December 06, 2006

Multichannel Retailing: A Complex Marketing Ecosystem

Last month, I had an e-mail exchange with Jim Fulton, author of two of the most popular posts in MineThatData history. We were discussing whether the online channel was more similar to the catalog channel, or the retail channel. Earlier today, I had an e-mail exchange with fellow Green Bay Packers fan Jeffrey Hassemer about the ecosystem our catalog, online and retail channels currently reside in.

A similar theme from each conversation arose, the idea that our multichannel retailing environment has become a gigantic ecosystem, full of inter-dependencies that executives did not have to deal with a decade ago.

In 1994, a catalog executive had the illusion of control. She decided that she would have 17 in-home dates. She decided how many pages she would have in each catalog, she decided the merchandising assortment, she determined the creative treatment. Her decisions about when catalogs were mailed, circulation depth and list, page counts, and merchandise assortment yielded a predictable amount of demand, so predictable that a call center and distribution center could be reliably staffed on the forecast of volume generated from the catalogs. If the executive wanted her business to be a $100,000,000 business, only cash, the availability of quality lists, and the ability to forecast and acquire inventory stood in her way.

Let's assume that in 2006, the catalog executive is still in charge of what is now a business that is at least 50% catalog and 50% online, if not skewed more online than catalog.

A giant marketing ecosystem now controls her business. Our executive manages a catalog housefile, an online housefile, and an e-mail subscriber list. Twelve years ago, the catalog executive mailed one catalog that drove $5,000,000 in net sales. Today, she mails two catalogs, eight e-mail campaigns, one-hundred affiliate programs, two portal deals and various search programs to drive $5,000,000 in net sales. Couple that with another $3,000,000 in net sales that are organically generated via the website, and it is obvious that our former catalog executive is living in an out-of-control marketing ecosystem.

Maybe the most challenging transition that direct marketing executives have had to make is the trasition from being "in-control", to allowing the marketing ecosystem to be in-control. Twelve years ago, the catalog executive made decisions, and saw the cause-and-effect of her decisions within a few days of the catalog in-home date. Today, that same executive makes twenty times as many decisions across a veritable plethora of marketing vehicles, and achieves far less control over the outcome.

In the Pacific Northwest, we closely monitor the health of our Orca Whale population. These whales live in a complex and dynamic ecosystem. Their health is impacted by pollution, the quantity of salmon, weather, proximity of tour boats, the number of times our military hurt their hearing system with sonar, the number of transient Orcas passing by. By managing these factors, we can influence the health of the Orcas.

In a similar manner, we direct marketers now "influence" the health of our business. The marketing ecosystem is made up of numerous factors that interact with each other, causing unusual and unpredictable outcomes. No longer is a decomposition of each strategy reasonable. The combination of strategies cause interactions that impact our business. Executives who think in a linear, cause-and-effect manner might struggle in this multidimensional ecosystem.

Over the next several months, I plan on exploring the interaction of products, brands, channels and marketing strategies. Let's have a lively discussion about how direct marketing has changed, and what can be done to better understand our direct marketing ecosystem.

1 comment:

  1. Kevin,
    I would like to throw some additional information into your ongoing discussions of the multi-channel ecosystem: holiday trend info that Oneupweb research just reported. I've copied the press release below and you can read the study, no form required at http://www.oneupweb.com/landing/pr/holiday_trends/holiday_whitepaper.htm?source=pr_holiday_study_06_up

    Oneupweb 2006 Holiday Online Retailing Study Reveals Startling Trends & Shares eCommerce Best Practices for Pay-Per-Click Advertising

    Study Provides Internet Marketers with Research-based Advice for Holiday Advertising on Google, Yahoo & MSN

    Lake Leelanau, MI (January 12, 2006)—Online marketing firm Oneupweb, today released its study, 2006 Holiday Online Retail Buying Trends, revealing data from more than a million consumers interacting with Google, Yahoo and MSN advertising. The study tracks traffic, conversion rates and sales across 14-weeks of the holiday sales season and is available free from Oneupweb.com. Most importantly for e-commerce marketers and internet advertisers, the study provides them with paid search marketing best practices in response to the trends revealed.

    For example, the study provides several milestones for implementing pay-per-click (PPC) advertising campaigns, helping internet retailers know when to test campaigns, estimate peak volumes and have completed campaigns ready for the season. It provides strategic bidding advice for peak sales weeks and helps online marketers continue to sell as the holidays draw close.

    “We set out to validate some of the speculation surrounding the 2006 holiday season online,” says Oneupweb CEO, Lisa Wehr. “E-commerce companies have their own season, and it starts much earlier than many online retailers believe. This study demonstrates the importance of having campaigns tested and ready for holiday shoppers by Halloween.”

    In addition to the week-by-week analysis, Oneupweb focuses attention on several critical days of the season: Thanksgiving, Black Friday (the Friday after Thanksgiving), Cyber Monday (the Monday after Thanksgiving), Christmas Eve and Christmas Day.

    Oneupweb’s study also answers the questions, “When is the highest sales day?” and, “When does the online market effectively dry-up?’” Wehr explains, “The analysis supports some theories about the importance of Cyber Monday and dispels some misconceptions about conversion rates for the week before Christmas Day. Because the data is generated by millions of consumers across a variety of retail categories, retailers can get a better view of the overall advertising trends for Google, Yahoo and MSN.”

    The 14-page study includes easy-to-read charts accompanied by thorough analysis, showing the following:

    • The start of the holiday season
    • Online holiday shopping peaks
    • A pre-Thanksgiving dip in traffic and sales
    • The effect of last-minute shoppers on the week before Christmas
    • A comparison of five important days of the holiday season

    “The online retail market is still evolving, by responding to changes in consumer preferences,” cautions Wehr. “While next holiday season may have a few surprises of its own, online retailers armed with the best practices outlined in this study will be better prepared to adapt to them.”

    About Oneupweb
    Oneupweb has been an innovator in online marketing for more than a decade, creating integrated online marketing plans that include natural search engine optimization, paid search marketing, podcast production, online market research, marketing analytics and more. An award–winning firm, Oneupweb was named a 2006 Michigan Top 50 Company to Watch and is the only three–time winner of the prestigious ClickZ Best Search Engine Marketing Vendor Award. CEO, Lisa Wehr, an Ernst & Young Entrepreneur of the Year, has been named to BtoB Magazine’s Who’s Who List three years and is recognized as a Leader & Innovator by Lawrence Technological University. The company publishes an SEO / SEM newsletter OnlineMarketingBrief.com and a blog named StraightUpSearch.com. Oneupweb is a privately held company located in Michigan. For more information on Oneupweb, please contact 231.256.9811 or visit Oneupweb.com.
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    .......................................

    Rachel North

    Director of Public Relations | oneupweb
     rachel@oneupweb.com

    > 231.256.9811 x116 phone
    > 231.256.9877 fax
     www.oneupweb.com
    ..............................................


    Voted Best Search Engine Marketing Firm 2006 by ClickZ & named to BtoB's Who's Who!

    ..............................................
    oneupweb | integrated online marketing
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