September 28, 2006

September's Top Four Stories

September saw a fifty percent increase in visitors browsing content on MineThatData. These are the top four stories, measured by the number of hits attributed to each permalink.

Number Four was the post titled "Four Ways An Information Technology Employee Can Get Ideas Heard". This article was well received by the folks who saw it on Reddit.

Number Three is this week's "Four Questions With Ann Handley". Ann is the Chief Content Officer at MarketingProfs, the sixth ranked Marketing Blog in the world. Her conversational nature was appreciated by our readers.

Number Two was the September 10 edition of The Carnival of Marketing. Readers enjoyed sampling the best marketing posts from early September.

And the Number One article in September is "How Much Do You Really Pay To Watch Football On television?". It was surprising to do the math and see how much National Football League fans have to pay advertisers, in order for the advertising to break-even.

Social Media and Anthropologie

Last night, I spent a lot of time talking about Anthropologie, discussing their initial steps into multichannel marketing. Their multichannel journey, as described in DMNews, is really about the management at the company deciding to speak to Anthropologie customers and prospects with one voice.

While Anthropologie management begins this journey, another revolution is happening all around them. This version of multichannel marketing is owned by the customer. The customer is using "her channel", to market the company on behalf of Anthropologie.

Check out the blog "Craving Anthropologie". This young lady, assuming she is who she represents herself to be, has taken it upon herself to glorify all that is Anthropologie. More than seventeen thousand visitors have followed her discussion of the company over the past year. Seventeen thousand! How many shoppers have been influenced by what this person chooses to write, by this person's interpretation of the Anthropologie "brand"?

This blogger isn't the only one evangelizing Anthropologie. Popular bloggers write about Anthropologie. Bloggers admire the design of Anthropologie products. Some people's comments about Anthropologie merchandise start a series of comments from other fans. This blogger does a better job of marketing Anthropologie than an Anthropologie email campaign. Here's another one --- do you think the branding experts at Anthropologie ever conceived this point of view?

It doesn't end. Other bloggers express themselves here, here and here. And when you read these posts from avid Anthropologie shoppers, how many times do you hear them say, "Boy, I wish Anthropologie did a better job of aligning their channels, because if they were a true multichannel retailer, I'd really increase my spend with their brand!"

Not surprisingly, these shoppers were obsessed with the merchandise Anthropologie sells. And as much as it pains me to say this, these shoppers were obsessed with what Anthropologie represents --- they were obsessed with "the brand". There, I said it! These shoppers were so enthralled by Anthropologie that they decided to invent their own marketing departments, evangelizing the brand on behalf of Anthropologie, for free.

Executives have a responsibility to truly understand their customers. The information is freely available to executives. Try typing the name of your brand into Google Blogsearch. You will immediately learn how customers perceive your business, positive or negative. You will immediately learn the merchandise they think is hot. Your customers are networking and talking. They are shaping the direction of your business, regardless of your multichannel efforts, regardless of the internal politics about how to organize around channels, regardless of what pundits think you should do!!

September 26, 2006

Anthropologie Begins The Multichannel Journey

Did you do your homework last night, and read the article about Anthropologie beginning their multichannel journey?

I really enjoyed this article. Multichannel pundits tell you that the customer demands you implement a multichannel solution, and while you are at it, why don't you purchase a multi-million dollar multichannel "solution". This article talked about the things we all deal with in our everyday lives.

The former CFO of Anthropologie was thrown under the bus, due to a lack of faith in the Direct channel. Who hasn't worked in a company where certain individuals do not believe in certain key initiatives?

There was a desire to mitigate the need for people to learn both the Direct and Retail side of the business. This is completely valid. Different skills are required to manage each side of the business. Regardless of what pundits tell you about the need to be a multichannel organization, it is not easy to transfer the skillset required to run one channel into the other channel. Real companies deal with these real issues. These real issues impede multichannel integration. Pundits can't help with this.

The article talked about the problems caused by different systems in different channels. A 19 digit sku does not tie out with a 17 digit sku. This caused problems between customers and employees working in the stores. These are real problems. And if profit is slowly declining, as it is at Urban Outfitters (Anthropologie's parent company), and your CFO doesn't believe in the Direct channel, systems integration becomes a challenge. Let's see a pundit convince the CFO to spend the money to fix this problem.

It is fascinating that the catalog becomes the inflection point for change. This very visible form of advertising becomes the critical element that forces channels to compromise. Nobody wants twenty-four million catalogs deliberately communicating inconsistent messages. Catalog is like the friend that brings two dissenting parties to the bargaining table.

The article wraps up with the fact that there isn't consistent data across channels, and that it may take two to three years to accomplish all of the multichannel initiatives. This represents unbridled optimism. Since the article states that there is still internal resistance, expect this process to take a half-decade. They may never achieve the multichannel nirvana that pundits require us to attain.

MineThatData gives four thumbs up to Michael Robinson, Managing Director at Anthropologie Direct, for giving all of us an honest, realistic, and normal view of multichannel marketing from the perspective of a real business leader. Anybody who ever had to actually implement multichannel initiatives within the confines of a business with diverse personalities can understand why pundit-speak is annoying.

Ok, your turn. What did you learn from last night's assignment?

Honesty in Advertising

I heard this on the radio, driving to lunch today:
  • McDonalds Radio Commercial: "A cup of fresh-brewed coffee and McDonalds breakfast sandwich can bring you life-affirming focus."
During the afternoon, I read this in a B2B email advertisement:
  • "Customer data integration (CDI) or, more broadly, customer-centric master data management (MDM) solutions, are gaining significant momentum, largely because of their ability to help organizations achieve critical cross-functional business imperatives to bolster customer profitability, reduce operational costs, and adhere to regulatory compliance. Companies have come to realize they can't achieve these cross-functional business imperatives without adopting customer-centricity throughout their business processes."
The first quote is intriguing. I thought having cancer was "life affirming". Maybe sipping coffee in a cardboard cup, while sitting on a plastic bench next to the condiment counter is the definition of "life affirming".

The second quote makes me feel stupid. I don't want to purchase things from people who make me feel stupid.

I don't blame copywriters for this. They are simply doing the job management asks them to do.

All --- we can do better. Let's start by simply being honest.

September 25, 2006

Anthropologie Attempts To Integrate Silos

Your homework assignment for today is to read this brief article in DMNews, about multichannel retailer Anthropologie. On Tuesday night, I will outline my thoughts ... so be ready to participate in the discussion!

September 23, 2006

Four Questions With Ann Handley, Chief Content Officer, MarketingProfs

This week, I welcome Ann Handley to the "Four Questions" segment on MineThatData.

Ann Handley is the Chief Content Officer of MarketingProfs -- which means that she is the Queen of all Things Content on the MarketingProfs Web site and newsletter and the Primary Caregiver of the blog, the MarketingProfs Daily Fix. Prior to that, she was the co-founder of ClickZ.com. Ann also spent time as a freelance journalist, and wrote regularly for the Boston Globe.

Let's see what Ann has to say!


Question #1: Tell us a little about your career, from being a freelance writer to starting ClickZ to your role now at MarketingProfs. What were the inflection points that caused you to make changes in your career?

Funny how after the fact, it seems like there was a plan all along!

I could say that I saw the Internet and I realized the enormous potential for me personally as well as for publishing. I could say that I was some sort of digital mystic who envisioned that the Internet would revolutionize the way we do business. I could remind you how I invented blogging.

But the truth is far less grand: I was a business journalist in Boston who wanted a little more balance in my work and family life, and thus sought out any opportunity that would give me more flexibility, some degree of intellectual challenge, and hopefully a little money. Early on that meant I became a freelance writer for everything from the Boston Globe to American Baby to those magazines in the back of airline seat pockets.

But in the late 1990s, I co-founded ClickZ to develop its editorial, and I realized I had a bit of knack for finding and developing good writers, honing a publication's overall voice and mission, and in directing this product now known as "content." We sold ClickZ in 2000, and when my noncompete expired two years later, I dropped a note to Allen Weiss, who was then flying solo at an up and coming web site and email newsletter called MarketingProfs.com. I volunteered to take the content piece off his hands, he didn't argue, and we became a team of two.

Four years later, MarketingProfs has just over 190,000 subscribers, a dozen employees, and more products than your readers would have the patience to read about here.


Question #2: You have grown the Marketing Profs Daily Fix blog into one of the ten most visited marketing blogs in the world. Many of your contributers already have very successful blogs. Why do you believe these talented individuals take the extra time to contribute to the Marketing Profs blog?


Because I pester them until they knuckle under.

No -- not really. I'm not sure the reason is the same for every author -- but in general it's probably because the collection of writers I've assembled are, in my view, some of the sharpest minds in marketing, and it's a bit of a kick to be included in such great company.

Also, some of the writers get exposure to either a wider, broader, or more varied audience than they might on their own blogs. For example, the talented David Armano has an awesome blog, but many of his readers are design or agency-focused, and MarketingProfs offers him exposure to a broader marketing audience. Same with Tom Ehrenfeld, who writes his own blog about the intersection of business and writing. And Eric Frenchman, whose passion is online marketing with an emphasis on political marketing. Finally, some of our authors -- like Ted Mininni and Gerry McGovern -- don't maintain their own blogs at all, so the Daily Fix gives them a blogging outlet without the need for daily maintenance.

And by the way, the MarketingProfs Daily Fix is now number 7. (Yay!)


Question #3: Which blogs do you like to read?


Tons. I read the big ones, certainly, which are obvious enough that I don't need to mention them, probably (but will): Seth Godin, Church of the Customer, MicroPersuasion, Guy Kawasaki. I also read all of the blogs (or newsletters) published by the 50-plus MarketingProfs Daily Fix authors. Or I try my best to.

But in truth, I like reading blogs published by lesser-known bloggers the best. What I like about smaller blogs -- the smallest blogs -- is that they are less affected by audience, advertisers, or any of the trappings of larger publishing ventures. They don't necessarily write for any other reason than that they have something to say. And I like the unaffected result.

I can't do that -- I can't write without imagining an audience, which is probably why I admire it.


Question #4: In ten years, where do you think today's journalists, newspaper writers, fiction writers, authors, biographers, and bloggers will be writing their content, and how will audiences find their content?

Oh Lord if I could answer that I'd be a genius -- wouldn't I? And an oracle, too. And then I'd head to the race track to place my bet!

But I guess my best answer would be that writers will have expanded their content offerings further into platforms we are already seeing emerge...vlogging, vcasting, mobile, podcasts, etc. Some of the writers I see blogging now, for example, will probably switch completely to audio or video formats as the technology and audience evolves, separating those with a true passion for writing from those who are more visual or aural. Various people will gravitate toward the kinds of platforms that thrill them most, in other words.

Generally, technology will continue to become more invisible, and therefore the way it is ingrained into our day-to-day lives will become more seamless. And those driven to deliver content will still be using it to keep writing, and/or speaking, sharing their opinions and knowledge and research, and finding all kinds of new friends, communities and audiences just the same.


Thank you, Ann, for taking the time to participate in this week's "Four Questions" segment!

September 22, 2006

Snoqualmie Joe

A dear friend of mine hosts the Snoqualmie Joe Podcast in the village of Snoqualmie, about thirty miles east of Seattle. Snoqualmie Joe drives a bus for a living. Five nights a week, he provides a valuable service to the residents of King County. During his spare time, he produces thirty podcasts a year. His topics range from griping about dog poo to caring for the safety of children riding scooters to politics to the development of a casino.

Last fall, during the November elections, Snoqualmie Joe hosted shows with most of the candidates running for offices in Snoqualmie. In the week prior to the election, three hundred people downloaded his shows. On election day, nine hundred people voted. It is entirely possible that Snoqualmie Joe influenced the decisions of up to a third of all active voters in Snoqualmie.

Recently, Snoqualmie Joe talked about a controversial road development linking new and established neighborhoods, and the public's negative reaction to comments made by the Mayor. Two weeks later, the Mayor called Snoqualmie Joe, asking for an opportunity to communicate with the residents of Snoqualmie via Snoqualmie Joe's podcast.

Snoqualmie Joe will probably never become famous, or earn millions of dollars, or even make a living doing his hobby. Snoqualmie Joe will educate the public. He will provide an invaluable public service. He will directly influence this November's the elections, on a local level.

Every one of us has the ability to achieve our potential, using the tools God gave us. Snoqualmie Joe translated his authentic, genuine, real, hilarious, honest, and unique personality into the relatively new field of podcasting, and in the process, became an invaluable part of the fabric of Snoqualmie.

Starbucks: Is A Five Cent Increase Necessary?

Based on the reaction of the blogosphere (216 unique posts about Starbucks in the past twelve hours according to Google Blog Search), many folks find the decision to increase the price of drinks by five cents to be conversation-worthy.

Whether you think that price hikes are silly for a company that has already earned $705,000,000 pre-tax profit in the first thirty-nine weeks of the year, or you think that rising energy costs and employee benefits are the reason that this increase occurred, it is interesting to convert the price increase into something we can all relate to.

Based on nine months of results, it looks like Starbucks will sell about $6,500,000,000 of coffee-related products that will have the five cent increase. Based on stats in their annual statement, the price change represents a 1.9% increase. On an annual basis, this should drive $123,500,000 of additional revenue.

Approximately fifty-nine percent of sales are converted to gross margin, yielding $72,865,000 profit.

Starbucks has about 115,000 employees. If we assume this money is earmarked to offset rising energy expenses and employee benefits, then the average employee will benefit to the tune of $633.61 of pre-tax salary per year, or $1.74 per day.

As you make your pilgrimage to Starbucks on Monday morning, look the employee who serves your beverage in they eye, and decide for yourself if the price increase is worth $1.74 to the person you are receiving your beverage from??

September 21, 2006

Business Predictions and Pundits

I want for all of you to offer me a gentle warning when I become preachy, and worse yet, start irresponsibly predicting what might happen to companies in the future (like for instance, in this article).

If you read blogs, then you've already digested Thursday's commentary from Seth Godin about pundits predicting the demise of Apple in the mid-1990s. While his article talked more about reinventing a brand verses hard-working your way out of a hole, the fact that all of those pundits "knew" what Apple had to do, and were proved utterly wrong, is enlightening.

It's even more enlightening when you realize you are sometimes guilty of the same behavior!

September 20, 2006

Pier 1: A Multichannel Mess

The Motley Fool wrote about Pier 1 on Tuesday. Pier 1 has not performed well over the past several years, and a 14.8% decrease in comp store sales during the second quarter is almost unfathomable to imagine (unless you are like me, and you worked at Eddie Bauer at a time when that company posted twenty percent drops in comp store sales). In the second quarter, Pier 1 lost $73 million dollars on $373 million in net sales.

In 2001, Pier 1 earned $160 million pre-tax profit.

In 2002, Pier 1 earned $206 million pre-tax profit.

In 2003, Pier 1 earned $187 million pre-tax profit.

In 2004, Pier 1 earned $99 million pre-tax profit.

In 2005, Pier 1 lost $42 million, pre-tax.

In 2006, Pier 1 has lost nearly $100 million, pre-tax, through six months.

Wow.

The two articles paint a grim story for this business. Back in the first quarter SEC filing, management issues several interesting statements. Because Pier 1 is being attacked on the low end by brands like Target and Wal-Mart, and is being attacked on the high-end by brands like Williams Sonoma, management elected to try to move the brand out of the mid-market area, electing to compete with higher-end retailers.

Management invested a lot of money attempting to reposition Pier 1. After seeing the initial response to this repositioning, management quickly changed course, publicly stating it was retreating back to the mid-market niche it owned just five years ago. Management noted that traffic suffered, and that they alienated their core customer by attempting to attract younger customers during the summer months.

So all of the "brand building", advertising, prospecting, repositioning, change in merchandise assortment, and whatever else management tried was thrown out after a quarter of very poor results.

There are many lessons embedded in this sad story.

First, I question whether management had the right data to make the decisions they made. Marketing pundits and consultants will provide compelling arguments to management to make significant changes in marketing strategy and target audience, using competitive research, focus groups, and surveys to chart a future course of action. Pundits frequently fail to analyze internal customer data, data that would indicate how terribly hard it is to flip a brand in a short period of time.

Database Marketers know that existing customers significantly outspend new customers. Let's assume that Pier 1 had 4,000,000 twelve-month buyers in 2005, generating $1.78 billion in net sales. Let's also assume the following:
  • Half of these customers will normally repurchase in the next twelve months, spending $600 per repurchaser.
  • Pier 1 acquires or reactivates 2,021,053 customers per year, each one spending $285.
Obviously, I don't know if these numbers are even close to accurate, but they will illustrate my point.

If marketing pundits and consultants suggest that Pier 1 move up-market, in order to avoid competition with Target and Wal-Mart, then it is likely that Pier 1 will alienate some of its core customers. If core customers are alienated, then in order to increase total sales, Pier 1 must greatly accelerate customer acquisition to make up for the loss of existing customers.

Assume that the annual repurchase rate decreases from fifty percent to forty-five percent, due to the change in market positioning. In other words, ten percent of Pier 1 customers will be alienated by the change in merchandising strategy.
  • 4,000,000 customers * 45% repurchase rate * $600 per repurchaser = $1,080,000,000 net sales.
In order to make up for core customers who did not repurchase due to the market positioning strategy, Pier 1 has to significantly ramp-up customer acquisition. At an average spend of $285, Pier 1 must acquire 2,442,105 new/reactivated customers, a twenty-one percent increase over the 2,021,053 customers in the base case. Did that make sense? If you alienate your core customer by ten percent, then you have to ramp-up new customer acquisition by twenty-one percent, in this example, just to maintain flat comp store sales.

This is the piece of the puzzle that marketing pundits and consultants so often miss. No focus group of nine individuals can possibly help you understand that you must ramp-up customer acquisition by this magnitude, just to keep sales flat. No amount of management consultant marketing-speak can ready management for the challenging reality they face.

It is the responsibility of Database Marketers to develop simulations, and effectively communicate the results of the simulations to management, so that management can make educated decisions about the strategic direction of their business. I am willing to bet that Pier 1 management did not have access to the simple math illustrated in this article.

In no way am I advocating that Pier 1 should have stayed the course. I am advocating that Pier 1 should have utilized customer purchase information and simulations to make educated decisions. Had they utilized customer data correctly, they may have realized how challenging their turnaround would truly be, and may not have elected to immediately retreat back to a mid-market strategy.

From this point forward, Pier 1 must execute a brilliant merchandising strategy that brings customers back into the store, or heavily invest in acquiring new customers who accept the merchandise Pier 1 offers. The latter is very difficult to pull off.

I hope this helps explain why customer analysis, database marketing, and simulations are such an important part of the strategic decision-making process.

September 19, 2006

Four Ways An Information Technology Employee Can Get Ideas Heard

There are many departments in your company that face unique challenges. In my profession, Database Marketing, I am sometimes given assignments that don't make a lot of business sense. But for the most part, the projects I have worked on in my career align with the initiatives my company believes to be important. And because almost nobody knows how to match the science of querying a database with the art of business intelligence and analysis, I have always enjoyed autonomy on my projects. Furthermore, because I have the key to the customer database, I have always been able to influence leaders and decision makers. Database Marketers can wield disproportionate influence.

During my tenure at Eddie Bauer, I frequently talked with a friend who worked in Information Technology at Microsoft. This person was full of ideas, bursting at the seam with ways for Eddie Bauer to make more money. I frequently heard comments like "If you just stopped mailing those expensive catalogs, you would save the planet, and save expense at the same time. I bet your customers would migrate to the internet, and you wouldn't lose any sales at all. Why don't you try that?"

His comments were based on how he chose to shop. He didn't think about how the fifty-eight year old woman in Topeka liked to shop. We knew, from tests and analyses, that while his idea sounded good, we could never practically implement the idea.

But I always felt sorry for this individual. Bursting with ideas, he seldom had a forum to present his thoughts. Worse yet, he was asked to write code to implement somebody else's strategy. In other words, he had to implement ideas he felt weren't always great, yet, his ideas had no opportunity to be developed. I doubt he was highly motivated by such a situation.

Some information technology departments make project implementation difficult. When their voice isn't heard, they can push back with the only leverage they have, the ability to say "no". I have always been amazed how quickly the IT folks rally around a cause when they agree with it, and how quickly the IT folks have "priorities" that need to be worked on if a proposed project isn't perceived to be sexy, or if the IT department does not agree with the strategy behind the project. I have to believe that if IT folks had more of a say in business strategy, they would be less push-back on other projects.

I believe there are opportunities for information technology folks to contribute in more ways than just writing code and managing projects. Here are four ways an information technology employee can get her ideas heard.
  1. Identify a Marketing Mentor. If a person in IT wanted to have a weekly meeting with me to learn about my department, my projects, my priorities, and learn what ideas were percolating among my fellow executives, I'd welcome the opportunity. Not many employees are willing to take this risk. Find an executive who is willing to meet with you either weekly or monthly, and ask to have business mentoring sessions with this individual.
  2. Listen! The friend I spoke of earlier was bursting with ideas. By listening to the needs of business leaders, he could have identified actual problems that needed to be solved, and could match his ideas to problems identified by business leaders.
  3. Get on a Cross-Functional Team. Nothing sends chills up my spine faster than the thought of being on a cross-functional team, a collection of individuals from a diverse array of departments brought together to solve a business problem. However, there is no better way to rapidly network yourself with others in the business than to get on cross-functional teams. You will quickly get to see how politics play out. You will quickly identify the individuals who have power. You will quickly learn who the true leaders are. Armed with this knowledge, you know which individuals are most likely to be receptive to your ideas, and you will understand the politics that can kill your ideas.
  4. Work on Side-Projects. When I was at Eddie Bauer, I made it clear that I wasn't going to work on regular projects on Friday. Friday was the day I focused on special projects, pet projects for certain business leaders I liked to partner with, or projects that I felt were important. Now, in order to make this strategy work, you have to get your work completed in a four day work week, which is a challenge. The upside is that you can identify leaders you wish to partner with, you can learn the challenges they face, and you can work on side-projects that benefit these leaders. By building relationships outside of your normal job responsibilities, you have a better chance of having your ideas heard.
Whether you work in Information Technology, Human Resources, Finance, or any other department not directly tied to corporate strategy, there are opportunities for you to get your ideas heard. Take a few risks, and try some of these ideas.

What do you think? How would you go about getting your ideas heard? What have you seen work?

September 18, 2006

Williams Sonoma, a Multichannel Monster With a Catalog Headache Looming

I like to follow the financial performance of Williams Sonoma. Few businesses provide the consumer with the multichannel opportunities that Williams Sonoma does. The business has core brands (Williams Sonoma, Pottery Barn), brand extensions (Williams Sonoma Home, PBTeen, PBKids, West Elm, the recently disbanded Hold Everything), catalogs, websites, and 573 stores. I'd relish the opportunity to illustrate how their customers interact with brands, sales channels, and advertising channels.

I'd also relish the opportunity to be a fly on the wall in their executive meetings. According to their second quarter earnings release, year-to-date retail net sales grew by 7.9% to $897,281,000. Recent softness in their Pottery Barn brand, representing 190 stores, has management cautious about the holiday season.

Online sales grew from $326,297,000 year-to-date-2005 to $414,780,000 year-to-date-2006.

Catalog sales are very interesting to monitor. Year-to-date net sales of $307,761,000 represent a significant decrease from the $339,295,000 level they were at last year. More important is that pages circulated increased by 4.2%, while catalog sales decreased by nine percent. The company does not tell the reader whether the increase in pages circulated drove enough business online to offset the drop in catalog volume.

Williams Sonoma's telephone sales peaked a few years ago. Like most mature businesses that have a catalog channel, they are experiencing a steady decline in telephone volume. At some point in the future, maybe in the next two years, Williams Sonoma will have to make hard decisions about what their catalogs truly mean to their customers.

Most likely, Williams Sonoma has outstanding quantitative individuals who have run simulations that clearly illustrate whether the catalog channel has a role in the future of their business. At some point, the volume generated over the telephone will be insignificant, compared with the expense incurred mailing the catalogs. Only well-designed simulations will help management make the right decisions about properly calibrating catalog advertising in the future.

September 17, 2006

Four Questions with Mike Faith, President and CEO, Headsets.com

Please welcome Mike Faith to our “Four Questions” segment!

Mike is the President and CEO of Headsets.com, a rapidly growing business located in San Francisco. Mike provides a unique perspective on marketing, focusing on an intense desire to please the customer. His interviews have appeared on CNN, the Wall Street Journal, DMNews, Catalog Age, Catalog Success, CBS Marketwatch, Inc. 500 Magazine, and FORTUNE Small Business. Mike hosts his own website and blog. Let’s see what Mike has to say.



Question #1: What can a company do to build a Customer file? How do you start database marketing without a database?


When we decided to get into marketing headsets, we looked around at the then ten or so companies that were doing it already, and their business models. There were two or three giants that were spending millions of dollars and man hours affecting corporate sales to large call centers – sure a $50,000 contract is nice, but there are only so many of them in the country in a given year, and with the offshore trend, these orders were only going to get scarcer and more fiercely contested on price. With eroded margins, the companies products wouldn’t develop, and their service would match.

At the other end of the scale, smaller outfits didn’t have the budget to advertise through the mail. They had to satisfy themselves with high margin niche products, or widen their offerings through line extension to the point that they became ‘me too’ telecoms resellers.


And just emerging were the Internet Retailers - all racing to the bottom to become the cheapest guys on the block. A “Never mind the profit, feel the volume!” mentality that meant so many companies never made it out of the rollercoaster nineties.


We felt there was a hole. According to the 1997 report of the U.S. Census Bureau, the nation’s 17 million small, non-farm businesses constituted 52 percent of the private workforce. These people, traditional office workers among them, all use the telephone in their daily lives, and as such are prime candidates for our product, yet no one was serving their needs. So we developed a catalog and solo mail offerings that we think filled the space.


Our intention from the start has been to grow by growing our category. Back in the nineties, no one except call center staff and receptionists used headsets. We strived then, and continue to strive today, to make people aware that if they use the telephone, a headset will save them hours a day - I’m sat on hold for a conference call while I type this for instance. So we targeted small companies. Conventional Direct Mail wisdom tells us that the person you mail, the contact is vitally important – and of course, the larger the company, the more true this becomes. The way we got started was by looking at the small companies, (<20>

It worked, we grew at an astonishing rate while our competition largely fell by the wayside. Once we had enough momentum, we started targeting the more traditional larger companies and the individual contacts within them, that would give us larger lifetime values, without the need to focus on anything other than Telephone Headsets.


Question #2: You have a single product line, that seems to have a long office life (telephone headsets). How does your Customer Contact Strategy differ from companies like say, Oriental Trading that has thousands of products and product lines?


Well, we have to work harder to keep in our Customers minds between purchases and to do that, we provide outstanding service and really look after our Customers. The best form of marketing you can possibly have is an enthusiastic Customer, and so we make sure each and every interaction with the Customer – from email queries, pre sales calls, post sales support – even collections calls – a opportunity to generate a Wow! experience in the Customer’s mind. It’s not easy and to do it, your organization has to build itself around its Customer Service Team.


Secondly, we mail frequently, and we mail to our entire house file. We’re not an old company by any means – just 9 years – and even our earliest customers still respond well to catalogs and offers. Could we save some marketing dollars by mailing less frequently? Yes, and we are starting to do just that, but getting the frequency right for a product with such a long life is hit and miss at best and we’d rather bear the cost of mailing more frequently that risk loosing our vital customers through neglect.


What we’ve found is that once one Customer in a company buys our products, they tend to spread into the entire company. So growth and lifetime value within a site make up for what can seem like limited opportunity at an individual level. Also the nature of our product means that new hires and new desks mean sales for us, and we target our prospecting accordingly.



Question #3: What is your online strategy? How does it tie in to your mailing strategy?


Despite the dot com in our name, we are a company that is primarily direct mail driven. We, of course, have a website (er, that would be headsets.com) but it’s different to most, in that its primary objective is to get a prospect to call our call center.


Companies and their web sites tend to fall into two groups. First are those that see the web, as a way to reduce costs associated with sales and service. If Customers are helping themselves, and the entire process is automated from end to end, they reason, they can scale indefinitely. An entirely hands off approach, like Amazon used to execute so flawlessly. (I say used to, have you tried to buy anything from Amazon recently? …shudder…) Secondly, there are those companies that want to price something based on the Customer need, or more generally the needs of the commission driven sales team - and they will let you do everything but actually place an order, or see a price. We think both these approaches are ludicrous from a Customer perspective and our site is aimed squarely in the middle. Our site is a mechanism to place an order, if that’s what the Customer wants to do, or to research a product independently (if that’s what they want to do) or to contact us through prominent placement of our 1-800-Headsets number, our Live Chat feature, email links that actually get answered (within two business hours) if they want to do that too. We strive to fill it with accurate, useful, useable information and let the Customer decide.

In fact, if all that our site achieved was to get people to pick up the phone to talk to our Customer Service Team, then that would be a perfect result. It’s only by talking to a knowledgeable and friendly CSR that a Customer can receive that Wow! experience and be sure that they are getting the right product tailored to their individual needs.


So, we do advertise through programs such as the ubiquitous Google AdWords and its cousins, and we do pay attention to search engine rankings and SEO principles in general. But that’s about all we do. We don’t email our Customers – Postal mail is so much more effective on a campaign by campaign basis. Sure, email is free, but it’s also generally only stimulates a few incremental sales – likely cannibalized from our mail program anyway, and the ill will it generates is not worth the trade in our minds. As for unsolicited email – we’ll leave that to our competition.


Question #4: Aside from Customer Service, what has surprised you about the evolution of your business? What challenges do you anticipate, as you try to grow your business beyond $100,000,000 in annual sales?


I guess the most surprising thing for me is that Headsets as a business tool still aren’t universally adopted by everyone. It’s a good thing in some ways because it means that we still have plenty of market to play with. Cell headsets, and now Bluetooth Wireless headsets are changing the picture slowly though. People are trying headsets as a ‘cellphone fashion accessory’ which in turn is making headsets more acceptable to people in general. Although we aren’t specifically marketing cellular and Bluetooth cellular headsets to businesses, the fact that everyone has a cell-phone, and more and more of them are Bluetooth enabled, means that at some point, pretty much everyone will have tried a headset out. In some way that helps our marketing efforts because the perception gap between ‘people who use headsets’ and ‘me’ shrinks in our prospects minds.

The largest challenge for us as we grow beyond $100M in sales is probably not going to be related to Product, Customer Service or to Marketing – I think we have those things nailed. It’s most likely going to come from growth itself. We’ve been growing at a pretty fast clip for a number of years, and although our headcount has remained small (we recently hired our 50th employee) at $32 million in revenue last year we are an extremely efficient company in terms of revenue per person. As we grow though, our challenge is to keep up this high level of personal productivity up, with more and more support functions, more people managing people managing people interacting with Customers. This is true of any business as it grows – some companies do it well and thrive, some do it poorly and strangle themselves out of business. I hope to model Headsets.com on the former. Ask me in 2008 and I’ll tell you how it went!

September 15, 2006

Multichannel Question: Zappos

Here is a question for you. Multichannel pundits extol the virtues of multichannel marketing. They tell us that our customers expect us to have retail, online and catalog channels, allowing the customer to purchase what they want, where they want, when they want.

If multichannel marketing is so essential to our toolbox, then how do we explain the rampant success of Zappos? In an October 2005 article, CEO Tony Hsieh said the following:
"We focus the company on providing the absolute best service and shopping experience and let word of mouth be our marketing. By doing so, we've historically been able to more than double sales year over year for all six years of the company`s existence."

This is a business that should top one billion dollars in net sales in the next four years. In other words, this business will have gone from zero to $1,000,000,000 in annual sales in just ten years, without a catalog channel, without retail stores, without the multichannel experience we are being told we absolutely must have.

We are constantly reminded that customers purchase from brands because of merchandise, price, convenience, and customer service. How else do we explain why a customer avoids purchasing a pair of Mary-Jane shoes at a highly convenient and respected multichannel retailer like Brooks Brothers, and instead purchase the shoes at a single-channel business like Zappos?

What is your opinion on this topic?

September 14, 2006

Is Gap Truly Executing A Multichannel Marketing Campaign?

From the good folks at DMNews, we learn that Gap is running a multichannel marketing campaign for their new retail concept.

My question for you: Is this truly a multichannel marketing campaign? If it is, please define why. If it isn't, what is your perception of a true multichannel marketing campaign?

September 13, 2006

This Database Marketer Likes Pepsi Products

The hotel I am staying at is a Coke hotel. All Coke products, all the time.

A Database Marketer can make mistakes analyzing data, based on biases in the database. By being forced to drink Coke, I had a couple of cans today. If Pepsi products were served, I would have enjoyed a half-dozen cans.

According to the hotel database, Coke appears to sell well. As a result, the hotel is encouraged to maintain their relationship with Coke. But as a customer, I am disappointed with both the hotel, and with Coke products.

As long as these biases exist in the data we analyze, there isn't hope that Database Marketers can facilitate a true one-to-one, or a one-to-segment relationship with a customer.

Now if the hotel left free Oreos in the room, I would be willing to forgive the Coke decision!

David Raab Has A New Blog

You enjoyed his "Four Questions" segment. Now, you can enjoy his new blog. Just click here to take a peek.

September 12, 2006

How Much Do You Really Pay To Watch Football On Television?

Sometimes numbers are presented in a way that makes you pause, and marvel at the gross misallocation of funds known as Capitalism. On Tuesday, Greg Easterbrook reported that ESPN pays $65,000,000 for each of the 17 NFL games they will broadcast this year, a total of $1,100,000,000. They paid $1.1 billion dollars for the right to televise fifty-one hours of sports, $65,000,000 to broadcast a three hour contest.

The real amount of revenue the NFL generates from television rights is actually $3,700,000,000, about ten percent more than the $3,400,000,000 it pays its players. Ticket revenue, which can easily be between $40,000,000 and $50,000,000 per year per team (the average ticket price is $62 in 2006), parking, concessions, radio and other revenue streams usually offset overhead, yielding profit for the owners, according to Easterbrook.

From this point forward, I use data for illustrative purposes.

Let's assume that advertisers will reimburse the networks with ad dollars that exceed the $3,700,000,000 the networks paid the NFL for the right to broadcast football games. In order for advertisers to obtain a suitable return on investment, they need consumers (that's us) to purchase enough products and services to generate enough profit to offset the $3,700,000,000 expense they incur. This means that between $8,000,000,000 and $16,000,000,000 of merchandise must be sold to generate enough profit to cover the $3,700,000,000 expense.

The theory is that by targeting the audience watching football, the football viewers will buy the products and services advertised. Consumers will purchase between $8,000,000,000 and $16,000,000,000 of merchandise, enough to cover the cost of advertising.

If we assume that 50,000,000 Americans regularly watch football, roughly three times the audience that watched an average Monday Night Football game in 2005, then the math becomes clear. The average NFL fan has to purchase between $160 and $320 of products and services each year from the advertisers running commercials on NFL football games, in order for the advertising to pay for itself. This allows the networks to break-even or make a profit from televising football.

It is possible that the advertising does not pay for itself. If that is the case, then a portion of the $3,700,000,000 spent on advertising is simply an expense that competes with other expenses on the corporate profit and loss statement. This means that your average company may need to send jobs overseas, or cut corners on quality, or borrow money, in order to fund the advertising.

Think of it this way. If the advertising does not drive any revenue, then the $3,700,000,000 of advertising expense is roughly equal to 92,500 jobs that pay an annual salary of $30,000 per year, including benefits.

The National Football League has a brilliant business model. They have fostered unimaginable brand loyalty for the thirty-two teams they represent, and a level of civic pride seldom equaled elsewhere. Every twenty years, they convince taxpayers to fund $500,000,000 stadiums. This year, they convinced television networks to pay $3,700,000,000 to pay their employees, the 2,000 players in the National Football League. They convinced advertisers to pay at least $3,700,000,000.

These advertisers must convince the football fan to spend between $160 and $320 per person on their products and services, in order to get a suitable return on investment. And if the sports fan is unwilling to spend money on these products and services, the advertisers must trim a portion of the $3,700,000,000 of expense from the profit and loss statement. Guess who gets hurt by that? Lastly, the NFL generates another $1.0 billion dollars or more in ticket revenue, annually, and who knows how much in radio broadcast rights, concessions, parking, merchandise, and however else they monetize their business??

Holy honking cow! The rest of us battle our brains out running businesses with the hopes of generating a five percent profit margin. The NFL is a brand that has really figured out how to monetize their product, relying upon advertisers and taxpayers to fuel their ever-increasing revenue machine.

September 11, 2006

Business Blogging

This is an entertaining read, courtesy of Stephen Denny.

Four Questions With David Raab, President, Client X Client

This week, I am pleased to have David Raab take part in our "Four Questions" segment on MineThatData.

David is President of Client X Client, a company that provides technology, analytics and services designed to achieve optimum yield per customer. David is one of the leading minds in the Database Marketing field, with nearly one hundred contributions to DMNews.

Let's begin the interview.


Question #1: You are one of the most respected analytical minds in the field of Database Marketing, having consulted with many great brands. Now you are President of Client X Client. What are some of the new challenges you now experience?

The industry has changed greatly since Database Marketing first became identified as a discipline fifteen or twenty years ago. Back then, we spent a lot of time explaining the basic concepts of how to build and use a marketing database, particularly when talking to people outside of traditional direct marketing. Today, the basic premise--that assembling information about individual customers lets you build more profitable relationships--is conventional wisdom across many industries. Similarly, in the early days, people were just starting to develop software to implement Database Marketing principles, so much of my work involved examining the different products and helping people to understand which capabilities were truly important. Today, the core functions of a good customer management system are widely understood and many marketers have hands-on experience with them. So, although I still spend a great deal of time looking at software and talking to vendors, the real challenge is helping clients make the best use of system capabilities. This means dealing more with marketing and business management issues, and less with technical concerns.


Question #2: Your company links the customer experience to actual business results via something called "The Customer Experience Matrix". Can you explain how this product helps businesses understand how customers behave?

The key point about the Customer Experience Matrix is that it gives companies a comprehensive overview of how they are treating their customers, across all channels and all stages of the customer life cycle. That's much harder than it sounds, because most companies are organized into functional groups responsible for a particular type of activity--say acquisition or customer service--and often further divide responsibility by having separate groups for each channel such as Web or direct mail. Each group does the best job it can, but without understanding its overall impact on the customer, all it can measure are internal metrics like response rate or cost per call handled. The Customer Experience Matrix uses all the database technology we've built in the past two decades to finally tie together all the interactions so companies can see how a change in one activity in one channel has an impact on later activities in other channels. The concrete example I always use is how a change in customer service levels has an impact on future sales--something that Dell Computer has recently illustrated in real life. What the Matrix does specifically is to measure the change in each customer's future value after a given type of interaction, so the company can assess whether the net impact of the interaction is positive or negative. But, to tell the truth, we're finding that companies get excited about the Matrix even without the detailed financial analysis because it lets them see, for the first time in a single place, the messages and business rules they're delivering across all their different interaction points. This lets them spot inconsistencies and opportunities that would otherwise remain buried.


Question #3: Put on your "consumer" hat. Are there companies that you believe do a really good job of building a relationship with you, personally, and why do you believe they do a good job?

Interesting question. Marketing is all about segmentation, and I happen to fall into the segment of consumers who are extremely utilitarian in most business relationships. This means I have almost no interest in building a "relationship" with most companies, at least in the conventional sense of an emotional commitment that would lead me to go out of my way to use one company's products over another's. There have been particular companies I have been very enthusiastic about at particular times--I can think of specific airlines, telephone companies and auto manufacturers--but only because they had products that happened to meet my needs very well at a particular moment. There are other companies in those same industries that have treated me so poorly I will never do business with them again unless I have no choice. But in both kinds of situations what drove my "loyalty" was the products themselves, not any type of personalized relationship. It's theoretically possible that I could enter into a "learning relationship" with a company that would know enough about me to make them eaiser to do business with than a competitor, but in practice I haven't seen anyone offer service that's customized enough to make much of a difference. In other words, for me at least, a company is only as good as its last interaction: while I'll cut an incumbent vendor some slack just to avoid the effort of making a change, there is very little else to hold me in place.


Question #4: In what ways would you say that consumers have benefited from advances in analytics and CRM software?

Notwithstanding my previous answer, there are consumers unlike me who do value personalized business relationships, and they have benefited from the analytic and CRM software that lets companies develop and maintain such relationships with them. But I think the more common value is the ability of companies to use such software to predict consumer actions and needs, and to make offers that are tailored to them. I have certainly appreciated and responded to product offers that reached me at appropriate moments, and many studies have shown the value of targeting based on detailed analysis of customer activities. Yet the biggest benefit of all, I think, is one that has become so common we almost take it for granted: we expect companies to have CRM systems in place that make our transaction history and account information instantly accessible should we need them for some form of service such as tracking a package or changing a reservation. Perhaps the best evidence for that expectation is the annoyance we feel when a company fails to meet it. The fact that we actually feel annoyed--instead of just surprised--shows it's a real consumer benefit. Again, this comes down to the point that value is based on operational performance, not better marketing or emotional relationships.

And that concludes our interview with David Raab. Thanks, David, for providing us with great comments and insights!

September 10, 2006

Carnival of Marketing: September 10, 2006

Welcome to this week's edition of the Carnival of Marketing. My name is Kevin Hillstrom, host of MineThatData, a leading Database Marketing and Customer Dynamics blog.

Many of my loyal readers may not be familiar with the Carnival of Marketing. The Carnival was the brainchild of Noah Kagan. Each week, a different blogger volunteers to host the carnival. Bloggers submit recent, relevant marketing articles that offer the reader actionable solutions. The seven best submissions, as determined by the host, are selected for that week's Carnival.

Given the mission of this Carnival, I attempted to give credit to the posts that met the criteria outlined by Noah. Ranked from Number Seven to Number One, I present you with this week's Carnival of Marketing!


Number 7:
Radical Hop and Peter Kua bring us “Three Personalities Critical to Explosive Business”. Peter hypothesizes that there are three types of people that need to be hired to promote a new business, a new product.

Number 6: Jeff Larche at Digital Solid discusses why “Boomers Aren't Immune to the Branding Power of User-Generated Content”. The topic relates to problems that I deal with on my own blog. My target audience doesn't always align with the people who read my blog. Jeff discusses a situation where the planets align, and a person who does not read blogs indirectly leveraged blogs to make an important purchase decision.

Number 5: David Maister at DavidMaister.com shares with us “Why Reporters Have PR People”. David writes about the comments of journalist Tommy Fernandez, and his opinion of Public Relations individuals at law firms.

Number 4: Nedra Kline Weinreich, President of Weinreich Communications and the Spare Change blog, brings us a comparison of “Social Marketing verses Social Media Marketing”. Her dissection of these topics created a lively discussion.

Number 3: At NoahBrier.com, Noah submits “Boring: The Story of YouTube's New Sponsorship Model”. Sometimes, people get caught up in the hype of new media opportunities. Noah presents a different point of view, and received more than a dozen comments because of his point of view.

Number 2: Brian Kim at BrianKim.net submitted “How To Get 105,934 Unique Visitors to Your New Blog Along With 2 Million Page Views in 45 Days”. Maybe more important than the meteoric rise in visitors that Brian experienced is his “open book” approach to discussing the marketing of his site. In business, I respect those who openly, humbly and selflessly share actionable knowledge so that others will benefit. Brian accomplished this with his submission.

Number 1: At the Business and Technology Reinvention Blog, David Daniels submits “The Crunch of the Turnaround – Part 1”. David published information from John Scheel, a noted business turnaround expert. The quality of this post is exceptional.

Other good contributions include “Why Have 24 Hour Specials”, “Make Your Contact Information Readily Available On Your Blog”, “Securing The Home Buyer's Place at the Table”, and “The Four P's of Marketing”.

That wrap's up this week's version of the Carnival of Marketing. Next week, please visit MyMoneyForest for another great selection of marketing discussions from the past week. Submit your blog article to the next edition of Carnival of Marketing using the carnival submission form. Past posts and future hosts can be found here.

Head On, Apply Directly To The Forehead

If you are like me (and you probably aren't), you take the occasional weekend break from watching CSPAN-2's coverage of Book TV, and turn on a sampling of the riveting programming available on approximately two-hundred channels of satellite television. Maybe you watch a TBS feature presentation of "You've Got Mail", a 1997 movie that only appears on TBS once every five or six days. Just maybe, you decide to not mute the commercials. And then you see this:

The product is "Head On", and is available without a prescription from many retailers, including Wal-Mart, according to the "Head On" website. Slate Magazine recently wrote a story about this ad.

On this website, I've discussed my opinion of the difference between branding and selling. Nowhere is that distinction more apparent than this commercial. The commercial tells you the name of the product (several times), it tells you how to use the product (several times), and it tells you where you can find the product. The commercial doesn't even tell you what the product is for. And according to the Slate article I referenced earlier, this advertisement was designed this way. The ad was based on focus group research.

The commercial is in stark contrast to so many of the advertisements we see today. So often, advertising tries to imitate art. The middle-aged mother wakes to a sun-splashed morning, her golden retriever puppy licking her face, and her three-year-old daughter tugging at her pajamas. Gentle piano music supports images that change every two seconds. The mother walks downstairs. The puppy bolts outside through an open screen door and scampers down concrete steps into a backyard with lush, green, dew-covered grass. The husband appears, well-groomed, teeth brushed, not shaved, hair perfectly manicured, toned muscles visible through his shirt, and hands the mother a piping-hot mug of delicious, refreshing, life-giving coffee. The mother offers a warm smile, cradles the mug of coffee like it is a long lost friend, sips the perfectly prepared beverage, and realizes that life is perfect on this sunny Sunday morning. We see a well-designed logo appear on the bottom of the screen, introducing the "brand", and are left with the image of the husband and wife embracing each other, as the child chases the golden retriever puppy back into the home.

Of course this commercial doesn't exist, but you can imagine that it might.

There are pros and cons of each style of advertising. Do you have a favorable image of "Head On"? Do you have a favorable image of the fictional coffee company I described earlier? Does the "Head On" product inspire you to purchase their product the next time you are at Wal-Mart? Do the images of an idyllic Sunday morning inspire you to purchase coffee the next time you are at Safeway?

I tend to skew toward advertising that sells, though I am curious as to what you think. What are the pros and cons of each style of advertising, and if you were running your own company, which advertising style would you use to promote your organization? How do you balance selling and branding?

September 07, 2006

"In Today's Marketing Environment ..."

Sitting comfortably at home, I opened my email, and read an article from a B2B organization trying to sell me a "solution". Here is a quote from their email newsletter (this quote represents one sentence):

"In today's marketing environment, the proliferation of segments, channels, and product categories is forcing companies to identify and prioritize opportunities at the points where these components intersect in order to stimulate growth."

I have a few questions for you, my loyal reader:

  • Is it easy for you to understand what this company is saying to you?
  • Does this organization appear more credible to you than a competitor that uses simple language?
  • Does this writing style inspire you to learn more about the "solution" this company is offering?
I would prefer a writing style that is more direct and simplistic. That being said, I frequently observe this style of writing in B2B marketing. Is this style successful? I don't know. What do you think?

September 06, 2006

E-Commerce Productivity

An executive at an e-commerce pureplay asked me a question about how best to measure the productivity of his website. He mentioned that his business experienced a significant increase in traffic, year-over-year, but experienced a reduction in conversion rate, year-over-year.

One way to analyze the sales productivity of a website is to take the Internet Retailer Top 500, remove outliers and smaller companies (leaving 251 observations) and plot demand-per-visitor (y-axis) against average monthly traffic (x-axis).

The scatterplot indicates that there is a diminishing rate of returns. As traffic increases, the productivity of each individual visitor decreases.

The relationship can be modeled using a "power" function (the word "demand" is used in this post, however, the relationships actually depict net sales, not demand, FYI).
  • Demand per Visitor = 816.2 * (Monthly Visitors ^ - 0.3754)
Using the relationship, we can predict an average Demand per Visitor, given average monthly traffic volumes:
  • 100,000 Monthly Visitors yields $13.33 per visitor.
  • 250,000 Monthly Visitors yields $9.61 per visitor.
  • 500,000 Monthly Visitors yields $7.50 per visitor.
  • 1,000,000 Monthly Visitors yields $5.85 per visitor.
  • 5,000,000 Monthly Visitors yields $3.29 per visitor.
  • 10,000,000 Monthly Visitors yields $2.57 per visitor.
Clearly, as a "brand" increases traffic to the site, it attracts traffic that will spend incrementally less (be less likely to convert to a purchase). Like all things in life, there is a law of diminishing returns. It is possible that my executive friend was observing a trend that is perfectly fine (traffic increase, productivity decrease).

The equation can be used to evaluate your e-commerce productivity. If you have 500,000 monthly visitors, you can expect $7.50 per visitor. If your site has $10.00 per visitor, you may be doing better than average. If your site has $5.00 per visitor, you may be doing worse than average.

Ah, the magic that occurs when you mine that data!!

September 05, 2006

Insensitive: Radio Shack

From a former co-worker of mine at Lands' End, Jeanne Bliss, on Radio Shack informing employees that their jobs had been eliminated via email.

I have fired people, I have also informed employees that I had eliminated their job. It is a humbling and emotional experience for the person on the other end of the table. It is really hard to be on my end of the table. But that experience builds character for both parties. You feel alive, full of feelings and emotions, when going through either side of this experience.

How Radio Shack chose to execute this strategy is just cold, cruel, and insensitive, if the story is true. How likely are you to recommend this company as a place to work? How likely are you to apply for a job there, knowing this is how they treat the very people that keep them in business?

Executives, Directors, Managers and Supervisors. Please be human, sensitive, kind, warm, and understanding when it is your turn to do something unpleasant. Your character, your integrity, your reason for being is at stake at a moment when a job comes to an end. If you are an Executive, this is when you earn that insanely large salary plus bonus plus stock options. Please demonstrate some leadership.

Is Email Really A Customer Retention Tool?

Had you asked me this question prior to today, I would have said "NO"!

But I was reading an article about open rates, click-through rates, and conversion rates in this month's Internet Retailer magazine, and the article caused me to do some thinking.

Let's mine that data! Here are the assumptions:
  • Assume you have an email subscriber list of 10,000 addresses.
  • Assume that fifty percent of these addresses will purchase again in the next twelve months. In other words, your company retains fifty percent of these customers.
  • Assume you send one email campaign per week to each of these 10,000 addresses.
  • Assume that half of these email addresses either unsubscribe or become invalid, distributed evenly during the year.
  • Assume that the average email campaign has a ten percent click-through rate. In other words, ten percent of recipients click-through the email to your website.
  • Assume that the average email campaign has a three percent conversion rate. In other words, three percent of recipients purchase something on your website because they received the email.
  • Assume that the average person who purchased because of an email campaign purchases twice a year. In other words, each order does not come from a unique customer. Some customers respond multiple times per month/year to email, purchasing multiple times per year.
  • Assume that half of the customers who purchased due to email would have also purchased during some other time of the year, and therefore, email cannot take credit for causing the repurchase.
For just one campaign, you can expect 10,000 * 0.10 (click-through rate) * 0.03 (conversion rate) = 30 purchasers. You send 10,000 emails, and you get 30 customers to purchase something.

Remember, of the 10,000 emails, half will unsubscribe or become invalid during the course of the year. We will assume these email addresses receive 26 campaigns per year.

The other half receive every one of 52 campaigns per year.

The total number of orders is then calculated as 5,000*0.10*0.03*26 + 5,000*0.10*0.03*52 = 390 + 780 = 1,170 orders per year.

Remember, I stated an assumption that the average email responder purchased twice per year due to email campaigns. Therefore, 1,170 / 2 = 585 customers purchase because of email campaigns.

Lastly, remember that half of the customers would have responded during other times of the year when email campaigns were not happening. This means email did not drive the response. Therefore, 585 / 2 = 293 customers repurchased because of email campaigns.

I stated that there is a fifty percent annual retention rate. Among the 10,000 email addresses in the list, 293 / 10,000 = 2.93% repurchased due to email.

In other words, the annual retention rate increased from 50.00% to 52.93% due to email.

This analysis is based on a huge number of assumptions. It is very important for companies to actually quantify each assumption, and plug in real numbers measured by analytical folks.

This example illustrates that email can have a marginal impact as a customer retention tool. It is not easy to move annual retention rates by three points. With a different set of assumptions, and multiple email campaigns per week, retention rates could improve even more.

So, I am not convinced that email is a powerful retention tool. But the math indicates that executing email campaigns can improve retention. Making significant incremental changes to an email campaign, like creative, promotional offers, subject line testing and merchandise offering, are likely to have a very, very small impact on customer retention.

September 04, 2006

Four Questions with Angie Brown, VP Marketing, PC/Nametag

This week, I am pleased to welcome Angie Brown to our "Four Questions" segment.

Angie is Vice President of Marketing at
PC/Nametag, a leading catalog and online seller of meeting registration supplies, including nametags, ribbons, lanyards and tote bags. With nearly fifty employees, Angie expects the business, led by Nick Topitzes, to grow by more than fifteen percent this year. Angie's job is to nurture an environment where talented and skilled employees can attract, develop and keep customers forever. Angie has been at PC/Nametag for more than twenty years, but did miss some time while earning her MBA. Amazingly, Angie has three children starting college this fall as freshmen!


Let's get to the questions!


Question #1: Internet marketing changed how marketers measure effectiveness, especially when catalogs are included in the marketing mix. How should a marketer evaluate whether her marketing activities are driving new customers to the website, or are driving repeat traffic?

Measuring the effectiveness of marketing activities has gotten more complex in the multi-channel environment. On top of that, the customers that we want to cultivate and grow are the customers who are operating in more than one channel. Studies show that the best customers are customers who operate in more than one channel. We need to nurture customers who order from the paper book, order off the web site and contact the call center when they have additional questions. Matchback analysis is one tool that helps analyze customer activity. This is especially useful when you do not talk directly to the customer when the customer places orders. Matchback analysis takes the orders within a specified time period and matches them back to an activity, such as mailing the customer a catalog. This type of analysis has pitfalls, since the marketer decides what the rule for matching a transaction with an activity will be. Here is an example of a rule: Any sale from a customer that is received within eight weeks of a catalog drop to that customer is matched to the catalog mailed. Is eight weeks enough time or too much time? The decision greatly affects the results. The process needs to be tweaked over time.


Question #2: In what ways can an online marketer improve customer loyalty? Without a lot of personal interaction between website and a customer, or a catalog and a customer, what does a marketer do to improve the relationship between company and customer?

Customer loyalty can be enhanced for online customers in several ways. First, customers are more likely to return and make future purchases if the process is smooth and the customer gets what they wanted when they wanted and how they wanted. This gets a ... "but of course" response but often this is not the experience that customers have. Give each online customer a customer service point of contact. When orders go awry customers want their issues handled immediately and the best way to do that is with a phone call. How many times are you on a web site and you want to call the company but you can't find their phone number? Customers appreciate working with consultative experts. Establish your company as the expert in your niche. Make it easy to reorder. Send me emails that say "Last year you ordered ...". Send me emails and make me offers for products and services I really want and need. Don't just fill my inbox with emails.


Question #3: Are there any business to business (B2B) marketers that do a good job of marketing to you, and are there tactics that these marketers use that you believe are effective?

Hmmmm, this question has puzzled me. I cannot think of any. Maybe this represents an opportunity?!


Question #4: Who do you look to in order to stay networked on the latest trends in business-to-business Direct Marketing? How do you continue to learn, and how do you continue to improve your marketing skills?

I stay connected to trends in several different ways. First, my co-workers are a rich source of ideas and information. They read something and pass it on. New employees are a good way to learn new ideas. They've had different mentors and experience. Ever time anyone in our office attends an outside conference or seminar, they must make a presentation to interested people about something they learned at the conference. Secondly, I look for variety. I don't always attend the same meeting every year, I look for new conferences. Journals and magazines, over time, become repetitive. I try to subscribe to new ones, to get more variety.



Thank you, Angie, for participating in this week's Four Questions segment!

September 01, 2006

Survivor, General Motors, and Database Marketing

What the heck do the television show "Survivor", General Motors, and my field, Database Marketing, have in common?

According to a post on the Fast Company Blog, General Motors pulled $14,700,000 of advertising from Survivor, after the show decided to group castaways on the basis of their race.

This is where Database Marketing comes into play. We Database Marketers frequently analyze the profitability of decisions made by our companies. And while General Motors appears to be taking a moral stand on the allocation of participants to teams on the basis of race, there are financial reasons that make this decision appear even more interesting.

According to General Motor's most recent annual 10-K filing, the average car sold by GM costs the consumer about $21,000, of which GM earns about $2,300 of gross profit.

Therefore, in order for General Motors to break even on $14,700,000 of Survivor advertising, they must sell 6,392 cars. It seems possible that GM could sell 6,392 incremental cars because they advertise on a show seen by at least 10,000,000 fans a week.

A few years ago, General Motors did not have to offer as many discounts and rebates to get a customer to purchase a car. A few years ago, General Motors earned about $4,000 on every car they sold. If this level of gross profit existed today, GM would have to sell just 3,675 cars to cover the cost of advertising on Survivor.

In other words, GM must sell 74% more cars in 2006 to cover the cost of their advertising, compared with just two years ago. The quality of the advertising must be 74% better than two years ago, to provide the same return on investment as two years ago.

Obviously, I have no idea why General Motors truly made the decision to pull advertising from the television show "Survivor". But it is clear that their current financial situation influences how precious cash could be spent. And when you have to sell 74% more cars just to cover the cost of advertising, it may seem like a good idea to pocket $14,700,000.

Unfortunately, companies cannot reduce expenses enough to overcome customer apathy. At some point, companies have to keep investing advertising dollars that generate an acceptable return on investment, somehow improve existing products, or develop new products that stimulate customer interest, and truly manage expenses in a wise manner, in order to run a successful business.

And if it were easy to do all of that, you and I would be running our own, highly successful companies.