February 28, 2008

The Direct Marketing Customer Continuum

Please click on the image to enlarge it.

I'm about to eclipse one year as a multichannel forensics proprietor. If there is one thing I've learned during the past year, it is that customers who shop website and catalog brands have fundamentally changed their behavior over the past ten years.

The concept of a "customer" fundamentally changed. Multichannel Forensics projects repeatedly illustrate a pattern of customer evolution, one that progresses from advertising as the reason for sales increases to one where the customer purchases because of faith and trust in a brand.

This process, what I call the "Direct Marketing Customer Continuum", can be hard to understand. We've been trained to analyze campaigns. We blast an e-mail to 794,000 customers, we get 1,000 orders. We achieve a $30 cost per order on a paid search campaign. We send a catalog to customers and observe a surge in website orders. My goodness, we're a multichannel brand, everything we're doing works!! We think customers love interacting with us in a multichannel manner.

Until you view this from the perspective of a customer.

See, the customer is simultaneously progressing through a relationship with a brand, and with technology, a collaborative relationship that has fundamentally changed over the past decade.

In the image at the beginning of this post, the upper-left portion of the image reflects a customer at the start of the continuum. This customer requires advertising to place an order. Catalogers and e-mail marketers love this customer! This is the customer we've always known. We controlled this customer.

But then a funny thing happens. The customer discovers that the internet can be used to help determine if she is making the right decision. At this point, catalog and e-mail marketing are augmented with search campaigns, a true multichannel nirvana.

And just when we think we've mastered multichannel marketing, the customer moves even further along the continuum. This move is frustrating for us, because the customer no longer needs our advertising. She starts researching what other customers say, in blogs or on MySpace. As she participates in these forums, her behavior shifts even further away, to Facebook, and then to 140 character mini-conversations in Twitter. She trusts the opinions of her virtual friends, choosing to buy from us because she trusts us, she trusts technology, and she trusts her virtual friends.

This is where we mess up the whole relationship. The customer buys from us for completely different reasons, but we "match back" her purchase to our marketing strategies. Our measurement abilities and ego attribute her purchase to our brilliant marketing strategies, when in reality, she purchased for completely different reasons.

So the customer moves ever closer to a place where she buys from us simply because she trusts us. She doesn't need marketing anymore. She's ready to be "hyper-profitable" to us. Yet we market to her even more, making her "less profitable" to us.

We have four different things happening, all at the same time.
  1. We execute marketing campaigns because that's what we've always done, it is the way customers have always interacted with us.
  2. Customers are no longer static, their behavior moves along a direct marketing customer continuum, making it harder for us to understand what it is that motivates the customer.
  3. Customer acquisition completely changed. We used to market to a static audience that we controlled. Now, customers jump into this continuum anywhere the customer wants to. This lowers response to marketing. We blast a catalog to a prospect who now uses Facebook to learn what others think about us --- of course the catalog is going to be thrown out! In some cases, we observe this via lower response rates. In other cases, we mistakenly match the order back to our advertising. In either case, we're wrong.
  4. You simply cannot move a customer from the upper left portion of the image to the lower right portion of the image overnight. The customer decides when she wants to move from one box to another.
More and more, catalogers and e-mail marketers tell me that certain marketing strategies "don't work", especially those in the lower two rows of the image. There's no way these strategies can work if the customer base still resides in the top row of the continuum.

Conversely, the marketer is trapped, because a large portion of the population is silently moving from the top row to the bottom two rows of the continuum. As this happens, response to marketing activities tailored to the top row of the continuum drop. This disconnect has catalog and online brand executives worried.

It is becoming obvious that future opportunities reside in identifying where our customers reside on the direct marketing continuum.
  • Traditional marketing can focus on customers in the top row of the continuum.
  • Online marketing focuses on the middle row of the continuum. All of the emerging social media opportunities focus on the bottom row of the continuum.
  • The bottom row represents the biggest opportunity, because these customers buy because they trust us, not because we market to them. We eliminate marketing waste among this audience, greatly increasing profitability.
I believe this is the direction our customers are taking us in. Our current tool set and mindset are not yet calibrated for the direct marketing customer continuum.

Your thoughts?