March 24, 2009

Modern Catalog Marketing: Rapid Segmentation

In the future, mailing catalogs is going to become prohibitively expensive. USPS costs will increase, while the productivity of many housefile customers will decrease due to a proliferation of micro-channels. The business model, as we knew it, is evolving.

Therefore, it will become important to execute what I call "rapid segmentation".

Immediately after a first purchase, the modern catalog marketer will overlay external purchase data, demographics, web analytics information (referring URLs, pages viewed, prior visits), and the prices/channels/merchandise purchased, to create a "profile" of the first time buyer.

The first time buyer will be placed in one of at least three different trajectories.
  • The traditional customer --- the 55+ exurban/rural customer who likes shopping via the telephone. These will be the customers that the catalog marketer speaks to with catalogs.
  • The digital customer --- a "Web 1.0" customer who likes e-mail marketing and search and all the traditional online marketing stuff. Our websites will be calibrated toward these individuals, seeking to maximize conversion among this audience. This segment will receive far fewer catalogs than the traditional customer receives.
  • The social shopper --- a "Web 2.0" customer who shops us for very different reasons. This customer will receive few if any catalogs, and we'll be glad to accept whatever profit this customer wants to pass our way. We'll also gladly accept the good will this customer passes our way via social media. Hint --- retail customers, by and large, are social shoppers.
It will be critical for us to rapidly segment the new-to-file buyer. Mailing catalogs to customers who don't want them will create negative feedback in the social media world, and will represent a significant waste of marketing dollars.

Rapid segmentation will lead to merchandising changes. As the catalogs become a targeted piece to a 55+ exurban/rural telephone shopper, the merchandise assortment will shift to what that audience prefers.

Conversely, the digital customer will be "micro-targeted" to with e-mail campaigns and paid search keywords that result in specifically merchandised landing pages.

The social shopper will be one where marketing resources are conserved. In many ways, these customers represent the profitable future of the modern catalog marketer. The history of the cataloger has always been about spending large sums of money up-front. The future of the social shopper eliminates all of this waste.

Rapid segmentation will be repeated after each subsequent purchase. Customers will move back and forth between segments --- usually moving from traditional direct marketing to social shopping, but occasionally going the other way, that's what makes this fun.

Some companies will mine this information internally (hint Williams Sonoma, L.L. Bean, big companies with staff).

Some companies will overlay this information from co-ops (hint Abacus, Z24, NextAction, you know who you are).

Some companies will overlay web behavior --- using clickstream information to make this decision.

Some companies will use all of the information that is available.

All modern catalog companies will have to perform this level of segmentation.