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.

Please Help Our Industry Measure Advertising Effectiveness!

Online/Catalog marketers (frequently called Multichannel marketers) have inherent challenges in properly allocating a purchase to the advertising tactic that truly drove the order. If a customer receives a catalog, several e-mail campaigns, and maybe additional direct mail within a short period of time, a purchase may have been caused by a combination of marketing activities, not just any one marketing activity. Posts from the past few days talk about this topic.

So, I am seeking your assistance. Download this spreadsheet with ten thousand simulated customers: MTD_Advertising_Effectiveness.xls

The spreadsheet has one row per customer. Each column in the spreadsheet is described here:

• Customer Number = Uniquely identifies each customer.
• Recency = Months since last purchase, grouped into segments.
• Frequency = Number of lifetime purchases, grouped into segments.
• Monetary = Average Order Size, grouped into segments.
• Receive Catalog = Yes/No indicator telling whether customer received a catalog in the past month.
• Receive Postcard = Yes/No indicator telling whether customer received a direct mail postcard promotion in the past month.
• Receive E-Mail Campaign #1 = Yes/No indicator telling whether customer received the first of two e-mail campaigns in the past month.
• Receive E-Mail Campaign #2 = Yes/No indicator telling whether customer received the second of two e-mail campaigns in the past month.
• Catalog Net Sales = Amount customer spent via the telephone channel in the past month.
• Online Net Sales = Amount customer spent via the online channel in the past month.

Here is what I would like for you to do. Analyze the dataset, and properly allocate the net sales each of the four advertising activities drove to the catalog/telephone channel and to the online channel. I provided the customer segmentation information, should you wish to control for this data. Sales that cannot be attributed to one of the methods of advertising should fall into the "organic" row in the table below.

When you have completed your analysis, submit a document (either MS-Word or PDF format) with your findings. Your analysis must have the following table, with the following information (your need to complete this table to have your results published):

The MineThatData Advertising Effectiveness Challenge
	Catalog	Online	Total
	Net Sales	Net Sales	Net Sales
Catalog Mailing	?	?	?
Postcard Mailing	?	?	?
E-Mail Campaign #1	?	?	?
E-Mail Campaign #2	?	?	?
Organic Sales	?	?	?

The analysis should yield about $59,000 total catalog sales, and about $72,000 total online sales.

The goal of this project is to help marketing individuals in the online/catalog multichannel world understand how they should measure advertising effectiveness. Keep that in mind when you summarize your findings. You are speaking to a marketing executive who may not be well-versed in analytics.

I will accept entries between now and January 31, 2007. I will publish all findings, so long as the table mentioned above is completed and your write-up can be understood by a marketing executive.

This exercise provides strong analytical individuals a good opportunity to showcase their skills. Vendors, in particular, have a great opportunity to illustrate use of their tool-set for marketing individuals who make decisions about which vendor to work with. Online/Catalog marketers have an opportunity to learn how they can improve their advertising measurements.

Please forward this post to your analytically-minded friends, and vendors who may already provide solutions to problems of this nature. Let's see if we can find a way to improve advertising measurement. I will post all completed entries in early February.

Matchback Analysis

Yesterday's post about allocating online orders to the catalog channel causes one to think about the best ways to measure advertising effectiveness.

Assuming you don't execute "A/B" tests to measure incremental sales across all channels, the matchback analysis provides better answers than doing nothing. However, there are challenges that need to be addressed.

Example #1: You send a catalog on October 15 to your entire catalog housefile. You send an e-mail campaign on October 18 to your opt-in housefile list. You also secure a placement on MSN on October 19. On October 22, a prior catalog purchaser and current e-mail subscriber visits your site with a referring URL from the MSN placement, and purchases merchandise. Which advertising channel is responsible for this order?

Example #2: Same criteria as above (catalog mailed on 10/15, e-mail sent on 10/18, MSN placement on 10/22). Customer visits site after conducting a search on MSN on 10/22, and purchases merchandise. Which advertising channel is responsible for this order?

Example #3: Same criteria as above. Customer visits your website via organic search on Google on 10/24, and purchases merchandise. Which channel is responsible for this order?

What analytical technique do you use to reconcile the issues in examples one through three? If you don't manage this issue in-house, which vendor do you work with to resolve these issues? If you don't work with a vendor or analyze these issues in-house, how do you determine your educated guesses?

Lastly, who are the vendors that you believe are most credible and most talented in this field of study?