August 27, 2009

OMS: They Bought Via An E-Mail Campaign. Now What?

You have a customer who purchased online a couple of years ago. Since then, you've sent this customer an opt-in e-mail message, twice a week, 200+ in total.

Today, for whatever reason, that customer is ready to purchase something. Through no fault of her own, the customer receives another e-mail campaign from us. The customer has a choice. Should she click through the e-mail message and purchase? Or should she just key in your website url and purchase?

Does it even matter?

Let's go to the Online Marketing Simulation and find out.

First, we simulate 1,000 2x buyers, first purchase online, second purchase online, both purchases = $150, both purchases from Merchandise Division #3. This will be our benchmark.
  • Annual Repurchase Rate = 41%.
  • Demand: Year 1 = $104,000, Year 2 = $68,000, Year 3 = $48,000, Year 4 = $38,000, Year 5 = $33,000. Total = $291,000.
  • Online Buyers via Offline Source: Year 1 = 124, Year 2 = 75, Year 3 = 49, Year 4 = 37, Year 5 = 31.
  • Online Buyers via E-Mail: Year 1 = 162, Year 2 = 88, Year 3 = 55, Year 4 = 41, Year 5 = 34.
  • Online Buyers via Search: Year 1 = 32, Year 2 = 20, Year 3 = 13, Year 4 = 10, Year 5 = 8.
  • Online Buyers, Pure Web: Year 1 = 99, Year 2 = 53, Year 3 = 34, Year 4 = 26, Year 5 = 22.

Now, we'll simulate what happens if these 1,000 customers instead place their second order via E-Mail.

  • Annual Repurchase Rate = 43%.
  • Demand: Year 1 = $102,000, Year 2 = $79,000, Year 3 = $63,000, Year 4 = $54,000, Year 5 = $48,000. Total = $346,000.
  • Online Buyers via Offline Source: Year 1 = 129, Year 2 = 85, Year 3 = 62, Year 4 = 50, Year 5 = 43.
  • Online Buyers via E-Mail: Year 1 = 204, Year 2 = 117, Year 3 = 80, Year 4 = 61, Year 5 = 51.
  • Online Buyers via Search: Year 1 = 26, Year 2 = 17, Year 3 = 13, Year 4 = 10, Year 5 = 9.
  • Online Buyers, Pure Web: Year 1 = 100, Year 2 = 63, Year 3 = 45, Year 4 = 35, Year 5 = 30.

If the customer converts to an E-Mail purchase, then future value is increased by about $50,000 ... or $50 per customer, so that's a good thing (your mileage will vary). Now look at a sampling of the key online micro-channels. Customers buying from offline sources are not significantly changed. Customers, however, become much more likely to buy via E-Mail (duh).

But there's a more interesting outcome when we look at merchandise divisions. Let's look at the outcome for Merchandise Division #5.

  • Pure Web Buyer: Year 1 = 86, Year 2 = 73, Year 3 = 55, Year 4 = 45, Year 5 = 40.
  • Pure Web + E-Mail Buyer: Year 1 = 171, Year 2 = 111, Year 3 = 84, Year 4 = 69, Year 5 = 61.

This is why we focus on the Online Marketing Simulation, the "OMS". The simulation tells us how customers are likely to behave in the future because of an action that happened in the past. Combined with Web Analytics, OMS yields very interesting insights, insights that help business leaders make decisions today that profitably influence the future.

In this case, when we encourage a customer to purchase from an e-mail campaign, we change the future merchandise preference of the customer. The executive in charge of Merchandise Division #5 should be partnering with the e-mail marketing team, given the synergy identified in the OMS run.

An OMS analysis complements your Web Analytics enviornment. With Web Analytics, you are easily able to look back in time. With OMS, you get to see the future.

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