. On a good day, our e-commerce site generated somewhere in the neighborhood of six or seven orders a day. A lot of catalog folks didn't think much of the e-commerce division back then. Here these 25 year-olds were generating orders that were obviously cannibalizing the catalog division, and they were getting credit for them.

Look where we are now. Good thing folks pursued the investment in technology. Except for the fact that investment largely stopped in the early 2000s. Now, we all have the same websites with the same broadly-accepted best practices that all yield homogenized purchase experiences that have resulted in declining online retention rates. On the other end of the spectrum are the mobile and social folks, with their goofy acceptance of honest conversations that create sales that nobody can measure.

Here we go again.

Technology is causing customers to spread out on a grid that is bounded by the analog world, classic direct marketing, the digital world, and the mobile world.

In-between these worlds are environments that can accept traffic, or push traffic to each world.

In 1995, all of our customers resided on the far left side of this grid. In 2010, customers are scattering all across this grid.

So, if we want to grow, we have to scatter with our audience.

This is not the traditional "multichannel" argument that you've heard so much about. No, instead, it is all about having marketing strategies that "cover the grid", if you will.

And we cover the grid via six different marketing strategies.

1. Mobile.
2. Social.
3. Media.
4. Algorithms.
5. Tradition.
6. Service.

Hint: Media/Content is going to be as important or more important than Mobile or Social or Algorithms. Mobile/Social/Algorithms require content to survive.

Most of the time, we focus our efforts on tactics within each strategy. We create a company blog, and believe we're participating in Social. We create an app for the iPhone, and we believe we are participating in Mobile. We complete an SEO project and believe we're participating with the Algorithms. We send a catalog, and feel like we're producing Media. We offer live chat, and believe we're offering great Service.

We'll use these tactics in the short term to market to existing customers.

Most important, especially for the old-school catalog brands who market to customers under the age of 50, is the concept of using these tools to create Awareness. For customers under the age of 50, it is no longer good enough to rent names and mail catalogs ... just look at your response rates, after matching-back online orders, during the past ten years. The data speaks for itself. You know the trends are not sustainable.

So you're going to have to have a broad-based strategy to create brand awareness, to stand out from a thousand competitors who all sell the same merchandise you sell at the same price (or cheaper) at cheaper shipping rates with faster delivery. You'll have no choice but to craft a strategy that doesn't yet exist, one that fuses Mobile, Social, Media (Rich & Traditional), Algorithms, Tradition, and Service.

You see the embryonic stages of this transition today --- Zappos is a great example of fusing Social and Algorithms and Service.

Now it is your turn. What are you going to do to fuse Mobile, Social, Media (Rich & Traditional), Algorithms, Tradition, and Service?

Oh, sure, I can hear the complaints now.

• "You obviously don't know anything about cataloging. 80% of our transactions come from the catalog. The catalog is the future, it will do better once the economy rebounds."

• "None of that Social stuff works, we tried a blog and it didn't work. We published discounts and promotions on Twitter and only have 339 followers. It simply doesn't work."

• "Why craft a mobile strategy when there isn't a critical mass within one carrier and one phone vendor? And heck, I don't even get coverage at my home, so mobile is nothing more than hype!"

• "The iPad is a farce, it doesn't utilize accepted software best practices. And why would I hold a tablet-based computer when I already own a laptop."
  

All of those are excuses. They are excuses that allow traditionalists to continue to pursue the status quo, one where sales continue to decline and it keeps getting harder and harder to acquire new customers. Be honest. Is your business in better shape, in terms of existing customers and sales and profitability and new customer acquisition than it was five years ago? For 7 of 10 of you, the answer is an unvarnished "NO". So why keep up the smokescreen? Why defend something that isn't working?

Why not step out of tactics and campaigns, and put on your leadership cap? Why not chart a course to the future? Why not be willing to be wrong? Why not earn your salary by inventing the future, by truly being strategic? Why not step away from pointless tactics and campaigns that only goose demand for a two-week period of time, and instead focus on being brilliant?

Thoughts?

Dear Catalog CEOs: Mobile, Social, Media, Algorithms, Tradition, Service

Dear Catalog CEOs:

I am preparing presentations for several conferences I am speaking at between now and June 1.

Two things have become obvious to me.

1. What our industry knew as "multichannel marketing" is dead. It cannot be resuscitated.
2. The customer decided what her version of the future looks like. We didn't anticipate her vision of the future.

Classic multichannel marketing looked something like this. Our industry mailed a catalog to a customer. The customer walked to her mailbox, full of anticipation. She opened her mailbox, and found nine of her favorite catalog brands offering 124 pages of sheer delight. The customer entered her home, fed her family a wholesome dinner, then covered herself in a blanket next to the fireplace, thumbing through more than a thousand pages of content. Her laptop sat beside her, her credit card securely stored in separate accounts at each of her favorite catalog retailer websites. She placed orders, she keyed in source codes off of the back of each catalog, she paid $14.95 for shipping and handling. In just six days, her merchandise arrived.

Classic multichannel marketing predicted that this process would repeat, evening after evening, in perpetuity.

And the script, written in 2001-2002, never varied. Even in 2010, this is the way the script is read. Worse, the e-mail marketing community picked up on the script. They claim that e-mail, a mature marketing channel, is the engine that fuels social media. Does that sound familiar to the script you've been following for a decade?

The script can always be justified, because there are always instances where the script is 100% correct. We'll always be able to find women in rural Maine who act the way we want them to act, causing us to believe that we're on the right track.

We're not on the right track.

There are many forces driving our customer base in different directions.

1. Mobile.
2. Social.
3. Media.
4. Algorithms.
5. Tradition.
   
6. Service.
   

Mobile is going to be unpredictable. Mobile is what the internet was in 1995. Your early investments in Mobile are unlikely to be fruitful. And yet, you have no choice but to be there, to experiment. So get busy!!

Social is the digital version of tradition. It is the place where humans digitally interact. People eat at a food court in a mall and chat. Now, people put a sign up on a digital property in Farmville, or share thoughts online.

Media is something that catalog brands need to embrace, immediately. Media must be created to engage customers. Media will be shared by folks in the social space. Media will connect people to brands in the mobile space. Heck, the iPad and successors are devices that will bring Media to life. Where is your high-definition programming channel? Instead of a tactic of creating a blog, what is your content strategy? How will you "entertain and inform" customers in a way that causes them to visit your website twice a week without the expense of a rented name from a co-op?

The future of Algorithms is uncertain. In a pre-Social world, Algorithms were the way that customers found information. Google decided who won and lost. That type of dominance is not likely to last this decade. Social and Algorithms and Mobile will interact in ways we cannot possibly anticipate today. We know how Algorithms used to work. Our customers will use our innovations to decide for themselves how they will interact in the future. One thing is certain. We need to be there.

We focus a disproportionate amount of time on Tradition. We mail our catalogs, we debate whether 64 pages are appropriate or whether 72 pages are appropriate. We contemplate a Monday-Wednesday in-home window or a Wednesday-Friday in-home window. We wonder whether we should add four pages of editorial in order to "make a statement". In 1994, this was a valid discussion. In 2010, this is 17% of what the discussion should be about. Tradition goes in other directions as well. Tradition relates to television, radio, newspaper, billboards, direct mail, e-mail marketing. Tradition relates to the competitive advantage a 35 year old catalog has over a 6 year old online startup. Tradition can be marketed a positive. Today, we let the customer decide what Tradition means, and all too often, she sees Tradition as being stodgy.

Service should never wane as a critically important component of a brand strategy in a digital world. Companies like Zappos choose to execute Service via operational excellence (i.e. rapid and free shipping), unfettered selection, and the use of Social to deliver the Service message. Nordstrom goes old-school, using real humans in physical stores to deliver Service. We must have a Service solution. It cannot be $14.95 shipping with six day delivery. It cannot be a bare-bones staffed call center.

Again, every Catalog CEO should demand that every member of the Executive team have an answer for how every strategy fits within each of these six dimensions.

1. Mobile.
2. Social.
3. Media.
4. Algorithms.
5. Tradition.
   
6. Service.

Take your website, for instance. How does your website interact with Mobile? Why would folks in the Social world recommend your website to somebody? What Media are you producing on your website that would cause the customer to voluntarily visit your website every-other-day? Do the Algorithms favor your website, driving new traffic? Do you leverage Tradition (i.e. your catalog) to drive traffic in a cost-effective manner? And what Service do you offer that is superior to anybody else?

Your website no longer represents technology, your website IS your store, it is the embodiment of who you are. Your website and your merchandise and your pricing strategy are essentially the same thing. You leverage Mobile, Social, Media, Algorithms, Tradition, and Service to grow your business. These dimensions replace traditional campaigns, the building blocks of classic marketing. No tactic within any dimension scales to a level that replaces a campaign, which is a problem of the 2010s that we simply cannot avoid.

Again, every strategy you implement should tie in to each of the six dimensions outlined in this article.

Ok, your thoughts?

Mail And Holdout Tests: Segmentation

If you really want to understand the incremental impact your marketing activities have on your business, be sure to have more than 5% of your file in the mail and holdout groups. Obviously, you cannot have 30% of your file in mail and holdout groups, but you might be able to accommodate 7.5% or 10% of the file in each segment.

Once you have the appropriate number of customers in the mail and holdout group, go ahead and segment each group based on prior customer behavior. Then, run your analysis (incremental results of the mailed group minus the control group) on segments of customers.

Here are some of the segments you might wish to analyze:

• Telephone Shoppers.
• Online Shoppers.
• Your Digital Profiles (often very enlightening!).
• E-Mail Buyers.
• Non E-Mail Buyers.
• Those Who Click On E-Mail Campaigns.
• Those Who Do Not Click On E-Mail Campaigns.
• Recent Buyers (i.e. Last Three Months).
• Lapsed Buyers (i.e. Last Purchase = 13-24 Months Ago).
• Paid Search Buyers.
• Affiliate Marketing Buyers.
• Banner Ad Buyers.
• One Time Buyers.
• Multi-Buyers.
• Multi-Channel Buyers.
• Retail Buyers.
• Those Who Buy From A Merchandise Division.
• Those Who Buy From Multiple Merchandise Divisions.
• Urban vs. Suburban vs. Rural Buyers.
• Discount vs. Full-Price Buyers.
• Those Who Buy Inexpensive Items.
• Those Who Buy Expensive Items.

Oh, there's so many other variables you can create segments from and analyze. Simply put, there's so much value to be had by conducting these type of tests, coupled with very simple measurement techniques.

So, why aren't more e-mail marketers and catalog marketers executing these tests? Your thoughts?

Mail And Holdout Tests: The Basics

Ok, folks, here are the basics of executing a mail/holdout test ... for both catalog marketers and for e-mail marketers.

Catalog Marketers:

• Identify the audience that is likely to receive catalogs in the next three months.
• You'll need about ten percent of your audience to measure this well.
• Randomly sample 5% of your customer audience. This group can receive catalogs if they are eligible, if they do not meet your selection criteria, don't mail a catalog to this customer.
• Randomly sample 5% of your customer audience. This group is not allowed to receive catalogs, unless they choose to request a catalog.
• Keep customers in each of these two segments for a period of three months.
• At any time during the test period, you are free to analyze the test results. Subtract the difference between the mailed group and the holdout group. This is the incremental value of catalog mailings. Run a profit and loss statement on this incremental difference.
• Analyze the incremental difference in telephone demand, online demand, e-mail demand, paid search, natural search, affiliate marketing, banner ads, portal advertising, and shopping comparison sites. You may find that catalog marketing drives incremental business to some of these channels.

E-Mail Marketing:

• E-Mail marketing results are often over-stated by click-through and conversion rate analyses, except in retail instances, where e-mail marketing results are often under-stated.
• Use the same rules outlined above for catalog marketers. Sample 5% of your e-mail file, and treat these customers normally. Sample 5% of your e-mail file, and do not send e-mail marketing messages to this audience for a period of three months.
• Measure the incremental difference between the mailed group and the holdout group. This is the true value of e-mail marketing. You are likely to be very surprised by the outcome of the test!

Catalog Marketers and Retailers: The iPad

If you are a catalog marketer, you absolutely have to be going bonkers over the roll-out of the iPad, right?

I mean, has there ever been a digital device that was more tailor-made for a digital catalog? You're flipping through pages with your index finger on a device that goes wherever you go, and the catalog pages on this digital device (you subscribe to your digital catalog via RSS so it automatically arrives on a weekly/monthly basis) link to landing pages on your website ... or better yet, you simply execute one-click shopping from the device without ever visiting the website.

You've been craving multi-channel solutions for ages ... this is the ultimate multi-channel solution.

And if you are a retailer, why would you not have an iPad in every store, so that your employees can assist the customer when he wants size XXL and it is not available? I'm just saying ....

The iPad and a myriad of soon-to-be-released competing devices are your new mobile mailbox. Why wouldn't you be first to capitalize on this opportunity?

Thoughts?

Point of View: Best Buy

In my Multichannel Forensics and Online Marketing Simulation projects, I repeatedly find that anytime a customer has an actual interaction with a human being at a brand, long-term customer value increases.

Best Buy is an example of a company that is working on making human connections easier in the online world.

For instance, their Best Buy Connect program helps illustrate how their "Twelpforce" assists customers who are having problems. For instance, @cookbookguy tweets the twelpforce with the comment "audio issues w/Samsung HTZ320&Toshiba46 plus INSIG bluray". Just one hour later, @agent1834 replies "What kind of audio issues? Syncing? Skipping? No audio at all?"

Now, granted, I have no idea if this exchange resolve the issue or not. Still, 24,285 folks are following the Twelpforce, and that's probably about 24,000 more folks than are following your contact center staff, right? And from time to time, problems are solved.

It isn't like Best Buy offers unique products ... you can pretty much buy Best Buy merchandise anywhere you want. So, this strategy creates a "point of view", a reason for Best Buy to exist in a sea of sameness. And it looks like Best Buy Connect is managed via Twitter and via Google's Appspot cloud computing platform --- hint, that means you get to go outside of your IT team to execute a marketing and customer service strategy --- that's a big deal!

Again, in all of my Multichannel Forensics and Online Marketing Simulation projects, I repeatedly find that when customers interact with an actual, live human being, long-term customer value increases. Best Buy is taking one approach to connect with customers. Certainly, there are lessons here that apply to your business --- especially for catalogers who staff a call center that is absolutely brimming with talent, talent that could certainly rival that of the "twelpforce".

Catalog Matchbacks: FAQs About Why They Cost You Profit

You had questions about my thesis that catalog matchbacks are costing you profit. Let's answer your questions.

Question: "What do you have against the vendor community? How can you criticize folks who've helped us through tough economic times, and are always there for us?"

Let me be clear. I am not being critical of members of the vendor community who have your best interests at heart. Plenty of folks in the list industry and the co-ops make the right decisions for you every single day. In fact, I recommend many folks from Millard or ALC or Abacus to you (as examples), when asked.

Always remember, however, that most in the catalog vendor community make more money when you mail more catalogs. There is a disincentive for the vendor community to share best practices in housefile contact strategy testing, because doing so is detrimental to their business, and could result in the vendor employee losing his/her job. I've witnessed this conflict first hand, where the vendor gives you an answer that ultimately benefits the vendor more than you. So do the right thing for your business, ask valid questions of your vendor reps, and closely monitor their response.

Question: How can you mail catalogs and get negative demand, I don't understand?

One of the myths of the "multichannel era" is that everything fits together, is additive or even multiplicative! This simply isn't true, and is clearly illustrated every time you execute a catalog housefile mail/holdout test. Advertising doesn't necessarily cause customers to spend more. Sometimes (often), advertising causes customers to change behavior. Some catalogers find that when you don't mail catalogs, demand from e-mail marketing doubles ... in essence, the lack of a catalog causes the customer to switch loyalty to e-mail marketing. You can't see that outcome unless you execute the test. That is an example of "negative demand". In other cases, mailing the catalog causes customers to spend more on e-mail marketing, this is the classic "multichannel era" outcome of 1+1=3. It does happen. But you cannot know it until you execute mail/holdout tests.

Question: If I execute a mail/holdout test, I'll lose demand, and I can't afford to do that when the economy is so bad. Why are you constantly recommending that I do something that hurts my business?

I wouldn't recommend that you do something that hurts your business. I am asking you to execute the test so that you can identify the most profitable catalog mailing strategy. Take a look at the image at the start of this post. On the left-hand side of the table, you see what happens when you follow your matchback results. You'll mail 12 catalogs to this customer segment. On the right-hand side of this table, you see what happens when you test different numbers of catalog mailings to a customer. You see that demand happens whether you mail catalogs or not to a customer. You see that 8 catalogs is the optimal strategy. You see that if you mail 8 catalogs, you increase profit by +/- 20%, per customer. Show me what other strategy you have in your toolkit to immediately increase customer profitability by 20% today?? If you want help executing/analyzing/implementing a contact strategy view of catalog customers, contact me!

Question: Are matchbacks invalid for outside lists?

No, go ahead an use matchbacks for outside lists, that's a good way to evaluate prospects.

Question: We go to great lengths to capture key codes on online orders. Why do we need to execute mail/holdout tests when we ask the customer to enter a key code?

Here's a neat finding from mail/holdout tests ... if you don't mail a catalog, a customer is likely to use an older catalog and will enter an older catalog key code. Or other times, the customer will just visit your website because she loves your brand. Imagine that? She'll simply come to your website unprompted by a catalog mailing, and will place an order, sans key code. That's the best measure of customer loyalty ... a customer willing to shop without advertising. How will you ever be able to accurately measure customer loyalty unless you execute the mail/holdout test?

Question: We know that 80% of our online orders are matched back to a catalog, so we know that matchback analytics are right for our business. Why would you ever recommend abandoning a methodology that is so useful?

There are two issues with your comment. First, when a catalog brand gets 80% of online orders from catalog mailings, the catalog brand is not doing a good job of online marketing. Second, the matchback algorithm is incorrectly allocating orders to catalogs. As stated earlier, your most loyal customers will always shop from you, regardless whether you mail catalogs or not. In other words, you don't need to advertise as often to your best customers ... they already love you!! How can it possibly hurt to execute a mail/holdout test and learn the optimal number of catalogs to mail to a customer?

Question: In your examples, if you don't mail catalogs, catalog demand decreases. We cannot support top-line sales declines. Why would you advocate hurting our business?

I'm advocating a strategy that makes you more profit. Profit dollars matter. My strategy means you end up spending less on catalog marketing, generating a decrease in top-line sales. I recommend re-investing that money in customer acquisition, online marketing/search, mobile, and in some cases social media strategies, in order to grow your business. If done right, top-line sales won't decrease, and you'll be more profitable.


Ok, it's time for your questions. What do you want to learn?

Catalog Matchbacks Are Incorrect, Costing You Profit

During the past ten years, I've analyzed, plus/minus, a hundred different contact strategy tests. In these tests, we hold out a group of customers, to understand how much the customer will spend if we don't mail catalogs.

In every case, the holdout tests indicate that the incremental sales generated by a catalog mailing are less than what is illustrated in a traditional matchback algorithm.

The matchback incorrectly assumes that just because a customer was mailed a catalog, then any online order was "caused" by the catalog.

This, my loyal readers, is simply not the case.

The image at the top of this post is typical of what I usually see. This would be a modestly-sized $60,000,000 catalog business with thirteen annual mailings. As you can see, when comparing the results of a matchback with the results of a mail/holdout test, demand is overstated by about 40%.

And as a result, profit is completely mis-stated. Your matchback reporting tells you that you generated more than $600,000 profit ... when in reality, you only generated a little over $300,000 in profit.

This means that you are grossly over-circulating to your housefile segments.

This happens all of the time. In the case of a $60,000,000 business, it is reasonable to expect that matchback analytics are costing you a million dollars of annual profit, per year.

Yes, you are losing a million dollars of profit on a sixty-million dollar business, per year, because you are using matchback analytics instead of mail/holdout results to evaluate your business.

Always remember that there are audiences that benefit from matchback analytics. This audience is not likely to help you evaluate your business in the most profitable way possible, because use of matchbacks benefits their business model.

• The USPS
• Your Printer
• Your Paper Rep
• Your Co-Op
• Your List Vendor

Always remember that there is an audience that benefits from mail/holdout test methodology.

• You

Which audience do you think you should focus on?

Please start using mail/holdout methodology, and improve the performance of your business. As always, I am here to help you.

Dear Catalog CEOs: Customer Loyalty

Dear Catalog CEOs:

Here's a question I get all of the time. "Hi Kevin, I stumbled across your blog, it's really informative. Say, could you offer me some free advice? I want for my customers to become more loyal. We all know that it costs 27 times as much to acquire a new customer as it costs to keep a loyal customer. Could you please tell me three best practices that I can implement right now to make my customers more loyal? Thanks, I'm really looking forward to your answer."

The most interesting part of the question is the word "make". Most of the time when somebody asks this question, the word "make" is included in the question.

I honestly don't think you "make" customers do anything. Go make your spouse stop playing Farmville sometime. If you can't make your spouse change behavior when standing alongside him/her, why do you think you can make a customer become more loyal, based on a relationship that lasts for all of five minutes a month, at most?

In every analysis I do, customers who have a relationship with a real human being have better long-term value than do other customers.

Let me say that again: "In every analysis I do, customers who have a relationship with a real human being have better long-term value than do other customers."

Nobody wants to hear that. We want customers to be dazzled by a shopping cart abandonment e-mail message that "wins back" the customer along with a 20% off offer coupled with free shipping and a big blue buy button that was tested to increase conversion rates by 9.2%.

Algorithms and tech solutions are good.

Humans are better.

Human interactions come in many forms.

Example: I mention on Twitter that Zappos has a new home page design. Zappos sends me a thank you message via Twitter in less than sixty minutes. That's a human interaction.

Example: A customer spent $750 last year. Instead of enrolling her in a points-based loyalty program, you assign an employee to this customer. This employee is there to meet every need the customer has. What do you think would work better, a points-based loyalty program, or an employee who will go above and beyond to exceed customer expecations?

Example: Imagine if you, the CEO, participated one hour a week, helping in live chat sessions. You think that wouldn't leave an impression in the mind of a customer. You think that wouldn't create Social Media "buzz"?

This advice is opposite of just about everything you hear out there. It is easy to set up a points-based loyalty program. It is easy to send a direct mail piece that appears to be handwritten but in reality is just fancy printing technology. It is easy to use the best paper quality. It is easy to offer 20% off or free shipping. It is easy to send a shopping cart abandonment e-mail. It is easy to change the size of buttons on your homepage.

It is hard to add humans to the customer relationship process. The more digital our world becomes, the more cold and sterile the buying experience becomes. Why not leverage your customer service team, transforming it into a customer loyalty team that uses Social Media and your call center and live chat and your sales staff, creating a humanized shopping experience?

Point of View: Kohl's

Kohl's has just shy of a million Facebook fans.

Here, we see how Kohl's facilitates interaction with pop television star Lauren Conrad and the Kohls Facebook crowd. The Facebook fan gets to learn all about her exclusive collection at Kohl's. A fan can flip through a design sketchbook, watch a behind-the-scenes video, see television commercials, get tips on how to wear the collection, shop her merchandise line, read her tweets, take a quiz, or view a YouTube video.

I've talked before about how the lines between e-commerce and media will blur. There's no reason that your garden variety e-commerce site couldn't have an online "television or media channel", complete with unique programming and content that surround the e-commerce/retail brand.

So take a peek at what Kohl's is doing, and see if there is something that resonates with your customers!

Point of View: Woot

You've probably heard of Woot. Management describes Woot in this way: "Woot.com is an online store and community that focuses on selling cool stuff cheap. It started as an employee-store slash market-testing type of place for an electronics distributor, but it's taken on a life of its own."

Woot sells one item a day ... they sell the item until it sells-out, or until 11:59pm Central Time.

Now, I can hear the complaints already ... "But Kevin, we sell 100,000 skus, so that business model means nothing to us." Or ... "they don't accept returns, that creates a bad customer experience, we'd never violate customer trust like they do." Or ... "they use all of that goofy community stuff and blogs and that's just not us, our 62 year old customer simply doesn't care about that."

Oh. Really?

Ok, what about the Woot model is of use to the way you market to customers?

Could you have one item out of the 100,000 skus you currently manage that you sell every day at 1:00pm EDT / 10:00am PDT, for a limited time (say one half-hour), at a discounted price (say 15% off)?

Could the customer also get free shipping if the customer adds two other items to her order?

Could you create a special e-mail list that folks subscribe to, and only the folks who subscribe to that list get to have advanced notice of what the special item will be?

Could you offer an additional 5% discount at checkout if the shopper could demonstrate that the shopper "re-tweeted" the special item to her loyal audience of 296 followers?

Could you envision the free word of mouth you'd get from this program, word of mouth that is a lot cheaper than producing a 148 page catalog that is targeted to a customer you rented from a co-op?

Could you use this marketing channel to liquidate items that are in short supply?

Could you then hire me to analyze the performance of this new "marketing channel", to see how your customers interact with it?

Honestly, there's almost no urgency in e-commerce. Create a reason for the customer to interact with your brand on a daily basis!!

Point of View: Saks Fifth Avenue

Traditional marketing was all about executing campaigns.

A visit to the Saks Fifth Avenue homepage begins to point us in a new direction. Here, you get to see a brief story hosted by Diane Von Furstenberg (click here).

Now, what would you trust more ... copy in a catalog, or a video that comes right from the source?

You can literally see where all of this stuff is heading ... e-commerce and video and content and social and mobile all fused together.

Social Media is going to require an almost unthinkable amount of content to "feed the beast". As video and content and social and mobile and e-commerce fuse, it will be critically important for e-commerce merchants to be outstanding at content creation, and to be excellent at propelling that information "into the cloud". This becomes the "new marketing" that ultimately complements and then consumes classic direct marketing and brand marketing.

Point of View: J. Crew

This near-depression certainly taught us that the methods we were supposed to implement to grow a business profitably weren't effective. For instance, we learned that it is probably a bad idea to expand into retail and be saddled with huge levels of long-term debt when 20% of the economy falls out from under you ... turns out that fabled multi-channel customer that vendors and consultants told us to pursue couldn't cover the interest on the debt.

So for the next few weeks, we're going to take a peek at what companies are doing online to create a "point of view" ... what are companies doing online to differentiate themselves from the competition? I'm not saying any of this is going to "work" for you ... the goal of the series is to simply illustrate what other companies are doing.

Let's start with J. Crew. Take a look at their "Who's That Girl" feature (click here). Most specialty apparel retailers are essentially selling the same thing at the same price. J. Crew is taking a different approach, featuring a few of the creative folks, letting you get to know them and their point of view.

Humans make a difference, folks. In any Multichannel Forensics project or Online Marketing Simulation, I repeatedly find that long-term customer value increases significantly when a customer has an interaction with a real human being.

Here, J. Crew is introducing you to some of the human beings that work behind the scenes. If all things are equal, and you're buying the same item from Gap or J. Crew, maybe you buy it from J. Crew because you know a little bit more about the people behind the scenes, who knows?

It's certainly worth testing, isn't it?

Dear Catalog CEOs: Aging Customers

Dear Catalog CEOs:

Here's a topic worth consideration.


What kind of customer do you want to acquire?


On the surface, this is an easy question to answer. You want customers who fit your target demographic, customers who are profitable in the acquisition transaction, customers who will generate long-term profit.


Theoretically, however, this is a challenging question to answer.


Most of us do not append demographic data to our customer files. We should append, at minimum, age information.


Why?


Because our existing best practices (i.e. ask the co-op for a million names) yield an outcome that we may not desire.

Let's assume that most of us don't append demographic data to our files. Can we then agree that a customer who mails her order to us via the postal service is probably not a twenty-six year old? Can we agree that, most of the time, a customer who phones the call center to place a $100 order (not the $775 order that requires assistance) is older than the customer who orders online?

If we can agree that those assumptions are valid, then we have some interesting metrics to consider.

Take your co-op results, and look at percentage of transactions by mail, by phone, and online. Are these percentages skewed more to mail and phone than are other outside lists? Are these percentages skewed more to mail and phone than they are for your housefile?

If the answer is "yes", then your co-ops are essentially optimizing your results for an audience that is generally older than your core customer.

This becomes a big deal, because your online marketing efforts often result in acquisition of a customer that is a bit younger than your catalog customer.

Now, granted, you may only care about surviving 2010. But if you plan on shepherding your business into the future, you probably care about the kind of customer you are acquiring via the co-ops (or online, for that matter).

When you acquire older customers, your measurement systems allow you to track them more directly --- mail and phone demand easily tie into your merchandising systems, allowing you to measure demand per thousand pages circulated easily. This results in a merchandise assortment that skews toward older customers, so you plan for 2011 merchandise that will be preferred by older customers, thereby allowing your co-op lists to appear to perform even better because the older customers they pick for you like the merchandise you offer ... can you see where this is heading?

Strategically, it is important to compare the merchandise that is purchased via mail orders, phone orders, and online orders. If you have demographic data, compare merchandise productivity by age bands (18-24, 25-34, 35-44, 45-54, 55-64, 65+).

Once you have this data, it is time to make a strategic decision.

• Market to the same customer cohort as that cohort ages.
• Market to a demographic (i.e 55-64 year olds), as customers age through that age band.
• Market to a younger customer that may be less productive today (i.e. risky), but may help guarantee the long-term success of your business.

So analyze your data, understand what is happening, and make the appropriate strategic decisions!!

Gliebers Dresses: The Book

In early April, you'll be able to purchase "the gift that keeps on giving".

Yes, that's right. You will have the opportunity to purchase "Gliebers Dresses: The Book".

Every post from this blog will be included in the book.

Best of all, there will be a final chapter that does not appear anywhere on the blog. You'll get to read Mr. Glieber's farewell to the company he built.

I will also offer my thoughts about each character, their strengths, their weaknesses. Hopefully, you'll see your reflection in some or many of the characters. Each character represents elements of everything that is good and bad about modern marketing.

Thank you so much for reading the 92,000+ words and 250+ pages that became "Gliebers Dresses"!

Digital Profiles: Q&A Time

Ok, you've learned an awful lot about Digital Profiles. I can tell that you're excited!

Now it is time for your questions. What made sense, what didn't make sense? Any thoughts on how you might use the methodology in your marketing strategy? Catalogers --- this stuff works REALLY WELL when trying to figure out which customers to no longer mail catalogs to!!!!!

So, use the comments section to ask your own questions about Digital Profiles.

Or contact me for a Digital Profile project!

Digital Profiles: E-Mail Targeting And Predicting Demand

Digital Profiles aren't some geeky, theoretical methodology. They are a way to better understand your business, a way to predict future demand.

Take this example. I took our example, and created a simple regression model (ignore the fact that many variables aren't significant, I'm doing this to prove a point) that predicts future e-mail demand, based on last year's demand and last year's Digital Profile.

There are several Digital Profiles that are big predictors of future e-mail demand. Digital Dudes (men who shop on the internet) and Happy Holidays (customers who purchase in Nov/Dec) are the "most valuable" to the e-mail marketing program.

Now, if you know that Digital Dudes are the most valuable Digital Profile, might you create a version of your e-mail campaigns specifically for this Digital Profile?

And if you know that Summer Ladies are an unproductive Digital Profile, might you sometimes elect to not send them an e-mail campaign, just to test how that customer would perform without e-mail marketing ... or might you send that customer e-mail campaigns during May/June/July, when that customer is most likely to shop?

Use Digital Profiles to "amp" your e-mail marketing program. Get to know your customers, and then use the data to make actionable marketing decisions that improve sales and profit!

Digital Profiles: Web Analytics And Keywords

You have your Digital Profiles all set up. And you are able to tie the information to your Web Analytics solution.

Ohhhhhhhh Boy!

Each week, you update your Web Analytics solution with the Digital Profile of each customer who logs in to your site.

Now go ahead and analyze performance by Digital Profile. For instance, this table illustrates conversion rates by Digital Profile for customers who are searching for any keyword within the "Handbags" category.

Not surprisingly, the Digital Profiles attracting the most customers include Summer Ladies, Show Me A Deal, Bargain Betty, Web Sale Susan, and Bonnie Big Ticket. Conversely, you don't see a lot of "Multichannel Men" searching for Handbags, do you?!!!

Predictably, conversion rates are highest among Digital Profiles that appear to be populated by Women.

This is a level of business intelligence that is available to any analyst using any of the major Web Analytics software packages. It does require a bit of "elbow grease" ... you have to be able to score your web visitors at a point in time using advanced logic.

Ok, your turn. What stops you from using Digital Profiles to learn more about various customer habits?