July 20, 2008

The Failure Of The Catalog/Multichannel Marketing Model

"The internet is the wild west. I keep advertising, only to send my customers out into the wild west. And they never return." Catalog Merchandising Executive, 2007.

When we conduct the post mortem on the failed experiment known as multichannel marketing, we'll look at this quote as being a key piece of the puzzle.

Back in 2001, it was a good idea to be "multichannel". We sent catalogs to customers, like we always have. Our analytics suggested that customers used our catalogs to shop on our e-commerce enabled websites. Woo-hoo!

And then Google took command of e-commerce. Ever since then, we've been leaking customers and prospects.

This manifests itself in the phrase I hear nearly every day ... "catalog customer acquisition performance continues to get worse".

Many smart people correctly point out that catalog marketing "creates demand". In other words, many customers do not intend to buy anything, but will buy something if advertised to. The catalog creates demand for an item. Paid search, in general, does not create demand --- it simply intercepts demand that is looking for a home.

Our industry mistakenly went down the multichannel path, believing that this form of demand creation was good. And in a pre-Google world, it was really good!

Today, demand creation is usurped by demand interception.

Go to Quantcast, and view the profile for Orvis. Notice that customers who interact with Orvis also interact with companies like RiverBum. To my knowledge, RiverBum does not have a catalog or stores.

So here you have the good folks at Orvis, doing the multichannel thing, sending paper out into the catalog ecosystem. They do a good job of creating demand for dry attractors.

But the customer isn't 100% sold on buying dry attractors on the Orvis website. He goes to Google and conducts the following search: Dry Attractors. Lo and behold, look who comes up #1 ... RiverBum!

Orvis creates demand for dry attractors. Google intercepts the demand, and funnels it to RiverBum. The customer places the order at RiverBum. The circulation manager at Orvis looks at the metrics, noticing that response continues to decrease.

Catalog marketing still works ... especially for the folks at RiverBum, folks who are not executing multichannel marketing the way the pundits told Orvis to execute it.

Sure, you can criticize Orvis for failing to capitalize on an obvious search opportunity (they don't appear in the top ten for the term dry attractors and did not appear in paid results either). But that criticism misses the point entirely.

The point is that traditional multichannel marketing, executed via catalogs and stores and websites, is a leaky bucket that can never be fixed in a world dominated by Google. No matter how effective you are at catalog marketing, no matter how hard you work to optimize page counts and stimulate demand via enticing copy and manage trim size and use recycled paper and send remails and remails of remails, you will constantly send customers to Google. And Google will send customers to your competition.

E-mail marketers ... you're in the same boat.

This is the grand failure of the catalog/multichannel marketing model, a failure nobody in our industry wants to talk about. When we get away from over-thinking catalog productivity, when we focus on executing the nuts and bolts of online marketing, we begin to view the world differently. And maybe, we can stabilize the leaky bucket problem we face.

6 comments:

  1. Glenn Edelman7:12 AM

    Great post Kevin. I like how you included email marketers as well. It comes as no surprise to us anymore when we send out a marketing email and all of a sudden see a run on traffic and orders from comparison shopping engines. Just like catalogs, email is a reminder to research and comparison shop.

    So what do we as marketers and merchandisers do about this? Here are two thoughts:

    - You can offer unique products not available anywhere else.

    - And/or, you do extensive brand-building to convince the customer (via top-notch customer service, an easy-to-use Web site, attractive value prices, etc.) that there is no need to shop elsewhere.

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  2. Yup, those are two good ideas!

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  3. So as Glenn said, you have to figure out how to generate the demand and capture the sale.

    This article seems to admit that catalogs create demand (albeit not to all segments). If you choose not to mail you still lose, since demand is reduced.

    Which means ultimately you are simply giving up margin (to Google, Social Networks, etc), since you have to show up wherever your customers end up once they receive your catalog.

    You're making an excellent point, the difficulty is dealing with it appropriately. At this point I think you really need to do both of the suggestions by Glen: unique product (on a national if not global scale), and a top-notch website.

    I'm curious as to your thoughts. Frankly, I think "unique product" is really the difference between most successful web marketers and everyone else, although some companies have a brand that can carry them through without completely unique product (but very few).

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  4. Unique product at a fair price with a healthy gross margin seems to be one way to get through the mess.

    Under that model, Google could redirect enough demand from other retailers to your site so that you net-out with more sales than you lose.

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  5. Jay, i agree with you (and others) on the need for a unique product. But, your point on "top notch website" is only half the point. There are a lot of really effective marketers out there with a crappy website, but awesome SEM operations. The key is to be a top-notch online marketer, to get the optimal amount of buyers to your site.

    I think the larger point is that catalog marketers have to change their way of thinking, from being a catalog marketer that also uses online marketing, to being an online marketer, with a catalog business attached.

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  6. I do agree that catalog marketers do not take the converse view of the world --- viewing the world as being an online brand that happens to mail a catalog. Things happen differently when the world is viewed in that manner.

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