The Top Four Posts For October

October saw a three percent increase in visitors over September. Here are the top four articles over the past thirty-one days. It is interesting that two are from September, showing considerable staying power. For those of you who are Jim Fulton fans, his posts were #5 and #6, the latter from August.

Number 4: Four Questions With Ann Handley, the number three article in September. Her easy-going and conversational style have resonated with so many of you, keeping you coming back for the second month in a row.

Number 3: This Week's Carnival of Business. In particular, the post by Christine Kane has been very well received, on this site and on many other sites.

Number 2: How Much Do You Really Pay To Watch Football? This was the number one article in September, and continues to draw a lot of visitors to the site.

Number 1: Does Homepage Design Influence Net Sales? This article really polarized folks. Some thought the discussion was spot-on, others thought the analysis was silly and uninformed. Regardless, it created a lot of debate and thought, and that is what I want to see here.

Four Questions With Ronald Rodd, Director of Analytics, MeritDirect

Ronald Rodd is our guest for "Four Questions"

Ronald serves as Director of Analytics at MeritDirect, the nation's leading business-to-business list brokerage and management company. He is responsible for the development of predictive models and provides research and analysis services to B-to-B direct marketers.

Prior to joining MeritDirect in 2001, Ron held senior level positions at BrandDirect Marketing, Bank of America and Mobil Oil Corporation. Past responsibilities have included the management of modeling and analysis teams, development of data warehouse applications, design of relational customer databases and administration of marketing information systems.

He is a current member of the Direct Marketing Association Analytics Council and holds an MBA in Operations Research from St. John'’s University.

Here we go with the interview!

Question #1: How do you use math and statistics to identify behaviors that cause customers to respond to direct marketing activities?

Much of the analysis required to understand and prepare data for predictive modeling is facilitated by software that is readily available in the marketplace and can be customized over time. At Merit Direct, we have developed a library of programs, spreadsheets and analysis aids to facilitate quality built models. We apply a variety of SAS/STAT procedures and macros to gain a thorough understanding of potential predictors of response in what is referred to as data transformation. Transformation is where art meets science in the model building process and is believed to be the most important step in building predictive models. A thorough understanding of a business and how data is derived, acquired and applied can make a huge difference in the quality of a predictive model. Our analysis begins by examining the influence of every potential predictor in what is termed univariate analysis. Independently, each variable will increase, decrease or have a neutral impact on the likelihood of generating a response. The output of univariate analysis will establish a foundation of knowledge that can later be used to help confirm the results of a model and/or validate past and future selection strategies. A model, however, represents the way individual variables interact to have a combined influence on predicting response. This is referred to as the multivariate effect. An experienced modeler can review a list of variables qualifying in a model and identify those which provide a dominant influence, those which contribute the same or similar influence and those that could be eliminated without degrading the expected benefit of a model. The end result is a model that taps into only the most influential variables that work together to have the greatest influence on predicting response.

Question #2: Communication can be a challenge, especially between analytic individuals, and those who manage marketing, merchandising or creative departments. What does your team do to improve your ability to communicate with your clients?

Communication is a key factor to ensure a successful modeling project. At the outset of a project, it is essential to assemble all parties that have a vested interest in a model. This includes individuals who will secure data for the development extract, those who will apply the model, those who will assess the performance of a model and those who will benefit from the model. The first step towards a successful model depends on a consensus being formed on the objective a model or what type of behavior will be predicted. In general, at Merit Direct, we seek to predict response though it is important to define what type of response we are attempting to predict: first time response, repeat buyer, reactivation or high value response are a few examples. After setting the objective, we look at how the model will be incorporated into existing selection strategies, how the model will be tested and, finally, how results will be evaluated to validate the effectiveness of a model. As an analytical individual, I am mindful to communicate in simple business terms when discussing the development, expectation and application of models with end users and clients.

Question #3: What changes have you witnessed in the business intelligence and data mining profession over the past ten years? How have these changes impacted your job?

The largest change is the breadth and depth of data available through cooperative databases such as MeritBase. It is difficult to create effective models when more than half a dataset is devoid of critical information such as firmgraphics (SIC, Employee Size). And it is difficult to gain a complete measure of what purchasing power a prospect brings without the meta-data that reflects not just compiled data but some reflection of actual activity. Coops such as MeritBase can offer multi-sourced enhancement, behavioral meta-data, and of course a viable database to apply completed models and use them effectively without increasing list costs. Additionally, a number of analytical software packages have been introduced to the marketplace that streamline the process of evaluating data and developing predictive models. However, instead of expecting pre-packaged software to replace skilled analysts, it is more realistic to consider new software offerings as tools that can be used by individuals to gain greater intelligent insight into the data. While we can now do more with less and do it faster, the 'black-box' approach does not result in building stable, predictive models.

Question #4: Are there differences in how you approach the analysis of direct mail verses online? Do you observe differences in customer behavior, between these two channels?

Analysis of on-line responders is critical to a comprehensive measurement of ROI and a successful modeling project. Ignoring 1/3 or more of responders (white mail, web responders, etc.) can lead to a model skewed towards only easily tracked responders. Our studies have consistently shown that the hardest responders to track frequently come from large or institutional businesses and more often than not represent high lifetime value (LTV) customers. Conversely, web-responders tend to come disproportionately from single employee-home based business (SOHO) audience and may represent lower LTV customers, but are still essential to measure to accurately gauge performance of this large segment. At MeritDirect, we have successfully capitalized on capturing a history of past actions by compiling response over time and across all mailers who subscribe to our cooperative database. Additionally, we developed a proprietary matchback process, called MeritMatch, to gain the most comprehensive view of response across channels so that the modeler has accurate information to start the actual analytical processes.

Measuring Return on Investment

The good folks at Direct Magazine shared this article about e-mail return on investment. The comments in the article appear to be accurate, if ROI is measured as net sales divided by marketing cost:

• Catalog drives $7.09 net sales for every marketing dollar spent.
• E-Mail drives $57.25 net sales for every marketing dollar spent.
• Online Marketing drives $22.52 net sales for every marketing dollar spent.

While e-mail clearly has the best ROI, the following table below shows it is least powerful in driving sales volume. Because e-mail has almost no cost, any amount of sales generated by e-mail makes e-mail marketing appear to have a great ROI.

ROI Comparison, Catalog, E-Mail and Online Marketing
		Catalog	E-Mail	Online Mktg.
Circulation / Searches		100,000	100,000	225,200
Response / Conversion		5.32%	0.17%	7.50%
Responses		5,318	172	16,890
Average Order Size		$100.00	$100.00	$100.00
Net Sales		$531,750	$17,175	$1,689,000
Gross Margin	50.0%	$265,875	$8,588	$844,500
Less Cost		$75,000	$300	$75,000
Less Variable Expense	13.0%	$69,128	$2,233	$219,570
Net Profit		$121,748	$6,055	$549,930
ROI per Direct Magazine		$7.09	$57.25	$22.52

Given the return on investment stats in the article, and an assumed cost of $0.003 per delivered e-mail, the same circulation of 100,000 customers results in catalog driving thirty times as much sales volume as e-mail. The same assumptions results in online marketing driving ninety times as much sales volume as e-mail. You can use this template to plug in your data, your assumptions, and see how your story turns out.

I think it is important to see a variety of ways of analyzing data. It is important that you develop a balaned approach to understanding ROI. The Direct Magazine example, and this example, provide two opposite, but appropriate, ways of measuring ROI.

E-Mail Article in Direct Magazine

Direct Magazine ran a recent article by Ken Magill titled "It Could Get Ugly". He references comments made by Epsilon Interactive Vice President Michael Della Penna about all-image e-mails being suppressed by large e-mail service providers like Google, AOL or Microsoft.

The executive offers scary comments like "you're going to get slaughtered online this year" and you are "in for a horrendous online holiday shopping season", if you don't address HTML-only e-mail image problems.

Give Mr. Della Penna credit for trying to help marketers with a potential credit. But don't be frightened into thinking your business is heading toward a horrendous online shopping season, or that you're going to get 'slaughtered' online. Neither will happen. E-mail is one part of a total online strategy that includes online marketing, search, catalogs, direct mail, affiliates, you-name-it! I'll revisit this topic in January, and we'll see if anybody got 'slaughtered' by this issue.

Carnival of Business

Welcome to the 28th edition of the Carnival of Business, hosted this week at The MineThatData Blog.

My name is Kevin Hillstrom, a database marketing executive with nearly two decades experience analyzing customer behavior. At one time in my career, I wrote SAS programming code on a PC with a 20meg hard drive, monochrome monitor, and an HP7475 plotter.

The Carnival of Business was founded by Tim at MyMoneyForest. Each week features a different host. Next week, be sure to visit The Real Estate Tomato for the 29th edition of the Carnival of Business.

I divided up this week's submissions into four categories. I promised to give any submissions that dealt with the business of Halloween top billing. Next, I outline four contributions that make up the Honor Roll, the posts I felt were best this week. Another group of contributions make the "Next Best" list, with a very large number of submissions rounding out this week's Carnival.

Please give these business bloggers your attention by clicking on their links, and where interest warrants, add their RSS feed to your RSS reader.



The Business Of Halloween:

Praveen at My Simple Trading System talks about "Halloween Synergy", sharing what a horror-filled amusement park in New York has lined up for Halloween.

Andrew Trinh at Trizoko submits "How To Overcome Your Fear Of Success". Andrew links Halloween fears with business fear, and talks about how to overcome those fears.

Greg Swan at the BloodhoundBlog used a Halloween-based title in "Interview With The Vampire: How Nick Learned To Knuckle-Under ..."



Carnival of Business Honor Roll:

Daniel Scocco shares "Seven Questions With Roger von Oech". This is a well-written interview with a leading expert on creativity.

Trent at Stock Market Beat has a good discussion called "Not The Time To Own A Truck", outlining a different trucking model that yielded success.

Christine Kane took considerable time to reflect upon what is important in life, and offers her comments in "Don't GET Rich Quick. BE Rich Quick."

David Maister at DavidMaister.com has a nicely done piece on "Guns For Hire". He starts the discussion by looking at the Edelman / Wal-Mart "flog", and then explores the challenges businesses have saying "NO" to less-than-ethical business opportunities. The discussion invited a lot of comments.



Carnival of Business Next Best:

FreeMoneyFinance offers "Why I Hate Rebates, Part 2". It would be great to have an executive from Scandisk comment how the customer benefits from this process.

Jon Symons contributed "Job Exit Tip - Flipping The Switch". I imagine that many individuals go through the process Jon describes.

Here's a good mathematical discussion from ForexBlog called "A Different Type Of Moving Average Cross".

Next week's host, The Real Estate Tomato, offers "Giving Away Trade Secrets?", an interesting discussion about how bloggers may be giving away secrets by informing the public about information for free.



Enjoy The Remainder Of This Week's Submissions!

Bill at MyBubbleLife speaks about "Benjamin Franklin's Faithful Plan", illustrating how the leader accomplished so much.

Steven Silvers talks about Hurricane Katrina and Michael Brown in "Ousted FEMA Director's Failure Offers One Good Crisis Management Lesson".

Grant at Kill The Meeting shares "Telecommuting In The Media". Maybe managers will be more amenable to telecommuting when gas prices rise above $8.00 a gallon?

Charles H. Green of Trusted Advisor Associates writes about "Paint By Numbers Management", his take on the HP leak scandal. It would be a great social experiment / simulation to put each of us in the situations these folks were in, and see how our actions would have caused different outcomes, either positive or negative.

Off Plan Properties submits "Sama Dubai Snap Poll Shows Dubai Property Outshines China And India", comparing Dubai to other attractive opportunities.

Jack Yoest at Reasoned Audacity gives "5 Tips To Get Your Company Ready For Your Radio Or TV Appearance". If you are lucky enough to be featured on television, these are important tips for you to follow.

Jeff Larche at Digital Solid shares "Data Mining, Finding An Arsenal In A Bunch Of Dry Bones". Jeff suggests possible ways that direct marketing and data mining could be used to drive local businesses.

Peter Kua at RadicalHop sent me "Product Innovation: Revisiting The Formula Of Product Leaders". He offers numerous opportunities to drive business success.

Smilerz at Life, Liberty and the Pursuit Of ... submits Stop! It's Budget Time. It would be good for folks to study the different ways different companies execute their strategic budgeting process.

Mike at OnlyOneMike submits "How To Enjoy Your Life". It is important in business to recharge your batteries. Read the article to see how Mike is recharging his batteries.

Barry Welford at The Other Bloke's Blog offers us "ask Google, google Ask", a discussion of how Google wants to stop having its name be used as a verb.

Travis Wright at Cultivate Greatness / Personal Development offers us the third in a series of podcasts about Napoleon Hill's Law of Success.

John at Mighty Bargain Hunter says that it "Must Be Nice To Turn Down A Billion Dollars", and shares his thoughts about the management team at Facebook saying 'no' to a big buy-out opportunity.

David E. shares "What Is The Secret Of Success" with our readers. I enjoyed some of the comments about success coming from practice. Success often comes from honing one's craft over time. He also submitted "When Is The Right Time To Invest?"

Scott at Scott On Money shares "Experian Triple Advantage Hassle", a criticism of service associated with the Triple Advantage Hassle program.

Spencer Hill submits "Want More Money From Your Business", discussing tools that you can use to save more money for your retirement.

Michael Wade at Execpundit wrote "Ten Powerpoint Presentation Mistakes". Powerpoint is a curse and a blessing, isn't it?

At Towards a Better Life, Victor Fam shares with us a pair of discussions. In The Risk of Missed Opportunities. Fam advocates having an entrepreneurial mindset, not an employee mindset. In Millionaire Factors, Fam shares six secrets of wealthy individuals.

Isabel M. Isidro submits "Breaking the Myths of Entrepreneurship", outlining three myths about starting your own business.

Brandon Peele at Generative Transformation shares Leadership Revisited with us. He outlines his definition of leadership, following work done over the past few months.

Emmanuel Oluwatosin shares "Customer Is King". He gives tips for how to deal with customers who may not be right, but have problems that need to be resolved.

Sanjay Kumar presents "Characteristics of Entrepreneurs", citing differences between small business owners and entrepreneurs.

Finnegan Lane offers us "What The Silicon Valley Startups In My Life Taught Me", sharing several examples of the dynamics of the startups he worked for.

Pamela Slim at Escape From Cubicle Nation discusses "Top 5 Nitpicky Mistakes Made By New Entrepreneurs That Drive Me Crazy". You know, I don't have my picture on my blog. Hmmmm.

Julia Dorofeeva contemplates "How To Start An Online Dating Business".

Patricia shares "15 Signs An Adult Is Stuck Thinking Or Acting Like A 3 Year Old". The author believes that happiness in business can happen if one acts more like a grownup.

Adnan at Blogtrepreneur forwards "Young Entrepreneur's Tools: Email And Instant Messaging". Adnan talks about using E-Mail and IM to compete with the big boys in their big offices!

Bryan C. Flemming contributed "Million Dollar Savings Club Update, Day 65".

The MineThatData Honor Roll

This is my first experiment with "The MineThatData Honor Roll". From time to time, I plan on including links to four articles that are worthy of your consideration.

Articles should meet the following criteria, to be included in the honor roll.

• Article must be relevant to my niche (database and multichannel marketing).
• The article does not aim to criticize a person or organization. The author may criticize if the criticism is part of a balanced argument. No "pundit puffery" is allowed here.
• The author attempts to bring new ideas to the table, or attempts to educate the reader for the sole purpose of benefiting the reader.

Listed below are a series of articles that qualify for the first MineThatData Honor Roll.

• Avinash Kaushik of Occam's Razor patiently explains the concept of measuring visitors in his web analytics blog. This is a great example of how one makes this honor roll. He explains a topic that others may assume the reader already knows, and he freely gives valuable information to the reader.

• Robbin Steif at LunaMetrics answers a question from a user about increasing website conversion for $1,524. Kudos to Robbin for giving valuable insight that can actually help any business or any website. In particular, the advice given is very useful for a small online business that doesn't have a lot of technical resources.

• Welcome Blog Business Summit to the Honor Roll for coverage of the Blog Business Summit Conference this past week in Seattle. The topics they cover are way out in front of where most direct marketers are these days. But be sure to pay attention, because elements of the "Web 2.0" strategies they describe will become part of your business.

And this is where I am stuck. Nearly three hours of reading posts, and I've only found three that meet my criteria. HELP!! Use the comments link to suggest articles from bloggers that you feel meet my criteria.

Does The "Long Tail" Hypothesis Yield Increased Sales?

Many of you have read about "The Long Tail", a hypothesis from Chris Anderson that suggests that online companies can sell more by selling many niche items to many niche audiences.
Fortunately, data is readily available from Internet Retailer that can help verify whether this hypothesis has merit. Here is what I did with the Internet Retailer top 500:

• Excluded the bottom 200 sites, as sometimes companies can not be entirely honest about their sales, in order to make the top 500.
• Excluded companies with sales above $1.5 billion (outliers that can skew results).
  
• Excluded companies with sales below $16 million (may have lied about sales).
  
• Excluded companies that did not report how many skus are available online.

This yielded 167 companies that I could analyze. I grouped these 167 companies into five segments, based on the number of skus they offer. The top segment of 34 companies sold an average of 450,000 skus. The next 34 companies offered 48,000 skus. The next 33 companies offered nearly 16,000 skus. The next 33 companies offered just over 6,900 skus. The bottom 33 companies offered just over 2,000 skus.

The table below illustrates key metrics from the analysis.

Internet Retailer Website Performance By Number of Skus Offered
	Average	Annual Net	Conversion	Sales
	Skus Offered	Sales (000s)	Rate	per Visitor
Segment #1	450,088	$268,120	3.26%	$3.13
Segment #2	48,043	$206,243	3.25%	$5.54
Segment #3	15,718	$116,395	4.60%	$4.28
Segment #4	6,914	$150,526	4.39%	$5.96
Segment #5	2,015	$84,572	5.84%	$5.49

First, I don't want to suggest that any particular strategy is better or worse. Whatever is right for your brand is the right strategy. I am not advocating you should increase or decrease skus.

I do want to illustrate a few key findings.

• More skus yielded increased sales. It could be that these companies are more established. Or it could be that these companies sell more because they offer more. There was a healthy distribution of top-selling companies, and bottom-selling companies, in each segment.
• Conversion rates decrease as skus increase. Does this suggest that websites become more difficult to navigate as skus increase? Chalk that up as a possible hypothesis that needs to be studied.
• Not surprisingly, sales per sku decrease as skus increase. This is in-line with the hypothesis advocated by Mr. Anderson.

To me, the most interesting comparison is between the first and second segment. Average net sales increase by a factor of 1.3 on nearly ten times the number of skus. If an online business can figure out how to profitably manage increased skus, then sales opportunities exist. If an online business cannot figure out how to profitably manage this dilly of a pickle, there are many profitable opportunities available focusing on one or a small number of niches.

Good job, Mr. Anderson! The hypothesis has merit, so long as the company can execute the strategy profitably.

Forrester Research Beats Up Bloomingdales

According to DMNews, Forrester Research Vice President Harry H. Harteveldt had unkind words to say about Bloomingdales online store.

The article states that Harteveldt felt the website had a lack of images, staid design, lack of merchandising and used acronyms for product descriptions. He mocked the site's use of the words "casual china" to describe its porcelain offering. According to a direct quote, Mr. Harteveldt said "To me, it's a billion people sitting around. Bloomingdale's distinguished in-store experience is missing online".

This is another good example of pundits clobbering folks in the B2C world. The people who work at Bloomingdales are undoubtedly good people who try hard to meet the expectations of their customers. Who is more likely to understand Bloomingdales customers, Bloomingdales, or Forrester Research?

Of course, Bloomingdales could do a better job of serving its customers. All companies could. What is to be gained by slamming them? And what happens when they listen to Forrester, implement Forrester's suggestions, and then sales stay flat, or decrease? Will Mr. Harteveldt stand up in front of a roomful of Forrester customers, and tell the audience that he was responsible for decreasing sales?

I have met numerous individuals from Forrester Research, and I thoroughly enjoy Forrester's Marketing Blog. All prior experiences with Forrester have been positive. But I'm really tired of pundits tossing B2C employees under the bus as a way of demonstrating their thought leadership.

I, too, will try to practice what I preach.

E-Mail, Catalog and Online Strategy

Over the past two days, I spoke about catalog/online strategy and e-mail strategy.

Our current business climate is at a unique inflection point. The fragmentation of the advertising industry is leading retailers away from less-accountable media, into catalog. The dominance of the online channel is driving direct marketers away from catalog, toward online marketing. Google eagerly welcomes all marketers to its version of marketing nirvana. And then there is e-mail.

The 1to1 blog talked about e-mail marketing on Tuesday. The article talks about targeting, personalization and pizzazz as being keys to driving a successful e-mail campaign. Nowhere does the article address the importance of merchandise. Merchandise is the real reason an e-mail campaign works, or doesn't work. All of the targeting, personalization and pizzazz cannot make up for the fact that either the customer wants to purchase what you have to offer, or does not want to purchase what you have to offer.

Because e-mail is close to free, we sometimes fail to apply the rigor we should when considering how to market via e-mail. The 1to1 article mentions that the average open rate for an e-mail campaign is twenty-seven percent. Stated differently, three out of four e-mail recipients discard your e-mail before even considering the contents.

The "relationship" aspect of e-mail CRM is completely missing. I don't have the answers to this problem. But, given my e-mail productivity discussion from yesterday, when getting one customer in a thousand to purchase something yields a profitable outcome, there won't be the kind of merchandising innovation needed in e-mail to make e-mail campaigns more productive.

Simply put, it is too easy to make money with e-mail to invest the real energy required to make real money with e-mail.

What are your thoughts?

Carnival of Business: October 30, 2006

MineThatData is hosting the October 30, 2006 edition of the Carnival of Business. Each week, writers from all over the blogosphere submit their best business posts from the past week, which are featured in the following week's Carnival.

Be sure to visit on Monday, and support these hard-working bloggers! Better yet, please submit your best business writing from the past week, and I'll be sure to publish it.

P.S.: I will give extra credit to any article written about the business of Halloween.

The Drama Of A Winter Storm

Day two in Tofino was fantastic. We were greeted with a High Wind Warning, and sure enough, breezes in the 30mph to 45mph range were in effect by early afternoon. The passing of a cold front stirred the ocean. I hearken to George Costanza's line on Seinfeld: "The sea was angry that day, my friends. It was like an old man sending back soup at a deli."

Tofino is a town that embraces its biggest flaw, weather. From San Francisco to Alaska, big windstorms, many with winds over 60mph, pelt the coast from November through February. It does not make sense that a person would travel seven hours from Vancouver, twelve hours from Seattle, or farther away, to spend a December day watching gigantic waves crash into the shore, while fifty mile-per-hour winds drive rain sideways on a raw, forty degree gray afternoon.

But that is just what people do. Tofino markets this horrible weather as something that is romantic, something worth experiencing. On the bottom of our dinner receipt this evening were twelve simple words: "Join us for the drama of a winter storm, November through February".

All marketers have an opportunity to turn a negative into a positive.

E-Mail Strategy

Assume you work for a small business with a e-mail list of 3,000 individuals. You executed an e-mail campaign last week, segmenting your campaign into three segments of customers (best, average, all others). Here are the results:

Best Customers (1,000 total):

• Open Rate = 35%. Of those who opened the e-mail, 10% clicked-through to the website. Of the 35 remaining customers, ten purchased merchandise, spending a total of $1,000, yielding $300 profit. Two customers opt-out of future e-mail campaigns.
  

Average Customers (1,000 total):

• Open Rate = 30%. Of those who opened the e-mail, 10% clicked-through to the website. Of the 30 remaining customers, three purchased merchandise, spending a total of $300, yielding $90 profit. Two customers opt-out of future e-mail campaigns.
  

All Other Customers (1,000 total):

• Open Rate = 25%. Of those who opened the e-mail, 6% clicked-through to the website. Of the 15 remaining customers, one purchased merchandise, spending a total of $100, yielding $30 profit. Two customers opt-out of future e-mail campaigns.
  

How would you judge the results of this e-mail campaign? Is the performance of all three segments acceptable? Without knowing anything about the merchandising strategy or creative execution of the campaign, would you recommend mailing a similar strategy to each segment next time?

Catalog and Online Marketing Strategy, You Decide!

Your business mails a catalog every November to 100,000 customers. It has been tradition to mail 50,000 housefile names, and 50,000 prospects.

Over the past three years, the performance of the November catalog has not met expectations. The database marketing folks do a good job of measuring results in the catalog and online channel. They don't follow the approach of allocating online orders to the catalog channel simply because the customer received a catalog. Instead, the database marketing folks execute mail and control tests, measuring the true incremental benefit of the mailing across channels.

Here are the results over the past three years, and the planned results for 2006. Each year, 100,000 catalogs were mailed.

November Catalog Performance
	Catalog	Online	Total	Total	Profit	Total
	Sales	Sales	Sales	Cost	Factor	Profit
2006 Plan	$200,000	$100,000	$300,000	$115,000	33.0%	($16,000)
2005 Results	$250,000	$75,000	$325,000	$110,000	32.0%	($6,000)
2004 Results	$300,000	$50,000	$350,000	$105,000	31.5%	$5,250
2003 Results	$375,000	$25,000	$400,000	$100,000	31.3%	$25,200

The online marketing folks also execute November campaigns, including email, online marketing, search and affiliate programs. The next table illustrates their results.

November Digital Marketing Performance
	Catalog	Online	Total	Total	Profit	Total
	Sales	Sales	Sales	Cost	Factor	Profit
2006 Plan	$2,000	$150,000	$152,000	$30,000	33.0%	$20,160
2005 Results	$2,000	$80,000	$82,000	$12,000	32.0%	$14,240
2004 Results	$2,000	$30,000	$32,000	$3,000	31.5%	$7,080
2003 Results	$2,000	$10,000	$12,000	$1,000	31.3%	$2,756

In total, multichannel campaigns have not met profit expectations. Here are the total results:

Total November Marketing Performance
	Catalog	Online	Total	Total	Profit	Total
	Sales	Sales	Sales	Cost	Factor	Profit
2006 Plan	$202,000	$250,000	$452,000	$145,000	33.0%	$4,160
2005 Results	$252,000	$155,000	$407,000	$122,000	32.0%	$8,240
2004 Results	$302,000	$80,000	$382,000	$108,000	31.5%	$12,330
2003 Results	$377,000	$35,000	$412,000	$101,000	31.3%	$27,956

You have been promoted to the position of Vice President of Database Marketing, reporting to the Chief Marketing Officer. The Chief Financial Officer assigned you the task of dramatically improving the profitability of marketing activities.

Your Chief Executive Officer strongly believes in the multichannel power of catalog mailings. Her thirty years of experience in catalog marketing fuel her belief that catalog is an effective tool in communicating the brand.

Your boss, the Chief Marketing Officer, is an online hipster with five years of total marketing experience. She wants to take catalog marketing dollars, and move them into the online channel, significantly increasing the presence of the brand online, and via email.

There probably aren't any right or wrong answers to this situation, though we would all agree that it is important to continue to increase sales and profit.

Let's discuss your 2007 marketing strategy. How would you change the mix of advertising spend between catalog and digital channels? How would you navigate the political challenges between the Chief Executive Officer, the Chief Financial Officer, and the Chief Marketing Officer?

The Little Guy verses The Pundit

Today is a spectacular fall day in the Pacific Northwest. The sun is out, and temperatures are in the upper fifties. You can probably count on one hand how many of these days are left.

I received a lot of negative feedback this week. Almost all of the negative feedback came from people who sell products and services.

My goal in writing this blog is to help "the little guy", the individual working at a company selling stuff via the online or catalog channel.

These people typically don't have a voice. They cannot speak on behalf of their company, the speaking role is reserved for the folks in the public relations department. These individuals cannot share proprietary information, because revealing fun, proprietary projects may give competitors insight into what makes a company tick. The work in silence, doing great things, unable to tell anybody about it.

On the other side of the spectrum are individuals who sell products and services. They need to market what they do, the must be seen as an expert, or people like me won't buy what they have to sell.

I am always going to side with the "little guy", the person running the database marketing department at a twenty million dollar online company, the person who does good work, but doesn't have a voice.

And when my opinions represent the "little guy", and fly in the face of what vendors are trying to sell, I get a lot of negative feedback.

That is what I observed this week. Each time I represented things from the point of view of the "little guy", negative feedback came from those marketing products and services --- lots of negative feedback!

I also received feedback this week from folks in the vendor community who are really good at taking that middle stance, between the "little guy" at a B2C organization and the vendors selling products and services. These folks tried to provide a balanced point of view.

People who can take this middle stance, in my opinion, have a great chance for personal and professional success. Seeing all sides of a story is important. I get several dozen calls each week from vendors trying the hard sell. They tell me I must have multichannel solutions, that my website isn't adequate, that I'm leaving sales in my shopping cart, that my inventory systems aren't aligned, that I'm not personalizing the website or direct mail, that my paper quality is too good, that my paper quality is shoddy, that my list hygiene is horrible, that my targeting strategies are stuck in the stone ages.

Every once in awhile, somebody takes that middle stance, and tries to be my partner. The way those individuals talk about their business resonates with me, and makes me much more likely to listen to them.

Instead of decrying somebody representing "the little guy", it may make sense to listen to what is being said, see if there is any truth to it, and try to understand the other side of the equation.

Low Clouds, and the Last Word on Brookstone/Abacus

Fall is an unusual time in the Pacific Northwest. It is a 2-3 week stretch between the dry season (July - September) and the rainy season (November - March). Today, the clouds were so low that they engulfed the foothills. You could literally watch a cloud envelop your home. In just a few weeks, we enter windstorm and heavy rain season. From there, we eagerly await the drizzle of January, February and March.

A few tidbits for you:

• Arthur Middleton Hughes, who was featured here last week, talks about nine database marketing sins.

• The 1to1 blog has a wrap-up of comments from the DMA conference.

• Advertising Age ranks the top 200 "brands" based on how much the brand spends on advertising. I wonder what the list would look like if they ranked "brands" on the basis of return on investment?

• For those of you who like LTV formulas, Avinash Kaushik has one for you.

• Gerry McGovern writes about award winning websites and their practicality / functionality.

A final note on the Brookstone / Abacus commentary of the past two days. Most of the feedback has been negative, especially negative from folks working in the B2B world. Adelino de Almeida at the Profitable Marketing blog wrote an insightful post.

What I learned from your comments and emails is that this is a really exciting time to be on the B2B side of Database Marketing. There's a lot more pressure on the B2C side of the Database Marketing equation, as businesses seek to become more "efficient" with advertising and expense management.

Brookstone, Abacus, and You

I want to revisit yesterday's announcement that Brookstone selected Abacus "to provide all of the prospecting, analytics and database management for its direct marketing efforts."

The DMNews article states that, among other reasons, the goals include "... gaining additional market share within its potential customer base while lowering overall direct marketing expenditures."

Obviously, I know nothing about the inner workings at Brookstone. I have worked with the folks at Abacus, and there is nothing wrong with Abacus taking the direction to provide these services, that is why they are in business.

But if you have spent your career in the Direct Marketing industry, what used to be the "Catalog" industry, or the Database Marketing industry, this should cause you concern, a lot of concern.

Strategically, Brookstone has a lot of ways to acquire new customers. Having stores allows Brookstone to acquire new customers organically. The internet feeds the direct channel with new customers. With the declining importance of catalog, it may be acceptable for a multichannel retailer to prospect off of the compiled list Abacus offers its clients.

By ceding database marketing skills, circulation skills, prospecting skills, and online marketing optimization and allocation skills to Abacus, Brookstone has made the decision that owning this important skill-set in-house is not important. If other companies follow-suit, jobs will be lost, and skills that served the direct marketing industry well for the past twenty years will be gobbled-up by a small number of large organizations. Database Marketing will go the way of the advertising agency. The Chief Marketing Officer will have one more reason to be fired after just two years on the job.

I believe this isn't an isolated incidence. I believe this is a trend. Direct Marketers already invited Google to the "C-Level" table, they just don't know it yet. Brookstone, you also added Abacus to your "C-Level" table.

Where Have All The Cowboys Gone?

At least that is what Paula Cole sang ten years ago. In this case, my traffic dropped by 2/3 this week, as the Direct Marketing community convenes in San Francisco for the DMA conference. My loyal readers, where art thou?

A few notes for those left behind, those holding the fort down while our co-workers listen to Bruce Hornsby and eat exotic delicacies at a vendor-sponsored party.

• Brookstone Selects Abacus For All Direct Marketing Activities. The article reads as though Brookstone has outsourced the whole direct marketing department to Abacus. Database Marketing professionals, beware ... your industry is being attacked on all sides. The banking industry is outsourcing jobs to India. Online marketing, search and web analytics are gobbling up what used to be the circulation department. Brookstone has outsourced what is typically an entire department to Abacus. Brookstone has limited customer acquisition to only the pool of names Abacus chooses to provide Brookstone, and the names they can acquire via the web. Database Marketers, do something to prove your value to the direct marketing profession, before the rest of the industry follows suit.

• A shameless plug. If you enjoy this blog, nominate it for the ClickZ awards.

• A.T. Clayton reports that Banta named Alison Heiser as its President and Chief Customer Officer. Her background is from Accenture (consultant), Michelin, LensCrafters, Kellogg and Procter & Gamble. It is my opinion that we will see more leaders in the Direct Marketing industry with skill sets not historically congruent with our industry. I believe the internet is taking us in this direction. The online channel acts a lot more like a retail channel than a catalog channel. This results in needing a different style of President or Chief Executive.

• By now, you know that I really enjoy the Note to CMO blog. Take a peek at today's post.

• An interesting post from Brian Carroll on why sales people don't use CRM systems. I think CRM systems would have a better chance for success if the sales force were the sponsors of the CRM project, the ones leading implementation.
  

Bureaucracy

This post by Sun CEO Jonathan Schwartz resonated with me today. If a startup can build a worldwide infrastructure that supports 100,000,000 videos viewed each day within just eighteen months, what the heck could our companies accomplish if it weren't for the internal processes we've created?

ESPN: The Entertainment and Sports Programming Network

My wife and I are enjoying teriyaki for dinner, watching Monday Night Football (when my beloved Packers are this bad, the next-best-thing to do is to cheer against Chicago and Minnesota), when we observe a new video by Jay-Z, featuring NASCAR and IRL drivers Dale Earnhardt, Jr. and Danica Patrick. Tossed-in for good measure are scantily clad women, and clips from yesterday's NFL games.

I'm a football purist, so this isn't how I'd prefer to spend halftime. However, I can see the genius of the person who decided to name this network "ESPN" instead of "SPN" back in 1979.

ESPN stands for the "Entertainment and Sports Programming Network". That "E", as my wife points out, gives ESPN the permission to offer you "Entertainment" during Monday Night Football. ESPN takes advantage of the letter "E" with much of their programming.

All of the companies we work for have little quirks that allow employees to take risks. Google's "Do No Evil" provides boundaries for employees, but also provides unlimited opportunities for doing good. What are examples of company quirks that allow you to take risks you otherwise wouldn't take?

Allstate Insurance, Earthquakes, and CRM

My wife and I received a letter in the mail Saturday, informing us that Allstate will no longer provide earthquake coverage on our home. Having lived through the 6.8 quake in 2001, it is a good idea to have earthquake coverage in the Pacific Northwest. Conversely, having lived through Hurricane Katrina, it is probably a good idea for Allstate to drop coverage of this nature.

Several years ago, I was in an accident in a rental car, one where I totaled two vehicles. Allstate cleaned up the whole mess for me in as professional and wonderful a manner as I could ever hope for. As a result, I have a soft spot in my heart for Allstate.

Still, there is something unsettling about this. I was told of this change in policy via a form letter. One might think a call from my agent would be nice. Oh well, yet another win for big business.

CRM experts, here is your chance to shine. If you were part of the management team at Allstate, how you do you handle communication of delicate news like this in a way that makes sure that I continue to sink my hard-earned dollars into endeavors that Allstate views as being highly profitable? How should Allstate have communicated this issue?

Multichannel Haiku #1

Dear Google, I need
to own several keywords.
Please do no evil.

Who Drives A Multichannel Strategy?

Last week's parable of multichannel marketing wrankled many of you. Good!

It is important to consider who is telling you that you must be "multichannel". Is your customer telling you what they want to see, or are vendors who provide solutions telling you how you should implement "multichannel" strategies?

The latter can be troubling. There are many vendors who genuinely want to do what is best for your business. There are other vendors that want you to purchase expensive products, services and solutions that provide multichannel functionality, including:

• Integrating inventory systems across all channels.
• Same product available in all channels at the same price.
  
• Integrated advertising/marketing across all channels, advertising/marketing with the same look and feel.
  
• Integrating ROI measurement across all channels.
• Vendors providing services from evolving industries like compiled lists, paper, television, magazines and newspaper, who want to maintain market share.
  

Frequently, vendors use phrases like "multichannel customers spend 'x' times more than single-channel customers", or "your customers demand to purchase what they want, where they want", or "Circuit City does a great job of allowing buy-online and pickup in stores". Quotes from Forrester Research or McKinsey about customer behavior are included as ways to justify the tools they are selling.

I am not saying that we shouldn't implement any/all multichannel strategies.

We should, however, pay close attention to what our customers really want, and how much it costs to serve our customers. We shouldn't do something because a vendor tells us that our customers demand it, or because a research company who makes money via consulting or the sale of research reports weaves a compelling story.

Look at all of the multichannel marketing opportunities that exist, then pick and choose the things your customer demands, or pick strategies you perceive your customers will demand but aren't educated about yet. Base your strategies around your business model and customer interests, not around a pundit telling you what you should do. All too often, the latter is happening. I perceive there are too few success stories to justify what we are hearing.

Lastly, think for a few moments about your experiences as a customer. On an annual basis, how often would you truly order an item online, then invest the time to drive twenty miles to a store, and pick up the merchandise? Would you do that with an $1,800 television? Would you do that with a $19 t-shirt? How often do you truly watch a television commercial, then see the same brand advertise with a catalog, then advertise via e-mail, then maintain the look-and-feel on the website, and say "wow, that's great integrated marketing, I'm getting in the car to go to the store to buy that product?" We need to do a better job of thinking like the customers we are when we aren't at work.

Lastly, we need to understand customer behavior before doing the next "flavor of the week" multichannel strategy. Circuit City customers might see the website as a compliment to the retail channel. The Territory Ahead might see the website and stores as a compliment of their catalog channel. Knowing how customers migrate across channels, and are retained by channel, determine what the appropriate multichannel strategy is. We spend too much time on the tactics, and not enough time understanding the customer behavior that drives the tactics.

These are the reasons why the parable was written.

Ok, time for your opinion. I want to hear it. We should all be able to agree with points, and disagree with other comments, and be able to share our thoughts here.