This week, I begin a new segment on MineThatData. Blatantly copying the strategy of Guy Kawasaki, I present to you "Four Questions".
My first guest is Database Marketing consultant Jim Fulton. I worked with Jim at Lands' End, back in the early 1990s. He might be the most talented individual in Database Marketing when it comes to understanding the dynamics of a customer file, understanding how actions taken today influence the customer base in the future. Jim Fulton wrote his first SPSS program in punch cards in 1981, and began his database analysis career at Lands' End in 1986. He founded Customer Metrics, Inc., a database marketing consultancy, in 1999, when his doctor told him he wasn't getting enough airline food. Jim lives in Madison, Wisconsin.
Jim has a wonderful sense of humor, which will become apparent as you read the answers to the questions I asked of him.
And with that, let's begin "Four questions"!
Question #1: We hear about multi-channel marketing everywhere we turn these days. How is multi-channel marketing in 2006 different than the challenges a cataloger with multiple titles faced back in 1991?
Jim: I’d like to answer that question in two ways; first, using the spare, minimalist form of haiku, and then in a more normal, consultanty form of prose.
Add the web? Oy vey.
I think in both cases, the strategic imperative is to maintain an enterprise-level understanding of customer behavior. In the case of a multititle cataloger, the issue of cannibalization is reasonably straightforward: given finite discretionary or impulse spending capacity of any individual customer, the idea that mailing Title B to a group of customers who just received Title A will cannibalize Title A to some degree isn’t especially controversial.
The growth of the Web has brought with it – in a lot of organizations – a considerable degree of wishful thinking, in the sense that they somehow hope that the Web is a game-changer in terms of customer file dynamics, that maybe if we do all these contortions on Web site usability and optimize our SEO and line up the right affiliates, then we won’t have to do all of that icky nasty customer acquisition and wouldn’t that be nice?
This is, to some degree, still an overhang from the dot com bubble when everybody and their brother was looking at floating their dot com division, but I think at this point organizations should be looking at the Web as a means to an end, not an end in itself, with the ultimate end being cost-effective customer retention, reactivation and acquisition. The physics of the business haven’t changed, and to some degree web investment can be thought of as a defensive investment, something you have to do to remain competitive.
I have one client who has achieved a unique degree of clarity on this point, and he jokes that if he put together channel P&Ls, then the fax machine would be the most profitable channel he has because it doesn’t have all the fixed costs associated with development and maintenance of the web site. When he said that, I remember thinking “hey wait a minute, I’m the consultant here, I’m supposed to say stuff like that.”
Question #2: If a catalog and online merchant had an additional $500,000 to spend marketing to customers, how would you advise they spend that money?
Choices face us now,
What’s incremental return?
Short- versus long-term.
If we posit that a database marketer’s first rule of resource allocation is “don’t overpromote anyone, don’t underpromote anyone,” and if we further posit that this $500K is not to be spent, for example, on contact strategy testing on the top of the file, I would in general advocate a fairly even split between testing promising but untried new customer acquisition sources, and getting a bit more aggressive with customer reactivation efforts. Both of those opportunities have a tendency to get rather short thrift in the budgeting/planning process, and yet both of them – properly and realistically understood – can provide current year EBITDA contribution and build the business for next year and beyond.
Obviously, some fraction of that $500K can usefully be spent on database marketing consultants as well.
Question #3: What role does brand marketing, and brand advertising, play within the marketing mix of a catalog and online merchant?
The intangible asset,
A brand’s relevance to a consumer is critical, and in my view advertising or sloganeering can be borderline irrelevant to that objective, if not counterproductive.
Oops, pardon me a moment, while I go douse my effigy being burned by the Politburo of the American Association of Advertising Agencies.
There, I’m back. What I mean by that is, a brand is the sum total of a customer’s experience with a company: quality of products, quality of service, taste levels, whatever. Starbucks is probably the outstanding example of this: they have grown into one of the solar system’s most-recognized brands and the amount they’ve spent on advertising over the years would be rounding error in Procter & Gamble’s annual budget for “Sniff ‘o’ the Cascades Scented Tide with Static Gard (50 oz. package).”
I think there’s a fallacy that your marketing or advertising efforts can, entirely on their own, create customer loyalty. My view is that customer loyalty can never be bought, it has to be earned, one customer at a time. And that’s as true today as it was when pre-Biblical merchants sailing the Mediterranean first contemplated whether to add PayPal to their payment options.
Question #4: What are the projects that you most enjoy working on?
Must pale in comparison,
To grooming a geek.
I have had the good fortune of being able to work on a wide variety of projects, with a wide variety of clients, all over the US and Europe, and in looking at the ones that I enjoy the most, they all include bright people who are eager to learn and re-think how they approach their businesses. In the seven years that I’ve been consulting, I’ve developed something of a niche as a “geek mentor” and the most rewarding experience for me is when I am working with someone on understanding their customer base and I can almost see the light bulbs going off. I did an article a few years back for the Seattle DMA on how to hire, train and develop database geeks and that has to be one of the most fun things I do. (Original article here: http://media.whatcounts.com/dmaseattle/ThoughtsonGeeks.pdf).
Here is my Catalog Optimizer for a "Great" catalog customer. Tell me the story the data tells you: The current strategy o...
Look at the first four rows of our life table (values of 0/1/2/3). These are the first 12-15 weeks after a customer buys for the firs...
In our simulation, we learn that there are different definitions of Carrying Capacity. If the CFO demands that we maximize profit o...
You probably run Life Tables for your customer file, right? Right? They've been around forever ( click here for a reference f...