In most multichannel businesses, there is one person responsible for combining all advertising investment opportunities.
At traditional catalogers, this person was the Director of Circulation. These days, the person could be the Director of Circulation, it could be the Director of Online Marketing. This person plays a critical role, one of the most important in any multichannel business.
Each organization has an annual budgeting process. This process is usually initiated by the finance division. The finance folks determine key dates when information is to be shared within the organization, with the executive team, and with ownership/board-level individuals.
In most companies, this investment process drives a series of discussions that can be exhilarating for some and frustrating for others. For most, the discussions are "circular" in nature.
The Circulation/Online Marketing Directors go through a process where they use internal analysis tools to forecast what they think sales will look like next year, for the marketing strategies they are accountable for.
In catalog circulation, changes in online/catalog customer files are measured, catalogs to be offered are determined, circulation cutoffs based on short-term and long-term profitability are established, resulting in a set of "rules" that are followed. A series of spreadsheets are crunched, resulting in a sales total across all channels, and profit estimates based on the investment totals.
A similar process occurs within the online marketing advertising channel. Traffic forecasts, conversion rate estimates, average order size guesses, keyword bidding projections, online marketing costs and affiliate strategies result in an estimated number of purchasers, yielding a sales total across all channels, and profit estimates based on the investment totals.
Catalog and online figures are combined, and presented to the executive team.
This is where things go haywire!
In most situations, the estimates yield sales and profit totals that are not acceptable to the executive team.
The executive team will immediately question the accuracy of the work done by the circulation/online marketing experts.
Assuming that the work was done accurately, a new series of questions arise. "What happens if we spend more money in e-mail marketing? What happens if we spend more money on paid search? What happens if we decrease portal advertising? What happens if we increase affiliates from 1,000 to 1,500? Are the catalogs driving more or less business to our online channel? What happens if your circulate to a -10% profit cutoff level verses break-even? What happens if you shift catalog acquisition out of Abacus names, into list rental and exchange names? What happens if we have six targeted versions of an e-mail instead of three? What happens if we no longer offer free shipping?
These questions set off a round of chaos that is very frustrating to the foot soldiers who do the actual work. Typically, the questions are answered in a sequential fashion.
In other words, the executive team learns what happens if free shipping is dropped. Then, they learn what happens if six targeted versions of an e-mail are offered instead of three. Then they learn what happens if all remail catalogs are dropped from the plan. All choices are explained in isolation.
As a result, there is a ton of busy work done by the foot soldiers, and a ton of anxiety felt by executives. The teams work together on an iterative process that ultimately results in one sales plan for the next year. Often, this sales plan is the result of a time deadline ... in other words, the plan must be completed by, say, November 25th. All work done by November 25th is put into the plan, scenarios not completed by November 25th are excluded.
One way to start getting out of this rut is to provide your executive team "options".
In other words, if you are the online marketing director, you can present five different options, based on different investment scenarios. This gives the executive team something to think about. The executive team can center their questions around one or two options that seem to yield the best outcome.
Similarly, the catalog marketing director can offer five different investment options. There can be scenarios with deep cutoff levels, scenarios with shallow cutoff levels, scenarios with a lot of customer acquisition, scenarios milking the top of the customer file with remails.
These scenarios are advantageous for many reasons. Maybe most important is the fact that the foot soldiers get to see which scenarios the executive team like best. Next year, the budgeting process will be smoother, because the foot soldiers know what the executive team want to see.
Multichannel investment options are an area you seldom hear about in trade journals or vendor-based publications. Yet, when you talk to executives, directors and analysts, you continually hear this as being an area of frustration.
Over the next five years, you will see a continued focus on improving the annual budgeting process. Online marketing leaders who invest time honing skills in this area will have a great opportunity to move into C-level management positions.
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