June 29, 2010

16 Multichannel Marketing Myths

It's likely that you are already reading The Ad Contrarian. One of the most interesting things mentioned on this blog is the concept of probabilities ... that there is nothing that is certain in advertising/marketing, nothing works for everybody all of the time. In other words, when you follow a best practice, there is an "x" percent chance that it will work for you, not 100%, but "x" percent.

Nowhere is this more appropriate than in the world of marketing that we exist in. Our world is full of myths, myths based on activities that worked for one company, but cannot work for all companies.

Myth: E-Mail marketing has the best ROI (return on investment).
  • This statement, of course, borders on being ridiculous. Even if you manage e-mail better than anybody in our industry, you might pull down $0.25 per recipient, generating $0.10 profit. Your old-school catalog will generate $3.00 per recipient, generating $0.60 profit. If you could only mail one piece, would you choose the e-mail campaign, or would you choose the catalog? The e-mail marketing community will take the $0.10 profit, divide it by the $0.002 it costs to send the e-mail, and claim that the 50 to 1 ROI ratio is far better than the 1 to 1 ROI ratio found in catalog marketing. This isn't even a myth, this is just plain silly! Go with the activities that deliver the most profit dollars, period.
Myth: Multichannel customers are the best customers.
  • No statement has been more damaging to the craft of catalog marketing than this statement. This statement is used by the establishment to maintain existing best practices. Instead of experimenting with the future, the statement is used to keep marketers entrenched in the past by demonstrating that customers love both old-school marketing and new marketing techniques ... strongly suggesting that without old-school marketing, the new techniques won't work. It turns out that the best customers do everything in "multiples" ... they buy from multiple merchandise divisions, multiple stores, they buy multiple items per order, they buy during multiple seasons, they buy from multiple sub-brands. Catalog marketers missed a decade of innovation by chasing a myth that you could somehow generate more multichannel buyers by sending more catalogs. Be honest, did that strategy work for you??
Myth: E-Mail and Social Media are the Dynamic Duo
  • Ugh. We continually see situations where the incumbent technology creates a myth, a myth designed to tie it to the technology that is destroying the incumbent. Hint: All channels have strengths, and all channels have weaknesses. Leverage e-mail based on what it is best at, leverage social media based on what it is best at, there's no need to link channels together to demonstrate the benefits of the incumbent channel.
Myth: Brands utilizing Social CRM are reaping rewards.
  • Exactly what rewards are they reaping? (and why do we constantly see the phrase "reaping the rewards" these days ...how exactly are we now defining 'rewards'?). CRM is in a fight for survival ... we've been hearing about one-to-one marketing and CRM for decades and in most cases we've been blessed with endless phone trees (push nine to speak to a live person). One-to-one marketing is being obliterated by social media, customers get to choose what they want, not brands. Be wary of anything that combines the phrase "Social" with the phrase "CRM" ... it's a marketing and technology pitch not supported by the desire of a customer to be managed by a computer.
Myth: Bricks 'n Clicks are the future of marketing.
  • Embarrassing. Who convinced direct marketers that you must have stores, and who convinced direct marketers that customers love stores? It might be the banking industry, who loves it when a direct marketer takes dollars that would have been spent generating sales tomorrow (catalogs and e-mail and search) and then funnels those dollars to interest payments to banks to cover new store loans. Bricks 'n clicks is marketing pap. If you are an operator (i.e. a person who actually tries to grow brands, not a consultant), you know that the majority of e-commerce customers will buy from a store, but the majority of store customers won't buy from e-commerce. This means that the store becomes the black hole of your business, it is a place where the rules of gravity change! Your customers eventually change behavior, become less likely to buy online, and have their entire experience dictated by the store experience. Banks who lend money to brands with stores benefit, I'm not sure that the direct marketer benefits.
Myth: Customer Centricity is the key to increased profit.
  • Notice that customer centricity is seldom mentioned by businesses that provide great customer service. Customer centricity is often met with other buzzwords (one-to-one marketing, CRM). If you are fighting to make your business more 'customer centric', you are a noble and bold individual fighting a culture that doesn't care about treating customers as nicely as you believe customers should be treated. In those situations, no CRM solution makes up for the inaction of your co-workers.
Myth: Bricks 'n Clicks are the future of marketing.
  • This topic deserves to be addressed twice! Explain this to me, folks ... explain how Amazon and Zappos and eBay and Netflix do so well without stores, while Borders and Blockbuster struggle to survive with integrated multi-channel strategies? There are always successes (i.e. Apple stores), and there are always failures (The Sharper Image, with integrated multi-channel campaigns). Everything is a probability, not a certainty. Have product that customers crave and outstanding customer service and you'll be successful no matter how you choose to market to customers.
Myth: Customers love interacting with brands on social media.
  • Ask yourself a question ... how many brands do you like to interact with via social media? Do you love to tweet that creepy Burger King character and say "Hey, Creepy Burger King Dude, nice commercial yesterday?" Be honest with yourself, this is a confection of a marketing audience that wants the global explosion of friend-to-friend communications to extend to brand-to-customer interactions. Sure, some stuff works (like when a customer needs help and you provide great customer service via social media or when a customer wants 10% off plus free shipping) ... but for most social media marketing tactics, it is one of those cases where probabilities come into play, you have one brand that does something and succeeds, but there is only a 10% chance of everybody else doing it and having it work for them, even if they execute perfectly. Social Media for business is largely a roulette table, you put your money on the number "14", somebody spins the wheel, and then you hope that you win.
Myth: Customer Engagement is the key to unlocking profit in a one-to-one world.
  • I once invited a group of co-workers to a party I was hosting at my home. One of my co-workers came with his entire family, walked in the kitchen, and grazed from the assortment of food platters, then left. One might posit that this family was engaged, they spent about ninety minutes at the party, they didn't "bounce from the home page" like other folks who came to the party and left ten minutes later. For some reason, we have this fascination with metrics that do not correlate with metrics that matter. The metric that matters, of course, is "profit" ... and when we can't find any innovative ways to increase profit, we move to other metrics we believe are loosely correlated with profit, namely, "engagement". If you can prove that there is a direct cause-and-effect relationship (i.e. customer visits, then customer buys, then customer becomes engaged, then customer becomes highly loyal only because of the engagement), then I'll buy the customer engagement argument. Otherwise, customer engagement is fool's gold, fun to measure, fun to theorize about, but uncorrelated with profit.

Myth: E-Commerce is the future.
  • If e-commerce is so amazingly wonderful, then why does retail still account for 9 in 10 of all purchases, and has accounted for 9 in 10 of all purchases for decades? E-commerce is the logical extension of the catalog marketing model ... and we're likely to see mobile become the logical extension of the e-commerce business model.
Myth: You'll be out of business in five years if you don't jump on the social media bandwagon.
  • Compare Comcast/Dell with Apple. The former brands are social media darlings, the latter is not. Which of the three brands is known for innovative products that customers crave? Hint: Great products create social media buzz ... social media buzz cannot sell average products.
Myth: Integrated campaigns are the secret to success.
  • The literature is filled with marketing pap about how integrated campaigns increase response. Here's a question for all of you ... if everybody is focusing on integrated campaigns and working so hard on improving response to individual or integrated campaigns, then why has the annual customer retention rate (the % of last year's customers who purchase again this year) remained flat or decreased for the past decade? All we're doing with integrated campaigns is shifting demand from non-campaign periods to integrated campaigns. We don't measure the right things ... we measure campaign response when we should be measuring annual customer behavior. Annual customer behavior seldom changes much.
Myth: Businesses fail because decisions are made by the highest paid person's opinion (HiPPO).
  • Spend five minutes with the Web Analytics crowd, and you'll be inundated with stories about how facts are continually ignored by business leadership. Horsefeathers!! Often, the story told by the analyst is incomplete or incoherent. Stories must have actionable outcomes. Stories have a better chance of success if data from non-web-analytics platforms is incorporated into the story. Hint: Executives respond to data stories when the Executive is likely to benefit from a strategy outlined in the story.
Myth: If you had the right metrics posted on a dashboard, Executives would make better decisions, and the business would be more successful.
  • For some reason, we now believe that if we just display the right information to business leaders, then business leaders will make better decisions. We can have all of the dashboards in the world showing the number animals being killed in the Gulf of Mexico by the big 'ole oil leak, but that doesn't mean that the problem will be fixed any faster or cleaned up any quicker.
Myth: If you continually test and optimize your website , your business will significantly outperform the competition.
  • We keep reading about tests that yield a 42% increase over the control. If this is true, and we then implement all of the positive test results, then why aren't businesses doubling or tripling in size all the time? Testing and optimization works when you are testing strategies that have a long "half-life". Testing whether to use a large green button or a small yellow button might yield a 31% increase in one strategy, but that strategy has no half-life, meaning that customers don't truly care about the strategy on a long-term basis, it was simply something that was interesting for a day or two.
Myth: Make cultivating your social media presence a ten minute task.
  • This was the headline in a trade journal daily e-mail I received this week. Hint: I have written over 1,500 blog posts and have tweeted more than 3,000 times in the past four years. Nothing is easy, folks. Why are we so infatuated with easy solutions to wretchedly hard problems? Be willing to do hard work. Be willing to do innovative work. Be willing to fail.
Time for your thoughts ... what are some of the marketing and analytics myths out there that are routinely being debunked?

21 comments:

  1. Great post Kevin! I don't have much to add, as you covered a great deal in this post. I agree with your Social Media conclusions. If you cannot directly attribute profit to your tweets and facebook wall posts, then call it what it is:

    Having fun at work while maybe increasing your business exposure and reach.

    I'd rather put the energy into a blog, PPC long-tail search ads that have great ROI, and improving customer service and the product you offer. Works wonders for the true industry leaders. :)

    ReplyDelete
  2. Incredibly valuable wisdom, Kevin. Thanks very much for that!

    ReplyDelete
  3. Very insightful and entertaining post - I always enjoy a nice blend of pragmatism and sarcasm

    I would like to echo your site optimization myth. We see a lot of companies testing and optimizing design elements like hero shots, buttons, text layout, often with impressive results. The longer-term strategy and greater overall benefit come from testing and optimizing audiences (segmentation) and offers (products and pricing). The lives of these elements are much more enduring and focused efforts here will provide greater strategic insights and actions.

    ReplyDelete
  4. Thank you Ernie & Casey.

    You do tend to see lasting impact on the audience and merchandise front.

    ReplyDelete
  5. One of the implications of your post, Kevin, is how our industry trade press struggles to report real data, rather than print stuff some self-interested party wants to say.

    Many, if not most, of the myths you've identified have been promoted by people who sell the services which will benefit from the myth.

    Thanks for the reminders.

    ReplyDelete
  6. Excellent myth busting. Sometimes the emperor has no clothes and we need to be willing to say so... even if we're huge fans.

    ReplyDelete
  7. Thank you David & Jason!

    ReplyDelete
  8. Kevin,

    Great stuff as usual. I think the volume of "marketing pap" out there is a product of two human weaknesses: laziness and boredom.

    Humans are suckers for quick fixes, be they diet pills, or marketing ploys. Fixing the real problems are hard work, and no one wants to hear that the way to lose weight is to stop eating like a pig and get some exercise.

    People also don't want to listen to marketing talks about "blocking and tackling," even though focusing on the core fundamentals is the key to success. They want to hear about the latest and greatest, even if they don't execute the fundamentals well.

    Ah well, it keeps the conferences busy :-)

    ReplyDelete
  9. The good thing about your team, George, is that they are willing to point out positives and negatives, and are willing to do what is right for the client.

    At your summit in May, the thing that impresses me was when you pointed out that allocation outcomes vary based on the statistician who is doing an allocation analysis ... most folks would say their results are what they are, not that they can vary.

    ReplyDelete
  10. CHURCH!! :-) This is definitely one of my favorite posts of yours, Kevin! Although I must say it's also probably one of the scariest. Knowing the truth is much easier than living the truth, especially as an employee. Presenting both information AND context completely honestly (e.g., explaining to executives how your results can vary) is usually punishible by blank stares (or worse), even for the "rock star" analyst. Even so, it's heartening when an expert like yourself tells it like it is (that's right people, campaign metrics are not a proxy for customer measures, for the love...) Analysts of the world, have courage!

    ReplyDelete
  11. Yup, campaign metrics are not a proxy for customer measures, so true!

    ReplyDelete
  12. Hi Kevin,
    A pretty thought provoking post! I think it's true that companies need to choose the channels that are right for them and their customers, not just do something because everyone says they should.
    One comment on your first point: it's not the e-mail marketing community saying e-mail has the highest ROI, it's the Direct Marketing Association, which also measures catalogs. The 2009 report stated e-mail's ROI at $43.62 and catalogs at $7.32 (as seen in this article: http://directmag.com/magilla/1020-e-mail-roi-still-slipping/)
    Do you think the DMA figures and/or methodology are incorrect?
    Full disclosure-I work for an ESP. :-)

    Thanks
    Liz

    ReplyDelete
  13. No, the numbers from the DMA are accurate, they are just highly, and I mean HIGHLY misleading!

    When you take either sales or profit, and divide it by the cost of the activity, you completely mislead your audience.

    Using their findings, you get $7.32 for every dollar spent mailing a catalog, whereas you get $43.62 for every dollar spent sending a e-mail message. However, as all marketers know, e-mail is so close to free as to essentially be free.

    So, when I visit clients, I continually see the following story:

    Story #1: Mail 1 catalog, get $3 in sales on $0.60 of cost, yielding about $0.60 of profit.

    Story #2. Mail 1 e-mail message, get $0.20 in sales on $0.002 of cost, yielding $0.08 of profit.

    Now, from an ROI standpoint, e-mail is better (0.20 / 0.002) than catalog (3.00 / 0.60).

    From a profit standpoint, e-mail delivers peanuts compared with a catalog. I want profit dollars, because profit dollars pay the bills, not ROI.

    That is where the DMA misleads the audience. They do not focus on profit dollars, and they should, because CEOs focus on profit dollars.

    ReplyDelete
  14. Excellent article, Kevin. I would really love for you to elaborate more on this: "Testing and optimization works when you are testing strategies that have a long "half-life"."

    A future blog post, perhaps?

    Keep it up anyhow, and thanks for the insights.

    ReplyDelete
  15. Ok, I'll put something up next week about half-life, thanks!

    ReplyDelete
  16. Thanks Kevin, definitely looking forward to it!

    ReplyDelete
  17. Excellent list.

    "Testing whether to use a large green button or a small yellow button..." will make someone inside the company or outside the company feel important but it will not be the customer. I always hear and read about people who talks about the colours of buttons.

    ReplyDelete
  18. Thanks for the comment, Richard!

    ReplyDelete
  19. Everyone knows how to important Facebook has become. Facebook is the most popular social network in the world. So buy Facebook fans for your business and get more traffic. Thanks for nice information.

    ReplyDelete