October 04, 2009

Dear Catalog CEOs: Dominate The Competition

Dear Catalog CEOs:

It's October. This is the time of year when I get a lot of Multichannel Forensics project requests from CEOs asking to see where sales are headed over the next two or three years. Based on the analysis, online marketing budgets and catalog marketing budgets are adjusted accordingly.

When we do this type of work, we sometimes step out of strategy, and into a discussion about tactics.
  • "What happens if we go from 148 pages to 140 pages per catalog?"
  • "What happens if we pay only for branded keywords?"
  • "Can we increase sales by 10% by using Social Media?"
  • "Will our customers be angry if we go from one e-mail campaign per week to two?"
  • "What can we do to immediately improve our conversion rate from 5% to 6%?"
  • "Should our standard 20% off promotion be changed to 25% off?"
  • "If we do free shipping all year, will we be out of business?"
  • "How can we motivate Abacus to get us a better list of prospects?"

Across all of my projects, two things consistently rise to the top among high-performing companies, two things that allow companies to dominate the competition:

  1. A disproportionate focus on merchandise. The companies that succeed have a passion for offering customers outstanding merchandise. This passion spills over into marketing --- the focus isn't on the promotion or the channel, but rather, the key items that a prospect might love, or the merchandise that loyal customers crave. You'll hear more talk about merchandising events than about free shipping events, more talk about launching new products than about launching a new Twitter presence.
  2. An appreciation for human beings.

Let's focus on #2, an appreciation for human beings, because #1 is self-evident.

I've yet to work on one project where any customer segment that interacted with a live human being didn't experience increased long-term value.

Allow me to repeat the statement. I've yet to work on one project where any customer segment that interacted with a live human being didn't experience increased long-term value.

Customers who use the telephone to place an order outperform customers who use your website to place an order.

Customers who interact with live chat outperform those who simply enter their items into the website and complete their order.

Customers who interact with store associates outperform those who interact with technology.

Customers who work with a talented sales force outperform those who simply order from an e-mail campaign or a catalog.

If we truly want to dominate our competition, or at minimum become more profitable, we might want to focus more effort on how our customers interact with human beings.

Increasingly, it appears that by embracing the internet, we removed humans from the merchandise/customer relationship. Each time we removed a human, we lowered long-term value. And as long-term value declined, we added discounts and promotions to make up for lost sales, which further eroded gross margin and profitability. And as profitability declined, we added additional automated channels (search, affiliates, e-mail), further removing the customer from human contact. It becomes a cycle that's hard to get out of.

In no way am I saying we shouldn't do search or affiliate marketing or e-mail marketing or catalog marketing.

What I am saying is that we need to find a way to inject human beings back into the equation. If we want to dominate the competition, we can simply add helpful and pleasant people back into the purchase process. A mechanical free-shipping offer from a computer is nice. A phone call or personalized e-mail message from an actual employee telling the customer that the new merchandise assortment will be available on Monday online and via catalog, but the actual employee will help you pre-shop the assortment via a micro-site on the Friday before it is available to the public will provide a completely different level of loyalty.

If you want to dominate the competition, give human beings a chance!