Consulting Project Focus Is Changing

The Multichannel Forensics projects you're asking me to work on have taken a turn.

Two years ago, you asked me to explain how customers interacted with channels.

One year ago, you asked me to explain how customers interacted with both channels and merchandise divisions, with an eye toward forecasting the future.

Then you saw what the future held, and it wasn't pretty.

Today, you ask me to use Multichannel Forensics to identify customers who will keep purchasing if advertising is significantly reduced.

The framework isn't significantly different than Multichannel Forensics projects from a few year ago. I still measure how customers interact with products, brands, and channels. And I still forecast the long-term trajectory of your business by product, brand or channel.

The mechanics of the project, however, have changed. We use whatever data is available to understand how customers move along the continuum above --- organic, social, algorithm, advertising, and begging. We attempt to identify where the customer resides on this continuum.

Customers who respond to begging (discounts, promotions, free-shipping, GWPs) are at the bottom of the ladder. We'll need to market to them, and we'll need to give them a reason to purchase. These may be profitable customers, but we'll have to work hard at creating gimmicks to encourage them to purchase. This is the realm of the marketer, especially in Fall 2008. In so many ways, we ruined e-commerce with our obsession of begging customers to purchase.

Traditional direct marketing focused on customers who respond to advertising. This is a segment of the customer file that is decreasing in size. We look for attributes that suggest a customer must be advertised to, in order to purchase. Customers who order over the telephone, customers who give catalog key-codes when shopping online, customers who click-through e-mail campaigns, customers living in zip codes classified as "Catalog Crazies". These customers are unlikely to buy in the future unless they are marketed to.

Then we have customers who use algorithms to purchase. Yup, these are the customers who use tools like paid search to purchase merchandise. These customers are different. They don't always respond to future advertising, and when they do respond, they combine advertising and algorithms to make decisions. This is where your Net Google Score comes into play. Catalog brands really struggle with algorithm customers, and online marketers struggle with e-mail marketing programs for algorithm customers.

Increasingly, we find ourselves managing social customers. If you're Crutchfield, you have customers who buy merchandise, customers who write reviews, and customers who are referred from blogs to your site. The latter two groups represent "social customers". Social customers are different than are typical catalog customers, and are different than typical e-commerce customers. Catalogers are way behind the curve when it comes to managing social customers. In fact, almost everybody is behind the curve regarding social customers. Hint: Social customers don't necessarily embrace catalogs, and sometimes get really angry when they are stuffed in the mailbox.

Finally, we get to the most valuable customer on the planet, the organic customer! I receive a lot of criticism about my assertion that there are customers who do not need to be advertised to. Why? I don't know. Many of you think customers only buy something if they are advertised to. Amazon.com gets a lot of organic business. Now it is true that maybe Amazon sent an e-mail at one time, and you bought because customers like you purchased certain texts. But that doesn't explain the fact that you see "Outliers" discussed on a blog, so you go and buy the book on Amazon (that makes you a social customer!). Or maybe you read about the book in New York Magazine, then buy it on Amazon (that makes you an organic customer). Organic demand is the most important kind of demand to generate, because it comes without advertising cost. Retailers have thrived for centuries via organic demand. E-commerce is a hybrid of retailing (organic demand) and cataloging (advertising demand).

So how did project work change?

These days, I score customers across each of the five dimensions listed above. If the customer generates organic demand, the customer gets an "A", if not, the customer gets an "F". The same process happens for Social Customers, Algorithm Customers, Advertising Customers, and for Customers Who Respond To Begging.

Once customers are graded, we monitor migration. Does the "Begging" customer migrate to "Organic" status? If so, then discounts and promotions work! Does the "Algorithm" customer slide down to "Begging"? If so, then Google isn't doing us any favors. Is the "Advertising" customer married to advertising? If so, then we have to keep streaming the catalogs at this customer. We apply the migration patterns, understanding the long-term trajectory of your business. Finally, we identify the customers who we can stop marketing to, without a significant dip in business.

Online pureplays are using this methodology, too ... they want to understand who should receive e-mail marketing, and they want to understand how deep they should dive into paid search.

Retailers ask me to do this, so that they can identify retail shoppers who are unresponsive to direct marketing, customers who have a high organic percentage.

Catalog Choice should love this (especially given the slowdown in user growth in recent months), because the end result of the project is the discontinuation of catalog marketing to customers who no longer respond to advertising, while protecting the catalog relationship among highly responsive customers.

That, my dear readers, is a description of the type of project I am being asked to work on by online marketers, retailers, and catalog brands. And it is big-time fun!

Net Promoter Score? Try Net Google Score!

Many database marketers are enthusiastic about computing the Net Promoter Score for the brand they work for. The net promoter score adds positive considerations, then subtracts the negative ones, yielding the net total of positives for a brand. For example, if you have 78 customers saying something positive about you, and 22 saying something negative about you, you have a net promoter score of 78 - 22 = 56.

One of the things we could be computing/estimating is a Net Google Score. The Net Google Score simply tallies the sales that we receive due to paid search and natural search, then subtracts the sales that Google takes away from us. The Net Google Score tells us if Google is on our side, or if we are doing a "good job of managing Google".

We do a good job of measuring the positives. We carefully track our paid search results, we know the sales we get due to a good SEO program.

We do almost nothing when it comes to measuring the sales we lose when customers enter Google and are diverted by competing links/offers.

One of the reasons that traditional advertising (catalog marketing, e-mail marketing, television, radio, newspapers) is dying is due to the Net Google Score. Catalogers know this all too well. Over the past five years, catalog customer acquisition performance declined by between five and fifty percent, depending upon the company, in part because of a negative Net Google Score.

The cataloger spends $1,000 trying to acquire customers, with $970 wasted on customers who had no intention of purchasing. This has always been the way customer acquisition worked.

But within the $30 of advertising that are effective, there is a fundamental change that is happening. Half of the $30 result in a customer purchasing from the brands we manage. But the other $30 of advertising drive a customer to the internet, specifically, Google.

Here is where the customer finds a veritable plethora of goodies. Google facilitates the diversion of funds away from the vehicle that drove the advertising, toward offers that better resonate with the customer. Sales are "lost", even though the advertising vehicle is just as effective as it always has been.

You tell me about this from both sides. Catalog executives lament the fact that customers go off into Google, never to return. Online pureplay leaders tell me that the love it when big brands do traditional advertising, because they benefit for "free".

This is where calculation (or much more likely, "estimation") of the Net Google Score becomes so important. If you can quantify that you are a $50,000,000 brand that has a Net Google Score of -$7,000,000, you instantly know that if you can eliminate that gap, you have a $57,000,000 brand that is probably much more profitable.

You also net out the Net Google Score in your matchback programs. Maybe you have a catalog that appears to drive $2,000,000 ... but after matchback, you add in the $750,000 you drove to your website, yielding $2,750,000 of real volume. Now, you consider the volume you drove to your competitors by advertising and driving customers to Google --- discounting the $2,750,000 of true volume by the Net Google Score. Hmmmmmm.

Long term, we have to ask ourselves if it is worth it to execute catalog marketing that results in a negative Net Google Score.

Short term, we need to begin calculating/estimating the Net Google Score.