Amazon Promotion, Co-Ops, Micro-Channels

Last Friday, Amazon sent a promotion to their affiliates. The affiliate could earn a commission by putting up a link to a free download of "Let's Get It On" by Marvin Gaye.

The promotion doesn't matter. And the style of marketing isn't necessarily innovative, either.

It is important to review, however, the evolution of direct marketing, because many of us employed in traditional direct marketing are trying so hard to preserve direct marketing as we knew it, instead of embracing what it is becoming.

In the music industry, control is shifting from "industry" to "music". In the article, Mr. Godin references the concept of a "micro-market". Sounds awfully similar to what we describe as a "micro-channel"! And the article talks about the "middle geography disappearing" in music --- this is exactly the same as catalog customer acquisition dying in our industry.

In the 1980s and 1990s, the list broker was the gate keeper. A quirky relationship existed.

• The list owner got paid.
• The list broker / manager got paid.
• The customer did not get paid. The customer had to spend in order for the list owner and list broker / manager to get paid.
  

In the 2000s, the fundamental relationship did not change --- co-ops displaced list brokers / managers. The essential structure of control remained the same --- there was a gatekeeper (co-ops).

As we close in on 2010, power is shifting.

In this case, Amazon doesn't go to a co-op to buy one-time access to 5,000,000 MP3-loving households modeled by a co-op statistician. No, Amazon bypasses the gate keeper, going directly to me.

This is the real dynamic behind the death of catalog customer acquisition. The gate keepers lost control --- no fault of their own, customers simply changed their behavior.

And so our job changes as well.

• How do we create something of value so that information from our business is on an individual customer's "My Yahoo" page every morning?

• How do we create a Twitter presence that adds value, so that more than just 394 people follow us --- how do we stay away from "we have swimsuits on sale?" as our only message?
  

• How do we build a network of 25,000 micro-channels, and create a mutually beneficial relationship (one not necessarily based on money)?

It is this development of micro-channel relationships that define the 2010s.

The Marketing Digital Divide And The Catalog Industry

In the first quarter of 2007, sales of music compact disks declined by twenty percent verses last year, as consumers continue to abandon album-based compact disks in favor of ala-carte purchases/sharing of digital music files.

The music industry strongly believes that free file sharing is responsible for the decline in CD sales. The labels are flexing their muscles where they can, to maintain their system of monetizing music even if it means heavily penalizing a new channel where music fans are enjoying music.

The crash of television and radio, the ascension of the internet, and the convenience of the iPod changed the music industry forever. Multichannel Forensics suggest that consumers "transfered" their behavior from CDs to MP3s during the late 1990s through the past few years.

Once consumers landed in a new world of music, they stayed there. In Multichannel Forensics, we call this "isolation". No matter how hard the music industry tries to bring consumers back to the old method of monetized music, the effort is futile. Consumers have moved on.

As consumers, we have a unique, God-given ability to identify trends in the marketplace. We can literally see the future, and react accordingly.

As business leaders, we have a unique, God-given ability to identify trends in the marketplace. We can literally see the future. However, we don't react accordingly. Instead, we dig in our heels, and demand that consumers and business partners come back to our way of thinking.

My beloved catalog industry falls into this category. Our customers can see the future, and are anywhere between 20% and 80% of the way toward evolving their behavior. At this time, customers are generally in "equilibrium" --- the state where they go back and forth between channels. They use catalogs and purchase over the telephone. They use catalogs and purchase on our websites. They ignore our marketing activities, use Google, and purchase on our sites. The combine our marketing activities with Google, and purchase on our sites.

Google recognizes this, and gobbles up properties that allow them to have an end-to-end marketing relationship with our future customers. Their version of an end-to-end marketing relationship does not include paper.

Over the next five years, our catalog customers will leave "equilibrium" mode, shifting to "transfer" mode. They will define a new way of interacting with brands, a new way of shopping. When that happens, what will become of what has been known for more than a hundred years as "the catalog industry"?

We can dig our heels in, and continue lauding the importance of sending paper to our customers as a way of generating sales. In this process, we must fight postal reform.

We can also give up. We can sell our businesses, getting out before big changes happen.

Or we can build a five-year plan for the future of our industry. We can be like a pilot, who takes an airplane down from 30,000 feet to a gentle landing. We can work with our customers as we reduce our dependence upon catalogs, building an infrastructure that allows customers to pull information from us.

We must thoroughly evaluate how Zappos, Endless, Piperlime, Blue Nile, and Amazon drive sales without paper. We need to emulate what they do well. We need to use our experience to capitalize on what they don't do well. We must chart a path to the future.

Folks in the music industry are actively talking about a path to the future. It's our turn to do the same. It will require a leap of faith, right over that pesky Marketing Digital Divide.