April 05, 2007

The Role Of A Website In A Multichannel Catalog Business

Yesterday, we talked about the way a website provides information for the retail customer in a multichannel retail business.

Today, the focus shifts to the role of the website in a multichannel catalog business. How can Multichannel Forensics help us understand how a website serves a catalog customer?

Catalog customers are different than retail customers. In retail, the customer goes to the store. In catalog, marketing comes to the customer.

This results in significant differences in the way a website serves a customer. In retail, the customer uses the website to obtain information, information that is ultimately used to purchase merchandise in a physical store. In theory, the website should be designed to take e-commerce orders, but is primarily designed to drive retail sales. The website reflects "the brand", if you will.

The traditional catalog business faces very different challenges. Historically, the catalog was used to drive sales to a telephone channel. Today, the catalog is driving more sales online than through the catalog channel. This is where complexity occurs.

Multichannel Forensics can be used to help the marketer understand how the telephone and online channels work together.

Frequently, catalog marketers have a telephone channel in "Hybrid/Equilibrium" mode. This means telephone customers have an approximate 50/50 chance of purchasing via the telephone channel next year. In addition, telephone channel customers are slowly moving online (hence, the designation of "Equilibrium").

The challenge for catalog marketers occurs when analyzing the online channel. Online customers frequently operate in "Acquisition/Isolation" or "Hybrid/Isolation" mode. This means online customers are unlikely to use the telephone channel.

Worse, catalog marketers often observe that the online channel has a lower annual repurchase rate than the telephone channel. This means that traditional catalog marketers are slowly "losing control" over the customer relationship. In the past, catalog marketing drove high corporate repurchase rates. Today, catalog marketing frequently drives average corporate repurchase rates, and lower-than-average online repurchase rates.

In other words, the catalog inspires the customer to "think" about buying something. The customer may choose to order over the telephone, may choose to go online, or may choose to put that online visit on hold. The longer the customer chooses to not go online, the less likely it is that the purchase will take place.

Long-term, the catalog marketer must use a combination of catalog marketing, e-mail marketing, search marketing, affiliate marketing, portal marketing, and word of mouth marketing to achieve the same corporate repurchase rate (and spend per repurchaser) that was achieved in the old days of catalog marketing in the telephone channel.

If this potpourri of marketing channels cannot achieve the same repurchase rate, order frequency, items per order, and price per item that the old-school catalog techniques produced, the catalog marketer faces long-term challenges.

For the catalog marketer, the role of the website is changing. The website becomes the primary order taker for the catalog marketer. But more importantly, online marketing techniques must become effective enough to replace the ever-decreasing effectiveness of catalog marketing. The website must evolve as well, providing the information, entertainment, and additional product assortment necessary for the brand to maintain historical corporate repurchase rates (and spend per repurchaser).

For the catalog marketer, the website plays a very different role than the website plays for the retail marketer. This is not a dynamic that is well understood by multichannel pundits.

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