The Hidden Marketing Tool: The Nameflow Model

It appears that Tim Hoermer from Carmot Marketing either has similar interests, or has created something that is mysteriously similar to Multichannel Forensics.

He calls it "The Hidden Marketing Tool: The Nameflow Model".

Read the article --- then you tell me if it isn't essentially eerily similar to Multichannel Fornesics, the widely adapted forecasting process we've described for the past three years.

Wow. Good to see folks using these concepts.

The concept isn't new, of course. Jim Fulton practiced his version of Multichannel Forensics at Lands' End back in the early 1990s (and does very good work as a consultant today), and I saw the concept practiced at Fingerhut in the 1980s.

New Book: Hillstrom's Multichannel Secrets! Get The Draft Version For Free Prior To April 26

My new handbook, "Hillstrom's Multichannel Secrets" will be available next week!!

I've taken a different approach with this handbook. Whereas "Hillstrom's Database Marketing" and "Hillstrom's Multichannel Forensics" focused on the math that supports our craft, "Hillstrom's Multichannel Secrets" outlines "Fifty-Nine Facts Every CEO Can Use To Improve Profitability".

The handbook is written primarily for the Catalog CEO, but applies to the Catalog Executive, Retail Executive, Online Executive, E-Mail Marketing Executive, and anybody who has to deal with multichannel marketing and advertising issues.

Inspired by two of the most popular posts in the history of this blog, 73 Vital Multichannel Catalog Marketing Tips and 53 Vital Multichannel Website / Online Marketing Tips, the handbook drills down on issues every CEO must understand. You'll read all about Catalog Choice, Co-Op Database Use, Matchbacks, Key-Codes, RFM, Test/Control Groups, Online Buyer Lifetime Value, Remail Catalogs, Clickstream Integration, Channel Compromise, E-Mail Marketing, Social Media, List Death, and dozens of additional topics.

There are no fancy charts or complex mathematical formulas in this handbook. You'll simply find 72 pages of high-level facts that CEOs can use to improve profitability, information that many folks believe are proprietary to their business. Given the forces conspiring against the multichannel marketing industry, it is important that all of us improve our base of multichannel marketing knowledge.

When available late next week, the paperback handbook will be available for $14.95. I am self-publishing the handbook using Lulu.

Many of you have been loyal blog readers, and have purchased my previous books. I'd like to give you a little perk for helping build this blog. If you would like to preview the handbook, please send me an e-mail prior to April 26, and I will forward you a PDF file of the next-to-last draft version of the handbook. The PDF will not include the cover (the cover may also change slightly between today and the release date), and the PDF is subject to modification in the final stages of being proofed.

As always, thank you for joining me in this multichannel marketing journey!

Mistake In The Multichannel Forensics Book: Figure 8.1

One of our loyal readers pointed out the Figure 8.1 in the Multichannel Forensics book is incorrect.

The image here (please click to enlarge) is what the actual image should look like.

Thanks for your attention to detail, folks, and my apologies for the incorrect figure in the book.

Offer Your Suggestions, And You Might Win A Free Book On Multichannel Forensics

More than a thousand of you read this blog on a daily basis.

Why?

I'm looking for a little feedback.

If you're willing to send me an e-mail or leave a comment, share why you read this blog, your company category (client or vendor), industry (catalog/multichannel, retail/multichannel, online pureplay, e-mail, search, web analytics, business intelligence), and what you'd like to see me talk about in the future. Criticisms are welcomed, feel free to tell me what you're sick of!

You can leave an anonymous comment.

If you choose to identify yourself (probably best done via e-mail), you'll be entered into a drawing for a free copy of my new book, "Hillstrom's Multichannel Forensics". That's a $95 value, folks!

Thank you in advance for taking a moment to help me understand how to provide you with a better experience.

Thanks,
Kevin

Mailbag: When Stores Close

"You talk about what happens when catalogs go away. What happens to sales when a store goes away"?

When stores close, the dynamic between catalog and online sales isn't terribly exciting. Stores frequently operate in "isolation mode", meaning customers shop the store, but are unlikely to shop online, and very unlikely to shop in catalog.

When the store closes, maybe eighty percent of the store base simply won't shop online, or in catalogs, regardless of how powerful your brand is.

The other twenty percent seem to wait awhile, then slowly transition back to the online channel, or catalog channel (so long as the brand advertises to them via catalog).

The most interesting part of store closings happen in multi-store markets. In these instances, Multichannel Forensics provide a rich portrait of the interactions between customers and stores. If you close a store that is in "transfer mode", those customers will quickly shop another store, potentially boosting sales at the other store.

If you close a store that is in "isolation mode", well, then those sales are likely to be lost. That might be fine, especially if the store being closed is unprofitable.

So, when you're thinking of closing a store, take a look at what Multichannel Forensics tell you. Stores in "isolation mode" will result in lost sales when the store is closed. Stores in "equilibrium mode" will result in some sales being reallocated to other stores. Stores in "transfer mode" may send a large portion of their sales to another store. Don't expect magical things to happen online or in catalog when the store closes.

An Innovative Twist

Nearly 2,000 of you have downloaded the Multichannel Forensics white paper. Some of you pre-ordered the book.

For the most part, I considered that a success.

Then I received an e-mail from an individual who read the white paper. This person figured out all of the calculations, and did the math for this person's business ... accurately!

Better yet, this individual applied the methodology in a manner I never intended for it to be applied.

It's interesting ... folks are strongly encouraging e-mail marketers and web analytics professionals to apply uniform standards to these professions. With each passing day, we squeeze more and more innovation out of e-commerce. You see it via bland, templated e-mail campaigns generating a miserable sixteen cents per e-mail delivered. You see it via similar website designs, with similar promotions and similar shopping carts and similar search functionality and similar landing pages and similar products and similar prices.

I never considered that somebody would use the Multichannel Forensics framework differently than I intended for it to be used.

We're all better off when this happens.

How have you used Multichannel Forensics in your business? What have you learned? Better yet, are you using the framework in a new, unique, innovative manner?

Multichannel Forensics Available October 15

Some of you asked about the delivery date of the new book, given that Amazon.com is suggesting availability is 4-6 weeks away.

Folks who pre-ordered the book via Amazon.com should expect delivery after October 15.

Amazon now lists the book at $95, the same price that the book is listed at via my publisher's site.

If you haven't purchased the book, and are willing to purchase through my publisher's website, please do so. We all realize that Amazon deserves to earn a pretty penny courtesy of "The Long Tail". My publisher deserves a portion of the price of the book as well, as he did a ton of work to get the book published. Either way, I am grateful you are considering purchase of the book, or pre-ordered the new book!

My first book, Hillstrom's Database Marketing, is also available via my publisher's website.

Abacusification

Please click on the image to enlarge it.

I'm about to board a plane to visit a traditional cataloger.

Traditional catalogers think differently than online pureplays, think really different than retailers who execute direct marketing via websites, catalogs and e-mail campaigns.

Most of the traditional catalogers I've worked with have annual repurchase rates that are under fifty percent. When the annual repurchase rate dips below forty percent, the traditional cataloger is in what is called "Acquisition Mode".

Anytime the annual repurchase rate is under fifty percent, the focus of marketing activities is on customer acquisition.

These days, catalogers shifted their focus on new customers from the list rental industry to the compiled list industry.

There are a half-dozen B2C compiled list vendors of note. Ask most catalogers about compiled list vendors, and they will focus on one "brand" ... Abacus., now a division of Epsilon.

Most of the catalogers that communicate with me put at least half of their customer acquisition circulation in compiled lists, with Abacus often getting the lion's share of the circulation.

Abacus deserves kudos for transforming catalog customer acquisition. Few companies have been as disruptive in catalog marketing as Abacus --- that includes all the companies associated with online marketing, including Google. Abacus had to do something right, or catalogers wouldn't have generously allocated the majority of their customer acquisition circulation to the guiding hands of Abacus-based statistical modelers.

One of the interesting theoretical discussions about Abacus, and the "Abacusification" of cataloging, surrounds the long-term impact of having a statistician in a far-away outpost determining the strategic direction of your catalog brand.

Try this analysis on for size. If you are a cataloger with half of your acquisition circulation in Abacus, then segment your file into two groups. The first group represents all customers who were acquired in 2006 from Abacus. The second group represents all other new catalog customers acquired in 2006.

Next, analyze the merchandise that the Abacus group purchased. Compare the "taper report" as some call it (ranking best sellers from #1 to #whatever) for Abacus names, vs. all other names. Does the merchandise rank order the same way, or are there variances?

If the merchandise ranks in the same order, there's no need to take the analysis farther, no need to read the rest of this article.

But if the best selling items for Abacus-sourced names are different than the best selling items for all other new names, you're about to be plopped in the middle of a unique theoretical challenge.

If this is happening to your business, it means that Abacus is providing names that are interested in your brand for fundamentally different reasons than the rest of your new customers.

Long-term, this will have a profound impact on your brand. In the chart at the top of this article, I outline the trend that many catalogers are heading toward, a trend where in five years, 3/4th of the active customer file will be sourced from Abacus.

And if the merchandise that Abacus (and honestly, this works for all compiled list vendors, not just Abacus) customers purchase is truly different than the merchandise purchased by other customers, then the merchandising and creative decisions you make over the next five years will evolve.

Without even noticing, you will respond to what your customers "want". Certain items will "work well". You'll feature those items more often. You'll feature the items other customers purchase less often, less prominently.

Within five years, the merchandising of your brand will have evolved out of your control. With 3/4th of your active customer file coming from Abacus, you'll be offering product that Abacus names like, presented in a way that Abacus names like to see merchandise presented.

This might be perfectly acceptable for your catalog brand. You might generate robust profits, your business might grow beyond your wildest dreams. I'm not saying this is a bad thing.

I am saying that as a business leader, you won't own your brand.

Abacus will own your catalog/telephone customers.

Google will (and already does) own your online customers.

You will merchandise your catalog, and present merchandise the way Abacus customers want the catalog merchandised. You will ultimately respond to the wants and needs of customers who buy from your business because of the actions of a small number of statisticians who made decisions based on equations developed years ago.

The end result is something that I call "Abacusification". Again, I'm not saying this is a bad thing --- your business might thrive because of this.

It is, however, a fascinating end-game for the catalog industry, one I would never have envisioned in 1990 when I sat down for my first day of work at Lands' End.

Does A Website Drive Sales In Retail Stores?

Please click on the image to enlarge it.

One of the more flummoxing issues facing multichannel retailers is quantification of the sales that a website drives to a retail store.

There aren't a lot of "best practices" for quantifying this issue.

Some folks want to give the website credit for any purchase initiated online. For instance, if a customer ordered online, and picked-up the item in-store, some folks want to give the website "credit" for that order. Some feel that any retail purchase that was researched online deserves to be credited, at least in-part, to the online channel.

Retail folks will claim that without stores, the website never would have existed, and therefore, the stores should get credit for all orders, even orders that happen online. Many retailers include online sales in their comp store sales calculation --- artificially propping up tepid retail comps with +25% online growth. Read the 10-K statements issued by retailers, you'll see that this is a common practice.

Multichannel Forensics can be used to simulate what might happen if a website no longer existed, was no longer there to support store sales.

Using this free spreadsheet, the analyst can plug in retail/online metrics, view the forecast, then zero-out the online portion of the business.

In the attached example, retail sales were growing at about four percent per year. Once the website is shut down, the simulation suggests that retail sales stop growing. Of course, all web sales disappear as well.

Theoretically, some assumptions can be made for perceived cannibalization between retail and online sales. In lieu of the actual, quantifiable metrics, this example shows that the website probably has a real, long-term impact on retail sales.

Plug the dynamics of your business into the spreadsheet. You can get an introductory view into the impact your website might have on retail growth.

Free Multichannel Forensics Worksheet!

One of your frequently asked questions about Multichannel Forensics is this ... "Do you have a spreadsheet I can borrow that does the analysis for me?"

If you manage a two-channel (or two-brand or two-product) business, I have a spreadsheet for you.

Download this spreadsheet, and you are just 48 easy steps away from understanding the dynamics of your two-channel business.

Open the spreadsheet. Page down to cell K48, and enter each of the 48 metrics readily available from your database marketing team, or the forecast you maintain for new customers by channel.

Once you've completed this task, cells A6 - G28 illustrate the forecasted five year trajectory of your business!

Cells I4 - N14 illustrate the Migration Probability Table necessary for understanding the true underlying dynamics of your business.

Understand two-channel dynamics, and you can build a three-channel worksheet. Beyond three channels, things get interesting, that's where a simulation tool makes life easier.

Available Multichannel Forensics Resources:

• The Free White Paper on Multichannel Forensics
  
• The Free 2-Channel Spreadsheet
• The Book: Hillstrom's Multichannel Forensics

Your Questions About Multichannel Forensics, Matchback Analyses, and Web Analytics

Tell people you have a book coming out, and you get a few questions.


Question: How are Multichannel Forensics different than Web Analytics?

• Multichannel Forensics and Web Analytics are very different disciplines. Web Analytics looks "back" in time, and tells you what customers did during a specific visit to a website. Multichannel Forensics look back in time to understand online customer behavior, then forecast over the next five years how online, retail and catalog sales will evolve. Notice that the methodology views online customer behavior, then illustrates what happens in all channels in the next five years.
  

Question: How are Multichannel Forensics different than Catalog Matchback Analyses?

• Matchback Analyses are very trendy these days, with dozens of catalog and analytical vendors vying for the right to explain to you how e-mail marketing, online marketing, and catalog/direct marketing work together to cause purchases to happen. Matchback Analyses typically "guess" at what caused customers to purchase, using business rules. Matchback Analyses only look back in time. Multichannel Forensics seldom try to quantify the impact of an individual e-mail marketing campaign, online marketing campaign, or catalog campaign. Instead, Multichannel Forensics quantify the annual impact of an e-mail marketing program, online marketing program, or catalog marketing program on telephone, online and retail channels. This is a fundamental and important difference. Multichannel Forensics is a strategic tool used by CEOs/EVPs to determine the best future strategy for various marketing platforms. Matchback Analyses are tactical tools that can be very beneficial for determining how to allocate a budget.

Question: What is the best use of Multichannel Forensics?

• There are four areas that I really like applying the technology.

• Understanding the long term impact of eliminating a product, brand or channel.

• Measuring the long-term impact of various forms of advertising.

• Identifying the reason why one specific channel is not growing the way management expects the channel to grow.

• Graphically illustrating how customers interact with advertising, products, brands and channels interact with each other.

New Book: Hillstrom's Multichannel Forensics

Well, the cat is out of the bag!

This morning, I received an e-mail from Amazon.

The e-mail said because I previously purchased a book from a different database marketing author, I might be interested in a book being released on September 30, called "Hillstrom's Multichannel Forensics".

I am interested in the book. I AM THE AUTHOR OF THE BOOK!!!!

I'm guessing I'm not the only person Amazon sent this e-mail to. So it is time to share with you what this new book is all about.

The text is the culmination of twelve years of research into how customers behave in a multichannel environment. Twelve years ago, e-commerce began to impact, then influence, then usurp catalog marketing. Peers at competing retailers and catalogers shared their frustration with me about understanding customer behavior in a multichannel environment.

Vendors and Research Organizations shared multichannel customer facts and figures that were impressive. They seldom told us meaningful information that helped us understand our customers. And if they had meaningful information, you can be sure the information would be highly monetized!

I felt compelled to create a methodology, a framework, for understanding and explaining multichannel customer behavior (in a b2b or a b2c environment).

I strongly believed the methodology should do two different things.

First, the methodology had to explain how customers interacted with advertising, products, brands and channels ... in a way that a CEO or Executive Vice President could understand.

Second, the methodology had to illustrate how sales within products, brands or channels will evolve over the next five years. This allows the CEO or EVP to make decisions today that limit future business challenges.

The combination of these factors became "Multichannel Forensics".

The perfect laboratory for testing this methodology came during my tenure at Nordstrom. In 2005, we eliminated our catalog marketing program. I used this framework, this methodology, to illustrate what would happen to online and retail net sales growth if catalogs were no longer there to support those channels.

The methodology worked!

Since beginning my own consulting practice in March, I've completed multichannel forensics projects for thirteen brands/titles. I'm continually pleased with the way CEOs and EVPs react to the methodology. I'm proud of the way the methodology forecasts what is likely to happen in the future. I love giving business leaders tools they can use to quell challenges from the Board of Directors, or Ownership Team.

There are three ways you can learn about multichannel forensics.

• You can read this blog. I will continue to give examples of how the methodology can be used in real-life settings.

• You can read the white paper, which goes into some level of detail on the topic.

• You can buy the book, and learn the nuts and bolts of the methodology. I want for you to be able to do these projects yourself!
  

• Of course, you can hire me to do a project for you.

I spend considerable time in the book outlining three-channel situations (i.e. catalog/online/retail or telemarketing/catalog/online, as examples). Two-channel and three-channel situations are very common, hence the focus on these topics.

I do not go into the complex simulation algorithms that I use to understand the interaction between, say, ten merchandise divisions and three channels. The concepts in the book are illustrated at a level that allows the reader to build the simulations, if desired.

How might you benefit from this book?

• CEOs and EVPs will learn the current trajectory of the business they manage, and will learn how they might mitigate negative trends.
  

• E-Mail Marketers will learn how their oft-criticized discipline builds long-term sales growth.

• Catalog Marketers will precisely learn the value of catalog marketing in a multichannel environment, in a way that matchback analyses cannot possibly explain.

• Online Marketers will finally be able to show retail leadership how online customers become retail customers, demonstrating how comp store sales growth is influenced by the online channel.

• Web Analytics practitioners and Business Intelligence analysts will be able to see how customer behavior can be analyzed longitudinally (over time), providing value that goes well beyond individual session metrics.

• Multichannel Vendors will be able to identify ways they can provide additional value to the clients they support, value that is targeted at the CEO/EVP level.

Amazon is allowing pre-orders of the book in anticipation of a September 30 release date. In the next two weeks, the book will be available on my publisher's website ... www.forbetterbooks.com. Obviously, Amazon is not part of the purchase process if you purchase the book from my publisher's website, Amazon's profit is reallocated among those who invested time, energy and money in creation of the book.

I invite you to learn more about Multichannel Forensics. Do so at no cost by downloading the white paper, or purchase the book! My thanks go to Don Libey for shepherding this book and my first book (Hillstrom's Database Marketing), for giving the little guy a chance!