March 10, 2013

Dear Catalog CEOs: Do Multiple Channels Yield More Orders?

Dear Catalog CEOs:

One of the popular arguments of our time is the "multichannel/omnichannel customers are more valuable" argument, trotted out with increasing frequency by vendors and trade journalists who have a vested interest in convincing us that we can seemingly grow customer frequency infinitely.

This is a graph of the average number of orders per buyer per year for a "multichannel business".  The graph starts in 2001 and goes through the end of 2012.  Think how few channels existed in 2001.  Think how many channels exist at the end of 2012.

What do you observe?  The customer places the same number of orders per year, year after year after year - regardless of the explosion of channels between 2001 and 2012.

Run the analysis for your business.

You're going to learn that your customers have a natural rhythm ... they place the same number of orders per year (within a band) ... this order rate is directly correlated with the annual repurchase rate of your twelve-month buyer file.  These numbers do not change, they are fundamentally tied to the merchandise you offer (i.e. groceries are needed weekly, gifts are needed infrequently).

When you learn that this is the way the world works, a few things become painfully obvious.
  1. Unless customers buy merchandise more than 4 times a year, loyalty programs are largely futile.
  2. Customers who buy more than 4 times a year touch many channels - not because of the channels you offer, but because of the purchase frequency inherent in the merchandise your offer.
  3. For 70% of businesses, the main driver of future success is low-cost customer acquisition programs that are maximized.
Run the analysis for your business.

Then craft strategies that align with the natural purchase rhythm of your business - and remember, the natural purchase rhythm of your business is determined by the merchandise you offer, and the frequency with which your customer needs your merchandise.