February 24, 2008

Separate Audiences

With each passing day, I become convinced we're approaching the concept of being "multichannel" in the wrong way.

Fifteen years ago, we had epic discussions at Lands' End about "incrementality". We had several catalog titles. Not surprisingly, the VP in charge of each catalog title kept her job if her catalog title increased sales and profit. So each executive mailed the "best" customers.

Which meant that the same customers received everything.

We'd test how much incremental business we received from this strategy. Standard reporting said a catalog generated $4,000,000 sales. Using test/control groups, some catalogs generates as little as $1,000,000 sales, meaning if you didn't mail the catalog, $3,000,000 would be reallocated to existing catalogs mailed previously.

Fast forward to today.

We're getting better at aligning merchandising and inventory management strategies.

From a marketing standpoint, we're still all about doing what we can to be everywhere our best customers are. We mail catalogs, lots of catalogs, to our best customers. We entice these customers to give us their e-mail address, so that we can send them e-mail marketing as well.

Then we make sure we are where our customers are. We have paid search programs to anticipate every possible want our customers have, not to mention portal advertising and shopping comparison marketing and affiliate marketing. If the customer wants to order online, great! If the customer wants to order in a store, great! If the customer wants to order over the phone, out of a catalog, great!

At the end of the day, we put all of our eggs in the best customer basket. Great!

The secret sauce seems to be in finding separate audiences. Yup, we should find unique customers who like e-mail marketing, then serve them with e-mail campaigns. Another subset loves catalogs, so we serve them with catalogs. The wild west of the internet is for customers who love "self-service", the do-it-yourselfer, so online marketing could focus on the self-service audience. We just re-allocate the marketing dollars we control to potential channels offering a unique audience (all of this assumes this can be done profitably, or else, all bets are off).

Separate audiences serve the same purpose as "diversification" in your stock portfolio. When one audience is unresponsive, the other audiences protect sales and profit.

I'm fearful (especially among catalogers) that we put all of our eggs in just one basket, focusing heavily on catalog mailings to drive online sales among a homogeneous customer audience. When sales for this one segment of customers slump, the entire business slumps.

The opportunity to diversify still exists today, but it is a long-term solution. Let's start diversifying, right now.

2 comments:

  1. I think you're right Kevin, with a twist. People are focusing on their best customers but they don't know it.

    They mail (especially online) everything to everybody but the majority of the sales come from active best buyers. So there is an incredible amount of waste in the system.

    The trick is to understand where the incrementality kicks in as the customer cycles through the relationship.

    With interactivity on the table, the customer is most likely to self-serve in the "middle" of the relationship. This means catalogs can best serve (incrementally, that is) the "ends":

    1. Acquisition, when the customer does not start on the web. This is somewhat equivalent to Brand advertising / serendipity, e.g. customer did not know about / would not search for your products or company. The catalog starts the relationship, which plays out online or offline.

    2. Retention, after the customer begins to dis-engage from interactive. Expanded choices or related categories, other books

    3. And of course, you will have folks who are catalog only.

    This is what I have seen, anyway.

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  2. No argument with your comment, thanks for sharing with our audience!!

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