January 26, 2009

The End Of Multichannel Marketing 1.0

Last week's news that Williams Sonoma is reducing staffing levels by 18%, and is continuing to cut catalog circulation (this year by 15-20%), may well nail the lid shut on the coffin of version 1.0 of Multichannel Marketing.

Toss in Circuit City's failure (buy online, pickup in store --- a great, customer-friendly idea that doesn't seem to fundamentally move the sales needle), and we've got trouble!

It's really hard to point to a brand that executed multichannel marketing the way our leadership told us to execute it, and as a result is thriving in this economy. It is even harder to defend traditional multichannel marketing when Amazon and Zappos are steamrolling us.

Traditional multichannel marketing was proven as viable via the matchback algorithm. Folks would mail 26 catalogs a year, then take credit for all of the online and retail orders from customers receiving the catalogs.

Mail and holdout tests seldom defend this style of analysis and attribution.

Try this one on, for size. If we believe that matchback analytics are accurate, then the Democratic Party could have sent 60,000,000 postcards to prospective Democratic voters two weeks before the Presidential Election --- and then matched each vote back to the postcard. The Democratic party could prove, via matchback analytics, that the postcard was responsible for the election results, right?!

You don't agree with that?

Then why do you believe in your matchback analytics reporting?

The tenants of Multichannel Marketing 1.0 are teetering. Nordstrom killed a $36,000,000 catalog marketing program and saw e-commerce sales increase in the absence of catalog marketing. Saks killed catalog marketing before Nordstrom did, Bloomingdales recently followed suit. Williams Sonoma is taking catalogs out of the mail stream at a breathtaking rate.

E-Mail marketing evolved outside of our expectations, optimizing itself along open rates and click-through rates and conversion rates that can only be maximized when offering up to 40% off and free shipping. E-Mail marketing represents a classic case study of optimizing around the wrong set of metrics.

We were told to make sure the look and feel of all marketing activities were the same, without any proof, without any single case study that demonstrated that the strategy worked on a long-term (i.e. six month or annual) basis. We were told to offer the same product in every channel at the same price --- never mind that in another industry it is a best practice to get a hotel room at the Hilton for $129 via Hotwire while paying $259 on the Hilton website, or that you can buy a seat on an airplane for $309 at 2:00pm, then pay $269 at 2:15pm, then pay $329 at 2:30pm.

Meanwhile, Google gladly takes our paid search dollars while re-allocating customers to other brands, customers we drove to Google with traditional advertising. This leaky bucket is best reflected in the 20% to 70% reduction in catalog customer acquisition performance over the past decade. This is a leaky bucket that cannot be fixed unless you do everything the way Google wants for you to do it, and even then, there's no guarantee you fix the leaky bucket!

Maybe it is time to retire Multichannel Marketing 1.0. This version of marketing represented the transition from traditional marketing to e-commerce. We're now going through the transition from e-commerce to something we cannot define just yet. Eventually, we'll go through the transition from whatever this is to Hologram Marketing --- and the e-commerce folks will repeat the multichannel marketing argument all over again!

Time for your thoughts. Is it time to retire Multichannel Marketing 1.0? If not, what data would you use to defend your argument? What brands would you point to that are shining examples of Multichannel Marketing done very, very well? Any catalog brands or retail brands come to mind?

4 comments:

  1. Hi Kevin,

    Great thought provoking article as ever. I would cite Tesco and John Lewis in the UK as world class multichannel retailers.
    Rgds,
    Tony.

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  2. Hi Tony, thanks for the comment, I appreciate it!

    Tell us what it is that Tesco and John Lewis do that makes them world class ... and how does what they do translate to profit? If they didn't do the world class things, what would happen to sales and profit?

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  3. I read about newspapers closing and going to online only. Why should my catalog be any different. I read this the same day as I read about postal rate case. hmmmm

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  4. Hi Dave, not sure catalogs should be any different.

    The signaling between the leadership of my industry, and the reality of my industry, is very different. A lot of folks in the catalog ecosystem have a vested interest in protecting the ecosystem.

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