Are My Customers Permanently Switching To Mobile?

We all lived through the transition from old-school direct marketing to e-commerce.

1. E-commerce was a fad (customers tried it, then went back to old-school direct marketing).
2. E-commerce became mainstream (customers switched, in large numbers, and did not go back to old-school direct marketing).
3. E-commerce became boring (customers returned to normal behavior, just in a new channel, with some customers choosing to not make the switch).

We're beginning the same process with mobile.  While the pundits hound you about the myriad ways your business is stuck in the stone ages (e-commerce), your peers are doing research to see whether we're in (1) (2) (3) above.

It's easy to see if we're in (1) (2) (3) above.  Go back to our Multichannel Forensics framework of 2007, and apply it to e-commerce vs. mobile.

Query:  Capture all customers who purchased via e-commerce or mobile between November 2011 and October 2012.  Within this audience, tabulate how many customers purchased via e-commerce or mobile in November 2012.  Then, we calculate the classic website (e-commerce) and mobile index metrics (remember, the migration probability matrix is the probability of buying from a channel in the future, divided by the probability of buying in the future).

This table shows what happens when customers are trying mobile, but are not adopting it as a primary channel.

As you can see, customers who purchased via mobile last year switched back to e-commerce.  Customers are not comfortable making the switch.

Look at this table.  This is what it looks like when customers are getting ready to make the switch to mobile --- website customers are not defecting to mobile, but mobile customers are not switching back to the website.

Remember, an index > 20% means customers want to switch.  When the table looks like this, mobile has taken hold.  Mainstream customers are not willing to make the switch, but mobile advocates have switched, and are not as likely to go back to the e-commerce experience.  This is such a key transitional phase ... it has to be measured and understood.  When this happens, you make organizational changes ... you move the focus from e-commerce to mobile, even though e-commerce is where the sales still happen.  Your customer is making the change, at this point.

When your query results look like this, customers have made the shift, and mobile is about to become the dominant channel.

Mobile customers have moved beyond e-commerce, they are unlikely to switch.  Conversely, e-commerce buyers are migrating to mobile.  When your query looks like this, mobile is truly your future.

Which of the three scenarios fits your business?  It's easy to run the query.  Your analytics expert, digital analyst, or web analytics professional should be able to pound out this query in 15 minutes.  Run the query this afternoon.  Share the results with your Executive Team.

It is not hard to understand where your customer is in the mobile transition.  Stop listening to trade journalists and bloggers, folks who don't even have access to your customer database.  

Analyze your own data, and make your own decisions!!

Tablets - Mobile

You can't throw a dead Blackberry phone at a pundit without hearing somebody talk about how customers are moving to mobile.

Many folks count the iPad as a mobile device.  This is an arbitrary designation, one often made to make mobile look better than it really is.

If you want to see if the iPad is really part of the mobile revolution, take a look at where purchases happen.  Segment customers who buy traditionally via your e-commerce site, customers who buy via a tablet, and customers who buy via a smartphone.  Once customers are segmented, look at the channel used in the very next purchase.

If an iPad customer shops via the iPad on the very next purchase, then you have a customer base making the transition to new devices.  If the iPad customer switches back to old-school e-commerce shopping, then you've got experimentation happening, you don't have a customer base that buys into new technology just yet.

We saw this with e-commerce in the late 1990s ... customers ordered online, then went back to buying via the telephone.  By the early 2000s, customers ordered online and stayed online ... at that point, the mass exodus from the call center was underway.

Simply repeat the work you did a decade a go, this time measuring the shift from traditional e-commerce to tablets/mobile.

Mobile: You'll Be Dead If You're Not Mobile. Or Not

On page two of this article (click here), we learn that HauteLook generates anywhere between 25% and 40% of visits from mobile devices, catering to a 30 year old customer.

And then we have the typical catalog brand, generating between 1% and 5% of visits from mobile devices, catering to a 59 year old customer.

It's becoming quite obvious, now.  Yes, a 59 year old customer will buy off of an Android device, and yes, a 27 year old will shop a catalog.

But by and large, there are significant generational differences, differences that are exaggerating as time goes by.

In the old CRM days, pundits suggested you hire managers to manage different customer segments.

Today, it makes a lot of sense to hire managers who are responsible for Judy, Jennifer, and Jasmine, crafting marketing strategies unique to each persona.  If your customer is Jasmine, and you're not folding mobile/social into the mix, yes, you'll struggle with this customer.  If your customer is Judy, and you're not folding mobile/social into the mix, well, Judy may never notice the difference.

Discuss.

Mobile Marketing: Lift

Now that we understand how our mobile app shoppers are distributed across our customer file, it is our job to begin to measure the incremental "lift" we expect from these customers going forward.

When file counts are small, we're just kind of stuck having to use what we have.

Remember, in yesterday's example, most of the mobile customers were graded as "A".

	Total	Mobile
	File	File	Index
Grade = "A"	50,000	394	2.58
Grade = "B"	50,000	176	1.15
Grade = "C"	50,000	88	0.58
Grade = "D"	50,000	65	0.42
Grade = "F"	50,000	42	0.27
Totals	250,000	765

So here's what we can do. Let's take everybody at the end of March who had a grade of "A". Split that segment by those who used a mobile app recently, and those who did not.

Now, for each group, measure the incremental demand generated during the month of April. Your table should look something like this:

							Non-
						% Via	Mobile
		HHs	Rebuy	Spend	Value	Mobile	Value
Grade = A, Mobile		394	3.4%	$165.00	$5.61	17.5%	$4.63
Grade = A, Other		50,000	3.1%	$170.00	$5.27	0.4%	$5.25
Lift					6.5%		-11.8%

There are a couple of things worth noticing here. First of all, the mobile app buyers, after equalizing a bit for customer quality, are worth 6.5% more in the month of April than are other customers. That's what we want to see, we want to see that the new channel creates value among customers.

Also notice that the number is 6.5% ... it's a small number. In cases like this, don't expect mobile apps to be the life saver you've been looking for to generate huge sales increases (unless the percentage of mobile app users are disproportionately new customers).

Finally, notice that non-mobile volume is nearly 12% less among mobile app shoppers. If you see an outcome like this, then you know that your efforts are causing these customers to shift business from your core website to the mobile app ... in other words, your online sales are being cannibalized by the mobile app.

Cannibalization matters, folks. Most businesses miss cannibalization until it is too late. Just ask catalogers, just ask the newspaper industry, just ask independent record stores. When sales are cannibalized, you have strategic issues that need to be addresses, so that "channel shift" is not devastating to your business.

Ok, you've read several posts about measuring fundamental relationships in mobile marketing, what are your thoughts, what questions do you have? We've got more posts coming ... that being said, this would be a good time for input.

Mobile Marketing: Loyalists

Once you've identified the mix of new/existing mobile app users, the next step is to identify how loyal these customers/users have been, historically.

In e-commerce, I like to take my customer file, and split it into six segments. Any customer without a purchase in the last twelve months, but at least one life-to-date purchase is put into segment "Z".

Then, I use dollar cutoff points to rank customers based on twelve month activity. For any customer who purchased in the past twelve months, I create five equal cutpoints. Here's an example:

• Spend $500+ = "A"
• Spend $300 to $499 = "B"
• Spend $200 to $299 = "C"
• Spend $100 to $199 = "D"
• Spend $1 to $99 = "F"

I try to use cutpoints to make sure that there are reasonably equal numbers of customers in each "grade".

Now that you've done this exercise, look at all mobile app purchasers in the past twelve months, and look at total dollars in the past year. Compare the distribution to the entire file:

	Total	Mobile
	File	File	Index
Grade = "A"	50,000	394	2.58
Grade = "B"	50,000	176	1.15
Grade = "C"	50,000	88	0.58
Grade = "D"	50,000	65	0.42
Grade = "F"	50,000	42	0.27
Totals	250,000	765

In this example, it is obvious that your mobile shoppers are disproportionately skewed to the top portion of your twelve month buyer file. This means that your mobile shoppers are likely to be disproportionately loyal to your business.

When this happens, the question of "incrementality" comes into play. Your most loyal buyers are often the ones most likely to try new channels, and when they try a new channel, they are not necessarily interested in purchasing more, they are simply trying a new channel.

So that's not so hard, is it? Give the methodology a try. It's basic, simple, and it allows you to clearly communicate results to management without your leaders becoming paralyzed by methodology issues.

Mobile Marketing: Newbies

Let's assume that you have your mobile marketing strategy in place. Maybe you built an app, and are taking live, actual orders. You are ready to get started.

There are plenty of good sources for measuring the basics of mobile marketing, so we aren't going to focus on basic metrics readily available in your web analytics application.

The very first metric worth calculating is new customers.

You already calculate simple metrics for your other channels.

• You know that 42% of all purchasers in April came were first time buyers.
• You know that 47% of offline/catalog purchasers in April were first time buyers.
• You know that 50% of branded paid search purchasers in April were first time buyers.
• You know that 61% of non-branded paid search purchasers in April were first time buyers.
• You know that 38% of organic search purchasers in April were first time buyers.
• You know that 19% of e-mail purchasers in April were first time buyers.
• You know that 40% of affiliate purchasers in April were first time buyers.

You know those things, right?

So the very first thing you do with any customer purchasing from a mobile app (or social media for that manner) is you identify how many of the customers are new, and how many are existing.

If, by comparing the numbers above, you find that 11% of your app buyers are new buyers, well, then there's going to be some fun analysis, right? We are going to have to determine whether the buyers would have purchased anyway, or if the app captured demand that would not have happened otherwise.

If, by comparing the numbers above, you find that 67% of your app buyers are new buyers, well, then you have something magical happening in the early stages of the channel.

Start simple. And communicate simple facts to your Executive Team. Stay away from making this stuff more complex than it has to be ... because as we work through this series, things are going to become more complex, and the more complex things become, the less people trust you!

Mobile Marketing: Incrementality

Many of you are now peppering me with questions about mobile marketing.

No, not questions about whether it works or not, or how to create an app. Instead, you are asking whether any demand attributed to a mobile app is "incremental".

The concept of "incrementality" is an old one. Back in the early 1990s, catalogers raced to maximize demand by mailing as many catalogs as possible. The goal, of course, was to find the number of catalogs that generated the most incremental profit. Some catalogs generated no incremental demand, if you didn't mail the catalog, the customer spent just as much.

An entire generation of direct marketers, now age 40-55, earned their stripes in this area of expertise. I count myself in this camp. This camp thinks very differently than other generations of direct marketers.

The online generation, folks who earned their stripes between 1995 and 2005, do not think in terms of incrementality. These folks never had to think in these terms, because their craft cannibalized sales from existing channels. They fought the "catalog generation", the folks who were being cannibalized, the folks who spent way too much time measuring the incremental value of the internet.

The online generation is about to care, to really care, about incrementality.

Tablet devices (iPad) will spawn micro-sites that are directionally linked to an e-commerce website, but are technically different ... just like the 18th catalog offering targeted merchandise was fundamentally different from the core catalogs mailed by a brand in 1992.

Mobile devices change purchase patterns. You walk into a Talbots store to buy a dress, but they only offer core sizes ... so you punch up your Talbots app to buy the extended size. This behavior makes you fundamentally different than the average customer, for at least two reasons.

1. You are a technology shopper, vs. the non-app shopper.
2. You buy extended sizes not available in stores, making you different than the core size shopper.

Is this purchase incremental? Maybe. Are future behaviors, now changed because of this shift from a store purchase to an app purchase, worth more? Maybe. Will the customer visit the e-commerce website, given the app purchase? Maybe.

None of these questions are answered by allocation models. They can be answered via Online Marketing Simulations and Multichannel Forensics.

We are going to spend time in May talking about the incremental value of a mobile channel. It seems that this is worth discussing, given your feedback. And almost nobody addresses the topic, so it is worth considering.