December 06, 2009

Dear Catalog CEOs: The Online Transition Is Essentially Complete

Dear Catalog CEOs:

An interesting trend is emerging in catalog marketing.

Back in the day, we'd measure how fast "catalog" customers were migrating to the "online" channel.

Multichannel Forensics were invented, in large part, to determine how fast this transition was happening, helping us understand how to deal with the transition.

In the past eighteen months, I'd say that the word "transition" no longer applies to our business. It appears that the transition online is, for the most part, complete. Trending, over time, illustrates a fundamental change.

For instance, one might see the following migration probability indices, over time.
  • Phone To Online Index: 2000 = 10%. 2003 = 35%. 2006 = 25%. 2009 = 20%.
  • Online To Phone Index: 2000 = 50%. 2003 = 30%. 2006 = 15%. 2009 = 5%.

In other words, around the "turn of the century", phone customers were unlikely to shop online, and online customers were unlikely to stay loyal to the online channel.

By 2003, it was a "free for all", as customers were thoroughly "multichannel". Catalogs drove web sales, online customers spoke with customer service associates, everything interacted.

And this is the problem with being "multichannel". Multichannel is a transitional phase, as customers migrate from old to new. Eventually, the customer lands on a preferred channel ... until something new displaces it. When that happens, "multichannel" becomes important again.

For many companies, 2009 represents an era of channel stability. All customers who were going to move online have, for the most part, done so. Online customers become unlikely to use the phone to shop, and in doing so, begin to become unresponsive to catalog marketing.

It is important to understand how channel shift happens over time. When customers settle upon their preferred channel, you can greatly reduce marketing expense. When customers are shifting across channels, marketing expenses tend to rise.

In my projects, I look for channel stability. When I find channel stability, I quickly identify the customer audience that requires considerably less advertising, and strongly advocate a reduction in offline marketing spend to the audience that now prefers "all things digital".

"Channel Stability" should be an area of emphasis for our businesses in 2010. Have your analytics teams study this trend for you, and be sure to begin reductions in offline marketing to customers who prefer "all things digital".

As always, I am here to support you!

Thanks,
Kevin

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