Dell v Acer: Multichannel and Social Media Considerations

Dell is a social media darling. The Twitterati love to talk about Dell's social media strategy, and enthusiastically call out the fact that Dell has sold $3 million of merchandise on Twitter. $3 million is a good thing!

Dell is a multichannel darling, too. They spent the past few years expanding into retail, leaving their direct-to-consumer and direct-to-business roots behind to align with Best Buy, Staples, and Wal-Mart. Direct + Retail is a long-established multichannel marketing gold standard.

Dell takes full advantage of customization and personalization, all good for the customer!

Dell is doing what leading marketing experts tell companies they should do, in order to be successful.

Then there is Acer. They don't leverage Social Media, they don't follow leading Multichannel Marketing strategies, and they don't offer the Customization that Dell offers.

So how is it that Acer is poised to pass Dell later this year for the #2 computer maker spot?

Use the comments section to explain this unique outcome.

Dell And Twitter Revenue: Keeping Perspective

There's no doubt that Dell's $1,000,000 of Twitter revenue is good ... something that points to Twitter as a possible sales channel (from Venturebeat via SmartBrief).

Now for the bad news. Dell generated $63,000,000,000 last year. This means that Twitter sales represent 0.0016% of annual revenue.

Let's say you are as successful as Dell is, but you manage a $50,000,000 business. 0.0016% of $50,000,000 is $794.

Somebody might blast me for this analysis, suggesting that something like 80% of volume is B2B, therefore excluded from Twitter. Let's go with your assumption. Now the comparison results in $4,000 for your average $50,000,000 business.

I am not criticizing marketing via Twitter, nor am I criticizing Dell, who is clearly innovating. About twenty percent of recent visitors to this blog come from Twitter, so I understand how the micro-channel can be used in a beneficial way.

I am simply asking you to carefully study the magnitude of the numbers the media share with us. Be willing to consider any bias in the information, and how that bias benefits those who write the articles.

Feds Set To Bail Out MineThatData

Washington, DC: In an unprecedented move, The Federal Reserve Board announced this evening that it will, for the first time ever, bail out a highly profitable sole proprietorship.

Seattle based MineThatData, a consultancy that helps CEOs understand the complex relationship between customers, advertising, product, brands and channels, will be the recipient of nearly $300,000,000 of free money, courtesy of an unprecedented taxpayer bailout.

"It's only one dollar per person living in the United States" groaned a noticeably exhausted Treasury Secretary Henry Paulson. "We just finished taking ownership of AIG, and now we're faced with having to bail out a highly profitable sole proprietorship. Where does this end?"

The announcement was met with an enthusiastic roar of approval at the Shop.org Annual Summit in Las Vegas. Attendee Maya Pemberton, Sr. Pay-Per-Click Analyst at Dell, told anybody who would listen that the announcement provides much-needed stability in the emerging field of Multichannel Forensics.

"We just realized that our online customers were in hybrid/transfer mode, rapidly migrating to our retail offering at Wal-Mart. We couldn't possibly take our strategy to the next level without assistance from the Feds." mentioned Pemberton, who then ran her badge under the bar code scanner at a social media vendor in the exhibition hall, earning her a free ballpoint pen and a chance to win an iPod shuffle.

Wall St. did not react positively to the announcement, with the Dow Jones Industrial Index plummeting 1.4% in after hours trading. We were unable to solicit a comment from management at MineThatData.

Note: Various, if not all elements of this story, have been fabricated. No taxpayers were harmed in the writing of this story.

Micro-Channels: How Dell Arrived At Their Twitter Strategy

Dell responded to the post on their Outlet/Twitter strategy --- they point us to this article in New Communications Review that outlines the genesis of the strategy and early results.

Thanks, Dell!!

Micro-Channels: Dell Outlet on Twitter

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

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

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

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

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

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

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

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

Now go give the strategy a try!!!

Retail Is Struggling

J.C. Penney merges marketing and merchandising functions across online/retail channels, then cuts 100 - 200 jobs. I'll bet that the 100 - 200 people who lost their jobs aren't big fans of multichannel integration.

Ann Taylor lets go of 13% of their corporate staff, 180 jobs amid a tepid retail environment. In addition, 117 stores will be closed.

Talbots to shut down 78 kids and mens stores. Sure this is old news, but it is reflective of what could be a widespread problem in 2008. This economic downturn could weed-out a lot of over-assorted retail square footage.

Eddie Bauer cuts 16% of its corporate staff, even as sales improved in Q4.

Home Depot cuts 500 corporate jobs, 10% of the corporate staff. Assume these are $75,000 a year jobs (including benefits). Take the $210,000,000 that former CEO Robert Nardelli garnered as part of his golden parachute, divide it by $75,000, and you are able to keep these 500 folks gainfully employed for another five years.

Dell plans to close 140 shopping mall kiosks.

Starbucks will close 100 underperforming stores.

If you are a retail real estate executive, you have to be wondering who the retailers are that will line up for the store locations made available by the great recession of 2008?

Old Navy updates their logo, and elects to move away from families, now focusing on a fashion-based twenty-something target audience.

Trees rejoice as USPS volume drops by 3% in Q1-2008.

Multichannel Business Models

Fifteen weeks as an independent multichannel strategist provide me with a new perspective on multichannel business models. I can see that there are at least six ways that retailers/catalogers are leveraging the online channel, the channel responsible for the "multichannel" moniker. Each business model has unique advantages, and unique challenges.

Model #1 = Simple Online Presence

• These businesses generate the vast majority of their sales by customers who send orders via the mail, or by calling a sales representative in a contact center. The order was stimulated by the mailing of a catalog. The online channel is not a significant driver of sales for businesses in this situation. The customer does not utilize the online channel as a shopping vehicle. At least eighty percent of the net sales happen via the mail, or via telephone. The average customer is at least fifty-five years old.
  

Model #2 = Online Order Form

• These are catalog businesses that use cataloging as the primary marketing vehicle, but provide a robust online experience that causes customers to place their orders online. These businesses struggle with the concept of being "multichannel", because all analytical work indicates that the catalog drives eighty percent or more of online sales. In reality, these businesses are not "multichannel", they are really catalog businesses that take orders online. Still, it is not uncommon for these businesses to generate half of all orders online.

Model #3 = True Catalog Multichannel Model

• It has been my experience that this is the least understood of all business models. These are catalogers that generate at least half of their annual net sales online. However, these catalogers typically believe that the catalog is responsible for driving the online sales. In reality, the online channel developed a foothold in these business models. If catalogs were not mailed to customers, online orders would happen anyway. This is very hard for catalog executives to understand, to digest, to develop strategies against. Company reporting and matchback reporting indicate that the catalog drives online sales. Mail/Holdout testing indicate that at least half of the online sales would happen regardless whether catalogs were mailed or not. These businesses have robust e-mail, paid search, natural search, affiliate, portal and online marketing programs that generate incremental sales. It is this business model that many industry experts and consultants target when they talk about "multichannel marketing".

Model #4 = Retail Business, Catalog Heritage

• These are interesting business models. Be it Coldwater Creek, Williams Sonoma, Lands' End or now Dell, these businesses practice true multichannel marketing, but with a strong focus on ROI. The catalog heritage drives measurement of all advertising activities across all channels. If an aspiring individual wanted the best multichannel lab to build multichannel skills in, I believe these environments provide the best place to gain valuable, portable experience.

Model #5 = Online Business, Retail Heritage

• A Neiman Marcus, Saks or Macy's fit into this business model. The online channel is strictly complementary to the store experience, as the stores are responsible for the lion's share of sales and profit. Management says the right things about multichannel marketing, and do invest in the online experience. That being said, the purpose of being multichannel is to do everything possible to please a store customer. This strategy leads to sub-optimization of the direct channel. Over time, these businesses will lead the online industry in "entertainment". The online channel (and supporting catalog channel) will likely become the entertainment and informational arm of the brand. Of course, a giant retail presence will cause a ton of traffic to migrate online, driving a huge volume of online sales. But the online sales will not be driven by brilliant online marketing or catalog marketing strategies. The online sales will happen because the online channel acts as the entertainment/informational arm of the retail brand experience. There's nothing wrong with this. But it does require a very different set of marketing skills --- traditional online and catalog marketers may be frustrated by this business model. Traditional analytics individuals may not be pleased with the depth of analytical insight required to run these businesses (i.e. the business is run by "brand instinct", not by analytical findings and ROI).
  

Model #6 = Online Pureplay

• These businesses are fundamentally different than the five models described above. These businesses were born online, and utilize a marketing strategy fundamentally different than other businesses. Traffic is driven by online marketing strategies. To compensate for what I call "channel disadvantage" --- not having catalogs or stores, these businesses utilize free-shipping, free-returns, and rock-bottom pricing to gain a competitive advantage. These businesses need to grow to a size large enough to overcome margin and shipping revenue shortfalls. Zappos is probably the best example of a business in this category. The online marketing departments in these companies offer spectacular laboratories for learning online marketing strategies. If I were a college student today, this would be one of my primary industries to target for employment.
  

Strategically, it is very important to understand where your business model falls on this continuum. The way you utilize multichannel marketing and advertising strategies is highly dependent upon the customer base you have, coupled with your heritage and objectives.

Cataloging makes less sense for business models five and six. Traditional cataloging strategies are frequently not congruent with brand-based retail models and online pureplays.

Online marketing makes less sense in the short term for business models one and two. These business models are supported by customers who are not willing to shop on the web without the benefit of catalog merchandise presentation.

Matchback and analytical expertise are probably most critical in business models three and four. Catalog businesses that migrated from model one to model two to model three have the best opportunity to overcome postal increases, because the customers shopping these businesses will purchase online if catalog frequency is reduced.

Your turn, my loyal reader! What e-commerce business models are missing from this list? How might you change these categorizations to make more sense?

Give Me Someone To Believe In

Last week, Dell agreed to sell computers in Wal-Mart stores, even though management repeatedly assured us that they are a direct-to-consumer brand.

The punditocracy tells us we need to emulate Circuit City and their "Buy Online, Pickup In Store" multichannel program. Yet, Circuit City is fighting to stay in business, as sales sag. Weren't we told that multichannel customers were the best customers? If Circuit City provides a great multichannel experience, then why in the heck aren't they swimming in a pool of profit produced by a ton of multichannel customers, the most valuable of all customers?

Of course, Circuit City competes with the successful Best Buy chain of electronics stores. The punditocracy tells us we should emulate Best Buy's "Customer Centric" approach to store design. On the surface, that would seem like a good idea, because they're killing Circuit City. And yet, Best Buy is accused of allegedly implementing a "bait and switch" program, whereby customers saw one price online, then were shown a higher price in an in-store online version of the website. If this is true, how "Customer Centric" is that? And if the lawsuit is proven to not be valid, the small number of customers who received a higher price did not receive a "Customer Centric" experience, did they?

Dell, Circuit City and Best Buy are "brands" that have a veritable plethora of hard working, earnest employees, all trying to do what is best for their customers and shareholders.

Each week, the punditocracy tells us who we should emulate, and why. All too often, their logic is flawed. We shouldn't copy Dell and their direct-to-consumer model. We shouldn't copy Circuit City and their "Buy Online, Pickup In Stores" program. We shouldn't copy Best Buy and their "Customer Centric" approach.

Instead, believe in yourself, and do what is best for your "brand". Give me someone to believe in --- YOU!!!

Dell And Discovery Channel

The fact that Dell may be moving deeper into the retail space, while the Discovery Channel announces they are exiting the retail space must be flummoxing to the multichannel punditocracy.

Weren't we told that "clicks and bricks" would trump online-only pureplays? And didn't Dell tell us they thoroughly believed in their direct-to-consumer strategy?

Focus on what your customer wants you to do, not what the punditocracy wants you to do.

The End of E-Commerce / Dell

Dell's announcement (see update at the bottom of this link) that they will have a virtual store in Second Life (a virtual reality environment) has far-reaching ramifications for all of us in the catalog/online space.

It was just a decade ago that various catalogers began dipping their toes in e-commerce. I recall being at Eddie Bauer, in 1996, listening to my Vice President joke with our Online Marketing Manager about generating maybe $750 of sales a day, while the catalog channel drove a million dollars a day, and our stores sold four million dollars of merchandise a day. Ten years ago, it was hard to fathom what e-commerce would become.

In much the same way, this announcement begins the shift away from e-commerce, to "v-commerce", or virtual reality commerce. The fact that somebody can configure their own PC in a virtual reality environment, and then have it shipped to one's home, changes online retailing.

This has ramifications for the online marketing folks working in companies today. You are the direct-to-consumer arm of your business now, you have taken that responsibility from catalog folks. Be certain to watch the developments of "v-commerce", and make sure your skills are sharp in this arena, so that you don't become "old school" in five to ten years. Don't repeat the mistakes that so many catalog marketers made in the past decade.