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.

The Role Of Channels

In basketball, we all look to superstar players for inspiration. We enjoy watching the player that can record a "triple-double", ten or more points, ten or more rebounds, ten or more assists, in one game.

The "triple-double" is like "multiple channels".

Here's the thing. A superstar player has a hard time achieving a triple-double without serious help from his/her teammates. You cannot score more than ten points unless somebody passes you the ball. You cannot achieve ten assists unless your teammates can make shots.

In other words, each player has a role.

Now, allow me to ask you a question. Who, when you are meeting in your strategy sessions, assigns the role of each channel, so that all employees know what role each channel plays in your business?

Don't feel bad if you haven't identified who plays that role in a business. And don't expect that person to be the CMO, either. We haven't trained chief marketing officers to think strategically about the roles that channels play.

I will say that the most talented multichannel employees tend to intuitively know what role each channel plays. This could be just about any employee in your business, couldn't it?

On a piece of paper, write down the following channels, and the role each channel plays in contributing to the success of your business.

• Catalog Marketing.
• E-Mail Marketing.
• Paid Search.
• Natural Search.
• Banner Ads.
• Affiliate Marketing.
• Shopping Comparison Sites.
• Orders Via Your Call Center.
• E-Commerce Orders.
• Sales Force.
  
• Live Chat.
• Google.
• Amazon.
• Video Commerce.
• Landing Pages.
  
• Retail Stores.
• Outlet Stores.
• Outlet Tabs On Your E-Commerce Website.
• Facebook.
• MySpace.
  
• Twitter.
• Your Blog.
• Radio.
• Television.
• Newspapers.
• Auction Sites.
• eBay.
• Drive-Through.
• ATM Machines.
• Local Branches.

How did you do? Ask yourself the following questions, for each channel:

• Does the channel scale? In other words, can it become one of the top two or three sales volume channels? If the answer is no, why do you participate in the channel?
• Does the channel do a good job of acquiring new customers? If the answer is yes, do the customers have an acceptable long-term value? If the answer is no, what is your strategy to deal with low-LTV customers?
  
• Does the channel aid in profitable customer retention? In other words, if you eliminated social media, would your annual retention rate change? If the answer is no, why are you participating in social media?
• Does the channel aid in customer service? In other words, does the channel solve customer problems? If the answer is yes (i.e. call center), ask yourself why you pay those folks $11 / hour while you take home $175,000 a year while not speaking directly with your customers?
  
• Does the channel feed other channels? If television advertising drives customers to your website, and your website drives customers to your stores, and customers generate profitable sales in your stores, then you established a successful micro-channel path. Hint --- the secret to successful multichannel marketing is to thoroughly understand and exploit profitable micro-channel paths. Quick ... name your five most profitable micro-channel combinations?
  
• Does the channel generate profit? Having an unprofitable $3,000,000 store doesn't do your brand any favors.
• Does your channel educate customers? Catalogs, websites, and e-mail are good at education. And education leads to demand generation. And demand generation is the secret to profitable success. Most of the Web 1.0 advertising channels are not capable of demand generation --- they focus on demand interception, an important but different role for those channels.
  
• What is the exit strategy for each channel? In other words, what is the future of, say, e-mail marketing? What are the conditions under which you would decide to discontinue e-mail marketing?
• What is your R&D strategy for emerging channels? It is one thing to be on Twitter, telling your customers that chinos are on sale for $29.99 and that your chief merchant ate a burrito for lunch. It is quite another thing to think strategically about how you will use the channel for research and development. How much time and money do you invest in an emerging channel, and when do you pull the plug?
  
• Does the channel lend itself to in-house expertise or vendor-expertise? There are advantages to both, aren't there?

If a channel fails to deliver across most of the questions listed above, ask yourself why you participate in that channel? What would happen if you dropped that channel, and re-invested your money elsewhere?

Your homework assignment for April is this:

• Assign one individual in your company the role of "Channel Advisor". This individual determines the role of each channel, and actively communicates the role each channel plays in the success of your business (using tools like Multichannel Forensics) to every employee in your company.

Multichannel Generational Behavior

Pay attention to this image of CNBC financial hosts Mark Haines and Erin Burnett.

Mark, age 62, has his newspaper in front of him, a paper loaded with information to help him get through the show. You can tell him that newspapers are dying, and it doesn't matter, this is how he consumes information.

Erin, age 32, has a laptop in front of her. You''ll see her Googling topics, or checking the hurdle on a free shipping offer at Macys while speaking to the audience.

As marketers, we repeatedly fail when trying to talk to these two individuals. Mark is probably not going to set up a Twitter account. His generation is the person we speak to when we mail catalogs. Erin uses search as a psuedo-administrative-assistant, in real-time.

Worse, our industry hawks the standard "Multichannel Customers Are The Best Customers" line. We encourage people to read the paper and consume information online. We homogenize the overall user experience by trying to make the look and feel of each medium appear the same --- instead of capitalizing on the unique differences between channels, we try to force people into doing things the way we want for them to do things, causing both channels to fail.

In this case, a picture is worth a thousand words.

Being Multichannel

I don't do this often --- here's a quote from Seth Godin:

If you have a presence on twitter, squidoo, blogs, facebook, myspace, linkedin and 20 other sites, the chances of finding critical mass at any of them is close to zero. But if you dominate, if you're the goto person, the king of your hill, magical things happen. One follower in each of twenty places is worthless. Twenty connected followers in one place is a tribe. It's the foundation for building something that matters.

This is the essence of being a multichannel marketer, isn't it? We're told that we have to be in mobile marketing, social media, e-mail marketing (best ROI, right?), pay-per-click, SEO, affiliate advertising, shopping comparison sites, portal advertising, catalog advertising, retail stores, radio advertising, television advertising, newspaper advertising, eBay, blah blah blah blah. Almost nobody has been able to demonstrate that actively being in all these channels increases sales and profit for the corporation at a rate that is greater than being outstanding in just one channel.

Don Libey says this in a different way on page 37 of the Expanded Second Edition of "Libey and Pickering on RFM And Beyond" (link to first edition on Amazon here):

"You never want to chase your market. It costs money to chase the market; it costs much less when the market chases you. That difference in cost is pure profit."

There's nothing wrong with having multiple channels, we need to have multiple channels. But when we chase channels as a solution, we lose.

Bob Lefsetz positions the challenge another way via the music industry.

"We’ve moved on to a new marketplace, where iPod penetration is gargantuan and the CD is antiquated, a worse fit for the times than network television shows. The goal is to get on someone’s iPod, how do you do that?"

Doesn't that sum up multichannel marketing in a nutshell? We chase channels. However, the goal is for us to have our brand appear in someone's browser, how do we do that?

How do we do that? Not by diving into mobile marketing because it is the next big thing, or e-mail marketing because it has the best ROI, but by understanding the needs of our customer, allowing our customer to "pull us in" however she wants, not by pushing fifty-four channels at her, or by pushing fifty-four versions of one channel at her.

When we view the challenge this way ... "the goal is for us to have our brand appear in someone's browser, how do we do that?", a whole new world opens up for us.

I don't force you to visit my blog. 80 out of every 100 folks view the blog in an RSS reader, 40 out of 100 via Google Reader. I don't force you to consume the information the way I want it consumed. I'm blessed to know that, for some reason, this information appears in your browser.

Being Multichannel means that we create an environment that allows the customer to pull us into her life. Being Multichannel does not mean that we pummel her by pushing channels at her.

Multichannel Customer Evolution

Reading the marketing literature, we learn all about how we have to be "multichannel". We need to be all things to all customers.

We don't read much about how customers behave as the migrate through the multichannel maze.

Across a veritable plethora of Multichannel Forensics projects, we get a good view into the evolution of customer behavior. Let's review different stages that frequently repeat themselves.


Stage 1 = Online Shopping Via Direct Marketing. This is the classic stage that the marketing folks talk about all the time. In this stage, the customer that was always responsive to direct marketing becomes responsive to direct marketing via the online channel. Here are six customers, before this transition, then following the transition.

Before Transition
Customer 1 = Telephone Shopper
Customer 2 = Telephone Shopper
Customer 3 = Telephone Shopper
Customer 4 = Telephone Shopper
Customer 5 = Telephone Shopper
Customer 6 = Telephone Shopper

After Transition
Customer 1 = Telephone Shopper
Customer 2 = Telephone Shopper
Customer 3 = Telephone Shopper
Customer 4 = Online Shopper Via Direct Marketing
Customer 5 = Online Shopper Via Direct Marketing
Customer 6 = Online Shopper Via Direct Marketing


Stage 2 = Paid Search, Social Media, And Branded Visitation: This is a transition that direct marketers born prior to e-commerce are struggling with. In this stage, traditional customers evolve to online shopping, while online customers begin to not use traditional direct marketing (catalogs, e-mail).

Before Transition
Customer 1 = Telephone Shopper
Customer 2 = Telephone Shopper
Customer 3 = Telephone Shopper
Customer 4 = Online Shopper Via Direct Marketing
Customer 5 = Online Shopper Via Direct Marketing
Customer 6 = Online Shopper Via Direct Marketing

After Transition
Customer 1 = Telephone Shopper
Customer 2 = Telephone Shopper
Customer 3 = Online Shopper Via Direct Marketing
Customer 4 = Online Shopper Via Direct Marketing
Customer 5 = Online Social Shopper
Customer 6 = Online Social Shopper


This is the transition we are going through right now. This transition is a tough one for traditional direct marketers, because the tools and techniques we always used now only work among 2/3 of the audience. Couple that with an economic downturn, and there's trouble brewing.

The real challenge comes in when adding retail to the equation. When a brand adds retail stores, all bets are off. Some customers migrate to retail, some customers migrate to retail while using the online channel for research purposes. Other customers are true multichannel customers, using all channels.

Stage 3 = Addition Of Retail Stores. Let's see what this looks like.

Before Transition
Customer 1 = Telephone Shopper
Customer 2 = Telephone Shopper
Customer 3 = Online Shopper Via Direct Marketing
Customer 4 = Online Shopper Via Direct Marketing
Customer 5 = Online Social Shopper
Customer 6 = Online Social Shopper

After Transition
Customer 1 = Telephone Shopper
Customer 2 = Retail Shopper Via Direct Marketing
Customer 3 = Retail Shopper Who Buys Online (True Multichannel Buyer)
Customer 4 = Retail Shopper Only, Not Responsive To Direct Marketing
Customer 5 = Online Social Shopper
Customer 6 = Retail Shopper Who Uses Online Micro-Channels For Research Purposes


Look at the six customers at the end of this transitional period. Six homogeneous customers become six independent customers, all exhibiting different behavior. This is the mystery of customer behavior that we're not quite comfortable with. We want to lump all six of these customers into the multichannel bucket, then execute old-school marketing and new techniques. This can anger a customer who doesn't want to hear via e-mail, blogs, catalogs, postcards, and search that you have a sale where the customer can save up to twenty percent. We'll stop marketing the same programs to all customers at some point --- we don't necessarily have the tools to do so today.

In reality, these are not multichannel customers. The customer is in a stage of transition --- the customer migrates through channels, instead of belonging to all channels. Our worldview will change in the next few years.

How Nordstrom Profitably Ended A Catalog Marketing Program, By Kevin Hillstrom

Something is going on in catalog marketing when I receive repeated inquiries asking how Nordstrom ended a traditional catalog marketing program and increased direct-to-consumer sales. An increasing number of catalog marketers are starting to re-think marketing strategy.

As a result of numerous recent queries from catalog and retail brands across the United States and Europe, I am going to write this essay explaining the decision-making process, and the high-level results. The goal is to help our industry. Please feel free to forward this article to your colleagues --- the hyperlink is embedded here.

If you have questions that I failed to answer here, please ask your question in the comments section of this post, so that all members of our industry may benefit from the answer.


How Nordstrom Profitably Ended A Catalog Marketing Program, By Kevin Hillstrom.

The year was 2004, and the world was a different place. Gas cost less than $2.00 per gallon. President Bush was re-elected for a second term as President of the United States. Finding Nemo won the Oscar for the best Animated Picture. Brett Favre pondered retirement from the Green Bay Packers. Barack Obama, an obscure Jr. Senator from Illinois, gave a stirring seventeen minute speech at the Democratic National Convention.

The catalog marketing world was buzzing over a term called "multichannel". Most brands were between five and nine years into their foray into e-commerce. During this time, telephone sales generally declined, while e-commerce sales dramatically increased. The accepted best practice was to mail catalogs to customers, causing the customer to purchase merchandise over the telephone, online, or in stores. The customer chose the channel she wanted to purchase in. The brand needed to be "multichannel", needed to be present in each channel to accommodate this savvy shopper. The catalog, based on an analytics tool called "matchback analytics", was at the core of this new marketing strategy.

The entire catalog marketing ecosystem liked this view of the world. Printers continued processing catalogs, makin' bacon in the process. Paper reps benefited from the strategy. Co-op marketers provided the analytics that proved this strategy worked, then benefited from the strategy as catalogers leased households from a half-dozen co-op databases. List rental and management organizations protected their future as well. List processing vendors enjoyed the benefits of continued merge/purge processing. E-commerce vendors enjoyed increased website traffic, causing demand for online software. Even e-mail vendors benefited, because catalog customers volunteered an e-mail address at the time of a phone or online purchase, fueling the growth of the e-mail marketing industry. Paid search vendors benefited, because the catalog customer went to Google to research products viewed in a catalog. Google benefited!

The marketing world agreed that mailing catalogs was the "right" thing to do.

In 2004, Nordstrom finally had a highly profitable direct marketing division. A division that lost 10% of net sales in 1999 and 2000 broke even in 2002, and came off of a profitable year in 2003. In 2004, sales and profit were and increasing.

The catalog strategy included marketing of a subset of merchandise, with many items not available in stores. The merchandise included items that sold well in the telephone channel, and did not include the vast majority of items that sold well in stores, did not include many items that sold well online.

By all accounts, this was a successful division.

And then management asked a simple question.

"What would happen if we integrated our channels, offering largely the same merchandise in all channels, without implementing a traditional catalog marketing program?"

Imagine if you are part of the management team of the direct-to-consumer channel, and you are asked this question. You are responsible for putting catalogs in the mail. And somebody is now questioning whether you should do this anymore.

As Vice President of Database Marketing, I built an entire team responsible for putting catalogs in the mail and measuring the effectiveness of these catalogs. What do you think I thought of this question? How would you respond to the question?

A task force of sixteen leaders was assembled. The leaders included Regional Managers, responsible for store performance in their region, Information Technology leaders, the Chief Marketing Officer, many members of the direct-to-consumer management team, and yes, even me.

If you are Vice President of Database Marketing, and you are asked to participate on this team, you are going to be asked questions by members of this team. Your direct-to-consumer team are going to ask you to demonstrate the importance of a traditional catalog marketing program. Your Chief Marketing Officer is going to ask you to present unbiased facts about customer performance.


What were some of the questions leadership wanted answered?

Question: Will catalog customers just switch their behavior, and shop online if catalogs are no longer mailed to them?

Answer: Some customers will switch. Many customers will simply stop purchasing. We tested not mailing customers catalogs in 2001, 2002, 2003, and 2004. We knew exactly what would happen. Without a reinvestment of advertising dollars, sales would decrease.


Question: If catalogs aren't mailed, won't customers just switch to e-mail marketing?

Answer: No. This strategy had also been tested. If a customer receives a catalog, she spends maybe $X across the phone, online, and retail channels. If a customer receives an e-mail marketing campaign, she spends maybe (0.12)*$X across the phone, online, and retail channels. When we tested not mailing catalogs to an e-mail customer, e-mail performance increased slightly. Almost all of the $X would be lost, not recouped by e-mail marketing. And we all know this, we measure e-mail marketing and compare it to catalog marketing and paid search.


Question: What role does catalog marketing play in acquiring new customers?

Answer: Catalog marketing played an important role in the acquisition of new customers. Like all catalogers, Nordstrom rented customers from competing organizations, and exchanged names with competing organizations. Privacy advocates and the Chief Marketing Officer strongly believed that the renting/exchange of names was not in the best interest of Nordstrom or the Nordstrom customer, and if a traditional catalog marketing strategy didn't exist, the rental/exchange strategy would disappear.


Question: Are Nordstrom customers truly "multichannel"?

Answer: Sometimes. Customers did purchase in multiple channels, in fact, a significant minority of total sales came from customers buying from multiple channels. The reality, however, was that customers were migrating from one channel to another, eventually landing in the store channel. Kind of a "duh", when you think about it, huh? The customer acquired over the telephone via a catalog eventually purchased online without the aid of catalog marketing, then shifted spend into the store channel, using the website to research merchandise. This evolution of customer behavior, identified via Multichannel Forensics, suggested that another marketing strategy could be employed, one that would be at least as effective as the traditional catalog marketing strategy.


Question: Do customers purchase from all merchandise divisions?

Answer: No. And this is an important point. The traditional catalog marketing strategy offered a subset of merchandise. If that subset of merchandise were no longer offered, those customers were likely to simply go away, and not cross-shop the rest of the offering, placing any potential new strategy at risk.


Question: Should a multichannel strategy include integration of silos across the organization?

Answer: In this case, it was decided that with a new multichannel strategy, without a true catalog program, that functions should be integrated across the company. This would prove to be a painful process. Pundits underestimate the human challenges associated with integrating people. Time would prove that people would lose their jobs trying to make this integration happen. It is hard, financially, to integrate systems and technology. It is hard, emotionally, to integrate people ... or to let a lot of people go.


Ultimately, it was decided that the traditional catalog marketing strategy would be terminated, effective June 30, 2005.

Here are some of the tactics that were employed.

• Traditional catalog customer acquisition programs were terminated in early 2005, to prevent the acquisition of customers who would later be disappointed.
• No announcements were made of the elimination of the catalog marketing strategy to loyal catalog customers.
• A new catalog marketing strategy would be employed, one where the vendors of the merchandise paid the cost of a page of catalog marketing to advertise their product.
• The privacy policy would be changed. Nordstrom would not rent or exchange any customer information with any competing or non-competing brands.
• E-mail marketing frequency would increase from one contact a week to two contacts per week.
• The online marketing budget would be increased, in an effort to acquire customers lost via the termination of the catalog marketing strategy.
• Systems and people would be integrated, across the company.

The Results:

• Long-time, loyal catalog-only customers did not take kindly to the new strategy, by and large choosing to not purchase again. "Dual-Channel" customers (phone + website) maintained their online spend, but stopped the spend they used to place over the telephone, for obvious reasons.
  
• The investment in online customer acquisition offset the losses from the traditional catalog customer acquisition strategy.
• The increase in e-mail contact strategy helped offset some of the loss of demand from long-time catalog customers.
  
• A subset of catalog customers shifted their spend online.
• The combination of online customer acquisition and catalog customer shift resulted in a net increase in net sales in the direct-to consumer channel. Yes, I said an increase! You can read through the 10-K statements and discover that fact for yourself.
  
• Many leaders in the direct-to-consumer channel chose to leave the company.
• Many positions were eliminated, positions associated with our call center, positions associated with catalog production and circulation expertise. Integration of creative teams (direct-to-consumer and retail) was a challenge.
• The new catalog marketing strategy did not perform as well, in fact, I had not previously worked with a program as unproductive as this one. When you let your vendors determine the merchandise that is advertised to customers, you set yourself up for sales decreases.
  
• The new catalog marketing strategy was, from a profit standpoint, wildly profitable. When you let your vendors pay for the cost of a page of advertising, you are, by default, guaranteeing profit.
• Many online marketing metrics improved without a catalog marketing program in place. In other words, in the past, we'd mail a catalog, causing a customer to use Google to do a search. In theory, the order would be shared between catalogs and paid search. Now, paid search got full credit.
  

Impact On The Database Marketing Department

• I ultimately eliminated eight of twenty-four positions in the department.
• The most seasoned catalog marketing staff left the company, or chose to work in the online marketing division.
• Eight positions were re-trained for work in Social Media, E-Mail Marketing, Online Marketing Analysis, Web Analytics (stuff that Coremetrics couldn't do for us). We integrated Coremetrics data with retail and telephone purchase data, creating a whole new area of emphasis.
  
• Eight positions went essentially unchanged (from a job requirements standpoint), though the focus of their work was on driving multichannel sales, not channel-specific sales.
• My role as Vice President of Database Marketing was ultimately de-emphasized, resulting in me starting my own consultancy.

Describe Some Of The Pitfalls:

• I must re-emphasize how difficult it is to integrate people. Catalog Marketers, Online Marketers, and Store Marketers think about things differently. As you de-emphasize one area, you make some employees feel bad, while others feel more powerful. That's a dangerous cocktail.
  
• Have a customer acquisition plan. You cannot kill a catalog marketing program without risking the future of the business. You can successfully migrate online by having a plan that fuels customer acquisition online.
• Geography Matters! A customer in rural North Dakota or Vermont is not going to be a multichannel customer. Take away her catalog, you take away her sales potential. A customer in suburban Chicago will shop all channels. A customer in Silicon Valley will buy online. Have a strategy for each customer segment, based on geography. Your results will vary.
  
• Product Matters! Know exactly what your catalog customer loves to purchase, your online (Google) customer loves to purchase, and if you have a store customer, what your store customer loves to purchase. Product differences dictate differences in advertising strategy (e-mail, paid search, catalog marketing, traditional advertising). Your multichannel efforts will be much more successful if you know what specific customers with specific channel preferences like to buy.

The pundits had a lot to say about this strategy. The usual suspects in the co-op and list world blasted my team and I in 2005. I recall reading the quotes in trade journals ... stuff like "Lands' End tried this in 1999 and it didn't work". I recall receiving phone calls from the catalog vendor community, folks blaming me for "letting this happen".

Then the strategy worked well. REALLY WELL. Much better than I ever expected it to work.

And then the pundits criticized me again. This time, the blather was all about "the only reason this worked is because of your brick and mortar presence ... the strategy will never work for a traditional cataloger". Hey pundits, why did the strategy work in Birmingham, or Madison, or Tucson, or Des Moines, or Boise, or New Orleans, or Evansville, or Omaha, or Topeka, or Oklahoma City, cities where Nordstrom didn't have a retail presence? When I speak at conferences, the audience loves to blast me on this topic. I am continually amazed how the opinions of many carry more weight than the experiences of the few who actually went through the process and have the scars to prove it.

The reason the strategy worked had nothing to do with the fact that we had a store presence. The reason the strategy worked was because we did two things well.

1. We knew, from our Multichannel Forensics work, how customers shopped across channels. We ran five-year simulations of the new plan, and knew directionally what to expect.
2. Leadership had a plan! They didn't just kill a program and not significantly re-invest elsewhere. They invested in systems, people, online marketing, and cross-channel merchandising strategy. We increased e-mail frequency.

Remember, the change in strategy resulted in an increase in net sales in the direct-to-consumer division, and did not fundamentally impact retail comp store sales. I was surprised by the results.

This can work for you if you do your homework. Have you tested what happens if you do not mail a customer a catalog for a year? Six months? Have you ever doubled your online marketing budget for a month, testing what happens to all channels when you dramatically change your marketing strategy? Have you tested altering your merchandising assortment in print and e-mail marketing? Have you figured out how to acquire new customers without paper in the mail? Have you ever tested raising prices as an instrument to potentially increase demand? Have you studied customer behavior by geography?

Maybe the right strategy is to have six mailings a year instead of sixteen. Maybe the right strategy is to have thirty mailings a year instead of sixteen. Maybe the right strategy is to have your vendors fund your catalog program. Maybe the right strategy is to stop mailing catalogs altogether. The answer is different for every company. There are no right or wrong answers. Your situation is unique. But your situation isn't one that should be executed on the basis of opinions, or gut feel, or guesses, or the collective opinion of an industry or vendor ecosystem.

Without a doubt, the right thing to do is to start testing different strategies.

Ok, your turn. What questions do you have that I failed to answer? Please do not e-mail your questions, please ask them (anonymously if you wish) in the comments section, so that all of our readers can benefit from the discussion.

Hillstrom's Multichannel Secrets, 59 Tips Every CEO Should Know, Now Available At Lulu.com

Great Moments In Database Marketing #10: The 3/2/1 Rule

During the next two weeks, we'll explore some of the unique things teams I've worked with have learned during the past twenty years about customer behavior.

#10 is the "3/2/1" rule. I once worked with a large retailer that did a spectacular job of linking website visitation data with store visit survey information and purchase data across all channels. The retailer learned that multichannel customers visit the e-commerce website three times a month, shop the store two times a month, then purchase once a month (with 85% of the purchases occurring in-store, 15% online).

How does your view of customer behavior change when you know this fact? It should cause your head to pop with possibilities!!!

First of all, you realize that your Web Analytics information is largely incomplete. Who cares if the visit-specific conversion rate is 3.04838290%? Within this project, we realized that conversion, when measured on a monthly basis (counting e-commerce and store purchases) was utterly staggering. Staggering!! More than ten times the visit-specific conversion rate.

All of a sudden, that cross-channel inventory system sounds like a good idea!

The web analytics corner of the world doesn't have enough data to tell you about the true power of your e-commerce website. You need your Business Intelligence team (and they better know SAS or SPSS, not just basic tools like Business Objects or MicroStrategy) to lead you down this path. And most important ... you need your BI team to mentor your Web Analytics team, you need them to teach the Web Analytics folks how customer behavior works across and between channels.

The true power of your e-commerce website is measured in a monthly or yearly conversion rate, combining conversions from all channels. You'll never view your website (or your analytics team) the same way, once you identify your version of the 3/2/1 rule!

Steve & Barry Retail Stores

No catalogs, no website, growing in an era of retail contraction. Steve & Barry, with just one channel, defies multichannel logic.

Multichannel advocates, do you think this brand is "missing an opportunity", or does having just one channel give it a unique competitive advantage, give it a reason for being, give it a focus that a multichannel brand simply cannot have?

Multichannel Strategy: The Rural Customer

You manage a brand with three traditional channels (phone, web, stores).

Today, you meet to decide your strategy for customers who live in rural areas.

Here's what you know about your rural customers.

• They purchase about two times per year.
• They do not purchase in your stores, because they live more than a hundred miles from their closest store.
  
• They are unlikely to purchase using your e-commerce channel.
• The average age of the customer is 57 years old.
  
• About a third of these customers volunteered an e-mail address to you. The e-mail address typically has a cable internet service provider suffix.
• The merchandise these customers purchase is more conservative than your average e-commerce customer, much more conservative than your average store customer.

If you were building your marketing plan from scratch, not doing the four drops and eight remails you've executed for the past fifteen years, not doing the two e-mail blasts per week you've typically executed, not doing the retail direct mail campaigns you've executed for twenty years, describe the marketing plan you'd employ for this customer segment.

If Multichannel Is Better ...

... then why do you purchase books at Amazon.com, and not at Barnes & Noble?

... then why do you rent movies from Netflix and not from Blockbuster?

... then why do you buy shoes at Zappos and not at Nordstrom?

... then why do you buy music at the iTunes store at not at Best Buy?

One Way To Increase Multichannel Sales

Click on the image to enlarge it.

Multichannel Customers And Advertising

Please click on the image to enlarge it.

The most popular question asked of me is "When can I stop advertising to or reduce advertising to a segment of customers?"

Often, catalogers and retailers are unwilling to execute tests that will answer this question, opting instead to maximize short-term sales.

If you fall into that camp, try this:

• Identify any customer who purchased from your brand in the past twelve months, and purchased at least ten times (since the first purchase).

• Sum how many of the ten most recent purchases occurred, by channel.

• Graph the frequency of occurrence, using one channel as the x-axis.

In the image at the start of this post, there are three distributions.

• The U-Shaped Distribution occurs when your customer prefers shopping from one channel. Almost all customers buy from, say, the online channel, or the catalog channel, and tend to purchase in equal rates. When this happens, nearly half of your audience is eligible for a reduction in advertising, as nearly half of the audience buys online, and may be in the habit of shopping online without the need for catalogs.

• The Bell-Shaped Distribution occurs when customers swap back and forth, between channels, not exhibiting a preference for any one channel. In this case, you probably need to continue catalog advertising.

• The Skewed-Shape Distribution happens when customers generally shop in just one channel, and show a clear preference for just one channel. This frequently happens in online/retail situations, where customers inevitably shift their preference to the retail channel.

If you want to reduce advertising (catalog advertising in particular), you don't want to see the bell-shaped distribution. When customers switch back and forth between channels, they are likely to be semi-dependent upon catalog advertising. Instead, you want to see a lot of customers who are 100% or nearly 100% loyal to the online channel. This is the audience that could stomach a reduction in advertising, without adversely impacting the top line.

Your Company's Multichannel DNA

Here's what I did. I scanned the 2007 10-K statements of five publicly traded companies:

• Nordstrom (JWN).
• J.C. Penney (JCP).
• Williams Sonoma (WSM).
• J. Crew (JCG).
• Coldwater Creek (CWTR).

Within each document, I scanned terms, like STORES, RETAIL, MULTI-CHANNEL, CATALOG, ONLINE, INTERNET, WEB, MAIL ORDER, CUSTOMER, CONSUMER, E-COMMERCE, E-MAIL, and DATABASE.

After tabulating the results, I was able to rank each of the five brands on the basis of how often these terms were used. The terms reflect how the management team of each company views the world. Let's take a peek at the findings.


Stores / Retail: The results aren't surprising, with Nordstrom and J.C. Penney skewing heaviest to these terms. Clearly, these brands view themselves as retailers, not so much as direct marketers.

• Nordstrom = 68.1%
• J.C. Penney = 67.3%
• J. Crew = 56.4%
• Coldwater Creek = 53.3%
• Williams Sonoma = 51.5%

Catalog: Guess which companies used this term most often? Sure, the ones with a catalog heritage (though JCP shows how they changed over time).

• Williams Sonoma = 14.9%
• Coldwater Creek = 12.5%
• J. Crew = 10.6%
• J.C. Penney = 5.6%.
• Nordstrom = 4.7%.

Internet: This one is a bit murkier to interpret. I'll leave it up to you!

• Williams Sonoma = 11.6%
• J. Crew = 11.5%
• Nordstrom = 9.7%
• J.C. Penney = 8.1%
• Coldwater Creek = 7.8%

E-Mail: Do these companies care about e-mail marketing enough to say something about it? Nope. E-Mail marketers appear to have work to do to prove the viability of this channel to Sr. Management.

• Coldwater Creek = 3.0%.
• J. Crew = 0.9%
• Nordstrom = 0.0%
• J.C. Penney = 0.0%
• Williams Sonoma = 0.0%

Multichannel: We hear the buzzword over and over and over from the vendor community. Do the management of these brands talk about it publicly? Not really.

• Nordstrom = 2.9%
• Coldwater Creek = 1.8%
• Williams Sonoma = 0.4%
• J.C. Penney = 0.3%
• J. Crew = 0.3%

Customer: Often mentioned in context with the direct channel, this illustrates how often these brands talk about serving customers, vs. managing stores. Notice the inverse relationship with retail focus.

• Williams Sonoma = 21.4%
• Coldwater Creek = 20.3%
• J. Crew = 19.8%
• J.C. Penney = 18.8%
• Nordstrom = 14.7%

Database: Does anybody mention metrics from the customer or e-mail database? Nope! A tip of the hat to Coldwater Creek for at least having a bit of database information available.

• Coldwater Creek = 1.3%
• J. Crew = 0.6%
• Nordstrom = 0.0%
• J.C. Penney = 0.0%
• Williams Sonoma = 0.0%

Does Any Of This Mean Anything? Yes!

The management teams of each company speak publicly, in an official manner, once a year. When they speak, they signal to the public what they care about.

Nordstrom and J.C. Penney care about retail, though Nordstrom talks more about being multichannel than anybody else. Clearly, Nordstrom wants to use the direct channel to inspire retail growth, given that they don't talk about their catalog or online channels much.

Williams Sonoma management discussions are skewed toward catalog. Williams Sonoma speaks about the online channel more than anybody else as well. The DNA of this company is all about direct marketing. Even though this company has a veritable plethora of retail locations compared with somebody like Nordstrom, the way this company views the world is fundamentally different.

J. Crew has a direct marketing skew, though the skew is focused online. The web means something more to J. Crew management than to the companies that have a catalog focus.

Coldwater Creek has the most unusual DNA of the companies listed. Management appears to view channels from a marketing standpoint, mentioning catalog marketing, e-mail marketing, and the customer database more often than the rest.


The data qualitatively illustrate that the management teams, and in all likelihood the culture of each company, have a DNA that determines "who they are".

This view of "who they are" may determine how each company approaches the future. Companies with a catalog heritage will believe in catalog marketing as a solution. Companies that view the web as an integral tool will use it to drive future business. Companies that view stores as the core part of the business might use direct marketing to improve comps.

What is the DNA of the company you work for? How does your DNA shape how your company views the future?

Orange Julius

A quick read of the DMNews Essential Guide To Multichannel Retail leaves one believing that retailers without a multichannel approach are about to be fossilized.

So let's pick a retailer, and give you an opportunity to share with all of us what an appropriate multichannel strategy would be.

The retailer: Orange Julius. Yes, that's right, the mall-based purveyor of appetite satisfaction.

It's unlikely that a catalog strategy will drive a dramatic increase in sales. It's unlikely that targeting prior hot dog consumers with discounted nachos via e-mail will move the needle (though they do offer an OJ Quench Club program that offers you e-mail discounts). And who is going to buy a smoothie online, and pick it up in the store? Or who wants to check retail inventory online to see if there will be an ample supply of turkey club pitas?

All kidding aside, here's your opportunity to draw up a multichannel strategy for an atypical retail brand. What ideas do you have (and all ideas are good ideas in this case, I won't be offering my thoughts in the comments section, so have at it)?

Multichannel Customers Are Not The Most Profitable Customers

This will probably stick in the craw of the multichannel establishment.

Have your data guru run this query.

• Step 1: Identify all customers who purchased via catalog or online channels during 2006.
• Step 2: Identify customers who were between the 30th and 40th percentile in 2006 spend. In my case, this is $200 - $300 in 2006 spend.
• Step 3: Split this audience into three groups, based on 2006 activity.
• Catalog-Only customers in 2006.
  
• Online-Only customers in 2006.
  
• Multichannel Customers (Catalog + Online) in 2006.
  
• Step 4: Measure repurchase rate, total sales, marketing cost, and profitability for each segment during 2007.

This is a forward-looking set of metrics, the type you need to run to really understand multichannel customer value, after controlling in some limited way for historical spend.

Take a look at this example from a catalog brand:

Future Twelve Month Value Of Last Year's Buyers: $200 - $300 Spend Last Year
Catalog	Web	Cases	Rebuy	Spend	Sales	Mktg	Profit
Yes	No	8,839	50.2%	$295.08	$148.13	$20.00	$24.44
No	Yes	6,217	43.6%	$288.39	$125.74	$9.00	$28.72
Yes	Yes	2,374	55.2%	$295.67	$163.21	$23.00	$25.96

Oh oh. Those vaunted multichannel customers are not the most profitable. Why?

One of the realities of multichannel marketing is that the "best" customers are most likely to be receptive to the "most" advertising channels. So in this case, the catalog brand bombs this customer --- saturating her with a veritable plethora of catalog and e-mail campaigns.

In addition, this customer does her own shopping, independent of catalog and e-mail marketing. She uses Google to search for merchandise. She utilizes affiliates, shopping comparison sites, portals, you name it. The cataloger spends money on all of those channels, so in essence, the customer is spending your marketing money on your behalf!

Your multichannel customer, the one you're focusing all this energy on in order to create a seamless multichannel experience, often end up being less profitable ... and we haven't even factored in systems integration costs yet.

We must find ways to reduce our investment in marketing to multichannel customers, so that self-directed customer investment (paid search, shopping comparison sites, affiliates, portals) doesn't cause an overall "over-investment". History is littered with ways to increase investment in multichannel customers, it is time to go the other way.

I'm guessing three out of four catalogers reading this blog will observe similar results, if this query is run at leading catalog brands.

Is this what you are observing when you measure the total profitability of customer segments?

Multichannel Customer Value: A Case Study

Click on the image to enlarge it.

We make a lot of decisions on the basis of multichannel customers. And why not? Our industry leaders tell us our customers demand a seamless multichannel customer experience.

For me, frustration boiled over this past week, when industry leaders cheered J.C. Penney's decision to consolidate marketing and merchandising functions across channels.

When did it become so fashionable for industry leaders to cheer the loss of jobs, all in the name of operational efficiencies that allow vendors to profit from the sale of multichannel solutions?

The phrase that vendors, industry experts, research organizations, and trade journals most frequently use to promote a multichannel agenda is this one:

"Multichannel customers are the most valuable customers".

We now know that this statement isn't accurate. Business Intelligence teams that use fair queries, controlling for other factors, do not observe this relationship.

The analytics used to defend the statement are highly biased. The metric is backward looking, not forward looking. Analysts query a database, splitting customers into two groups --- those that purchased from multiple channels last year, and those who purchased from a single channel last year. Next, the analyst computes the mean of last year's net sales in each group.

By default, the multichannel group will have spent more. The query is designed to make this happen. A single channel customer is disproportionately skewed toward one purchase. A multichannel customer, by definition, had to purchase at least two times. This greatly biases the results of the query.

The bias benefits our entire vendor industry, from those offering inventory solutions to those promoting the use of paper advertising to those offering e-mail solutions to those promoting pay-per-click marketing to those providing website marketing products and services.

Now honestly, you might find that multichannel customers are your best customers. But it will be because your unbiased queries prove they are your best customers, not because somebody surveyed 849 customers and extrapolated the results to 300,000,000 residents of the United States.

What happens if we try to eliminate this bias?

The image at the start of this post illustrates future twelve month net sales, based on customer activity in the past twelve months for a client. Sure, this metric will be viewed by some as being biased. Maybe I'll spur a discussion that improves how we view our field.


Here's how you run the query.

Step 1: Identify all customers who purchased from your brand in 2006.

Step 2: Within this audience, select customers who were customers prior to 2006 (in other words, eliminate all new customers in 2006).

Step 3: Identify the top 25% cutoff point for spend in this audience in 2006. Say that amount is $350. Keep that amount in mind for subsequent analyses. Select only customers who spent at least $350.

Step 4: Within this universe of great customers, calculate the average number of channels the customer purchased in during 2006.

Step 5: Calculate the mean net sales spent by this audience in 2007. If a customer did not purchase in 2007, the customer spent $0.

Step 6: Repeat steps 1-5 for all prior years, using the $350 cutoff (or whatever your dollar cutoff is for really good customers) in each year you run the analysis.

Step 7: Plot average channels purchased from (x-axis) by mean net sales in the next twelve months (y-axis).

Step 8: Review your graph (the graph attached to this post).


If the experts are right, then this graph should have a linear relation, with future sales increasing as prior channels increase.

In this example, we don't observe a linear trend, do we? In fact, the correlation is negative. Among really good customers, years where there was high multichannel activity were followed by years of lower spend.

What caused increased spend? Merchandise productivity! When the brand offered great products, customers spent more. When the brand didn't have great products, customers spent less. Channels didn't play a significant role in increasing or lowering customer spend.

Our industry demands that we improve the multichannel customer experience, offering little proof that customers will spend more.

Data consistently tell us that when customers love the merchandise we offer, customers spend more.

Focus on merchandise, the main reason customers buy from your brand. Then allocate proportionately fewer resources to the vendor / expert / research / trade-journal agenda of multichannel excellence.

When Is The Best Time To Send A Catalog To Support A Retail Event And Drive Multichannel Sales?

Please click on the image to enlarge it.

I'm often asked what the best timing is for sending a catalog that supports a retail event. Here are a few guidelines for you to consider.

Let's assume you want to mail a catalog to support a retail event.

First, identify (via test and holdout groups, not via matchback analytics) the channel that benefits most from the mailing of a catalog. If the channel is the telephone channel, you'll probably have to mail the catalog at least three weeks ahead of the event, with a Monday/Wednesday in-home date. If the channel that benefits the most is the retail channel, you'll probably have to mail the catalog 1-2 weeks ahead of the event, with a Wednesday/Friday in-home date.

Similarly, you ask yourself who the majority of customers receiving this mailing are. Catalog/Online customers prefer Monday/Wednesday in-home dates, while Retail customers prefer Wednesday/Friday in-home dates.

The combination of these questions yields a matrix that tells you when to send the catalog, and tells you the expected performance of the catalog on a grading scale of "A" (excellent) to "F" (poor).

In many cases, the management of the dominant channel in your brand will require you to execute your mailing to give their channel the best chance of success. The grid helps explain the impact of compromise --- one of the things that multichannel pundits don't talk about much --- the fact that compromises to accommodate channels reduce the overall ROI of a catalog campaign.

53 Vital Multichannel Website/Online Marketing Tips

Here is the hyper-link to forward to your multichannel catalog and retail colleagues:

http://minethatdata.blogspot.com/2008/01/53-vital-multichannel-websiteonline.html

1. Create widgets that allow your customer to create a sub-store on their own homepage (Google, My Yahoo, etc.).
2. Give your customers access to their historical online visitation behavior.
3. As a perk, allow your multichannel or most loyal customers to create a widget-based personalized homepage.
   
4. Stop guessing what your customer wants --- pay CLOSE ATTENTION to the widgets your best customers put on their personalized homepage!
5. Don't treat your RSS feeds like e-mail campaigns.
6. Allow every store manager to create a personalized/widget-based "store page", and encourage store customers to interact with that page instead of your typical e-commerce homepage.
7. Allow your best store employees to have their own personalized/widget-based "store page", and encourage your store customers to interact with that page instead of your typical e-commerce homepage.
   
8. Have gifted employees write heartfelt blogs about your brand. Give them twenty-four months to build an audience. Keep your PR department out of this activity.
9. After twenty-four months, measure the profitability of customers who interact with the blogs your employees write.
   
10. Retail websites serve three purposes: E-Commerce, Research, and Entertainment. Decide which of these elements is most important to your customer.
11. Catalog websites serve three purposes: E-Commerce, Research, and a Catalog Order Form. Decide which of these elements is most important to your customer.
12. Your catalog/retail audience is homogeneous. Your website audience is heterogeneous. Merchandising a website is more difficult than merchandising a catalog, or a store.
13. Divide your online audience into "segments" based on the activity that drives them to the website (i.e. visitors from Google (paid/natural, branded etc.), from E-Mail, from Catalog, from Retail, from Portals, from Shopping Comparison Sites, from Affiliates, from Widgets, from Blogs). Measure everything across sub-audiences. Merchandise to each individual audience.
14. It is very likely that your customer visits your site three or four times between purchases, rendering metrics like conversion rate useless.
15. Instead of measuring conversion rate, measure the probability of a prior loyal visitor visiting again this month.
16. Instead of measuring conversion rate, measure the average number of visits made if a loyal visitor visits again this month.
17. Instead of measuring conversion rate within one session/day, measure the probability of a loyal visitor purchasing over a seven/thirty day period of time.
18. Instead of measuring conversion rate within the online channel, measure the probability of a website visitor purchasing via mail/phone/store within a seven/thirty day period of time, and add those conversions to your online conversions.
19. Your website is a home with many entry doors. Customers are less and less likely to ring the doorbell to the front door.
20. Use Multichannel Forensics to identify if e-commerce customers become retail customers.
21. Shopping cart abandonment is not a bad thing. For many customers, the shopping cart is simply a "wish list repository", a place to hold items the customer wants to purchase in your store at a later date.
22. If you want to increase the conversion rate of your website, pay attention to "ugly" websites.
23. In your customer database, record the number of days since last website visit.
24. In your customer database, record the number of days since last visit to all of your key landing pages.
25. In your customer database, record the number of days since last visit from Google and other search engines.
26. In your customer database, record the number of days since last visit from an E-mail campaign.
27. In your customer database, record the number of days since last visit from Portal advertising, Shopping Comparison sites, Affiliate marketing, etc.
28. In your customer database, record the number of days since last visit from a blog.
29. In your customer database, record the number of days since last visit to each of your key merchandise divisions.
30. In your customer database, record the number of days since the customer used your internal search function.
    
31. Measure customer interaction with the sub-channels on your website (paid search, natural search, branded search, non-branded search, e-mail, widgets, portals, shopping comparison, affiliates, etc.).
32. Once measured, target your e-mail and search marketing strategies around customer interactions with sub-channels.
33. Retail Executives: Please treat your online marketing team as equal partners.
34. Catalog Executives: Please treat your online marketing team as equal partners.
35. Online Executives: Please meet your retail and catalog executives "half-way"!
36. Similar to catalog marketing, there is a relationship between online merchandise density and sales per visit.
37. Pay close attention to the items catalog buyers purchase online. Which non-catalog-advertised items are customers purchasing?
38. Pay close attention to the items retail customers purchase online. Which non-retail items are customers purchasing?
39. Personas are communication tools that allow your executive team to understand who is interacting with your website. Executives understand personas better than they understand conversion rates.
40. Online Executives: Go "on the road". Visit every store manager, every one of your call centers and distribution centers, and evangelize your craft to those who are not immersed in it.
41. Link customer behavior across multiple computers for a complete view of customer interaction with your brand.
42. Try something different with e-mail marketing. Stop the "sameness" that plagues the retail/catalog industry, test anything that is not a "best practice".
43. Require each executive to respond to one customer complaint per month/quarter on a "complaint blog", and actively listen to customer comments in response to executive posts.
44. Require each store manager, or teams of store managers, to execute online marketing campaigns from time to time, to learn and appreciate your craft.
45. Require online marketing managers to work the sales floor in your store two days per year.
46. Require each store marketing manager (television, newspapers, magazines) to execute online marketing campaigns, and require these folks to measure success across all channels.
    
47. Require each online marketing manager to execute store marketing campaigns, and require these folks to measure success across channels.
48. Require store merchandisers to actively monitor "what sells online".
49. Require online merchandisers to actively monitor "what sells in stores".
50. Test the difference in customer behavior when marketing campaigns are integrated (same across stores/website), and when marketing campaigns are run independent of each other (different across stores/website).
51. Retail executives: Your website may well be a media channel. Split your website into two parts, an e-commerce part, and a media channel. Treat each "sub-channel" appropriately. Hint: You're better at managing a media channel, your online marketing folks are better at managing the e-commerce channel.
52. Web Analytics: Complement your traditional session/daily metrics with time-based metrics based on fixed groups of customers. There isn't a difference between a customer visiting four times and buying once during a month, and a customer visiting once and buying once during a month.
53. The days of +25% online sales growth are winding down. If you are an online marketing executive, be ready to prove your worth in a +4% comp-sales online world.

73 Vital Multichannel Catalog Tips

Please feel free to forward this article to anybody you feel would benefit from the information. Add your tip in the comments section of this post.

Here is the hyperlink you can forward to your multichannel colleagues: http://minethatdata.blogspot.com/2008/01/73-vital-multichannel-catalog-tips.html

1. Remail catalogs are on their last legs. Where possible, use new creative, the customer knows the difference.
2. Honor all catalog opt-out requests, regardless of source.
3. Urban customers like to use catalogs to shop retail stores.
4. Suburban customers like to use catalogs to shop your website.
5. Rural customers like to use catalogs to purchase merchandise over the telephone.
6. It is very likely that you are under-investing in online marketing (paid search, portals, etc.).
7. Online customers have lower lifetime value than catalog-sourced customers. Get over it!!
8. Profit and loss statements should be generated, by item, on a quarterly basis, measuring profit across all channels.
9. Statistical models almost always outperform RFM models.
10. RFM models are perfect for understanding comp-segment performance.
11. Increased product density in catalogs is generally correlated with increases in phone/mail channel sales.
12. If your customer acquisition activities are at a break-even level (on each incremental segment, or in total), you are probably under-investing in customer acquisition, throttling the long-term growth of your brand.
    
13. Ease up on mailing online-only buyers.
    
14. Ease up on mailing retail-only buyers.
15. Use mail/holdout groups to understand if catalogs need to be mailed to "multichannel customers". Determine how much of the sales volume will happen without mailing any catalogs.
16. Matchback algorithms over-state the effectiveness of catalog marketing.
17. Multichannel Forensics (white paper, book) should be used to understand when customers are willing to switch channels, or no longer need catalog advertising to purchase from your brand.
    
18. If you double the number of pages in a catalog, expect a 50% increase in sales volume.
19. Do not test new merchandise or new creative strategies in mailings targeted to new customers.
20. Thoughtfully evaluate the mix of new and existing merchandise offered to your best customers.
    
21. Pay close attention to the Zappos business model. Pay REALLY close attention!
22. If more than one out of every five catalogs you mail is sourced from a co-op database, pay very close attention to the merchandise preferences of co-op customers vs. all other customers --- your future merchandising assortment may be driven by co-op statisticians, not by you!
23. If more than one out of every five online purchases is sourced from Google, pay very close attention to the merchandise preferences of Google customers vs. all other customers --- your future merchandising assortment may be drive by Google, not by you!
24. Accurately forecast segment-level household counts. Your inventory management team thanks you for your support!
25. Don't cut back on customer acquisition during an economic downturn, or during an inflationary expense environment.
    
26. Use Multichannel Forensics to forecast the five year trajectory of each of your channels, and then pro-actively change the trajectory of each channel in a favorable manner.
27. Don't outsource your intellectual capital. Keep smart people, and pay them what they are worth.
28. Learn from your online marketing and e-mail marketing staff.
29. Cross-train your catalog marketing, online marketing, e-mail marketing and social marketing experts.
30. If your catalog marketing, online marketing, e-mail marketing and social marketing experts do not defend all of their decisions via profit and loss statements, immediately train each individual on how to produce a profit and loss statement.
31. Listen to your business intelligence and data mining staff for advice. Don't ask these folks to drive your business strategy.
32. Adding a 20th catalog to your contact strategy will probably not cause a proportional increase in sales.
33. Adding a 20th catalog to your catalog strategy will probably cause a proportional increase in expenses.
34. Multichannel customers are not always your best customers.
35. Execute and analyze mail/holdout tests in every catalog and e-mail marketing campaign.
36. A growing minority of consumers view your catalog marketing efforts as "junk mail", as being a threat to the environment. Respond to this trend!
    
37. If a catalog customer has not purchased in two years, but visited your website yesterday, mail this customer a catalog.
38. All of your future catalog and e-mail targeting strategies will require a database of summarized online visitation behavior.
39. The best catalog marketing in the world will not overcome shoddy financial or operational management of your brand.
    
40. Customers who order three or more items, only to realize these items are not available, will have lower lifetime value than customers who receive the items they wish to purchase.
41. Channel data ages differently. Catalog purchases have a long half-life. Online purchases have an average half-life. Retail purchases have a short half-life.
42. Do not allow phone/mail transactions to drive your overall merchandising strategy. These transactions are disproportionately driven by age 50+ rural shoppers.
43. Keycode/Source Code response management is a dying craft.
44. Your list management, list rental/exchange firm, or co-op partner should be viewed as a "trusted adviser".
45. Conversely, list management, and list rental/exchange folk, or co-op partners should be branding themselves as "smart people" rather than "list people".
46. If you merchandise a catalog for multichannel success, you will probably end up mailing an unsuccessful catalog. Pick a primary channel, and merchandise to the target customer of the primary channel.
47. The merchandise mix of items purchased in a store is likely to be different than the merchandise offered in the catalog you mailed to a store customer. Optimal catalog merchandising to drive store sales is a complex and misunderstood process.
48. Forty-eight pages may drive just as much online and store volume as do eighty-four pages.
49. When an online/store shopper is willing to purchase without marketing assistance, gladly stop marketing to the customer.
50. As you add channels, pay close attention to your purchase metrics. During the past decade, we haven't significantly "pushed the peanut" on repurchase rate, orders per repurchaser, items per order, or average order size, in spite of additional channels and additional marketing expense.
51. Special catalogs have special products at higher-than-average price points.
52. The first twenty pages and the back cover of your catalog mean EVERYTHING. This is not real estate worthy of experimentation or careless branding strategies.
53. Identify order starters (the items that cause a customer to purchase) in catalog and e-mail marketing activity. Capitalize on these items across all marketing activities.
54. Your database must have summarized and detail-level catalog, online and retail purchase behavior, updated on a weekly basis, at a customer level.
    
55. Your database must have summarized and detail-level online visitation activity, updated on (at worst) a daily basis, at a customer level.
    
56. Your database must have summarized and detail-level marketing expenditures at a customer level.
    
57. If you purchase campaign management software for your direct mail and e-mail activities, expect staffing turnover due to differences in skill-sets between traditional circulation tasks and campaign management circulation tasks.
58. Demand oversight and a collaborative relationship with your co-op statistician. This person has a disproportionate influence on your brand.
59. Long-term, you are an online brand that mails catalogs, not a catalog brand with a website. Start transitioning your staff today for this long-term certainty.
60. You can successfully integrate all of your merchandising and inventory systems across channels. You may not have the marketing expertise to take advantage of multichannel systems integration.
61. The days of charging $14.95 for one week shipping/handling are coming to an abrupt end. See tip #21 for more details.
62. You will be amazed how much waste is pared from your marketing activities when you're no longer able to charge $14.95 for shipping/handling.
63. Challenge the ACCM, and DMA conferences to feature speakers with innovative and relevant ideas. Demand that our best conferences provide you with a roadmap to the future.
64. Talk openly about how Catalog Choice will impact the long-term future of your business.
65. Talk openly about how you would alter your marketing strategy if you were not allowed to mail catalogs to customers who have never previously purchased from your brand.
66. Become best friends with the folks who work in your Finance department.
67. Become best friends with your Web Analytics expert.
    
68. When vendors talk about huge targeting and data mining successes, be skeptical. It is likely that the success is due to previous failures in marketing strategy, not in targeting/data mining strategy.
69. Listen to the passion your Chief Merchandising Officer has about merchandise. If you find a talented person anywhere else in your organization who has comparable passion for his/her craft, hold on to that person with all your might!
70. Realize that almost nobody in your organization understands the economics, response, and profitability of your catalog, e-mail and online marketing efforts.
71. Become the person in your organization that thoroughly understands the economics, response, and profitability of your catalog, e-mail and online marketing efforts.
72. How will you ever innovate if all you do is follow "best practices"?
73. If you want to improve your multichannel marketing strategies, listen to your customers before you listen to vendors / research organizations.
    

Gift Wrapping At Amazon.com

Here's a thorny challenge.

Maybe you're like me (most likely you're not like me, but that's a topic for another day). Being 1,700 miles from family, you visit Amazon to purchase a gift for your nephew for Christmas.

You select the gift, then you select gift wrapping. Except, the item isn't eligible for gift wrapping. The item comes from one of Amazon's partners.

In this case, you run into a unique challenge in multichannel marketing. Amazon uses a vendor that allows for a different customer experience than the experience typically promoted by Amazon.

If you were CEO of a brand that had business partners with different customer service capabilities than your brand, how would you deal with this challenge?

New Book: Hillstrom's Multichannel Forensics

Well, the cat is out of the bag!

This morning, I received an e-mail from Amazon.

The e-mail said because I previously purchased a book from a different database marketing author, I might be interested in a book being released on September 30, called "Hillstrom's Multichannel Forensics".

I am interested in the book. I AM THE AUTHOR OF THE BOOK!!!!

I'm guessing I'm not the only person Amazon sent this e-mail to. So it is time to share with you what this new book is all about.

The text is the culmination of twelve years of research into how customers behave in a multichannel environment. Twelve years ago, e-commerce began to impact, then influence, then usurp catalog marketing. Peers at competing retailers and catalogers shared their frustration with me about understanding customer behavior in a multichannel environment.

Vendors and Research Organizations shared multichannel customer facts and figures that were impressive. They seldom told us meaningful information that helped us understand our customers. And if they had meaningful information, you can be sure the information would be highly monetized!

I felt compelled to create a methodology, a framework, for understanding and explaining multichannel customer behavior (in a b2b or a b2c environment).

I strongly believed the methodology should do two different things.

First, the methodology had to explain how customers interacted with advertising, products, brands and channels ... in a way that a CEO or Executive Vice President could understand.

Second, the methodology had to illustrate how sales within products, brands or channels will evolve over the next five years. This allows the CEO or EVP to make decisions today that limit future business challenges.

The combination of these factors became "Multichannel Forensics".

The perfect laboratory for testing this methodology came during my tenure at Nordstrom. In 2005, we eliminated our catalog marketing program. I used this framework, this methodology, to illustrate what would happen to online and retail net sales growth if catalogs were no longer there to support those channels.

The methodology worked!

Since beginning my own consulting practice in March, I've completed multichannel forensics projects for thirteen brands/titles. I'm continually pleased with the way CEOs and EVPs react to the methodology. I'm proud of the way the methodology forecasts what is likely to happen in the future. I love giving business leaders tools they can use to quell challenges from the Board of Directors, or Ownership Team.

There are three ways you can learn about multichannel forensics.

• You can read this blog. I will continue to give examples of how the methodology can be used in real-life settings.

• You can read the white paper, which goes into some level of detail on the topic.

• You can buy the book, and learn the nuts and bolts of the methodology. I want for you to be able to do these projects yourself!
  

• Of course, you can hire me to do a project for you.

I spend considerable time in the book outlining three-channel situations (i.e. catalog/online/retail or telemarketing/catalog/online, as examples). Two-channel and three-channel situations are very common, hence the focus on these topics.

I do not go into the complex simulation algorithms that I use to understand the interaction between, say, ten merchandise divisions and three channels. The concepts in the book are illustrated at a level that allows the reader to build the simulations, if desired.

How might you benefit from this book?

• CEOs and EVPs will learn the current trajectory of the business they manage, and will learn how they might mitigate negative trends.
  

• E-Mail Marketers will learn how their oft-criticized discipline builds long-term sales growth.

• Catalog Marketers will precisely learn the value of catalog marketing in a multichannel environment, in a way that matchback analyses cannot possibly explain.

• Online Marketers will finally be able to show retail leadership how online customers become retail customers, demonstrating how comp store sales growth is influenced by the online channel.

• Web Analytics practitioners and Business Intelligence analysts will be able to see how customer behavior can be analyzed longitudinally (over time), providing value that goes well beyond individual session metrics.

• Multichannel Vendors will be able to identify ways they can provide additional value to the clients they support, value that is targeted at the CEO/EVP level.

Amazon is allowing pre-orders of the book in anticipation of a September 30 release date. In the next two weeks, the book will be available on my publisher's website ... www.forbetterbooks.com. Obviously, Amazon is not part of the purchase process if you purchase the book from my publisher's website, Amazon's profit is reallocated among those who invested time, energy and money in creation of the book.

I invite you to learn more about Multichannel Forensics. Do so at no cost by downloading the white paper, or purchase the book! My thanks go to Don Libey for shepherding this book and my first book (Hillstrom's Database Marketing), for giving the little guy a chance!