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?


5 comments:

  1. Great analysis as usual. The situation describes an industry that is still focused on traditional marketing/selling environment and mindsets while their customer base is web 2.0 focused on social relationships, infinite touchpoints and connections.
    Direct marketers need to be more conversation focused rather than campaign oriented and migrate from a push environment to pull interactions with their customers.

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  2. I run into many clients who are in the second and third box, and that is exactly where their customers are ... so it's fine for them to continue business as usual.

    Once customers move onto that second row, that's where things get interesting.

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  3. That chart is brilliant. It describes my process as a consumer almost perfectly, starting in the far upper left in 1992 (the year we bought our house, in a region of the country where the retail channel barely exists), moving rapidly through the second row in 2001–2003 (the first two years of Internet connection at home), and now settling firmly into the final box (skipping the second-to-last box altogether). Brilliant, I say. I hope lots of people in the industry are paying attention to your analyses, Kevin.

    I'd like to note that one of my favorite places to shop also features an online forum where not only the customers congregate, but the owners drop by fairly regularly. Merchants would benefit from doing more of that type of thing, if they want to reach third-row people like me. They have no control over the reviews they're getting elsewhere (and yes, I look for that information, as well), but I love when a seller takes time to really hear my opinions and makes it easy for me to provide feedback. It builds good rapport, a sense of connection. I'm happiest giving my money to someone I know.

    At the other end of the spectrum, my husband received a seemingly random prospecting catalog this morning from a DMA member (even though we're both enrolled in the mail preference service). I've completed my research and can now report with confidence that this is the 26th time that's happened in four months. That doesn't feel like a connection. It feels like a violation of our personal space. We've begun writing to these merchants to see if they're willing to honor DMA's new Commitment to Consumer Choice guidelines and disclose the source for our name and address info. Their reply (or lack of reply) will tell us a great deal about whether they're a company deserving of our faith. I'm not especially optimistic, but I'd love to be pleasantly surprised.

    Our perspective has definitely changed a lot since the 90s, when my husband and I were more tolerant of the incredible waste involved simply because catalogs were pretty much the only attractive and convenient channel for us to shop.

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  4. I wonder...is this phenomenon of TOTAL customer control reside in the direct marketing field? Or is it non-marketing that does not fit into any marketing definition?

    It sounds closer to the art and science of public relations than marketing to me.

    Perhaps this is a new field. I don't yet see how "social marketing" has much to do with one-to-one marketing. One-to-one refers to the selling activity between the business and the individual customer.

    What we have on your chart is customer-to-customer marketing that the company has little to no control over. If the company cannot find a way to manage it with predictable results, then I contend that it is no longer marketing.

    "Disruptive marketing" has existed since the dawn of commerce and will never go away in my opinion. Not so much because the customer needs it. But rather because the company needs it to survive and prosper.

    My thoughts on this subject are still evolving. So I hope you will forgive my lack of conciseness on this issue.

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  5. Thanks for your input, Tracy.

    Catalogers like to feel like they have total customer control. I had a CEO tell me that he loved catalogs and e-mail, because he had total control, he decided how and when demand happened.

    The point of the exercise was to show that at some point, with a subset of the customer audience, the marketer doesn't have to market to the customer anymore ... and that's great. The customer simply purchases, no need for marketing to happen ... sort of like what happens with a bunch of customers who shop at Zappos.

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