Multichannel Retailing Week: Wrap-Up

There are probably four key messages that I want for you to take from our exploration of multichannel retailing.


One: A re-definition of multichannel retailing. I'd like to define it as "Pleasing customers through a profitable mix of advertising, products, brands, channels, service and community".

Two: Multichannel retailing is about employees working well together and communicating well with each other. This combination trumps marketing strategy.

Three: While customers are the best asset a brand has, you do not have customers without innovative, appealing product that is presented favorably. This combination trumps marketing strategy.

Four: No strategy works "for every brand". A subset of best practices combined with innovation specific to your brand yield great results.


Viewing multichannel retailing through this lens explains much of the diversity we see in retailing. Clearly, we could all do a better job, just ask some of our leading service providers and research organizations.

Each point is important. The first two words in the first point might be most important ... "pleasing customers". Maybe your catalog is critical to pleasing customers. Maybe you don't have to offer "buy online, pick up in stores" to please customers. Whatever pleases customers and is 'profitable' is most important. Off-shoring customer service may be profitable, but it may not please customers. Only you, as owner of your brand, know the answers.

For me, it is so important that employees work well together, and communicate well together. Many of the multichannel retailing shortcomings I've observed are due to communication failures.

Product and creative presentation of merchandise are always key --- this sets Apple apart from other organizations. Why else would people stand in line for two days to purchase a $500 phone that other companies already market for about half the cost?

And finally, not everything works for everybody. Each business has different customers, and these customers have different needs and expectations. Do what is best for your customers.


Your turn. What did I miss this week that you wanted for me to talk about? What are your viewpoints on multichannel retailing?

Multichannel Retailing Week: Consumer Intelligence

What spelled doom for me at the end of my tenure at Nordstrom was the concept of "consumer intelligence".

This was a movement that, in retrospect, anybody could see coming. But when you're slogging through day-to-day issues, it can be easy to miss.

Think of "consumer intelligence" as the sum of all activities that explain overall customer behavior.

• Customer performance in catalog marketing campaigns.
• Customer performance in e-mail marketing campaigns.
• Customer performance in online marketing campaigns.
• Database Marketing, the traditional role of direct marketing campaign execution.
  
• Organic customer performance ... what customers spend when not marketed to (a very important concept in retailing, not well understood in the online environment).
• Business Intelligence, the software tools and general ad-hoc queries that help solve generic business questions about customers, merchandise performance, and store performance.
• Social Media Experts, folks who thoroughly understand how customers are interacting with tools like Facebook, Blogs, Twitter.
• Customer Advocates, the folks who strongly believe that companies require "Chief Customer Officers" to better understand the challenges facing customers.
• Multichannel Ombudsmen, the folks who understand customer behavior across channels, and then try to develop strategies like "Buy Online, Pickup In Store" that can be implemented by various channel leaders.
  
• Lifetime Value, the net present value of all future customer transactions.
• Statistical Modeling, condensing customer behavior down to an equation that explains customer actions.
• Marketing Research, including surveys and focus groups.
• Merchandise and Market Share Analysis, source from databases like NPD, Scarborough and Simmons.
  
• Competitive and Customer Research from organizations like Forrester, Jupiter, Gartner.

The goal is to take these activities, typically done by separate individuals across the organization, tie them together, identify actionable findings, and then drive strategy through the EVP/C-Level/Board-Level individuals at multichannel retailers.

To be successful, the consumer intelligence leader must recruit a talented team of "translators", folks who synthesize the technical information obtained by staff members who work in the various functions, then put the information into a context that is relevant to the EVP/C-Level/Board-Level individual.

In some ways, you can think of it as the role that Management Consultants used to play, executed in a considerably less expensive manner.

It was good to have this experience at Nordstrom, because the companies I visit these days are ultimately asking for this solution --- they just don't know this is what they are asking for. The business leaders want folks to distill geeky, complex customer information into actionable sound bites that they can work with.

As our marketing world becomes more fragmented, with terminology and techniques that are unique to each discipline, it will become more important for a "Consumer Intelligence" expert to tie together each discipline. Multichannel retailing is a logical early adopter of this emerging discipline.

Multichannel Retailing Week: Catalog Circulation

This morning, an article arrived in my RSS reader, promoting the power of catalog marketing.

You can't argue with the fact that more paper is being deposited into our mailboxes than ever before. Does the incremental increase in paper drive an incremental and proportionate increase in sales in the telephone, online and retail channels? Vendors don't answer that question for you.

Your catalog circulation expert knows the answer to that question. In fact, the catalog circulation expert knows the answers to more questions than almost any other marketing individual in your company. Ask the online marketing executive if natural search results in an increase in store sales, and see if you get an answer you can trust. Ask the e-mail marketing executive if e-mail campaigns cause customers to order merchandise over the telephone, and see if you get an immediate, confident answer. Ask the web analytics individual if an abandoned shopping cart resulted in a store purchase, and see if you get an honest answer.

But ask the catalog executive how effective catalogs are at driving sales to the telephone, online and retail channels, and you'll get an earful. You may not understand a geeky word that the catalog circulation expert says, but you'll at least get the inkling that this person has measured the concept, and markets to a combined ROI across channels.

So if the catalog folks have all this "tribal knowledge", why are they largely being under-utilized at many multichannel retailers? Why would multichannel retailers make the decision to eliminate traditional circulation teams and list vendor relationships in favor of an outsourced solution from the folks at Abacus?

Today, I am seeking your feedback on this topic, your thoughts on catalog marketers and catalog marketing.

If you work at a catalog/online retailer, or a catalog/online/retail organization, please share your thoughts about what you think about catalog marketing, and about the folks who do catalog marketing in your organization.

How do you view these individuals? What value do these individuals bring to your company? Let's not cloud things with my opinion --- let's get your thoughts on the topic. Please discuss!!

Multichannel Retailing Week: Online Marketing

Here's a secret: Online Marketing works in a multichannel retailing environment.

Maybe that's not a secret to you, because you work in the online marketing profession.

But it is an unknown fact to almost every other employee in your multichannel organization.

As an online marketing professional, it is your job to evangelize your craft.

I recently sat in a room full of retail executives, retail directors, and retail marketing managers. I asked them the question, "If you were going to purchase a computer, and had no idea where to shop, what is the first thing you would do?"

The answer I was looking for was "I'd do a internet search".

Not one of the sixteen individuals volunteered this answer.

We all know that customers initiate searches, primarily on Google, to research and learn about potential product purchases. But this roomful of retail leaders, entrenched in their mall-based shopping ecosystem, did not think of shopping in this manner.

We also know that between twenty-five and thirty percent of website visitors at multichannel websites arrive via search.

In many cases, a targeted e-mail campaign sent right before a catalog mailing causes an increase in online or store response.

In many cases, catalog marketing and search marketing combine to increase the likelihood of a customer purchasing an item online or in stores.

In many cases, online advertising and search marketing combine to increase the likelihood of a customer purchasing an item online or in stores.

Your average retail staffer does not see the world through this lens.

During the next five to ten years, the online marketing executive will need to bridge this communication gap. If the online marketing executive wants to become the Chief Marketing Executive, the transition from metrics-based facts to retail storytelling will be essential.

To do this, the online marketing executive will partner less with the web analytics team (as they generally have access to online transactions). The online marketing executive will increasingly partner with the database marketing team or the business intelligence team, SAS-based programmers who link online, catalog and retail transactions with clickstream data. This gives the online marketer a holistic view of the effectiveness of online marketing.

Maybe the biggest thing the online marketer will learn is that at least half of their marketing activities are speaking to existing, often loyal customers. Historically, online marketing has been viewed as a customer acquisition tool. In the future, online marketing will be viewed as a customer retention tool. Couple that perspective with the education of your retail marketing team, and you've greatly enhanced the power of online marketing.

Multichannel Retailing Week: Call Centers And Distribution Centers

How many multichannel retail executives view their call center and distribution center as a "cost center"?

It is easy to think of operations as a cost center. After accounting for shipping/handling revenue, it costs between ten and fifteen cents of every dollar of sales to field phone calls, manage live chat, respond to e-mails, and pick/pack/ship items.

You don't view your call center or distribution center as a cost center if you spend any time in these facilities. You'll find yourself rubbing shoulders with individuals more committed to your brand than you are. These folks aren't killing time, waiting for their stock options to vest.

You'll see individuals eagerly attacking contests to improve productivity. You'll find employees who are taking calls, even though their Aunt passed away earlier that morning. You'll find employees who milked cows at 5:00am, showered, and made it in to work through a snowstorm to begin their 8:00am shift five minutes early. You'll see co-workers bringing sub sandwiches, cookies, and treats to work. Food is a motivator for folks who don't earn enough money.

These folks work eight hour shifts for just $11 an hour. After taxes, that's an eight hour day that nets the employee around $70.

We expect an awful lot out of individuals who take home $70 a day.

We expect every single order to be processed correctly.

We expect all e-mails to be responded to within four hours.

We expect orders to be taken with joy, we expect our complaints and criticisms to be met with empathy.

We want these individuals to communicate our frustration with soldout items to an inventory management team they never get to work with.

We want these individuals to absorb the abuse we toss at them because we are frustrated with cost-cutting management teams that hold us hostage in telephone-based CRM systems.

I had the privilege of working in a call center in the late 1980s. I can tell you that it was one of the harder jobs I've ever had. I had to ask customers if their AT&T repair service was done accurately and on-time. Ask a seventy-six year old angry man if he was "very satisfied", "somewhat satisfied", "satisfied", "somewhat unsatisfied", or "very unsatisfied", and I promise you, you'll receive some "feedback".


When I worked at Eddie Bauer, I frequently got to visit our parent company, Spiegel. The executive team worked in a section of the building that had leather floors.

People in call centers and distribution centers work in buildings with dirty floors.

I do think that many multichannel retailers will begin to see call centers and distribution centers as "knowledge centers" over the next decade. Nobody knows more about the "vibe of the customer" than these individuals. We've used these people to increase the "cross-sell" rates from 9% to 14%, netting us significant increases in profits. Over the next decade, we can partner with these individuals to learn more about what our customers truly want.

We can literally pull customer information from these individuals. Today, we push promotions at them, hoping they will push them at the customer.

Instead of talking about corporate blogging, we should talk about call center and distribution center blogging. We could have internal blogs that allow these employees to have a dialogue with business leaders --- passing information back and forth. If the executive won't make the trip to the call center, let technology bridge the gap. We can give these folks a voice. If we want to implement a promotion, we can float the idea through the call center blog, and let our call center employees advocate on behalf of the customer.

If we want to create a better experience for the customer, we can start by creating a better experience for the call center and distribution center employee. We could view these individuals as "knowledge centers" instead of "cost centers".

Multichannel Retailing Week: Information Technology

Three experiences illustrate the challenges facing information technology experts in multichannel retailing.

Experience #1: I attended a meeting where a multichannel business wanted to implement a marketing idea on the website. The information technology individual told the attendees (some were executives) that IT would not implement the idea, because it "wasn't a good idea".

Experience #2: Earlier this week, a representative of a vendor told me he had "143 low-cost individuals over in India, just waiting to do whatever I tell them to do."

Experience #3: Recently, an IT staffer told me I could call him at any time of the day, whether he was at work or at home, that he would go to any length to take care of me.

Multichannel retail information technology is not sexy work. Would you rather try to scale the Facebook platform, or would you rather modify COBOL code for an antiquated point of sale system?

Our challenge as multichannel business leaders is to create genuine ways to incorporate information technology experts as true business partners. We've largely failed to do this.

When a crisis occurs, we demand that IT is there to support us, 24/7/365. When IT becomes overwhelmed, they push back. When IT pushes back too much, and becomes too expensive, management sends the jobs to a lower-cost alternative.

To fulfill the multichannel reality that vendors, consultants and research organizations propose, we must integrate technology individuals into our business processes. We see the necessity to integrate technology into our processes, but we fail to integrate technology individuals into our processes.

Over the next decade, expect to see better integration between business leaders and information technology leaders. When people communicate better, our systems will begin to integrate and communicate better with each other.

Multichannel Retailing Week: Web Analytics

A Vice President attends between one and two thousand meetings a year. Maybe a quarter of those are higher-level meetings, with multiple VPs discussing business issues.

Frequently, a VP will bring a technician or business intelligence analyst to a meeting, to help support an important point.

During the past twelve years in multichannel retail, I can count on one hand the number of meetings I've been in where a Web Analytics guru was one of the chosen technicians to demonstrate key customer insights.

This is not a harbinger of things to come, or a criticism of the folks who do web analytics. It is a failure of multichannel retailers to appreciate or understand what web analytics can do to help the business improve.

Could you imagine if an analyst walked into a meeting at Bloomingdales, and told a team of merchants this fact: 67% of store customers walked past a coat after looking at it, 33% stopped by to pick it up. Of the 33% who picked up the coat, 25% took the coat to the dressing room. Of the 25% who took the coat to the dressing room, 38% bought the item. In total, for every 100 customers who walked past the coat, three purchased the item.

Retail merchants would salivate if they knew that type of information, by item.

And yet, every multichannel retailer has individuals who do this type of measurement on a daily basis for the websites they support.

In our multichannel businesses, we still have disconnects between catalog employees and online employees. There are bigger disconnects between online employees and retail employees. The language barriers are enormous.

Web analytics practitioners suffer from two language barriers. First is the technical to practical language translation that must happen for business folks to act upon what a technician describes. Second is a direct-channel to retail-channel language translation that must happen for retail folks to act upon what has been learned in a direct-channel.

Web Analytics is a wonderful field that has enormous potential to improve multichannel retailing. This potential will be harnessed when multichannel retailers hire "translators" to convert language from technical to business-oriented, from direct-channel to retail-channel. When this happens within the right culture, eyes will open, and web analytics will become tightly integrated with all business systems and analytical teams.

Multichannel Retailing Week: Social Media

Since starting my own business, about one in three business leaders have asked my advice about what an appropriate "social media" strategy could be for the multichannel retail brand they support.

This tells you there is something to this 'social media' stuff. Or at least there is a 'buzz' in the air, or 'was' a buzz in the air.

One thing we have learned in multichannel retailing is to not listen to the social media punditocracy. They tell you what to do --- they blast you when you try things they don't agree with, they laud executive bloggers who eventually are discovered to have been participating in potentially illegal activities (i.e. Whole Foods). It is hard to please these individuals, individuals who on occasion haven't had the privilege of accountability for driving sales and profit at multichannel organizations.

You can please your customers, however. This is where your interpretation of social media can play a role.

In my final year at Nordstrom, we assigned one of our managers the task of thoroughly understanding how Nordstrom customers interacted with social media. Our Public Relations team, in my opinion one of the best teams in all of multichannel retailing, also monitored the blogosphere for customer commentary about Nordstrom. Our talented online marketing team, PR, and a Database Marketing social media expert combined skills to understand how customers were networking with each other, communicating aspects of brand preference with each other.

Many larger multichannel retailers monitor what is being said about them. Many smaller multichannel retailers actually participate in some way, with blogging representing a tangible communication outlet.

In the old days (i.e. before 2005), we read reports that documented customer complaints at our call center. When things really got challenging, we recruited customers for a survey or focus group to learn what our loyal advocates were thinking.

Today, our customers happily leave a digital paper trail all over the internet. We can easily follow the trail of bread crumbs. Really good Database Marketers are busy organizing these bread crumbs into actionable pieces of information that are stored in the customer data warehouse.

I've observed a handful of multichannel retailers who do this. The insights are interesting. In some cases, visitors with a social media referring URL have lower than average conversion rates. If the objective of social media is to facilitate a conversation, there's no problem with this. If the objective is to monetize social media, this doesn't bode well for this emerging form of media.

In my opinion, we'll see multichannel retailers harness the power of social media over the next decade. How we do this will likely be very different than the tools and techniques the social media punditocracy recommend we implement today, and that's no fault of the social media punditocracy --- technology and consumer sociology are simply moving too fast for us to anticipate or predict. We will find authentic ways to engage our most loyal customers. Our loyal customers will spread the message that television and radio commercials spread for the past sixty years.

If I were in charge of the social media strategy at a multichannel retailer, I'd start first with an internal blog, one for employees to share ideas and communicate with each other. This will provide a fertile laboratory that will pay dividends later when a strategy is crafted for customers. In year two, I would have a blog that I invite only my most loyal customers to participate in --- the blog would allow the most loyal customers to communicate directly with management. During these two years, I'd watch how the landscape changes, and begin experimenting with marketing strategies that partner with consumers in year three.

Of course, these are just my ideas, my opinions. We'll see multichannel retailers try lots of unusual strategies over the next five to ten years. Eventually, a set of 'best practices' will emerge from this 'Wild West of Social Media', just like paid and natural search emerged from the embryonic online marketing wilderness of the late 1990s.

Your turn --- how do you see multichannel retailers interacting with social media over the next decade? What interesting trends are you observing today?

Multichannel Retailing Week: Human Resources

We're at a very important crossroads in multichannel retailing, one that is well suited for the talents of your beloved Human Resources staff member.

There are at least four important issues that I've experienced, issues requiring leadership from the Human Resources teams I've worked with.

The first issue is talent, or more specifically, a lack of talent. This doesn't mean the folks working at multichannel retailers lack talent. Instead, the demographics of America are conspiring against multichannel retailers.

Through the 1980s and 1990s talent was plentiful. Baby Boomers were generally between the ages of 35 and 55, filling the lion's share of management positions at growing multichannel retailers. This was a wonderful situation for Baby Boomers, but a frustrating situation for my generation, dubiously labeled 'Generation X'. Career opportunities have been far less plentiful for Gen-X individuals, trapped by Baby Boomers who are firmly entrenched in their career trajectory.

As a result, Gen-Xers have taken different paths to achieve career objectives, becoming the most entrepreneurial generation in history, according to a recent article in the Harvard Business Review.

The smaller number of Gen-X individuals (compared with the Baby Boomer generation), coupled with alternate career paths crafted by Gen-Xers have created a talent shortage at the Sr. Analyst, Manager and Director level. Adding to the talent challenge is the fact that Gen-Xers who are working at multichannel retailers are heavily focused on online and e-mail marketing disciplines, and are less focused on traditional jobs.

Human Resource individuals have the opportunity to re-invent the multichannel professional workplace. Via telecommuting and work-life balance, HR staffers can add to the talent pool of the multichannel retailer in non-traditional ways.

A second issue I've observed surrounds compensation. With Baby Boomers firmly entrenched in management positions, Gen-Xers and Gen-Yers are largely trapped in entry level and middle management positions. Multichannel retailers have largely put the clamps on compensation over the past decade, allowing marginal salary increases that barely keep pace with inflation. I've watched this practice cripple talented teams across many companies. Our HR team members have a huge opportunity to craft compensation packages (bonuses, stock options, additional paid time off) that reward entry level and middle management professionals for outstanding performance without significantly increasing base pay.

A third issue involves professional tension surrounding the "marketing digital divide". Take your marketing employee working in the advertising department, supporting newspaper advertising. This individual can do outstanding work. How do you prove the work drove an increase in sales? Now take a marketing employee working in the paid search department. This individual can do average work. Yet, there are a veritable plethora of metrics that prove there was an increase in sales. This individual may be viewed more favorably by management. Our Human Resource partners can help create career paths that reward outstanding employees, regardless which side of the marketing digital divide they work on. In addition, our HR teams can provide 'cross-training' opportunities, to get employees over the marketing digital divide.

The fourth issue I've observed holds back multichannel retailers. This issue combines "under-staffing" with "metrics obsession".

I spoke with a marketing director today who told me he has never worked harder in his entire twenty year career than he has worked in the past two years --- and his hard work has largely gone unrecognized by Sr. Management.

A combination of lean staffing and too many unimportant real-time metrics have created a level of 'busy work' that is unprecedented in multichannel retailing. We can measure changes in paid search conversion on a minute-by-minute basis, causing so much more tension than existed fifteen years ago when we measured marketing effectiveness once a week, or once every twelve weeks! This 'busy work' causes all staff members to focus on unimportant issues. We fail to focus on strategy, because we have to understand the reasons why the Monday e-mail campaign performed 3.8% below expectations (though we don't have the tools to measure if it drove a 3.8% increase at retail). HR staffers can partner with business leaders to address time management skills, helping employees focus on 'big picture' challenges instead of short-term metric-based crises that are not relevant to the overall momentum of the business.

As I mentioned at the start of this article, these times are well suited for the talents of the Human Resources leader.

Your turn --- what challenges are you observing in your multichannel organization that are well suited for the talents of the HR leader?

Multichannel Retailing Week: The CFO

As we complete the transition from catalog and retail to "multichannel retail", we find we don't have the technology solution or marketing strategy necessary to meet the needs of our customers.

This is where the multichannel CFO comes into play.

The multichannel CFO determines the investment strategy for the business. The CFO has a set budget, one largely determined by the growth trajectory of the business. As sales increase, investment can increase (though hopefully at a slower rate than sales, yielding more profit).

In the early days of the internet, some incremental sales were being added to the business. Coupled with competitive pressures, multichannel CFOs invested tremendous amounts of capital building and improving e-commerce enabled websites.

However, in our post-Google multichannel environment, things have changed. Direct-to-consumer sales are growing at subtle rates. This introduces risk in the investment portfolio of the multichannel CFO.

Take the traditional catalog CFO. This individual likes to look at the 'ad-to-sales' ratio on the profit and loss statement. If you sum catalog advertising and online advertising, and calculate the ad-to-sales ratio, you will likely see an increase in this ratio over the past five years. This means that the introduction of e-commerce has not grown sales at a sufficient rate to offset the increased advertising expense necessary to support multiple channels.

The traditional catalog CFO, armed with the information, is likely to challenge the CMO or Database Marketing executive to "mail smarter", and better leverage online marketing strategies, shifting dollars out of catalog and into paid/natural search, affiliates, portal advertising and e-mail.

Until ad-to-sales ratios improve, it will be difficult to convince traditional catalog CFOs to invest in multichannel solutions.

The traditional retail CFO has a different set of concerns. To please shareholders, the CFO must grow comp store sales, and must increase the number of new stores in new markets.

Ultimately, the traditional retail CFO has to decide whether it is a better to invest in multichannel technology improvement, multichannel advertising increases, new stores, remodeled stores, and all other internal investment needs necessary to run the business.

This is where we really fail the traditional retail CFO.

The traditional retail CFO has several "knowns":

• If the CFO invests in a new 6,000 square foot store, the business will probably get $2,000,000 of net sales per year. It might cost $1.7 million dollars to build the new store.
• If the CFO invests in remodeling a 6,000 square foot store, the business will probably get an additional $400,000 of net sales per year. Maybe it costs $0.7 million dollars to remodel a store.
• If the CFO invests in catalog or online advertising, there is a known incremental rate of return for the increased investment.

For multichannel investments, the CFO has a great big "unknown".

• Say the multichannel CFO invests $1.7 million in inventory systems and point-of-sale systems to facilitate "buy online, pickup in stores".
• What are the incremental sales that will be generated by this strategy? Will the incremental sales be more than what is observed in a store remodel? Will the incremental sales be more than what is observed when a new store is built?

The CFO depends upon the multichannel advocate (the CMO or the Database Marketing executive or the catalog/online executive) to "prove" that a multichannel investment will generate a better ROI than a new store or remodeled store.

So, the multichannel advocate uses research reports, anecdotal information, 'our competitors are doing it so we have to do it', 'our customers demand it', and the time-honored "multichannel customers are 'x' times more valuable than single channel customer" metric to "sell" the multichannel strategy.

CFOs don't like flimsy comments like these. CFOs want to know, with certainty, that multichannel investment yields a competitive ROI that exceeds the internal cost of capital.

It is my opinion that this relationship, as described above, limits the pace at which multichannel organizations implement true multichannel solutions.

This would be a great place for a vendor, research organization, or consulting firm to provide actual facts that help the CFO. The CFO is going to look at Circuit City, the poster child for 'buy online and pickup in stores', and say 'Gee, that strategy hasn't helped them financially, why should I make the same mistake?' The vendor, research organization, or consulting firm is going to have to provide actual facts, positive and negative, if they want the CFO to advance shared objectives.

The Database Marketing team has to view the business differently, illustrating the long-term impact on the customer file. The potential long-term impact on the customer file is what fuels the investment in multichannel strategies.

Over the next decade, your multichannel CFO is going to become even more critical of the ad-to-sales ratio, and will demand that total net sales increase at a fast rate. If total net sales do not increase at above-average rates, it is unlikely we'll see CFOs supporting multichannel initiatives at the level we'd all like to see happen.

Your turn: Does your multichannel CFO have the right information necessary to make multichannel investment decisions? What information does your multichannel CFO need to improve multichannel systems and strategies?

Multichannel Retailing Week: Google

Over the next ten years, multichannel retailers will come to terms with the fact that they have been given the unique challenge of managing a business partner named "Google".

Let's use a parable to describe the situation we now face.


Pretend you are Eddie Bauer. You have a store in a favorable mall. Throughout the history of your business, you teamed up with the mall developer and your competitors to create an experience that was hopefully favorable to your customer. You marketed to your customers. Via your 'brand proposition', you built a loyal customer base that drove your sales increases, and accounted for your profitability.

Then one day a person set up an information booth at the entrance to the mall. This person categorized information about every retailer in the mall, including the items being sold in each store, the price of the items being sold, and any discounts/promotions that are available. If customers were displeased with their experience, the information booth documented the complaints.

The information booth never forced itself on anybody. It created a simple little sign that said 'Free Information'.

Within a year or two of setting up the booth, one out of every five visitors to the mall stopped at the booth for assistance. Visitors were free to ask any question. The information booth freely gave answers to visitors. The information booth became amazingly efficient at answering all questions, no matter how long the line of visitors in front of the information booth.

The retailers in the mall were fascinated by this information booth. Seeing the potential power of the information booth steering new customers to each store, they began to give varying sums of money to the information booth. In exchange, the information booth agreed to prioritize certain bits of information favorable to each retailer. The information booth would not tell any of the retailers how much money each retailer spent. The information booth would not tell any of the retailers how it decides which bits of favorable information were prioritized over other bits of favorable information. Retailers would have to stand next to the information booth, and physically watch how visitors interacted with the information booth.

Soon, each retailer realized it had to pay this fee to the information booth. The retailer had no choice. If it did not pay this fee, then its own customers could defect to other stores in the mall, because the information booth would steer them away from the retailer not paying the fee.

Visitors to the mall realized that they were not getting unbiased information from the information booth. Seeking to help each individual visitor, the information booth subdivided into two mini-booths. One mini-booth had free information, the other mini-booth essentially had brochures of information from the retailers in the mall, with those brochures coming from retailers paying the most money on the top of the pile. Few visitors wanted to wade through the piles in either mini-booth.

Before long, the retailers figured out that it would be really nice to be included in the mini-booth that offered free information. The retailers hired special individuals to figure out how the information booth prioritized free information. Once these special individuals learned how the information booth prioritized free information, they handled day-to-day prioritization for the retailer. These special individuals stayed on top of all the changes that the information booth utilized to rank piles of information.

Eventually, the retailers in the mall figured out that they were no longer driving significant sales increases. Eventually, the competitive advantage generated early in the relationship with the information booth was offset, because every retailer paid the information booth to prioritize information. Big retailers paid large sums of money to compete in the paid mini-booth. Small retailers paid the 'special individuals' enough money to compete in the free mini-booth.

'Back in the day', retailers paid money to drive customers to the mall parking lot. Once the customer entered the mall, each retailer competed for customer loyalty.

Today, retailers pay money to drive customers to the mall parking lot. Then, retailers pay the information booth or special individuals a sum of money to enter the mall. Once the customer enters the mall, the customer has a wireless connection to the information booth, a wireless connection that further directs the customer toward the retailer that best leverages the dynamics of the information booth.


This parable illustrates the complex, necessary, and costly dance that multichannel retail will (in my opinion) partake in with Google over the next decade. When all multichannel retailers figure out how to work with Google, figure out how to optimize their website for natural search, or pay a sufficient fee for paid search, any competitive advantage will be lost. At that time, Google has simply figured out a way to extract a portion of the profit multichannel retailers used to generate.

It will be very exciting to see how we as multichannel retailers manage this evolving process. Will we further invite Google into our businesses by giving them full access to our purchase transactions (Google Checkout) and our inventory systems (Item Availability And Keyword Targeting)? Or will our profit and loss statements become challenged, causing us to identify new platforms for enabling customer search? If we take that path, will the customer come with us?

Multichannel Retailing Week: The Chief Marketing Officer

With each passing day, I become more convinced that the role of Chief Marketing Officer is the hardest job in Multichannel Retailing.

The issues facing the CMO are very similar, regardless whether you're looking at a Catalog/Online retailer, a Retail/Online organization, or a Catalog/Retail/Online business.

Retail and Direct Marketing trade journals hound CMOs to "integrate" their marketing efforts, providing a common look, feel and theme across all activities. Catalogs should look like the website, the website should be reflective of the stores, catalogs should drive traffic to stores, stores should acquire traffic that will ultimately buy online, and merchandise offerings should be common across channels.

However, actual cross-channel marketing results measurement indicates that consistency and integration, while most likely beneficial to the customer, is not beneficial to the profit and loss statement. What performs best in e-mail campaigns (look, feel, style, merchandise assortment) is often different than the style and merchandise offering that works best in catalog. Online marketing requires a different merchandising strategy. The affiliate programs that work best may not be "brand appropriate". Traditional marketing activities frequently drive traffic to stores, not to websites or telephone channels --- with a different messaging, promotional rhythm and creative style required to drive the store traffic.

CMOs are heading toward a series of compromises that protect the p&l statement, while helping fulfill consultant/vendor/customer vision of a good multichannel customer experience. CMOs do use available resources to align promotions, retail floorset and website homepage merchandising changes. It appears unlikely that multichannel retailers will ever achieve the nirvana recommended by consultants/vendors. And that is probably fine.

Investment allocation has become a huge challenge for the multichannel retail Chief Marketing Officer.

There are many marketing activities that the CMO manages. Each activity has varying levels of measurement accuracy, and varying lengths of time to evaluate profitability. Today, the CMO does not have the right information necessary to make or defend investment decisions. CFOs know this, frequently challenging CMOs to do better.

• Catalogs are probably the best measured activity. Specific profit and loss can be tracked across any timeframe, in the telephone channel, the online channel, or retail channel. Because it is so thoroughly measured, catalog marketing ends up benefiting from over-investment.
• E-mail campaign performance is often under-reported. E-mail campaigns can drive sales far beyond the 1-2 days the campaign is active. E-mail campaigns frequently drive as much business to a retail channel as they do to the online channel. Most CMOs do not have the analytical resources necessary to understand either phenomenon. As a result, e-mail investment is compromised.
• Paid and natural search, portal marketing, and affiliate marketing performance are all under-reported for multichannel businesses with a retail channel, due to the same issues observed in e-mail marketing. In addition, we don't understand what a "shared" brand relationship between Google and our brand means to the long-term loyalty of the customer.
  
• Traditional advertising (television, radio, newspaper) can never be accurately measured. Vendors are providing solutions to estimate the impact of these advertising channels. CMOs can use these tools to estimate the impact of traditional advertising across channels. However, "double-counting" of sales can occur with these methods --- i.e. the e-mail marketer counts a sale as being driven by e-mail, while the traditional advertising marketer counts the sale being driven by newspaper advertising. Again, vendors are working hard to develop fractional allocation methods.
• Brand Advertising is dying. Since so many CMOs know this arena far better than catalog/online/e-mail advertising, this arena receives a disproportionate amount of focus. This is the hardest marketing activity to measure, requiring the longest timeframe to evaluate for success. In reality, "branding" has never been more important --- everybody offers the same merchandise at the same price. Our "brand" becomes the only real differentiator for the customer. The sum of all experiences the customer has with a business becomes the "brand" perceived by the customer. To properly manage a "brand", the CMO should be given accountability for all aspects of the customer relationship. To date, not many CMOs have this experience. The COO may be a stronger individual at managing the call center experience than the CMO, may be better at responding to customer complaints.

Over the next ten years, the multichannel CMO will acquire skills that will make the CMO position more valuable than it is today.

• Ownership of the "customer experience". It is my opinion that marketing will evolve. Marketing will be more about "pleasing" a customer than about "creating demand". The CMO will have to own the end-to-end customer relationship. This means the information technology folks cannot own the website. The COO cannot own management of the call center. One can envision a CMO utilizing Human Resources staff to support customers, much in the same way that Human Resources staff support employees today.
• Holistic Measurement. Over the next decade, measurement tools will improve. The CMO will trust an analytics expert who "speaks the language of the CMO" to holistically measure catalog marketing, portal marketing, paid/search marketing, affiliate marketing, e-mail marketing, and traditional advertising along the same set of metrics, across all channels, over the same timeframes.
• Investment Strategy. Via holistic measurement, the CMO is armed to defend investment strategies as a partner to the CFO. Today, the CMO is often viewed as being far less "analytical" than the CFO. As a result, the CFO owns the business investment strategy. In the future, the CMO and the CFO will have to be partners for the CMO to succeed.
• Online Proficiency. Today, CMO skills are frequently skewed toward traditional advertising. Over the next ten years, a generation of online marketers will assume CMO roles, and will bring a new and refreshing view of the marketing world to the executive table.
• Metric Proficiency. Today, CMOs are comfortable with market research metrics. Over the next decade, the generation of online marketers who assume CMO titles will bring a proficiency to understanding metrics that will greatly enhance the credibility of the CMO.
• Management Style. The CMO of the future will be very gifted at managing individuals with wildly divergent skills and interests. The CMO will balance the career needs of traditional advertisers and catalogers who are experiencing the decline of their craft. The CMO will mentor online and e-mail marketers who, to-date, do not have the cross-functional skills and abilities of other marketers. The CMO will be more adept at selling long-term strategies to business partners. The CMO will be able to get more done through strong partnerships with the Information Technology leader. The CMO will get creative individuals to work with analytics staff.

If vendors/consultants/research organizations/customers ever hope to see their vision of multichannel retailing fulfilled, management will need to hire CMOs with a broad set of skills, skills required to manage the business of the future. Management will need to give CMOs more responsibility than they have today. As we go through this transition, it appears the opposite is actually happening --- CMO tenure is under two years. I believe this is a temporary phenomenon, necessary because of the transition from traditional advertising to our new multichannel marketing reality. We are transitioning from campaign-based management of the business to a holistic, long-term management of the customer. Eventually, marketing leaders will acquire the skills necessary to complete this transition.

Those are my opinions. It is time for your thoughts. What challenges do you think the CMO faces in multichannel retailing, and how should the CMO address them?

Multichannel Retailing Week: E-Mail Marketing

The multichannel e-mail marketing manager faces a unique set of challenges that are not well understood by those not working in multichannel retail e-mail marketing.

Within the e-mail marketing industry, the focus isn't always on driving increased sales through brilliant merchandising or creative presentation. The multichannel e-mail marketer learns about the importance of targeting strategies, plain text vs. html, double opt-ins, unsubscribes, trigger-based messages, alerts, spam filters, rendering issues, personalization, preview panes, blacklists, preferences, animated GIFs, open rates, click-thru rates, conversion rates and a veritable plethora of technical terms plague the e-mail marketer every single day.

Those who are not actively involved in e-mail marketing at multichannel retail organizations could care less about any of the issues that consume the time spent by multichannel e-mail marketing experts. They believe that it costs essentially nothing (after accounting for fixed costs) to send an e-mail campaign to a customer.

Merchants want e-mail marketers to feature their specific product or department in every single e-mail campaign. They want all customers to see their product, multiple times per week. They want to "expose" the customer to the merchandise they are offering. Targeting is a compromise, one that drives increased sales and profit. But targeting doesn't make merchants happy, because their merchandise is not being featured to the entire audience.

So the multichannel e-mail expert does their best to make compromises, and spends considerable time explaining targeting strategies. Merchants blame multichannel e-mail experts if the merchandise doesn't sell well, believing the wrong customers were targeted.

One of the biggest problems facing multichannel e-mail marketers is what I call "integrated measurement". E-mail marketing systems are often set up as separate systems from the rest of the database marketing infrastructure. This creates significant challenges for the multichannel e-mail marketer.

First, e-mail marketing does drive sales to the retail channel. The e-mail marketer is given access to open rate, click-thru rate and conversion rate information over a short period of time, say twelve hours. The e-mail marketer generally sees these metrics for only the online channel. Response that occurs in retail stores, or even the telephone, are often not measured by e-mail marketers.

Worse, response to e-mail campaigns is "terrible". We always hear that e-mail ROI is far better than in any other marketing channel. That will always be the case when the incremental cost of sending an e-mail is essentially zero. Multichannel e-mail marketing expert knows that only one in seven-hundred customers who receive an e-mail actually buy something. An e-mail campaign will drive between $0.15 and $0.35 of sales per e-mail. A catalog will drive $1.00 to $10.00 of sales per catalog. This really hurts the multichannel e-mail marketing expert. Merchants know that other forms of advertising drive better sales volumes --- and consequently, treat the multichannel e-mail marketing expert with less respect than is deserved.

Over the next ten years, the multichannel e-mail marketing expert will be well-served by integrating with the rest of the organization. Test/control measurement techniques will reveal that e-mail marketing drives equal amounts of sales to the online and retail channel --- causing multichannel e-mail marketing experts to realize their campaigns are twice as effective as previously believed to be. Measurement will focus more on the long-term relationship building aspect of e-mail, less on the impact of re-shuffling sales into a twelve hour period of time following the delivery of an e-mail campaign. As online marketing becomes more expensive, as catalog postage rockets skyward, the multichannel organization will better appreciate the potential of e-mail marketing. The multichannel CFO will invest in database marketing integration between catalog, online and e-mail marketing. Personalized and dynamic e-mails will eventually become the norm --- and ultimately, e-mail and RSS will become essentially the same marketing tool.

Strategically, the multichannel e-mail marketing expert will spend less time with his/her "flock" of professionals across the industry. The multichannel e-mail marketing expert will learn the communication style necessary to be highly effective, and will earn more respect within a multichannel business. Communication will focus more on the annual contribution of e-mail campaigns (which is significant), less on the campaign contribution of e-mail (which is largely insignificant). Communication will be holistic, so that store employees understand that they are benefiting from e-mail.

Eventually, we multichannel retailers will learn that e-mail is a great tool for communicating events and product introductions, and a good tool for complementing sales of individually advertised items. With luck, we'll get away from using e-mail as a "sale", "promotion", "free shipping" and "%-off" marketing tool. We will instead invest the time in developing unique merchandising strategies and creative presentations that truly increase sales, and set our business apart from others employing "best practices" that result in a feel of "sameness" across retailers. When this happens, multichannel e-mail marketing experts will be revered.

Your turn. What are the multichannel e-mail challenges that you face in your multichannel retailing organization?

Multichannel Retailing Week: Inventory Management

One of the most under-appreciated jobs in Multichannel Retail is the title of Inventory Manager.

The inventory manager supports the merchant. By looking at sales history, the circulation plan, the e-mail marketing plan, the online marketing plan, and traditional advertising, the inventory manager determines how many units of an item to purchase.

Multichannel retailing made inventory management very challenging. Five issues really challenge the inventory manager.

First, inventory managers have to deal with different measurement techniques in different channels. The catalog/telephone channel captures "lost sales". In other words, when a customer calls to place an order, and the item isn't available, the fact that the customer "wanted" to purchase this item is recorded. This is a huge benefit that catalogers have over retailers. If 1,000 units were forecast, and customers "wanted" to purchase 1,850 units, the inventory manager has access to this data. Next year, the inventory manager will order the appropriate number of units. In retail, once the 1,000 units "sell through", there are no more units to purchase. In retail, there is an art to forecasting what would have sold. The online channel strikes a balance between cataloging and retailing, in that "lost sales" can be captured by the multichannel retailer, if management is willing to capture the information.

The second challenge facing multichannel inventory managers is the information systems they get to use. Catalog/Online systems are frequently different than Retail inventory management systems. The systems don't always talk to each other, and the systems occasionally utilize different metrics. This means that folks working in catalog/online channels view the business differently than folks working in the retail channel. Different skill-sets evolve. In some ways, it is like the catalog/online inventory manager speaks Spanish, while the retail inventory manager speaks Portuguese. The multichannel CFO plays a key role in this relationship. If the CFO understands the importance of linking disparate systems, staff can evolve to speak a common language. Linked systems, however, need to accommodate the unique measurement differences between channels. This does not always happen in multichannel retailing. If retail wins out, it is possible that demand will not be captured in the catalog channel, sub-optimizing catalog marketing activities.

The third challenge multichannel inventory managers deal with is the information captured in inventory management systems. In most cases, changes in marketing strategy cause significant changes in unit sales. For instance, a drop in circulation depth of twenty percent frequently yields a ten percent decrease in sales. Featuring an item in an e-mail campaign may drive a fifty percent increase in sales of that item. Paid search can influence item sales. In most cases, the inventory manager does not have an organized information system that allows the inventory manager to analyze the simultaneous influence of all of these factors. Really talented inventory managers tabulate their own information system in spreadsheets, and build good relationships with circulation, e-mail marketing and online marketing individuals.

Fourth, not all items sell at the same rate in all channels. Items that are prominently featured in catalogs sell well over the telephone, sell at an average rate online, and may not sell well in retail stores. Items featured in e-mails cause online sales to surge, but may not drive any retail or telephone sales. The audience purchasing via telephone, online, and stores is frequently different. The telephone audience is often older, and lives in rural areas. The online customer may be younger, living in the suburbs. The retail customer lives near a store. Differences in demography and lifestyle cause each item to sell differently, by channel. The inventory manager does not usually have this type of information available in a systematized way. The inventory manager has to make a lot of guesses, in order to be accurate.

Fifth, the inventory manage has to be really accurate, but is not given the tools necessary to create accurate forecasts. If too much merchandise is purchased, then overstock occur, costing the company a ton of profit. If too little merchandise is purchased, sold-outs and lost-sales occur, costing the company a ton of profit. The inventory manager is constantly hounded by merchandising and financial staff members to be accurate. The reward for being accurate is harvested by all employees. The risk for not being accurate falls upon the inventory manager.

Over the next ten years, we will see an inventory manager from a multichannel retailer create an inventory management system that integrates the issues listed above. Many vendors try their hardest to do this today. I believe somebody will figure out how to leverage all of the spreadsheets clogging network drives at multichannel retailers, allowing the multichannel inventory manager to be more effective. This information will be combined with clickstream data --- sales information, marketing information, and the items customers viewed on the website will be combined in a way that allows inventory managers to do a better job.

With luck, CFOs will agree that these systems are needed, and will spend the money to implement them.

Until that happens, the complexity of a multichannel business will continue to challenge inventory managers. These folks are frequently compensated at or below the company average for professional staff, but bear more risk than the average employee.

Your turn. What is your view of multichannel inventory management?

Multichannel Retailing Week

This week, I want to take a look at Multichannel Retailing from the perspective of many different job functions, viewing Multichannel Retailing from the position of an actual practitioner on the "client side" of the business. Though I've spent the past four months managing my own projects as a freelance analyst, I did spend the past nineteen years dealing with real issues on the "client side" of the business relationship.

Maybe ninety percent of what you read about Multichannel Retailing comes from the "vendor side" of the business. It's been my experience that these folks, by and large, want to do good for their clients. Still, they have to sell something in order to put bread on the table.

This week, I hope we can have a discussion about real challenges that employees at multichannel retailers (those with a catalog/web presence, retail/web presence, or retail/catalog/web presence) face, a discussion where readers don't feel like they are being 'sold a solution'. I'd appreciate your participation, by submitting comments where appropriate.

Data Mining vs. Mining Data In Multichannel Retailing

If there's one thing I've learned during my first four months as a small business owner, it is that multichannel retail executives are hesitant about "data mining", but are very enthusiastic about "mining data".

Assume you have a catalog/online CEO who wants to understand how website customers behave between a first visit and a twentieth visit.

A statistician might provide a series of reports and analyses that thoroughly explains the process from soup to nuts, publishing exciting findings along with complex statistical information to support his findings.

The multichannel CEO nods politely, even offers verbal kudos, then leaves the room feeling like she still doesn't understand how her customers behave.

The person who "mines data" identifies the handful of key findings that every CEO must know, then puts the findings into a context, a "story", that the CEO can use to create actionable strategies that drive sales and profit. There is something that the CEO can "do" with the findings, and it is easy for the CEO to "know" what the next steps are.

Mathematically, this type of work is much less satisfying. Professionally, this kind of work can be more gratifying.

Data mining software and data mining experts are generally plentiful and affordable in multichannel retailing.

Folks who "mine data" are generally in short supply, and are desperately needed by multichannel executives.

Multichannel Retailer Stock Performance

I track about twenty stocks, trying to understand how multichannel retailers (those with stores & websites and possibly catalogs) are performing against online/catalog pureplays.

Here are the online/catalog pureplays I follow: Amazon.com, Blue Nile, CDW, Dell (which may need to be removed), Drugstore.com, eBay, Overstock.com, PC Connection.

Here are the multichannel retailers I follow: Best Buy, Cabelas, Circuit City, Coldwater Creek, Eddie Bauer, J. Crew, J.C. Penney, Nordstrom, Office Depot, Office Max, Talbots, Williams Sonoma.

Since mid-March, the online/catalog pureplays have an index of 1,287 (1,000 = base). Multichannel retailers are at 1,017 (1000 = base).

I'll continue to follow these retailers, to see which business model Wall St. values more. If you'd like to see other retailers included, make a suggestion in the comments section.

MineThatData Index
Index =	1,125
		Today	2007.03.16
Amazon.com	AMZN	$65.78	$37.85
Blue Nile	NILE	$66.06	$38.49
CDW	CDWC	$84.65	$60.56
Dell	DELL	$28.65	$22.50
Drugstore.com	DSCM	$2.83	$2.44
eBay	EBAY	$32.91	$31.74
Overstock.com	OSTK	$19.23	$17.35
PC Connection	PCCC	$12.80	$14.84
BestBuy	BBY	$47.51	$47.85
Cabelas	CAB	$21.66	$24.24
Circuit City	CC	$14.64	$17.63
Coldwater Creek	CWTR	$21.99	$17.60
Eddie Bauer	EBHI	$13.66	$8.90
J. Crew	JCG	$52.37	$38.48
J.C. Penney	JCP	$71.15	$79.47
Nordstrom	JWN	$47.55	$50.96
Office Depot	ODP	$29.81	$34.69
Office Max	OMX	$38.05	$49.22
Talbots	TLB	$24.74	$24.71
Williams Sonoma	WSM	$31.17	$35.33
Direct-Primary Index		1,287	1,000
Multichannel Index		1,017	1,000
Total Index		1,125	1,000

Credit For Channel Growth

You worked your tail off to acquire a customer via catalog advertising, in the telephone channel, back in 2002.

Today, your job as it existed back in 2002 no longer exists. You do the work of two or three catalog folks from 2002. Your former catalog positions are now leadership-level positions in the online marketing department.

Remember the customer you acquired, via catalog, in 2002? This customer now purchases merchandise exclusively via the online channel. She may or may not purchase online because of the catalogs she receives. But she certainly clicks on paid search via Google.

Last week, an individual told me "I deserve credit for acquiring this customer. The website folks get all the credit for customers I worked so hard to acquire."


One of the challenges of multichannel marketing involves rewarding individuals for exemplary performance.

If there's one thing I observed last week, in speaking with folks, it is that employees really want to do what is right for the customer. If the customer wants to purchase merchandise via any channel, at any time, and have merchandise/pricing transparency in any channel, employees want to provide this for the customer.

And yet, within companies, there is tension. Finance folks want to see sales reporting based on the channel that records the sale. As long as this happens, employees that work in growing channels will be rewarded. Conversely, employees that work in shrinking channels are not as likely to be rewarded.

It will be really interesting to see what happens when the online channel stops growing at twenty-five percent per year. When this channel grows at five percent a year, and Google fails to drive significant increases, a generation of online marketers raised in an era of constant growth will be challenged like never before, will feel pressure like never before. Many of these folks will have never experienced a true, non-bubble-based downturn. What will they fall back on for experience, when the sales increases stop happening?


Multichannel CEOs and CMOs: This is a very good time to start thinking about how you would dramatically grow the online channel, if asked to. Online executives benefited from the transfer of catalog and retail customers to the online channel. Here's a great drill --- run a simulation. Have your folks tell you what it would take to grow online sales by an additional twenty-five percent TOMORROW. How much would you have to spend? How profitable would it be? Could you do it via online marketing, or would you need paper/catalogs to help you? And if you needed paper/catalogs, who would you give credit for the online sales to?

Major Pain Points In Catalog/Online Multichannel Marketing

Having just spent three days with 400+ top online and catalog marketers, there are a few things that really stand out from my conversations with these folks. Here are the major topics in catalog/online multichannel marketing, based on discussions folks had with me at the conference.


Topic #1 = Colliding Forces. There was a lot of discussion about the USPS increase, set for May 14. For many smaller online and catalog businesses, this results in an approximate 25% increase in postage. This force will cause many small businesses to reduce circulation, especially among marginal housefile and prospect names. This force will eventually collide with the inevitability of online marketing. Customers under the age of forty-five are shifting their behavior away from traditional media (television, radio, catalogs too) to online media. The colliding force of the USPS increases and customer transfer from traditional media to online media will require a change in mindset and skillset among those in attendance.

Topic #2 = Allocation Of Advertising Dollars. Those in attendance are frustrated with our new marketing world. We have more metrics than ever to measure performance with. Almost none of the metrics are relevant in telling the overall story about what caused a customer to purchase something. Ten years ago, we argued about how to allocate those pesky fifteen percent of orders that came into the telephone channel without a valid source code. Today, we realize we have no idea how to properly allocate orders, when a combination of three catalogs, six e-mails, and two Google searches and one price comparison on mySimon truly caused the customer to order. Seriously, how do you allocate this order across these twelve advertising vehicles? It was obvious that the attendees did not trust Abacus to do this for them, as some badgered the company during a presentation (I would say that Abacus has better thought leadership on this than most). This is going to have to become an organic field of experimentation --- I strongly advise non-competitive catalogers and online marketers to work together on knowledge exchange, in order to come up with allocation methods that make sense for our industry. Heck, give me a call, I'm very willing to help out on this topic!!!! Getting even more theoretical, some of the big companies are struggling with allocating orders, when not all catalog advertising produces incremental sales (i.e. a customer spends just as much online when receiving seven catalogs as when receiving ten catalogs). That's a really enjoyable, really theoretical project to tackle.

Topic #3 = Strategy: I saw this repeatedly at the conference. Attendees were asking so many questions about the first two topics that true business strategy was rarely, if ever, discussed. I heard several CEOs discuss the problem of having a unique merchandise assortment --- that as soon as a unique and creative product is created and marketed, folks like Target (and even small competitors) can create their own product, with equal quality, at a lower price. Since there aren't a whole bunch of new, original ideas just laying around out there, it makes "staying alive" very challenging for the smaller online/catalog business. This is one place where online marketing and catalog marketing can make a significant difference. E-commerce is a TERRIBLE storytelling platform. However, blogging and cataloging are BRILLIANT storytelling platforms. There is a lot of opportunity to morph the catalog into the primary storytelling vehicle, as a way to keep paper viable.

Topic #4 = What Happens When A Catalog No Longer Exists? This was the question I was asked the most, during the conference. Folks wanted to learn, in detail, what happens to the online channel, and to catalog customers, when paper is taken out of the mail. Having lived through the experience during the past three years at Nordstrom, I have a unique perspective on the topic. Obviously, I can't be liberal in my discussion of those events. That being said, folks were VERY interested in hearing what happened to employees who spent their lives growing the catalog business at Nordstrom. Attendees wanted to know if these people were able to move into online marketing, if they were laid-off, if they became disgruntled and quit, or if they happily made the transition. Obviously, all of those things happened. It was the most fascinating and painful experience of my professional career, I wouldn't trade it for anything. The experience will allow me to help others as they go through this process.

Topic #5 = Google Is Getting Too Much Credit For Online Orders: This came up over and over again, and is closely tied to Topic #2. In an instance where a customer receives three catalogs, six e-mails, conducts two Google searches, and does one shopping comparison on mySimon, why should I pay Google twice for sending the traffic to my site? There's no doubt that Google and mySimon are partners in this process. However, the catalog/online marketer is now forced to pay for three catalogs, six e-mails, two paid searches and one shopping comparison affiliate commission. Ten years ago, three catalogs would have sufficed. In the next ten years, you will see an evolution in how Google and affiliates get paid. Search and affiliate marketers have taken advantage of the ignorance of all of us who have a catalog heritage. It's time to make things more equitable, and this can only begin to happen if non-competitive catalog/online marketers band together as a unified force.

Topic #6 = "Multichannel" Doesn't Mean Executing The Same Across All Channels: The vendor-speak and pundit-speak of the past eight years (all channels should execute the same) has been rejected by those actually practicing multichannel retail. While everybody generally agreed that items should be the same price across all channels, the attendees generally agreed that the strengths of each channel should be readily exploited. If one wants to do free shipping in an e-mail and not in catalog, then by all means, do so --- but be willing to honor the promotion in other channels. If one wants to keep clearance items off the internet, go right ahead! If a brand wants to have a different look and feel in advertising, creative execution, merchandise assortment, you name it, go right ahead and do so. There was an absolute groundswell of consensus on using each channel appropriately, so that the customer ultimately chooses our brand over somebody else's brand.

Topic #7 = E-Commerce Is "Cold", Catalog And Retail Are "Warm": This was the first time I've heard multiple people tell me that they are frustrated with the lack of warmth in E-Commerce websites. Many felt that the E-Commerce experience lacks humanity, is clumsy, and often breaks down from a technological standpoint. Marketers must take their most important marketing vehicle, a website, from the information technology folks that currently dictate what gets done in online development, and dictate when things get done. If you are a fan of the catalog advertising channel, this is your chance to create great creative execution via print --- your chance to show others how to market with warmth, and in the process, win over some of your marginal customers.

Multichannel Catalog Merchandising Strategy

The art of cataloging changed during the past ten years.

We used to market our catalogs to a target audience. We put the best merchandise in our catalogs. We sent the catalogs to our target audience. We measured results. We carried the best merchandise forward. We carried the best new merchandise forward. We capitalized on runners, we killed dogs.

Multichannel cataloging is different. Though we merchandise and market to our target audience, we have no control over which channel the target audience chooses to respond in.

Multichannel retailers run demographic profiles of the customers who respond to various products. For instance, assume we manage circulation at J. Crew. We advertise this Montauk Tote in our catalog.

In the telephone channel, we observe a DMPC (Demand per Thousand Pages Circulated) of $50.00. We're happy with this, because the outcome exceeds our profitability expectations.

Online, we notice that this item has a below-average conversion rate, a below-average "demand per visitor" metric.

Given the combination of the metrics, we elect to carry this item forward next season.

Still, something nags us about the performance of the item. So, we decide to look at the demographics of the customers who purchased the item, by channel.

• Catalog Customers Who Responded Via Telephone: Age = 53, Income = $63,000.
• Catalog Customers Who Responded Online: Age = 49, Income = $70,000.
• Online Responders Who Did Not Receive A Catalog: Age = 46, Income = $66,000.

Can you see the challenge we face?

This item worked in the telephone channel. Our online-based analysis says this item performed below average. Our demographic profile suggests different audiences are responding, by channel.

Our challenge is to decide the role of catalog advertising.

If we want a profitable telephone channel, we run this item next year.

If we want to drive online sales, we don't run this item next year.

If we want to maximize multichannel sales, we run this item next year, but we may need to reduce circulation, or mail the catalog to a different audience. Eventually, we will mail catalogs only to customers who shop via telephone and web --- a limited audience.

Darwinian-style evolution of catalog advertising suggests that catalogs will either be constructed to maximize telephone sales, or will be mailed only to a limited audience that shops via both the telephone and online channels (or shops both direct and retail channels for companies who sell via retail). We're already heading in one of those two directions, most of us just don't know it, yet.

We're not going to get thought leadership from a Management Consulting firm on this topic. The answer does not appear in a $279 report from Forrester Research. The answer is not evident in a statistic that says "multichannel customers are worth 'x' times as much as single channel customers".

Multichannel CEOs and CMOs: I don't think there's a right or wrong answer, here. We simply have to decide what we want our multichannel catalog advertising to accomplish, and accept the consequences of our decision.

What Does Your Website Look Like In 2017?

Doug Mack at Shop.org talks about the future of multichannel websites. In the article, notice that an individual at Gartner talks about everybody being held hostage by "Googazon". Remind your multichannel retailing co-workers that you heard that concept first on The MineThatData Blog!

The online channel is likely to evolve very differently, depending upon the business model employed by the retailer. Let's review three business models, and the likely evolution of the websites these business models manage.

Catalog + Online Retailer: Multichannel Forensics dictates that catalog customers are transferring loyalty to the online channel. Businesses with an older customer base are experiencing this transition much slower than businesses with a younger customer base. Over the next ten years, this evolution will drive a dramatic transformation of the catalog advertising channel. The catalog becomes a "brand advertising" tactic that drives business to the website, or communicates the general attributes of "the brand". The website must sell merchandise. This will drive website design toward the most efficient layout, one that easily facilitates a customer purchase during any one specific visit.

Direct + Retail Channels: As retailing splits into two niches (low-cost and high-end), websites will evolve accordingly. High-end retailers will see less and less value in e-commerce, and will see more and more value in using the website as the primary tool for customers to interact with a brand. For instance, L.L. Bean reported 73 million annual online visitors during 2006. I imagine that Neiman Marcus had more than 100 million annual online visitors during 2006. What the heck do you think will happen to these websites when brand marketers wrestle control of the website from the clutches of the technology folks? No other marketing activity replaces the experience of a hundred million individuals who volunteer their personal time to spend time on your website. If 100 million customers and prospects volunteer to spend their free time on your website, you have a responsibility to configure the website to facilitate any and all possible retail transactions. The Direct + Retail website will become the entertainment and information arm of a retailer --- e-commerce will be, at best, a secondary function that serves the purpose of meeting a specific customer need at a specific point in time. These businesses, in my opinion, are the most likely to use Social Media in the future --- integrating Social Media with the retail purchasing experience. Maybe most interesting will be the evolution of virtual-reality sites, as either competition to today's websites, or as the logical evolution of today's websites. The experience will be what matters, not e-commerce.

Online Pureplays: Expect online pureplays to compete with catalogers and retailers by hyper-innovation and hyper-price-based competition. These businesses will have to make their sites a destination, a place where people want to spend time. This strategy will be at direct odds with the intense pressure associated with the need to sell merchandise to survive. Darwinian evolution drives these businesses toward the lowest price, fastest shipping, and best merchandise selection. Expect these businesses to develop partnerships with Google and a likely family of search successors, so that traffic is diverted away from multichannel retail sites.

Ok folks, time for you to chime in. How do you think websites will evolve over the next ten years? What trends do you expect to come to the forefront for each business model?