E-Mail Marketing, Search, Matchback, Attribution

One of the mysteries of marketing in 2009 is the concept of attribution, a process where we matchback orders derived in one micro-channel to the advertising micro-channel that drove the order.

For whatever reason, the e-mail blogosphere and vendor community fails to capitalize on this opportunity.

My Mutichannel Forensics projects repeatedly indicate that e-mail marketing and search marketing play a unique micro-channel role. E-Mail marketing is a "love" channel, if you will. The 10% to 50% of your twelve-month buyer file that subscribes to e-mail marketing "loves you" more than the average customer. These customers have better "RFM" characteristics, not because of e-mail marketing necessarily, but because the customer is a good customer who wants to learn more.

And then we have search, which works in the opposite direction. The customer who "loves you" doesn't implicitly trust you. As a result, she wants to make sure that she's getting the best deal possible, the best combination of merchandise and value.

When you have customers who want to see your e-mail campaigns and then want to use search, you have a classic micro-channel combination that must be tabulated in your database, and analyzed going forward.

At minimum, we need to run matchback algorithms for e-mail marketing. Catalogers have been running matchbacks for the past fifteen years, taking credit for orders that were not necessarily driven by catalogs. E-Mail marketers, however, have been exceptionally slow to embrace attribution and matchback programs. I don't understand why.

It's a fairly simple process. Say you deliver an e-mail marketing campaign on a Tuesday. Take all customers who ordered on Tuesday, Wednesday, Thursday, and Friday, and match them back to your e-mail campaign. And by the way, make sure you have a holdout group, a group who did not receive the e-mail campaign, and do the same process --- subtracting the difference between mailed and holdout group for true incremental value.

Now, any orders that are generated by search marketing are matched back and attributed to the e-mail marketing campaign. And here's where we need to make an adjustment ... we need to make a guess at all of the unconverted searches that were caused by e-mail marketing, and allocate the cost of those unconverted searches back to the e-mail marketing campaign. If the typical search conversion rate is, say, 3%, you have to multiply converted searches by 33, and then multiply that total by the cost-per-click, in order to get at the right advertising cost.

Two things usually happen, two things that are highly relevant to e-mail marketers.

1. E-Mail marketing causes search activity, and that search activity results in orders that are normally credited to search and should be credited to e-mail. This can result in e-mail marketing being more productive that usually measured to be.
2. E-Mail marketing causes the "search audience" to do a bunch of unproductive searches. As a result, the "search segment" is actually unprofitable --- causing the e-mail marketer to withhold e-mail marketing campaigns to customers who search all of the time.

The latter point is worth noting ... the e-mail marketer should be creating segments in the database of customers who utilize search on a frequent basis ... electing to develop a different contact strategy for the "E-Mail / Search" micro-channel combination.

Multichannel Marketing And Merchants

Our merchandising organizations provide passion and excitement. Heck, if these folks didn't believe in their product, why would the customer believe in the product?

Back in the day (i.e. pre-internet, 1995), catalog marketing was "the store". Say you mailed 1,000,000 catalogs, and put a dress on a quarter page of the catalog. If you didn't feature the dress, you sold $0. If you did feature the dress, maybe you sold $25,000 of merchandise.

Today, the internet is "the store". The catalog, while still very important, "influences" sales.

Today, you will probably sell $33,333 of merchandise instead of $25,000. However, the distribution of sales will be very different, assuming you run the dress in a catalog to a million folks on a quarter page:

• Telephone Demand = $10,000.
• Online Demand Driven By The Catalog = $5,000.
• Online Demand Driven By E-Mail = $3,000.
• Online Demand Driven By Search = $3,000.
• Online Demand Driven By Affiliates = $1,500.
• Online Demand Driven By Portal Advertising = $1,500.
• Online Demand --- Organic = $9,333.

Notice the difference between 1995 and 2007. Back in the day, a merchant got product in the catalog --- where product appeared, how it was presented, and who saw the catalog made a big difference. The merchant fought for her product.

Today, there are at least a half-dozen different avenues for the same item. There are numerous folks that the merchant has to work with, in order to maximize the sales of the dress she is trying to sell.

Most important, the merchant literally has a "portfolio" of investment options. The merchant doesn't have to feel terrified if the dress is not featured in a module in the e-mail campaign, for example. The e-mail campaign only drives a small fraction of total volume of this item.

Now that I'm running my own sole proprietorship, I get to talk to a lot of people across the catalog/online industry. I'm not convinced that we have done an excellent job of teaching our merchandising friends how different the marketing world is in 2007, compared with 1995. Maybe in some ways, we have yet to figure out how different the world is.

Multichannel Verses Integration

One word in this DMNews article caught my attention: "Integration".

The search folks have a very different mindset than traditional catalogers have. Second Life isn't necessarily the future of the internet. Something like Second Life is the future. That future is an obvious threat to today's version of the search industry.

Before the future even becomes relevant, the search folks call for "Integration". Catalogers are still arguing over whether printed, perfect-bound or saddle-stitched creative pieces drove an online sale, and are arguing over who gets credit for the sale.

The search folks see the future, and quickly call for "Integration". Online, Offline, Second Life, it doesn't matter.

"Integration" is so much more useful than "Multichannel". Catalogers and Retailers demanded credibility in the face of online competition, crafting the "Multichannel" moniker. "Integration" demands credibility, demands inclusion. You wouldn't integrate something unless it was useful and important. It requires all parts to fulfill the whole.

Nice job, search marketers!

Nordstrom Integrates RSS Feeds And Search Results

Nordstrom recently implemented use of RSS feeds, as part of the search process within their multichannel retail website.

Give this a try: Visit the Nordstrom website. Search for a shoe brand, like Donald J Pliner. You'll notice a little RSS button halfway down the page, on the right side of the screen. Click on the image, and you will be taken to a page that allows you to subscribe to the feed for this brand, using several popular feed readers. You'll receive updates as new styles become available.

This is an interesting take on the implementation of RSS within the multichannel retail community. Did the Nordstrom Marketing folks do this well, or should they have attempted a different strategy? Your thoughts?


P.S.: In the spirit of full disclosure, I worked at Nordstrom from January 2001 to March 2007.

Cost Per Click In Multichannel Retail

SpyFu is a website that helps users understand how much various businesses spend on online advertising.

Having insider information about accuracy of the data at several multichannel retailers, I can tell you that SpyFu is at best, directionally accurate.

That being said, one can summarize and classify the information. By doing so, many of the numerical inaccuracies are mitigated.

The attached image classifies apparel and shoe multichannel retailers into nine cells. Among these thirty-seven businesses, I use SpyFu data to determine if the retailer spends a lot, or very little on online advertising. Next, I use SpyFu data to determine if the average Cost per Click is inexpensive, average, or expensive.

The best place to reside in this image is in the upper right cell. In this cell, spend is huge, while Cost per Click is low. If these clickers convert at an acceptable rate, there is significant efficiency in the online marketing efforts of retailers in this cell. Interestingly, only Zappos meets this criteria.

Of course, SpyFu data does not have access to online or retail conversions. In other words, a customer might search for denim. The customer clicks on J. Crew in the paid search section of Google, views an item on the website, drives to the store, and purchases the item. Whether the item is purchased online or in a J. Crew store, SpyFu cannot see the conversion.

Many of the businesses in this table sell far more in their retail channel than in their direct channel. Some of the more sophisticated multichannel retailers already link paid search to estimated retail conversions. While it is important to look at cost per click, it is much more important to measure variable operating profit across all channels. This concept certainly isn't new, and has been documented many times in Database Marketing literature (this is frequently called a "matchback" analysis).

The table at the end of this post looks at multichannel profit, obtained by spending $100,000 on a paid search program. Notice how important it is to at least be able to estimate the retail conversions driven by online advertising.

In this example, the multichannel retailer generates $33 of profit for every conversion. Also notice that the multichannel retailer generates $1.49 profit per click, in this example. If these metrics were negative, the multichannel retailer would have to conduct a lifetime value analysis, to see if future sales offset short term losses.

Amount Spent, Paid Search	100,000
Cost per Click	0.75
Number of Clicks	133,333
Online Conversion Rate	2.5%
Estimated Retail Conversion Rate	2.0%
True Conversion Rate	4.5%
Online Average Order Size	225.00
Retail Average Order Size	175.00
Online Demand	750,000
Retail Net Sales	466,667
Online Profit to Demand Ratio	23.0%
Retail Profit to Net Sales Ratio	27.0%
Online Profit	172,500
Retail Profit	126,000
Less Online Advertising Expense	100,000
Net Profit	198,500
Return on Investment (Profit/Expense)	1.99
Profit per Conversion	33.08
Profit per Click	1.49

Neiman Marcus Event Marketing And Google

Multichannel marketers face considerable challenges in using the online channel to manage brand image and promote their own marketing activities.

Do this simple Google Search: Neiman Marcus Event Marketing

A person who is interested in this topic finds the Neiman Marcus website listed at the bottom of the first ten results. More problematic for Neiman Marcus is that my blog is listed sixth.

Of course, Neiman Marcus pays for their brand name, and is prominently listed in the paid search section of the page.

Multichannel CEOs and CMOs: If Kevin Hillstrom at The MineThatData Blog can outperform your megabrand on simple search terms like Neiman Marcus Event Marketing, you have problems you need to address:

• Take ownership of your brand. A good way to do this is to have staff write content that is search friendly, so that your customers will find your website when they search Google. Too much energy has been spent on e-commerce --- this energy caused us to not focus enough on owning our brand. The solution could be to follow Google's rules, and manipulate them for your own benefit.
  

• Is Google your friend or foe? In this case, Google's algorithm somehow finds me more relevant than the brand equity Neiman Marcus spent decades building. Google likes you if you follow their rules. What is your plan for addressing Google's partial ownership of your brand, especially going forward? What do you do when Google gets bigger, and more influential? Do you trust a partner that ranks The MineThatData Blog higher than your own website?
  

Another Reason Businesses Should Host Blogs: Millard and infoUSA

According to DMNews, Linda McAleer has retired from multichannel list firm Millard.

How does this relate to blogs? When I analyze my visitor information, I can see the search terms that bring people to my site. The search terms, when viewed in a broader context, suggest change at Millard, an infoUSA company.

There are numerous reasons why businesses should blog. If the blogger does a good job of search engine optimization, s/he will be able to understand industry inflection points via search terms. This picture into the future gives you a competitive advantage, assuming your SEO techniques are solid. I am not implying my techniques are solid. I continue to learn.

There Goes Google Again

Sometimes things just slip by me, and I need a fellow blogger to awaken my senses.

Earlier this year, Google released Google Checkout, a method to make checkout easy for customers shopping your site. Google charges a fee of 2% of the order size, plus a $0.20 flat fee per transaction. In other words, Google picks up the charges associated with the credit card order, and keeps a small fee for themselves.

The list of participants is a who's who of online merchandising.

So, my dear online marketers, database marketers, and multichannel marketers. I have a few questions for you.

Question #1: Did you receive incessant and passionate feedback from your customers, begging you to add this service to the array of checkout options you already offer?

Question #2: At what point do you, as an online marketing executive, finally stand up to Google and say "No thanks, I'll manage the rest of my business on my own?

Think about it. A portion of your customers fail to recognize your brand, and instead type BLUE NILE into Google, resulting in a click-through to your website. Worse, the click-through may be the result of the customer clicking on paid search. In this case, you pay Google because you haven't trained your own beloved customer to bookmark your URL.

So, you pay Google to get your own customer to visit your site. Next, you pay Google to facilitate the transaction on your site. You use Google Analytics to analyze how effectively Google managed your purchase consideration process. You enter key metrics into the documents and spreadsheet application Google hosts. Then, you blog about the process with Blogger, so that your customers can read the content, search for your URL on Google, and start the process all over again.

Will you let Google manage your distribution center one day? Will you let Google staff your contact center for you? Will you let Google run your finance department, or human resource department?

Maybe I'm just paranoid. You tell me. It's your turn to participate in the discussion.

Google Search and Eddie Bauer Merchandise

We marketers continue to give Google ownership of our business. Are we getting the results we deserve? This example shows how far search engines have to go before they are doing an adequate job.

Try this Google search: eddie bauer jeans style # 5318. Which site shows up #1 out of 741 on November 12? Oh, it is The MineThatData Blog. And the person doing the search clicked-thru to my website.

Do you think the customer had my site in mind when s/he searched this phrase?

Eddie Bauer does win the paid search battle. Thing is, I've trained myself to not even look at the paid search results, so I didn't notice this fact until the third time I looked at the results.

As we continue to hand over a portion of our businesses to the folks at Google, Yahoo! and MSN, we need to hold them accountable for producing accurate search results. Or, we need to figure out how to make our website pages search friendly, so that this doesn't happen.