Proven And Influenced Advertising Channels

There are two types of advertising channels in the Multichannel Forensics framework.

1. Proven Channels
2. Influenced Channels

The proven channel is what we enjoyed back in the 1980s and early 1990s. We mailed a catalog. Then the customer ordered from us, and was kind enough to provide us with a key code, allowing us to track with accuracy the proven channel that drove the order.

Oh, those were heady times.

These days, everybody is obsessed with fractionally allocating orders based on the advertising channels that they perceive to be driving orders. First touch? Last touch? Allocation across touches.

Of course, all of the allocation rules are bogus. We don't really know, do we? Especially if we don't do mail/holdout groups, and you really cannot do mail/holdout groups for paid search (though you can do some innovative spend/no-spend strategies).

So why the obsession with first touch, last touch, and fractional allocation? The end result is clouded with fiction, anyway.

There's another way to approach this challenge. Instead of investing all of our efforts on the art of allocation, why not categorize orders based on proven and influenced sources, then track how customers evolve over time --- allowing us to reduce catalog or e-mail marketing expense in the future?

Let's say that you have three advertising channels that resulted in an order:

1. Catalog received on June 1.
2. E-Mail received on June 3.
3. Order on June 5, using Pay-Per-Click.

One could label pay-per-click as the "proven" source. One could also label catalog and e-mail marketing as "influenced" sources --- in theory, these advertising channels influenced the order.

Here's the marketing analytics secret for you --- shhhhhh, don't tell anybody!

• When catalogs and/or e-mails move from "proven" to "influenced" advertising sources, you don't have to send as many of these to the customers using them as "influenced sources" in the future --- once customers move away from these advertising channels as their primary reason for purchasing, they become less likely to use them in the future.
  

Fractional allocation or first touch or last touch cannot provide you with this marketing analytics secret --- all of these forms of allocation just allow you to make guesses about what happened in the past. We need to know how to market to individual customers in the future.

This is where Multichannel Forensics, and micro-channels in particular, make a big difference.

Psychographics

Up until about two years ago, I was not a proponent of demographics / psychographics.

Times have changed. The "multichannel era" and the era of "best practices" have made understanding demographics / psychographics more important than ever.

Take the folks at comScore. They are suggesting that Twitter users skew older than average.
And guess what? Twitter users are likely to live in urban areas (thanks Don Libey of Libey's DailyDM and Multichannel Advisor). That's a micro-channel, folks --- urban baby-boomers communicating in passionate 140 character bursts.

If you were forced to fill in the demographic and psychographic profile of users of the following channels, could you do it?

• Catalogs, Especially Customers Coming From Co-Ops.
  
• E-Mail Marketing.
• Mobile Marketing.
• Twitter.
• Facebook.
• MySpace.
• Paid Search.
• Retail.

The future of micro-channel marketing demands that we thoroughly know the following about the user of each micro-channel:

• Age.
• Income.
• Gender.
  
• Urban / Suburban / Exurban / Rural.
• Merchandise Preferences.
• Price Point Preferences.
  
• Physical Channel Preferences.
  
• Online Visitation Preferences.
• Advertising Preferences.
  
• Lifestyle Preferences.
• Opt-In And Pull Marketing Preferences.
  

Modern micro-channel marketing demands a thorough understanding of these characteristics. You're already using Multichannel Forensics to understand the linkages.

Pandora And Micro-Channels

You might be familiar with Pandora, the streaming online music service? You list a half-dozen of your favorite artists, and then "the algorithm" streams you a series of songs that you, in theory, will enjoy listening to.

I have 1.5mbps DSL service, not anywhere near as fast as cable, but fast enough for me to get streaming Netflix movies via my Roku player, and more than fast enough to handle Pandora. I listen to Pandora through my Grace Wireless Internet Radio ($176 with free two-day shipping at Amazon), and I set up all of my NPR podcasts through this player as well.

Why the two-paragraph description of my viewing and listening habits?

Micro-channels.

Once you head down a path that is both convenient and more entertaining than a prior channel, you become less likely to go back.

There's no reason to listen to 103.7 FM (The Mountain) and endure twenty minutes of commercials and a half-dozen songs that I'm not interested in when Pandora delivers most of what I want, for free.

Once again, a profitable channel (radio) is replaced by a popular (to me) channel that is hard to monetize (Pandora).

And there's no way that 103.7 FM (The Mountain) can fight their way back into my life under the confines of the current business model. They can move their channel online, streaming what you hear on the radio. They can add "HD" stations, truly becoming "multi-channel". But the core premise of the brand is to sell twenty minutes of advertising, per hour, every hour, and to get me to listen to the advertising. That worked when music was scarce.

The problem for my preferred micro-channel combination (Pandora + Grace Wireless Internet Radio) is that maybe a few hundred thousand people (at most) prefer this combination. This combination, while futuristic, does not represent the future.

That's the challenge that we, the "multichannel generation", are facing. Somehow we were all smart enough to jump on the internet bandwagon a dozen years ago --- we could see that e-commerce was going to be important. Today, it's a lot harder to see the future. We simply cannot point to the "next big thing". We probably need to experiment in a hundred or a thousand micro-channels. But because none of it scales, we don't experiment, hastening our current trajectory.

The next generation of merchandising and business leaders will solve this problem. Oh, the opportunity!

Mega-Metrics: Micro-Channels Purchased From

This is a mega-metric that almost nobody is tracking.

And yet, this metric is our future.

We calculate Annual Micro-Channels purchased from by identifying the number of twelve month buyers, then summing the total number of unique micro-channel combinations the customer purchases from.

Micro-channels are a combination of the referring URL and the physical channel the customer purchased from. Referring URLs are usually summarized --- for instance, at Nordstrom, back in 2006, we combined all blogs, calling all of them one "micro-channel".

There are two trends we need to follow. First, there is an explosion of micro-channels, and if your business is not seeing customers purchasing from multiple micro-channels, it may mean that your customers are either unwilling to shop multiple micro-channels, or that you are not taking advantage of the veritable plethora of micro-channels that now exist.

Second, the shift in micro-channel behavior has never been faster. So this becomes really important. If you see stagnant growth in micro-channels purchased from, but a huge shift in micro-channel behavior (customers who used to use Google now use Twitter), then you have huge micro-channel cannibalization happening.

Micro-channel cannibalization is rampant on this blog. Three years ago, all of my visitors came from other blogs. Eighteen months ago, it was a combination of subscribers and Google juice. Today, visitors are a combination of subscribers, much less Google juice, and many more visitors from Twitter. There is no doubt that Twitter utterly cannibalized blog visitors, and is now in the embryonic stages of cannibalizing Google searchers.

These trends are happening, in real-time, on your e-commerce website. You'll want to measure annual micro-channels purchased from, and you'll want to use Multichannel Forensics to measure how customers are migrating between micro-channels. You'll want to work with the good folks at Coremetrics or Omniture to calibrate this (and all) mega-metrics.

Channel Migration Visualization

Many database marketers who practice Multichannel Forensics categorize customer activity on the basis of the channel the customer purchased from. Others take this a step further, combining the physical purchase channel with the advertising channel that drove the order.

Example:

• A brand has two physical channels: Telephone and Website.

• A brand has eight advertising channels: Catalog, E-Mail, Paid Search, Organic Search, Affiliates, Shopping Comparison Sites, Portal Advertising, Blogs, Twitter, Uncoded.
  

Each combination represents a micro-channel. Many combinations have little relevance, and are not included below:

• Catalog / Phone.
• Catalog / Website.
• E-Mail / Website.
• Paid Search / Website.
• Organic Search / Website.
• Affiliates / Website.
• Shopping Comparison Sites / Website.
• Portal Advertising / Website.
• Blogs / Website.
• Twitter / Website.
• Uncoded / Phone.
• Uncoded / Website.

At this point, you have twelve micro-channels, and now you have something. Take a look at the ecosystem revealed by a Multichannel Forensics analysis (click the image to enlarge it).



This is fun stuff!! You can clearly see the path a customer takes as she moves from newbie status to becoming a loyal customer.

E-Mail marketers --- pay close attention to the middle of this chart. I frequently find that e-mail marketing is the "glue" that links a customer as the customer moves from the past (direct marketing, catalog marketing) to the future (social media, organic demand).

Paid Search marketers --- pay close attention to the role you play in this chart. You are frequently a source of new customers, but the customers you bring into the business are often not responsive to traditional direct marketing. That's ok, as long as the brand doesn't try to convert that customer to traditional advertising via direct marketing.

Often, there's a transition the customer goes through.

• Traditional Direct Marketing (Catalogs).
• Traditional Digital Marketing (E-Mail Marketing).
• Loyal Customer Generating Organic Demand.

And there's a digital transition that the customer goes through.

• Paid Search
• Organic Search
• Loyal Customer Generating Organic Demand.

There's a ton of profitability to be had by marketing appropriately to customers walking down one of these two paths. And increasingly, we'll add in social media and micro-blogging and mobile marketing.

Channel Shift And Online Marketing

These are absolutely delicious times in the world of multiple channels.

Sure, I focus a disproportionate amount of time on catalogers and retailers, because that's what I know. But the most interesting stories are over in the online marketing world.

You know those online marketers. They're the folks that just stare at you when you mention anything that cannot be immediately quantified with a conversion rate metric. They're the folks who organically benefited from all of your offline marketing. They're good people, learning their craft on the fly --- something offline marketers have a much harder time doing.

And in the course of just six months, the world shifted out from under them.

Aaron asks us, "How Much Of Your Pagerank Are You Wasting On Twitter?" Catalogers/Retailers, read this carefully, but as you read the article, make the appropriate substitutions:

1. When you see the word "Google", put in the word "Catalog", or the word "Retail".
2. When you see the word "Twitter", put in the word "Internet" or the phrase "Online Marketing".

Aaron speaks about the exact sort of thing that was announced at Get Elastic today. These folks are reducing blogging frequency, and eliminating Friday link-love, instead spending time on Twitter forwarding readers to good articles. Just like that, a brand that utilized a fruitful combination of social media and Google elects to slowly de-tether from the beast, choosing to spend more time on Twitter.

Too much hype was made over Web 2.0. What is happening now, however, doesn't have a label. It is a fusion of online marketing and offline marketing and Web 2.0 and, most importantly, demand creation, that is threatening to anybody in the online marketing camp.

Demand creation is sorely missing from online marketing and Web 2.0. Improving conversion rates and managing search and placing a shopping cart in the upper right hand corner of the screen is all about capturing as much demand as possible --- a good thing. But it is a fundamentally different process than what one goes through to create demand.

Demand creation results in new channels. New channels, as we have learned over and over again, cannibalize old channels. Search, all of a sudden, is an old channel. Old channels go after the money. New channels go after romance --- and are always criticized in the early going for not delivering ROI.

For my loyal catalog and retail readers out there, this is a time of huge opportunity. You can ignore the pap about selling on Twitter. You can ignore the stories about improving conversion rates by 394%. You can, instead, find new and innovative ways to use combinations of micro-channels in ways others haven't envisioned. Test! Try things. The mighty online marketing empire probably peaked last September, and is now being nibbled all around the edges by the very micro-channels it enabled.

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.

Overstock.com Had 3,400 Affiliates In New York State

Pay attention to the small print toward the end of this argument about internet sales tax collection.

While it is important to consider the issues with internet sales tax (issues that are largely meaningless, because customer behavior doesn't fundamentally change as sales tax is added), it is so much more interesting to consider that Overstock.com had 3,400 affiliates in New York State!!

You're probably looking at, what, 30,000 to 50,000 affiliates in total, nationwide, at Overstock?

This is what I mean when I talk about micro-channels. It is easy to go to Abacus and ask for one-time access to 1,000,000 households that yield you 8,000 new customers after matchback.

It is hard work to manage 40,000 affiliates that will drive 8,000 new customers to your brand. You'll quickly note that this style of marketing "doesn't work --- half of your affiliates wouldn't generate any new customers over a two month period of time"!

And yet, each method generates the same result. Results are all that matter.

Our future is an endless array of 200,000 micro-channels that yield one or two or three or seven-hundred new customers a year. There will simply be too much competition to leverage Google effectively, and all of the old-school mass-audience methods are slowly dying.

Multichannel Madness

Chad outlines a JCPenney e-mail strategy he likes, one where the brand calls out stores and landing pages and e-mail and text messaging.

This works when we have two or three channels to mention.

Back in the 1990s, catalog contact strategy management (horizontal marketing) was all the rage --- planning which of eighteen catalogs any individual customer should receive. Almost nobody could figure that one out, so we just mailed everybody everything!

Now what the heck do we do when we have to communicate a message to customers using two dozen micro channels? Do we communicate the same message via Catalog Marketing, E-Mail Marketing, MySpace, Facebook, Twitter, Plurk, YouTube, Flickr, Outbound Telemarketing, Direct Mail, Blogs, Television, Radio, Newspapers, Newsletters, Billboards, Buses, Paid Search, Affiliates, Shopping Comparison Sites, Press Releases, SMS, Video Marketing, Hologram Marketing?

There are no best practices, and there probably won't ever be, because the minute best practices are established, Facebook and Twitter will become unpopular and Newspapers will be dead, replaced by something new and shiny called "Guppie", changing the rules of the game.

So the question to you, the loyal reader, is this ... how do you propose dealing with Multichannel Madness? Do you bomb your "multichannel customers" with the exact same message across micro-channels? Do you bomb your multichannel customers with different messages across micro-channels? Do you bomb your multichannel customers with personalized messages across micro-channels? Do you use some channels and not others? Do you increase frequency in some channels, decrease in others, and let the customer pick/choose from social media? Do you market to the same folks, or do you try to find new ones?

If you just lost your job, this might be a place to focus your efforts ... folks will pay $$$ to anybody who knows how to manage this micro-channel marketing mess.

Analog Dollars, Digital Pennies, Micro-Channels, Catalog Marketing

Many folks have talked about the evolution of analog media to digital media. The key topic is the transition from "analog dollars to digital pennies", where the brand slowly gives up big revenue streams for a bunch of tiny online revenue streams.

Nowhere has the transition from analog dollars to digital pennies been resisted more than in catalog marketing.

Our catalogs, which used to generate $5 per mailing, now generate maybe $2 to $4 per mailing, even after factoring in the results of matchback analytics.

But the $3 catalog mailing is still a big deal, when compared with the $0.15 we get when sending an e-mail marketing campaign into the digital marketplace. We need twenty-one e-mail subscribers to equal the sales impact we get when sending just one catalog into the analog marketplace (though the $0.15 e-mail may be more profitable than the $2 catalog mailing).

And a catalog mailing is a big deal, compared with paid search, where you work your tail off spending $500 to get 1,000 folks to click on a keyword, resulting in maybe twenty orders.

You keep telling me that paid search "doesn't scale", that there simply aren't enough people searching for "Ugg Boots" to replace all of the business you're slowly losing in catalog marketing.

We just can't force people to search for "Ugg Boots" in the same way we can force a catalog in the mailbox!

Catalog marketing scales. You can always visit your favorite co-op or list broker and pay $250,000 for one-time mailing access to 5,000,000 names willingly contributed by your most feared competitors if your catalogs are productive enough and you have deep pockets. A few catalog businesses appear to be absolutely thriving as they push themselves toward critical mass, offering desired merchandise and capitalizing on customers nurtured by competitors.

So catalog marketing, like the music industry and the newspaper industry and television and radio, is inevitably evolving, increasingly trading analog dollars for digital pennies.

And this is where we resist change.

We resist the transition to online marketing, just like the music industry resists the $0.99 digital song, and the eventual transition to a subscription-based music service. Just like the newspaper industry, we want the customer to keep using paper. We want to stay focused on a small number of activities that generate large amounts of revenue, activities that scale.

But online, the cataloger who wants to "scale" has to be in a thousand, or ten-thousand different places, all at the same time, without appearing to "force" itself into those places. These places are called "micro-channels", representing all of the ways a cataloger can interact with small communities.

Force is a key part of the analog equation. Catalog marketing via the mailbox/co-op/list-broker/printer defines force. E-mail marketing, after the opt-in opportunity, is largely an issue of force.

Paid search is not about force. The customer decides to click on your keyword. Natural/organic search is not about force (it is, however, about Google controlling your business). Affiliate marketing, shopping comparison sites, social media, they are not about force. In each case, the cataloger puts herself in a position to be successful, but the customer makes the final decision.

Nowhere is this more apparent than on this blog. Vendors hire PR firms, and those PR firms try to force a message upon you, the loyal reader, thinking they are taking advantage of this micro-channel. "Kevin, love your blog (though I review my web stats and observed that they just did a Google search for 'database marketing blog'). We think your readers would love to learn more about our products and services. Could we pay to place an article on your site, or would you be willing to volunteer your time to write about our products and services? Thanks, looking forward to our relationship!!" This is a traditional approach to micro-channels, trying to force a message.

Micro-channels are not about force, they are about influence. What might have happened if the firm I mentioned above had their own blog, and had mentioned my articles a half dozen times? Might I have voluntarily mentioned their business without their firm ever having to ask? In this example, they are using a micro-channel to get my micro-channel to talk about their overall business.

Take Eddie Bauer. Instead of spending $250,000 renting catalog names, why not give the first 5,000 Cute Overload subscribers this Holiday Labrador Ornament for free, no strings attached? And don't do that on the big, popular blogs, but go give this opportunity to the good folks at The Lab Brats Blog, too! Go out and interact with folks, build relationships, give people something, test things, see what works. Or better yet, host your own blog and plant some seeds now.

It is easy to rent 5,000,000 names from a co-op. 5,000 names or 5,000,000 names, the work largely scales, one person asking the co-op for names, one accounting department paying the bill, one postal service delivering the catalogs.

It is hard work managing five thousand micro-channels.

List rental and co-op marketing represent analog dollars. Micro-channels represent digital pennies.

The transition is being made for us, so why not embrace it?

Your thoughts?

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.

San Jose: Micro-Channels

If Northern Michigan is vacation country, San Jose is, well, something very different.

In a world where folks invent social media applications faster than folks microwave popcorn, traditional marketing may well be dead to many.

So if we want to engage these folks, we need to be something more than a remail of a 124 page Holiday catalog offering $14.95 shipping and handling.

This is where you get to test your micro-channel mettle. E-mail, paid search, affiliate marketing, shopping comparison marketing, social media, the whole nine yards apply here. Customer acquisition is less about pushing a message, more about pulling folks in to the experience.

During the past few decades, some folks advocated that there should be segment managers, responsible for increasing share of wallet among various segments of customers. Here's a segment of customers where the theory may have potential.

Northern MIchigan: Micro-Channels

Northern Michigan is vacation country. Sure, you could go to the Upper Peninsula and enjoy a pasty, but why travel an additional two hours when all that beauty is just a few hours away?

Vacation country is a bit different than, say, midtown Manhattan. You're less likely to find a house with 1,500kbps broadband internet access. Heck, you might find a home with a rotary phone ... or two!

You can tell businesses that they must have a Twitter presence. Or that they must advertise on MySpace or Facebook. You can clobber the luddites who still promote traditional strategies.

Traditional strategies work well in Northern Michigan.

Northern Michigan is a place where folks still watch network television, and read newspapers. There are actual disk jockeys in Northern Michigan, as opposed to the national wave of Jack-FM stations.

Segment customers who live in Northern Michigan separate from other customers. Treat them differently. The catalog IS the store for these customers. Social Media micro-channels aren't likely to resonate, as a whole, though they may resonate with a subset of customers. You'll use Zip Code Forensics to do this --- or, you can create your own zip code segmentation strategy. Either way, you'll benefit, and your customers will benefit.

Micro-Channel: Video And E-Mail

Staying with my current fascination of Crutchfield, here's how the venerable direct marketer uses video to describe the Polk Surroundbar.

It's quick, crisp, and complements text-based copy or user generated reviews.

Best of all, we capture this information in our database, right? We create an indicator that measures the most recent date a customer viewed a video (and we'll certainly get more sophisticated in time). And when we tailor our e-mail marketing campaigns, we sub-segment the video viewers from everybody else --- offering them vastly different content.

Eventually, we use Multichannel Forensics to see how video micro-channel users evolve and change, knowing and understanding the role video plays in the customer experience.

Fun stuff!

Multichannel Forensics A to Z: Natural Search

We don't talk a lot about the relationship between Natural Search and Multichannel Forensics (book, study).

We have talked about micro-channels. Natural Search is the perfect complement to micro-channels.

Many times, you cannot tell that the customer arrived via Natural Search. At Nordstrom, in November - December 2006, we knew that 141,000 visitors came from one of a thousand high-ranking blogs. Undoubtedly, many of those visitors arrived at the blog after conducting a search on Google, Yahoo!, or MSN.

Our future includes a veritable plethora of micro-channels, and more important, micro-channels that include combinations of advertising channels. We'll have the customer who receives an e-mail campaign, searches on Google, visits a blog, visits our site three times, then buys something in-store. This customer will be fundamentally different than the customer who receives a catalog, searches on Yahoo!, hears about something on Twitter, visits our site three times, then buys something online.

Though the behavior is fundamentally similar (direct marketing, search marketing, social media, website, purchase), the customers are very, VERY different. Without a thorough analysis of micro-channels, we'll be unable to respond to the needs of these customers.

Natural Search is at the core of each micro-channel described above. From a database marketing standpoint, we have no choice but to build an information infrastructure that allows us to categorize customers based on past behavior, prior micro-channel behavior.

More On Micro-Channels And Zappos

Zappos, the e-commerce purveyor of shoes, utilizes micro-channels as part of their marketing strategy.

Here's how Zappos leverages Twitter.

And here, Zappos embraces a YouTube channel.

There's the little things they do, as illustrated on Flickr.

Maybe you've seen their ads in shoe trays at the airport?

Zappos will circulate a magalog to 1,000,000 folks in the near future.

They experimented with television ads.

Employees get to share the culture with customers.

Upgrades to the site are tested publicly --- would your IT staff try out a beta site with the public before launching it?

You can look through the comments of this blog post to see what a customer said about Zappos.

And then there's the things they don't brag about, like the kind gesture they gave to this woman.

Our future increasingly suggests that we'll apply several hundred advertising micro-channels to acquire the same number of customers we used to acquire with two or three customer acquisition strategies. These are tactics that we're not entirely comfortable with, tactics that don't have an immediate ROI, but many are measurable. Many of these activities will fail, some will succeed.

We owe it to ourselves to experiment, to try new stuff --- especially now.

Google, Yahoo!, MSN, and Multichannel Forensics

Web Analytics practitioners do a very nice job of summarizing visit-specific customer behavior. They can tell you that 29% of the customers who visited a landing page were new, 71% existing visitors. Our world of marketing and measurement fundamentally changed when we were given access to the information provided by Web Analytics.

Now it is time to complement the veritable plethora of information provided by Web Analytics with Multichannel Forensics.

Most online marketers generate considerable sales from customers referred by Google, Yahoo!, and MSN searches.

Now let's consider future behavior. In other words, does the Google purchaser purchase again after conducting a search using Google? Does she purchase again because she becomes loyal to your website, visiting it frequently? Does she purchase again because of your catalog marketing activities? Does the MSN purchaser stay loyal to the MSN micro-channel, or does she switch to Google?

Multichannel Forensics provide answers to all of those questions.

Often, Multichannel Forensics suggest that Google is a unique micro-channel, separate from your e-commerce channel. My projects routinely indicate that Google customers have comparable future value, compared with Yahoo! or MSN customers. But subsequent behavior is fundamentally different! This means downstream marketing activities can be executed differently for the Google shopper than the MSN or Yahoo! shopper.

The Yahoo! and MSN shopper are occasionally less loyal to their portal than are Google shoppers. Loyalty to your brand may be similar, but you may find these customers elsewhere on the internet in the future, whereas the Google shopper may continue to be loyal to Google.

Results across brands are frequently unique, so it is important that you give Multichannel Forensics a try, considering each online marketing vehicle as a unique micro-channel.

Great Moments In Database Marketing #3: Micro-Channels

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

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

These folks maintain a customer database with fields like these:

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

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

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

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

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

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

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

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

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

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

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

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

Examples of micro-channels:

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

• Paid search customer who does not subsequently repurchase.

• Rural customer who buys online after receiving a catalog.

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

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

• Customer buys in-store only.
  

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

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

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

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

Micro-Channel Challenges: Abacus And Co-Ops

I am continually told by traditional catalogers that there isn't a viable way to get away from a paper-based advertising model. Regardless of the sales success of folks at Zappos or Blue Nile or Amazon or Overstock.com, folks who do not use a catalog marketing channel, traditional catalogers usually have data (and more important, a belief system), to support the need for a paper-based advertising model.

Many (most?) catalogers have annual repurchase rates under fifty percent. In other words, fewer than fifty percent of 2006 purchasers buy again in 2007. When this happens, the business model demands a disproportionate focus on customer acquisition.

Catalogers look to outside lists and co-op databases (with Abacus being the primary co-op) as the primary way to acquire new customers, looking at paid search and online marketing as a secondary source.

Micro-channels like Abacus / Co-Ops present unique challenges. We need to seriously look at WHO the customers are that we acquire via these channels.

Have you completed this exercise? The exercise is valid for any micro-channel (not just e-mail or co-ops or rented lists or paid search).

Some folks see that the names they acquire from Abacus / Co-Ops are disproportionately rural. These customers are likely to stay in the catalog / telephone environment (which, by the way, is a more measurable environment, making Abacus / Co-Op names appear to perform better, simply because the phone/mail channel is the most measurable ... an interesting and unintended outcome).

Some folks observe that the names they acquire from Abacus / Co-Ops buy fundamentally different merchandise than customers acquired from other sources. This implies that the future value of these names will be different (maybe better, maybe worse). This also implies that, depending upon how many new customers are acquired from these sources, the future merchandise assortment is being driven by co-op statisticians applying sophisticated algorithms.

There are significant differences between names acquired from various sources.

• Rented / Exchanged Lists are brand loyal, this loyalty to another brand drives their future behavior within your brand.
  
• Abacus / Co-Op names are selected by a human using an algorithm. Future behavior is driven by the choices made by the human using the algorithm.
• Paid Search names self-select themselves on the basis of an algorithm. Future behavior is driven by the needs of the person self-selected by the algorithm.

Profiling the names acquired via these micro-channels will give you an idea where your brand is heading. Increasingly, algorithms and outside individuals are driving the future success of our multichannel brands. This is neither good nor bad, it is simply part of our new marketing reality.

Use tools like Multichannel Forensics (or simple future value tables) to understand the long-term trajectory of customers acquired via micro-channels.

Micro-Channel Challenges: E-Mail

Attention E-Mail Marketers!! Next time you see your business intelligence or data mining or SAS programming expert cookin' up a bag of microwave popcorn (preferably buttered), ask them to profile your e-mail marketing list for you.

Keep your analysis simple. Take twelve month buyers, and split them into three groups ... those without an e-mail address, inactive e-mail subscribers, and active e-mail subscribers.

Pay attention to the trends:

• Urban, Suburban, and Rural Customers. Customers have different preferences. The rural e-mail subscriber might respond to free shipping promotions. The urban e-mail subscriber might appear to never respond, because she visits stores after receiving an e-mail campaign.

• Merchandise Preference. E-mail subscribers typically prefer a different merchandise assortment than non e-mail subscribers. You're likely to find that active e-mail subscribers are hyper-loyal to a subset of your merchandise assortment. Brand marketing individuals sometimes wish to use e-mail to communicate a holistic marketing message, whereas the profile might indicate that various e-mail / merchandise combinations represent vital "micro-channels" to customers.

• Advertising Micro-Channels. Do e-mail subscribers and active e-mail customers purchase using e-mail in combination with catalog marketing, direct marketing, search marketing, or any other kind of marketing? If the answer is yes, your multichannel expert may be right in seeking to align all marketing activities across the company.

• Future Channels. One of the unintended consequences of multichannel marketing occurs when one form of marketing (e-mail marketing) is effective, causing the customer to switch channels. Most of the Multichannel Forensics projects I work on suggest that customers are much more likely to switch channels than they are to become loyal multichannel shoppers. See if your e-mail marketing activities shift customer behavior. If e-mail marketing causes a shift to a lower-value channel, re-visit the purpose of e-mail marketing.
  

Micro-Channels: Dell Outlet on Twitter

Have you ever had the challenge of having to clear out six pair of shoes, or a single couch, or a handful of sundresses?

Social media guru Shel Israel points us to Dell Outlet, who is using Twitter to clear out various items.

Think about the contrast in this style of marketing, and traditional direct marketing.

• Direct mailers identify an audience, send direct mail at a cost of $0.25 to $1.00 per piece, and generally do a good enough job to make money targeting a list of "x" likely buyers.

• E-Mail marketers identify an audience, send an e-mail campaign that is virtually free, then sit back and enjoy as 1 in 700 customers purchase something.
  

• Micro-channel marketing combines an advertising channel (Twitter) with an e-commerce sub-channel (Dell Outlet) and a community (subscribers to Dell Outlet via Twitter). Those who wish to participate actually participate, those who don't want to don't have to. You're marketing to avid fans on their terms.
  

Given the cost of this marketing platform (hint, it is nearly zero), it is almost embarrassing to consider how few catalog/multichannel brands are willing to test micro-channel strategies.

We're in the very early days of micro-channels. Clearance strategies are a logical place to start testing micro-channels.

Now go give the strategy a try!!!

Bill James, Sabermetrics

My wife always wonders why I never applied my craft to the analysis of sports. Well, it would be hard to answer questions better than Bill James does in this interview with baseball fans on the Freakonomics blog in the New York Times (FYI, here is Bill's website, if you're interested).

Using his logic, if analysis of multichannel and micro-channel customers were a baseball game, we've just moved into the bottom of the first inning in terms of our ability to understand customer behavior.

Think about the established metrics (valid or invalid) baseball uses to evaluate players. When a player comes to bat, the television screen instantly shows batting average, home runs, runs batted in. We know where the player bats in the batting order. Given the information, we set expectations for the outcome of the at-bat.

Now think about multichannel and micro-channel analysis. If you were given a segment of customers at a company that features catalog marketing, e-mail marketing, social media, and store channels, what are the metrics one would list on a television screen that would set your expectations for future performance of that customer segment?

Yup, we're in the bottom of the first inning when it comes to integrating Web Analytics, E-Mail Analytics, Catalog Response, Social Media Response, and Store Performance at a customer level.

Micro-Channels

In an increasing number of Multichannel Forensics projects, the concept of micro-channels is becoming important.

Definition: A micro-channel is the combination of advertising channels and physical channels that are attributed to an order placed by a customer.

As you might surmise, most brands have a customer base using a diverse array of micro-channels. Micro-channels are ultimately driven by the customer, making them difficult to manage in a traditional marketing sense. Let's consider a series of micro-channels, for illustrative purposes:

• Customer orders on a website using the key code from the back of the catalog.

• Customer orders on a website after clicking on a paid search term. Customer received an e-mail campaign earlier that week, and received a catalog two weeks ago.

• Customer visits website on Monday, then purchases merchandise in a store on Wednesday.

• Customer sees a clearance item advertised on Twitter, visits website, purchases item.

• Customer sees an item advertised on a popular apparel blog, visits website, purchases the item.
  

• Customer receives a direct mail piece on Monday, visits website on Tuesday, buys merchandise in a store on Wednesday.

Our industry has an intense desire to parse mixed orders to the advertising channel responsible for generating the order. Once parsed, profit and loss statements are run for each advertising campaign within each advertising channel. This activity, while necessary, strips your database of a rich set of consumer behavior vital to the evolution of your brand.

My Multichannel Forensics projects suggest that micro-channels are highly predictive of future behavior, and help the brand go a long way toward determining when/if the customer should be advertised to.

Equally important is the concept of creating a micro-channel dashboard. In other words, rolling twelve month files can be created for each micro-channel. The dashboard illustrates the micro-channels that are growing, and shrinking.

In lieu of working with your favorite Multichannel Forensics expert, your matchback analytics vendor should be able to provide you with micro-channel reporting, especially if the vendor houses your customer database.

Zappos CEO Blog And Other Zappos Micro-Channels

In case you're wondering how the CEO of a brand that grew from $0 to $800 million in a decade views the world (without the use of catalog marketing, folks), give the Zappos CEO Blog a try, written by Zappos CEO Tony Hsieh.

URL: http://blogs.zappos.com/blogs/ceo-blog.

Zappos hosts a series of blogs / micro-channels:

• Inside Zappos.
• The Zappos Running Blog.
• Couture Blog.

As you probably already know, micro-channels help you in Google natural search results, driving visitors to your site, resulting in increased organic demand. Hint: Organic demand, demand generated without marketing expense, is a REALLY GOOD thing!!

Catalogers Utilize Micro-Channels, Social Media, And Community

Take a peek at the ways catalogers are utilizing what I call "micro-channels" to communicate with consumers.

Stork Avenue offers a series of lifestyle e-mail newsletters called Stork Avenue News, keeping you up to date on Pregnancy News, Parenting News, Featured Products, and offers an RSS feed.

At the Posh Cravings community page, one can join the "Mamma's With Mojo" community. There appear to be four personas that can be subscribed to via RSS, including Eventually Eliza, Syd Says, Allie's Aboard, and It's Isabelle!

The Alternative Energy Store hosts a community page for loyal customers and prospects, featuring customer stories, a customer gallery, and a series of forums. They even feature a series of classes and webinars.

The Mepps Fishing Guide catalog utilizes RSS to communicate news about fishing new lakes, new lodges and guides, and redfishing.

The Academic Superstore archives newsletters that offer helpful tips to different audiences.