February 21, 2008

Multichannel Forensics: How A Cataloger Becomes An Online Brand

Times change. Multichannel Forensics are a great way to illustrate how times change if you are a catalog brand.

Let's analyze the repurchase index for the catalog channel and the online channel for a catalog brand.

1999: Catalog to Online = 0.06, Online to Catalog = 0.59. Catalog customers are unwilling to shop online. Online customers transfer back to the catalog channel after purchasing online.

2000: Catalog to Online = 0.11, Online to Catalog = 0.48. To the catalog executive, things don't look dramatically different. Online customers still shift back to the catalog channel. For two consecutive years, it appears that the online channel depends upon the catalog for business.

2001: Catalog to Online = 0.17, Online to Catalog = 0.41. Same old same old, if you're the catalog executive. The online channel grows, but online customers switch back to traditional catalog shopping. However, pay attention to each index, one increasing, one decreasing.

2002: Catalog to Online = 0.23, Online to Catalog = 0.33. At this time, the catalog executive notices that catalog productivity is struggling, while the online channel continues to grow. Something seems fishy.

2003: Catalog to Online = 0.28, Online to Catalog = 0.29. The catalog seems to flounder, while the online folks gloat about their wonderful channel. This is when matchback analytics became popular, "proving" that online orders are driven by catalog orders.

2004: Catalog to Online = 0.32, Online to Catalog = 0.23. Here's where management changes occur. The catalog channel continues to flounder, now shrinking. Conversely, online purchasers are on the verge of becoming unlikely to buy over the telephone.

2005: Catalog to Online = 0.36, Online to Catalog = 0.15. We've passed a key inflection point, no longer able to return to "the good 'ole days". Catalog customers are willing to shop online. Online customers are no longer willing to pick up the phone and place an order. It is here that the traditional cataloger mails online customers like they are going out of style, using matchback analytics to "prove" that the catalog drives online orders.

2006: Catalog to Online = 0.40, Online to Catalog = 0.13. The cataloger doesn't realize it, but the online customer is in many ways becoming a fundamentally different customer, not needing catalog advertising to place orders. Yet, because the cataloger mails most online customers, the cataloger mistakenly "proves" that catalog mailings drive online orders. Multichannel Forensics metrics diverge from matchback analytics.

2007: Catalog to Online = 0.43, Online to Catalog = 0.12. The transition is basically complete. The catalog brand is now an online brand that uses catalog advertising. Online customers keep shopping online, while the remaining segment of catalog customers continue to leak into the online channel.

If a catalog executive sees this trend, then she knows that the days of catalog marketing are winding down.

Once again, the trend looks like this:
  • 1999 Cat-Web = 0.06, Web-Cat = 0.59.
  • 2000 Cat-Web = 0.11, Web-Cat = 0.48.
  • 2001 Cat-Web = 0.17, Web-Cat = 0.41.
  • 2002 Cat-Web = 0.23, Web-Cat = 0.33.
  • 2003 Cat-Web = 0.28, Web-Cat = 0.29.
  • 2004 Cat-Web = 0.32, Web-Cat = 0.23.
  • 2005 Cat-Web = 0.36, Web-Cat = 0.15.
  • 2006 Cat-Web = 0.40, Web-Cat = 0.13.
  • 2007 Cat-Web = 0.43, Web-Cat = 0.12.

What does the relationship look like when the catalog business still matters?
  • 1999 Cat-Web = 0.06, Web-Cat = 0.59.
  • 2000 Cat-Web = 0.11, Web-Cat = 0.48.
  • 2001 Cat-Web = 0.17, Web-Cat = 0.41.
  • 2002 Cat-Web = 0.22, Web-Cat = 0.34.
  • 2003 Cat-Web = 0.25, Web-Cat = 0.32.
  • 2004 Cat-Web = 0.26, Web-Cat = 0.31.
  • 2005 Cat-Web = 0.28, Web-Cat = 0.30.
  • 2006 Cat-Web = 0.29, Web-Cat = 0.29.
  • 2007 Cat-Web = 0.30, Web-Cat = 0.28.
If this is the relationship you see, you likely have three separate customer segments:
  • Pure catalog customers who buy over the phone when catalogs are sent to them.
  • Online customers who are inspired to purchase by catalogs.
  • True online customers who do not respond to catalog marketing.

What does the relationship look like when the catalog business IS the business?
  • 1999 Cat-Web = 0.06, Web-Cat = 0.59.
  • 2000 Cat-Web = 0.08, Web-Cat = 0.48.
  • 2001 Cat-Web = 0.11, Web-Cat = 0.41.
  • 2002 Cat-Web = 0.14, Web-Cat = 0.35.
  • 2003 Cat-Web = 0.16, Web-Cat = 0.32.
  • 2004 Cat-Web = 0.17, Web-Cat = 0.31.
  • 2005 Cat-Web = 0.17, Web-Cat = 0.30.
  • 2006 Cat-Web = 0.18, Web-Cat = 0.30.
  • 2007 Cat-Web = 0.18, Web-Cat = 0.30.
If this is the relationship you see, you are truly a cataloger. Your website basically serves the purpose of a glorified order form. Your survival depends upon the mailing of catalogs. Your future, however, depends upon your ability to cultivate a segment of customers who are willing to shop online, not needing catalogs to purchase merchandise.

The future is a bit murky for some catalogers. Many catalog companies have a head start building a segment of the customer base that shops online not because catalogs are mailed, but simply because the customer loves the brand.

Catalogers who do not have this "insurance policy" will struggle, because everything depends upon the cataloger mailing catalogs. Third parties like the USPS eat away at the brand from a profitability standpoint. Third parties like the DMA and Catalog Choice, via opt-out lists, facilitate customer backlash (though the backlash is ultimately our fault, not theirs), further lowering catalog productivity.

Catalogers who have this insurance policy, a segment of customers who buy exclusively online without the aid of marketing, are able to generate profit without the cost of advertising. This profit offsets the lowered profit from USPS cost increases, increases in paper cost, and customer backlash facilitated by Catalog Choice and the DMA.

So the goal for a cataloger is to understand where the customer is in the evolution from catalog marketing to online purchasing. By using Multichannel Forensics, executives are able to discern where a catalog brand stands on the evolutionary path to an online future. The executive then understands what must be done to protect the business, both short-term and long-term.