July 31, 2008

Starbucks Database Marketing

It wasn't that long ago that marketers lauded Starbucks, praising decisions like selling CDs and the like.

And then things happened. The business posts a quarterly loss for the first time in sixteen years, and the critics get to have their day while the marketing fans shy away.

Folks who work in Database Marketing departments like to diagnose the reasons why a business is struggling, from a customer standpoint. And when a brand is in Retention Mode, like Starbucks is, folks might look at a very simple set of metrics.

A typical dashboard might look at customers who shopped in a Starbucks store in June, measuring how likely the customers were to repurchase in July. The dashboard compares 2008 performance to similar customers in 2007. Of course, ninety percent of folks tell you "you don't capture every single customer, what about all of those customers paying with cash, customers you cannot track?" Those pundits would rather you do nothing than at least gaining some insight. I vote for gaining some insight.

This is what the a dashboard might look like within a specific market (the data are not representative of Starbucks, and are only presented for illustrative purposes).

Jul-08 Jul-07 ----Change

June Households 10,000 10,500 -4.8%
Repurchase Rate 0.782 0.831 -5.9%
Total Buyers 7,820 8,726 -10.4%
Orders per Buyer 8.341 8.492 -1.8%
Items per Order 1.243 1.184 5.0%
Price per Item 3.894 3.790 2.7%
Average Order Value 4.840 4.487 7.9%
Total Volume $315,713 $332,500 -5.0%

All Other Buyers 3,941 4,782 -17.6%
Orders per Buyer 3.743 3.593 4.2%
Items per Order 1.143 1.074 6.4%
Price per Item 3.631 3.504 3.6%
Average Order Value 4.150 3.763 10.3%
Total Volume $61,221 $64,660 -5.3%

Assuming you're able to capture the performance of some customers, you get the opportunity to get some level of insight. In this hypothetical case, June customers are less likely to visit the store, but are buying more items and spending more. This kind of simulates the "less traffic" situation you hear about.

Other customers exhibit a similar trend.

More often than not, pundits rip database marketers for making conclusions about customer behavior when not every transaction can be measured. Always remember to clearly state the limitations in the data being presented, but always remember that it is better to present something than to hide behind the crutch that you're not tracking cash customers. And web analytics pros --- you fall into the same boat!!

In no way am I saying that Starbucks does this ... I'm just using their brand for illustrative purposes.

Another tip --- when closing stores, you make strategic choices based on the customer base supporting stores. For instance, given two stores that are equally unprofitable, you kill the store that competes with more stores in the same geographic area. That's kind of a "duh", but, the data exists to make these kind of insights, so you may as well use the data to your advantage. Back in the day at Eddie Bauer, we evaluated every store based on estimated cannibalization rates --- understanding how each store was impacted by neighboring stores.

Some Light Summertime Reading

Admit it, you're looking out the window of your office. You observe light breezes. The sky has a bit of haze to it. These are the dog days of summer! You'd rather be outside, sitting on a blanket laying on a manicured lawn, opening a picnic basket filled with sandwiches and chips and cold drinks.

But you aren't outside. You're earning a wage, sitting in a artificially lit and air-conditioned building, getting ready for a department-wide meeting where you'll learn for the 280th consecutive day that sales missed expectations by six percent. You'll be told that your career development objective to attend the Shop.org conference is being scrapped in an effort to save a thousand bucks, a move guaranteed to increase shareholder value.

Instead of considering such sobering facts, why not take a few moments and read some of the fine articles written by authors all across the blogosphere.

The more the world changes, the more the world stays the same. Give this essay from Don Libey, written in the fall of 2002, a try. You can replace very few words, and end up with an essay that describes 2008.

Catalog Success wrote about the State of the Co-Ops in 2008 a month ago. You folks seem to like clicking through my site to get to this article.

Are you an online or catalog marketer looking to try a new strategy? Take a look at what Mr. Godin is trying to accomplish.

The good folks at the Rimm-Kaufman group talk about using the word "voucher" vs. using the word "coupon".

Jim Novo asks for your thoughts on the topic of Social Media.

David Raab discusses the value of a blog. I talked about this topic at the MeritDirect Co-Op --- for me, the value is about $100 per subscriber per year.

Akin Arikan was recently intereviewed in eM+C Magazine.

Polly discusses the future of Catalog Customer Acquisition.

Sally McKenzie writes an essay about "The Long Tail" from the perspective of a merchant.

A bit about J. Peterman on The Catalog Chronicles Blog.

Tamara features daily links to relevant e-mail marketing articles.

Chad White talks about e-mail marketers using longer preheader messages.

Mark Brownlow is up to part eleven of a series of essays about modern e-mail marketing.

Justin Premick disses renting e-mail lists.

Zach Gemignani shares 5 Options For Embedding Charts In A Web Page.

Robbin asks "Can You Start Small On Conversion And PPC?".

Jeff asks why folks aren't flocking to e-books?

RRW Consulting offers a case study on e-mail marketing and segmentation.

Alison Bolen shares resources for finding Business Intelligence blogs.

UK readers, have you visited The Snow Patrol recently?

Curt Barry asks if happiness can improve your bottom line?

Bob Bly stirs the pot by comparing old school and modern marketing practices.

Ted Grigg talks about clients turning around invoices in a slow manner. Uh huh!

Some in the blogosphere might be flummoxed to learn that simply having great merchandise doesn't guarantee success.

Matthew Hurts, the NY Times, and a map on Foreclosures.

July 30, 2008

My Keynote Address At The Shop.org Annual Summit

In the tradition of an earlier speech, I bring you My Keynote Address At The Shop.org Annual Summit.

Good morning everybody! Please, please, sit down! What a pleasure it is to be here with you on another glorious September morning in Las Vegas, to see so many familiar faces. If there is one way that this conference changed over the years, it is in the number of familiar faces I see as I look across the room. Six years ago, this was a much smaller group of individuals who were largely creating a new channel. There was a vibe in the room! Today, this is a large group of inter-connected, multichannel individuals. Our websites are now part of a large ecosystem. Online retailing is a mature industry.

I'm seldom asked to speak at industry events. My message is often contrary to the programmed message of best practices that conference organizers want for you to hear. The fact that Shop.org is willing to consider all points of view is refreshing. I thank the organizers of this conference for the opportunity to share a different point of view.

Today, I am going to share a different point of view. We're going to consider the topic of "dependence".

Allow me to ask you a few questions. In the spirit of other sessions at this conference, I'll title my mini-series "ELEVEN QUESTIONS EVERY ONLINE RETAILER MUST EFFECTIVELY ANSWER TO REMAIN RELEVANT".

Question #1: What would happen to online sales if Google were to not be available for customers to use for just one month?

Question #2: What would happen to online sales if Comcast or any cable giant were to not provide high speed internet access for just one month?

Question #3: What would happen to online sales if nobody had access to a television, radio, newspaper, or any other form of traditional media for just one month?

Question #4: What would happen to online sales if the post office could not mail catalogs for just one month due to another anthrax threat?

Question #5: What would happen to online sales if every retail store in the United States were forced to close one day a week to conserve energy?

Question #6: What would happen to online sales if it became too expensive for the USPS, UPS or FedEx to deliver packages to our homes in a timely manner?

Question #7: What would happen to online sales if a worm or computer virus made it impossible for folks to use Microsoft Outlook to receive e-mail marketing messages for just one month?

Question #8: What would happen to online sales if every information technology expert went on strike, refusing to maintain our e-commerce enabled websites for thirty days in protest of our best practice of outsourcing technology labor overseas?

Question #9: What would happen to online sales if we were forced to close our distribution centers, call centers, and live chat centers for one day each week to conserve energy?

Question #10: What would happen to online sales if a vocal minority of social media users decided to try to sink us with negative publicity?

Question #11: What would happen to online sales if eco-friendly organizations decided that online retailing burned too much coal to power too many servers, causing rampant pollution and accelerated global warming?

We've heard an awful lot about best practices over the past two days. We've learned a lot of useful tips that, for the most part, will cause online and offline sales to increase if applied properly.

We didn't talk much about how dependent we are on others for our success. Online retailing is a wonderfully flawed concept, one that demands perfection from innumerable individuals and organizations for the online marketer to experience success.

Back in 2005, I spoke with an individual who told me that he was "so pleased to be part of a three-team person that built an entire e-commerce business". I said "Oh really? Did you not depend on the information technology staff to write the code necessary to enable a website to run properly? Did you not depend on an existing catalog call center to field calls from confused customers who did not understand product because of faulty website creative and imagery? Did you not depend on offline advertising to drive customers to your website? Did you not depend on a person in the Midwest working on a Sunday morning to pick, pack, and ship merchandise to your customer? Did you not depend on a store merchant to pick products that store customers would love, products she thought your online customer would also love? Did you not depend on an inventory manager who knew exactly how many items to buy based on prior customer demand across all channels? Did you not depend on a well executed e-mail marketing program to drive customers online? Did you not depend on inexpensive internet access to even allow a customer to place an order? Did you not depend on a store employee in Richmond telling the customer to visit the website for a broader assortment of merchandise? Did you not depend on a disruptive business model named Google to drive random traffic to your site, traffic that you got credit for even though you did nothing to earn it?"

I observe this style of dependence in my own business. Google sends fifty-six visitors a day to my blog, a blog that is hosted on Google servers, a blog that is generated using software from Google. I analyze my visitors using web analytics software provided by Google. My RSS feed is converted to one that is easier to maintain --- the company that provides this service is owned by Google.

What do you think would happen to my blog, my business, if something happened to Google?

What do you think would happen to your business if something happened to Google, or to any of the individuals, organizations, or offline advertising techniques mentioned earlier?

See, we blindly pursued this multichannel thing with such zeal that we never really asked ourselves fundamental questions about the online retail businesses we were building. Maybe it is the right thing for me, as a leader, to depend on a community of followers on Facebook to evangelize my brand for me. Maybe it is right for me, as a leader, to depend on Google for twenty-five percent of my traffic.

But what if it isn't the right thing for me to outsource every aspect of my online retailing business to somebody else?

Honestly, if you strip away traditional advertising and direct marketing, if you strip away the overbearing influence of Google, if you strip away the sales that a retail store generates for you, if you strip away the social media pap that simply replaces the water cooler conversations of the 1990s, what do you as an online retailing leader actually control from a sales generation standpoint? What percentage of your annual sales are truly generated because of you, because of the strategies you employ? Have you ever gone through this exercise, decomposing your online business, measuring your true impact to the organization?

A true rainmaker is able to generate incremental sales, sales that would not have happened without the unique skills of the rainmaker. Take a moment, and look at the individuals in this room. How many individuals in this room have achieved "rainmaker" status? In how many cases can you find an individual who, if the individual didn't exist, would cause online sales to decrease by maybe ten to forty percent?

This is our challenge. Online sales won't continue to increase forever. In fact, many folks have told me that they are experiencing, for the first time ever, online sales decreases. These individuals want to know what they can do to reverse this trend. They've followed the advice offered at conferences like this one, implementing best practices, becoming "multichannel". And yet online sales are decreasing. Now what? What does the online marketer, the individual who has only known fifteen years of sales increases, do when online sales finally decrease?

Over the next decade, our challenge is to find unique ways to generate demand, methods that are not dependent upon traditional offline advertising, methods that are not dependent upon Google. Our customers and prospects must want to visit our websites without the aid of offline tactics or external traffic sources like MSN or Yahoo!. Our survival depends on providing an experience that gives the customer more than she expected, more than a simple multichannel experience that allows her to place an order in a retail store.

Are we, the folks in this room, ready to provide the customer with this experience? I am optimistic that we can do this as some point in the future. We need to get ready today for the challenges that we'll all face tomorrow.

Thank you for your attention this morning! Are there any questions?

July 29, 2008

Multichannel Forensics A to Z: Hybrid Mode

Hybrid Mode is probably the most interesting aspect of Multichannel Forensics (book, study).

Hybrid Mode occurs when customers of a product, brand or channel have a forty to sixty percent chance of purchasing again in the next twelve months.

Unless you have a diverse array of skus among products that must be purchased often (i.e. Wal-Mart), it is likely that your brand is in Acquisition Mode or Hybrid Mode, with Hybrid mode yielding fascinating dynamics.

When I was at Lands' End and Eddie Bauer, we were in Hybrid Mode, and at some times (at Lands' End), we strayed into Retention Mode.

In Hybrid Mode, the executive has a myriad of levels that can be pulled to improve business performance. Want to improve performance, long-term? Boost customer acquisition! Want to improve short-term sales? Advertise more to your best customers! Want to improve profit today? Advertise less to your best customers!

The executive in Retention Mode is trapped by her best customers --- they call the shots.

The executive in Acquisition Mode is trapped by the constant need to find new customers --- there isn't any customer loyalty to tap into.

The executive in Hybrid Mode has the best chance to genuinely influence the future trajectory of the business.

Some of the more spectacular executive failures I've witnessed happened because the executive has training in Hybrid Mode, but the business the executive is managing is in another mode.

Is your business in Hybrid Mode?

July 28, 2008

Benchmarking Repurchase Rates

We enjoy comparing ourselves to others, don't we?

Now you might not be able to pull annual repurchase rate out of your web analytics or business intelligence solution. But you might be able to pull annual purchase frequency out of your information system.

The attached graph indicates a relationship between annual purchase frequency, and annual repurchase rate. Annual repurchase rate is important, because it determines if you are in Acquisition Mode, Hybrid Mode, or Retention Mode. The mode you are in determines the type of business model you operate. It determines your sole purpose in life as a marketer.

If your customers order fewer than 1.75 times per year, it is most likely that your business is in Acquisition Mode. You retain fewer than 40% of last year's buyers. Your job is to constantly "fill the funnel" with new customers, or your business won't grow.

If your customers order between 1.75 and 3.00 times per year, it is most likely that your business is in Hybrid Mode, the most enjoyable mode for an executive to operate. You balance customer acquisition and customer retention activities.

If your customers order more than three times per year, it is most likely that your business is in Retention Mode. Roll out the loyalty program, because you have to find a way to increase annual purchase frequency --- you're not likely to move the annual repurchase rate much.

The table below allows you to identify if your annual repurchase rate is above or below average. Here are approximate averages, given annual purchase frequency (your mileage will vary depending upon your customer acquisition strategy and merchandise assortment).
  • 1.25 Annual Orders = 18% Annual Repurchase Rate
  • 1.50 Annual Orders = 30% Annual Repurchase Rate
  • 1.75 Annual Orders = 39% Annual Repurchase Rate
  • 2.00 Annual Orders = 45% Annual Repurchase Rate
  • 2.33 Annual Orders = 52% Annual Repurchase Rate
  • 2.67 Annual Orders = 57% Annual Repurchase Rate
  • 3.00 Annual Orders = 60% Annual Repurchase Rate
  • 3.50 Annual Orders = 65% Annual Repurchase Rate
  • 4.00 Annual Orders = 68% Annual Repurchase Rate
  • 5.00 Annual Orders = 73% Annual Repurchase Rate
  • 7.00 Annual Orders = 78% Annual Repurchase Rate
  • 10.00 Annual Orders = 82% Annual Repurchase Rate
  • 24.00 Annual Orders = 87% Annual Repurchase Rate.

July 27, 2008

How Nordstrom Profitably Ended A Catalog Marketing Program, By Kevin Hillstrom

Something is going on in catalog marketing when I receive repeated inquiries asking how Nordstrom ended a traditional catalog marketing program and increased direct-to-consumer sales. An increasing number of catalog marketers are starting to re-think marketing strategy.

As a result of numerous recent queries from catalog and retail brands across the United States and Europe, I am going to write this essay explaining the decision-making process, and the high-level results. The goal is to help our industry. Please feel free to forward this article to your colleagues --- the hyperlink is embedded here.

If you have questions that I failed to answer here, please ask your question in the comments section of this post, so that all members of our industry may benefit from the answer.

How Nordstrom Profitably Ended A Catalog Marketing Program, By Kevin Hillstrom.

The year was 2004, and the world was a different place. Gas cost less than $2.00 per gallon. President Bush was re-elected for a second term as President of the United States. Finding Nemo won the Oscar for the best Animated Picture. Brett Favre pondered retirement from the Green Bay Packers. Barack Obama, an obscure Jr. Senator from Illinois, gave a stirring seventeen minute speech at the Democratic National Convention.

The catalog marketing world was buzzing over a term called "multichannel". Most brands were between five and nine years into their foray into e-commerce. During this time, telephone sales generally declined, while e-commerce sales dramatically increased. The accepted best practice was to mail catalogs to customers, causing the customer to purchase merchandise over the telephone, online, or in stores. The customer chose the channel she wanted to purchase in. The brand needed to be "multichannel", needed to be present in each channel to accommodate this savvy shopper. The catalog, based on an analytics tool called "matchback analytics", was at the core of this new marketing strategy.

The entire catalog marketing ecosystem liked this view of the world. Printers continued processing catalogs, makin' bacon in the process. Paper reps benefited from the strategy. Co-op marketers provided the analytics that proved this strategy worked, then benefited from the strategy as catalogers leased households from a half-dozen co-op databases. List rental and management organizations protected their future as well. List processing vendors enjoyed the benefits of continued merge/purge processing. E-commerce vendors enjoyed increased website traffic, causing demand for online software. Even e-mail vendors benefited, because catalog customers volunteered an e-mail address at the time of a phone or online purchase, fueling the growth of the e-mail marketing industry. Paid search vendors benefited, because the catalog customer went to Google to research products viewed in a catalog. Google benefited!

The marketing world agreed that mailing catalogs was the "right" thing to do.

In 2004, Nordstrom finally had a highly profitable direct marketing division. A division that lost 10% of net sales in 1999 and 2000 broke even in 2002, and came off of a profitable year in 2003. In 2004, sales and profit were and increasing.

The catalog strategy included marketing of a subset of merchandise, with many items not available in stores. The merchandise included items that sold well in the telephone channel, and did not include the vast majority of items that sold well in stores, did not include many items that sold well online.

By all accounts, this was a successful division.

And then management asked a simple question.

"What would happen if we integrated our channels, offering largely the same merchandise in all channels, without implementing a traditional catalog marketing program?"

Imagine if you are part of the management team of the direct-to-consumer channel, and you are asked this question. You are responsible for putting catalogs in the mail. And somebody is now questioning whether you should do this anymore.

As Vice President of Database Marketing, I built an entire team responsible for putting catalogs in the mail and measuring the effectiveness of these catalogs. What do you think I thought of this question? How would you respond to the question?

A task force of sixteen leaders was assembled. The leaders included Regional Managers, responsible for store performance in their region, Information Technology leaders, the Chief Marketing Officer, many members of the direct-to-consumer management team, and yes, even me.

If you are Vice President of Database Marketing, and you are asked to participate on this team, you are going to be asked questions by members of this team. Your direct-to-consumer team are going to ask you to demonstrate the importance of a traditional catalog marketing program. Your Chief Marketing Officer is going to ask you to present unbiased facts about customer performance.

What were some of the questions leadership wanted answered?

Question: Will catalog customers just switch their behavior, and shop online if catalogs are no longer mailed to them?

Answer: Some customers will switch. Many customers will simply stop purchasing. We tested not mailing customers catalogs in 2001, 2002, 2003, and 2004. We knew exactly what would happen. Without a reinvestment of advertising dollars, sales would decrease.

Question: If catalogs aren't mailed, won't customers just switch to e-mail marketing?

Answer: No. This strategy had also been tested. If a customer receives a catalog, she spends maybe $X across the phone, online, and retail channels. If a customer receives an e-mail marketing campaign, she spends maybe (0.12)*$X across the phone, online, and retail channels. When we tested not mailing catalogs to an e-mail customer, e-mail performance increased slightly. Almost all of the $X would be lost, not recouped by e-mail marketing. And we all know this, we measure e-mail marketing and compare it to catalog marketing and paid search.

Question: What role does catalog marketing play in acquiring new customers?

Answer: Catalog marketing played an important role in the acquisition of new customers. Like all catalogers, Nordstrom rented customers from competing organizations, and exchanged names with competing organizations. Privacy advocates and the Chief Marketing Officer strongly believed that the renting/exchange of names was not in the best interest of Nordstrom or the Nordstrom customer, and if a traditional catalog marketing strategy didn't exist, the rental/exchange strategy would disappear.

Question: Are Nordstrom customers truly "multichannel"?

Answer: Sometimes. Customers did purchase in multiple channels, in fact, a significant minority of total sales came from customers buying from multiple channels. The reality, however, was that customers were migrating from one channel to another, eventually landing in the store channel. Kind of a "duh", when you think about it, huh? The customer acquired over the telephone via a catalog eventually purchased online without the aid of catalog marketing, then shifted spend into the store channel, using the website to research merchandise. This evolution of customer behavior, identified via Multichannel Forensics, suggested that another marketing strategy could be employed, one that would be at least as effective as the traditional catalog marketing strategy.

Question: Do customers purchase from all merchandise divisions?

Answer: No. And this is an important point. The traditional catalog marketing strategy offered a subset of merchandise. If that subset of merchandise were no longer offered, those customers were likely to simply go away, and not cross-shop the rest of the offering, placing any potential new strategy at risk.

Question: Should a multichannel strategy include integration of silos across the organization?

Answer: In this case, it was decided that with a new multichannel strategy, without a true catalog program, that functions should be integrated across the company. This would prove to be a painful process. Pundits underestimate the human challenges associated with integrating people. Time would prove that people would lose their jobs trying to make this integration happen. It is hard, financially, to integrate systems and technology. It is hard, emotionally, to integrate people ... or to let a lot of people go.

Ultimately, it was decided that the traditional catalog marketing strategy would be terminated, effective June 30, 2005.

Here are some of the tactics that were employed.
  • Traditional catalog customer acquisition programs were terminated in early 2005, to prevent the acquisition of customers who would later be disappointed.
  • No announcements were made of the elimination of the catalog marketing strategy to loyal catalog customers.
  • A new catalog marketing strategy would be employed, one where the vendors of the merchandise paid the cost of a page of catalog marketing to advertise their product.
  • The privacy policy would be changed. Nordstrom would not rent or exchange any customer information with any competing or non-competing brands.
  • E-mail marketing frequency would increase from one contact a week to two contacts per week.
  • The online marketing budget would be increased, in an effort to acquire customers lost via the termination of the catalog marketing strategy.
  • Systems and people would be integrated, across the company.
The Results:
  • Long-time, loyal catalog-only customers did not take kindly to the new strategy, by and large choosing to not purchase again. "Dual-Channel" customers (phone + website) maintained their online spend, but stopped the spend they used to place over the telephone, for obvious reasons.
  • The investment in online customer acquisition offset the losses from the traditional catalog customer acquisition strategy.
  • The increase in e-mail contact strategy helped offset some of the loss of demand from long-time catalog customers.
  • A subset of catalog customers shifted their spend online.
  • The combination of online customer acquisition and catalog customer shift resulted in a net increase in net sales in the direct-to consumer channel. Yes, I said an increase! You can read through the 10-K statements and discover that fact for yourself.
  • Many leaders in the direct-to-consumer channel chose to leave the company.
  • Many positions were eliminated, positions associated with our call center, positions associated with catalog production and circulation expertise. Integration of creative teams (direct-to-consumer and retail) was a challenge.
  • The new catalog marketing strategy did not perform as well, in fact, I had not previously worked with a program as unproductive as this one. When you let your vendors determine the merchandise that is advertised to customers, you set yourself up for sales decreases.
  • The new catalog marketing strategy was, from a profit standpoint, wildly profitable. When you let your vendors pay for the cost of a page of advertising, you are, by default, guaranteeing profit.
  • Many online marketing metrics improved without a catalog marketing program in place. In other words, in the past, we'd mail a catalog, causing a customer to use Google to do a search. In theory, the order would be shared between catalogs and paid search. Now, paid search got full credit.
Impact On The Database Marketing Department
  • I ultimately eliminated eight of twenty-four positions in the department.
  • The most seasoned catalog marketing staff left the company, or chose to work in the online marketing division.
  • Eight positions were re-trained for work in Social Media, E-Mail Marketing, Online Marketing Analysis, Web Analytics (stuff that Coremetrics couldn't do for us). We integrated Coremetrics data with retail and telephone purchase data, creating a whole new area of emphasis.
  • Eight positions went essentially unchanged (from a job requirements standpoint), though the focus of their work was on driving multichannel sales, not channel-specific sales.
  • My role as Vice President of Database Marketing was ultimately de-emphasized, resulting in me starting my own consultancy.
Describe Some Of The Pitfalls:
  • I must re-emphasize how difficult it is to integrate people. Catalog Marketers, Online Marketers, and Store Marketers think about things differently. As you de-emphasize one area, you make some employees feel bad, while others feel more powerful. That's a dangerous cocktail.
  • Have a customer acquisition plan. You cannot kill a catalog marketing program without risking the future of the business. You can successfully migrate online by having a plan that fuels customer acquisition online.
  • Geography Matters! A customer in rural North Dakota or Vermont is not going to be a multichannel customer. Take away her catalog, you take away her sales potential. A customer in suburban Chicago will shop all channels. A customer in Silicon Valley will buy online. Have a strategy for each customer segment, based on geography. Your results will vary.
  • Product Matters! Know exactly what your catalog customer loves to purchase, your online (Google) customer loves to purchase, and if you have a store customer, what your store customer loves to purchase. Product differences dictate differences in advertising strategy (e-mail, paid search, catalog marketing, traditional advertising). Your multichannel efforts will be much more successful if you know what specific customers with specific channel preferences like to buy.

The pundits had a lot to say about this strategy. The usual suspects in the co-op and list world blasted my team and I in 2005. I recall reading the quotes in trade journals ... stuff like "Lands' End tried this in 1999 and it didn't work". I recall receiving phone calls from the catalog vendor community, folks blaming me for "letting this happen".

Then the strategy worked well. REALLY WELL. Much better than I ever expected it to work.

And then the pundits criticized me again. This time, the blather was all about "the only reason this worked is because of your brick and mortar presence ... the strategy will never work for a traditional cataloger". Hey pundits, why did the strategy work in Birmingham, or Madison, or Tucson, or Des Moines, or Boise, or New Orleans, or Evansville, or Omaha, or Topeka, or Oklahoma City, cities where Nordstrom didn't have a retail presence? When I speak at conferences, the audience loves to blast me on this topic. I am continually amazed how the opinions of many carry more weight than the experiences of the few who actually went through the process and have the scars to prove it.

The reason the strategy worked had nothing to do with the fact that we had a store presence. The reason the strategy worked was because we did two things well.
  1. We knew, from our Multichannel Forensics work, how customers shopped across channels. We ran five-year simulations of the new plan, and knew directionally what to expect.
  2. Leadership had a plan! They didn't just kill a program and not significantly re-invest elsewhere. They invested in systems, people, online marketing, and cross-channel merchandising strategy. We increased e-mail frequency.

Remember, the change in strategy resulted in an increase in net sales in the direct-to-consumer division, and did not fundamentally impact retail comp store sales. I was surprised by the results.

This can work for you if you do your homework. Have you tested what happens if you do not mail a customer a catalog for a year? Six months? Have you ever doubled your online marketing budget for a month, testing what happens to all channels when you dramatically change your marketing strategy? Have you tested altering your merchandising assortment in print and e-mail marketing? Have you figured out how to acquire new customers without paper in the mail? Have you ever tested raising prices as an instrument to potentially increase demand? Have you studied customer behavior by geography?

Maybe the right strategy is to have six mailings a year instead of sixteen. Maybe the right strategy is to have thirty mailings a year instead of sixteen. Maybe the right strategy is to have your vendors fund your catalog program. Maybe the right strategy is to stop mailing catalogs altogether. The answer is different for every company. There are no right or wrong answers. Your situation is unique. But your situation isn't one that should be executed on the basis of opinions, or gut feel, or guesses, or the collective opinion of an industry or vendor ecosystem.

Without a doubt, the right thing to do is to start testing different strategies.

Ok, your turn. What questions do you have that I failed to answer? Please do not e-mail your questions, please ask them (anonymously if you wish) in the comments section, so that all of our readers can benefit from the discussion.

Hillstrom's Multichannel Secrets, 59 Tips Every CEO Should Know, Now Available At Lulu.com
Support independent publishing: buy this book on Lulu.

July 26, 2008

More On Micro-Channels And Zappos

Zappos, the e-commerce purveyor of shoes, utilizes micro-channels as part of their marketing strategy.

Here's how Zappos leverages Twitter.

And here, Zappos embraces a YouTube channel.

There's the little things they do, as illustrated on Flickr.

Maybe you've seen their ads in shoe trays at the airport?

Zappos will circulate a magalog to 1,000,000 folks in the near future.

They experimented with television ads.

Employees get to share the culture with customers.

Upgrades to the site are tested publicly --- would your IT staff try out a beta site with the public before launching it?

You can look through the comments of this blog post to see what a customer said about Zappos.

And then there's the things they don't brag about, like the kind gesture they gave to this woman.

Our future increasingly suggests that we'll apply several hundred advertising micro-channels to acquire the same number of customers we used to acquire with two or three customer acquisition strategies. These are tactics that we're not entirely comfortable with, tactics that don't have an immediate ROI, but many are measurable. Many of these activities will fail, some will succeed.

We owe it to ourselves to experiment, to try new stuff --- especially now.

July 25, 2008

Multichannel Forensics A to Z: Going Green

In some cases, I am asked to conduct a Multichannel Forensics analysis (book, study) to understand if there is an opportunity for a catalog brand to "go green".

There is significant danger in "going green" for catalogers. Catalogers with customers age 30 to 49 have an opportunity, because the younger customers in this age group are generally responsive to social media, the older customers are part of the Google generation. The cataloger can reduce catalog marketing expense, transferring marketing dollars online.

Catalogers with customers age 50 to 70 really struggle with the concept of "going green". The 57 year old still shops via catalog. She receives a catalog, identifies the items she wants to purchase, then usually goes online or picks up the phone to buy merchandise. Without the catalog, the sale doesn't happen. Going green means losing sales for catalogers in this demographic.

The environmental community would be well-served by using Multichannel Forensics to identify opportunities for catalog brands to go green. If the methodology indicates an opportunity, go green! If the methodology indicates that sales will go south, environmentally friendly printing might make the most sense.

The communications I have with business leaders lean more and more toward using Multichannel Forensics to identify areas where the carbon footprint can be reduced. The key is to know how many customers will continue to shop online without the benefit of advertising.

Brookstone Q2 2008 Results. Oh Oh.

Recently, we were told about strategic changes at Brookstone, a brand that was outsourcing strategic circulation functions to co-op business partners.
Now, an industry blogger shares with us recent results (read the company press release here).
  • Direct-to-Consumer sales were down 3.8% on a 23% increase in circulation in the past three months. Oh my goodness.
  • Same store sales were down 4% in the past three months.
  • Direct-to-Consumer sales were up 9% on a 37% increase in circulation in the past six months. Imagine what the p&l looks like for this relationship?
  • Circulation will be scaled back in the 2nd half of 2008. Density will be increased to increase productivity as a response to rising paper costs --- contradicting what was written last year.
  • The company lost an additional $5,000,000 of profit in the first half of 2008, compared with the first half of 2007.
Folks, this is not an critique of using co-op databases, there's nothing wrong with working with the co-ops on a database and circulation strategy solution as long as you have control over the database and circulation strategy. This is not a critique of Brookstone either --- many folks are struggling in this economy.

This is a direct criticism of how "solutions" are marketed to us. We need to demand better from our business partners.

July 24, 2008

E-Mail Marketing And Geography: Multichannel Opportunities

In e-mail marketing, we obsess about simply getting a marketing message to first arrive in the inbox of a customer, then to get the image to render properly. Assuming we can accomplish these challenging issues, we focus on the offer and subject line text, trying to maximize click-through and conversion rates.

Seldom do we tailor the message based on geography.

This is a map of the greater Seattle metropolitan area. Green zip codes are those that perform best for this brand, while yellow zip codes perform worst.

The magic of e-mail marketing is that separate messages can be created, based on geography.

The customer who lives in Easton, sixty miles southeast of downtown Seattle in the Cascade Mountains, is not likely to shop in your store --- heck, in winter, this customer simply cannot get across the mountain pass. Why advertise a store message to this customer?

Conversely, the customer living in Belltown has close to a thousand shopping opportunities within ten miles of her home, and can easily walk to several hundred stores. How might the marketing message be different for this customer than for the customer living in Easton?

What about the customer living in Bremerton, just ten miles west of Seattle ... but a two hour trip due to the wait to get on to a ferry to get to Seattle? Maybe buy online / pickup in store is an option, given that this customer works in Seattle?

Zip code data is FREE! You maintain the information for every customer who purchases from your online and phone channels, and in many cases, you have this data for retail purchasers as well.

Each zip code can be classified across different dimensions.
  • Urban, Suburban or Rural.
  • High Spending, Average Spending, Low Spending Zip Codes.
  • Distance From Closest Store.
  • Store Preference.
  • Channel Preference: Phone, Website, Store
E-Mail marketing strategy is crafted for each categorization. You're likely to see a ten or twenty percent increase in e-mail marketing performance based on versions of e-mail campaigns targeted to customers having different zip code characteristics.

July 23, 2008

Multichannel Forensics A to Z: Future

The five year forecast might be the best part of any Multichannel Forensics project. Seriously, name one executive who wouldn't want to be able to predict what the future holds?

Consider the business model in this image. Telephone sales are forecast to decrease by more than thirty percent over the next five years. Store sales are generally flat. Online sales are projected to increase significantly, due to a steady influx of new customers.

How might you change your strategic business plan if you knew that you'll need to reduce your call center staff by nearly half over the next five years?

How might you change your capex expenditure in new stores if you knew that comp store sales are forecast to decrease?

Multichannel Forensics allow you to catch a glimpse into the future of your business, allowing you to literally alter the future trajectory of your products, brands or channels.

July 22, 2008


An assortment of recent questions from you, the loyal reader. All are actual questions from you.

Q: What is the future of catalog marketing?

A: This is simply my opinion. Catalog marketing will become a housefile-based marketing tool. In other words, you'll send catalogs to loyal customers who want to receive catalogs. There's an entire ecosystem that depends upon the catalog customer acquisition model for survival. Long-term, I don't see how this ecosystem will survive. Long-term might be thirty years, long-term might be thirty months. I don't know which timeframe is reasonable.

Q: Why are you so supportive of third party catalog opt-out services, going to great lengths to encourage link-baiting?

A: I am not supportive of third party catalog opt-out services. I am fully supportive of our industry honoring the request of a customer/prospect who no longer wishes to receive paper-based marketing, whether it comes into our call centers or via third party services. Also, the last thing I'm trying to do is link-bait. It has been amazing how long-time catalog employees from reputable brands in the Northeast have been such big critics on this topic.

Q: When are you moving your blog off of the blogspot platform?

A: It is very likely that this will happen sometime this fall, opening up the blog to those of you who cannot read it at work.

Q: How much does a typical Multichannel Forensics project cost?

A: Depending upon the number of twelve month buyers you have, the cost is usually between $10,000 and $50,000.

Q: How much longer can you keep giving away information for free? How do you ever expect to sell books or consulting projects when you don't have to buy the book to learn what you need to learn?

A: I'll keep giving information away for free, forever. This is a different business model than you are used to working with. In the past, our vendor community offered glitzy articles in trade journals, giving away free advice like "target your best customers with a relevant merchandise offering". Thanks, I hadn't thought of that one! Our industry desperately needs to share ideas. We need to collaborate more, compete less. We need to be "friendemies". We are already a loose federation of companies who already share our most valuable asset --- our customer file, with each other. Think about how absurd this is --- we share our best customers with each other, but we won't share our best ideas with each other. What's up with that? I'll continue to offer free advice, spreadsheets, books, you name it, until I cannot make a living or you tire of the content. And by the way, the books have a heck of a lot of content that never gets covered in the blog.

Q: What is more important ... how customers interact with channels, or how customers interact with products?

A: Customer interaction with products is by far more important than customer interaction with channels. We've been sold a bill of goods on this whole multichannel thing. Explore, on a deep level, customer interaction with products.

Q: Why do you have a grudge against folks who preach the benefits of "best practices"?

A: I don't hold a grudge against "best practices". Here's the problem, folks. Who decides what a "best practice" is? A blogger? A vendor? A consultant? Too often, the purveyor of the best practice is biased (trying to sell something as a consequence of the best practice), and occasionally, is wrong!! Best practices should include building blocks that take you from earning a grade of "F" to earning a grade of "C" on your direct marketing exam. Best practices are important if what you do is broken. Best practices hold you back if you need to innovate. Go walk into a Sears store, and you'll see a litany of best practices, all contributing to an endless array of negative comp store sales.

Q: Is e-mail marketing dead?

A: E-mail marketing, as a template-based campaign strategy, may die a slow death similar to the slow death crushing the catalog industry. And yet, direct marketing will survive, it always has. E-mail marketing must evolve. Expect to see businesses use e-mail as a form of entertainment in the future. Expect to see e-mail marketing evolve into a social forum, an interactive platform where customers interact with other customers and employees.

Q: Is blogging dead?

A: Blogging as defined in 2005 or 2006 is already dead. Folks move in multiple directions these days, opting for the MySpace/Facebook/LinkedIn route, the essay-based blogging route, or the glorified text messaging world of Twitter. And yet, if you are a business, and you want to create a forum that allows your customers to see "who you really are", it is still a good time to do so. Blogging may be dead. Authenticity is alive and well!

Q: What software do you use?

A: I use SPSS to analyze customer behavior. Most of the web analytics community would blast me for being a fossil, using programming code perfected back in the 1970s and 1980s. Until somebody creates software that replaces what I can do, I'll continue to make a living being a fossil!

Q: Are folks visiting my website from Yahoo and MSN truly different than those visiting from Google? Do they act different in the future?

A: Yes, and Yes.

Q: Can you really increase readership via online copy marketing?

A: Yes! The words you use, and the hyperlinks associated with certain phrases give you the consumer intelligence necessary to significantly increase visitors / readership / subscribers / purchasers / conversion. We'll talk more about this in the future.

If you have any questions you want answered, e-mail me, or ask them in the comments section of this post.

July 21, 2008

Redirection: How Catalogs Create Demand For Online Pureplays

Given that catalogers seem to enjoy yesterday's discussion about the failure of catalog and multichannel marketing, is is appropriate to share the following outline concerning demand generation in 1994, 2001 and 2008. Of course, what follows in the image is only a theory of mine --- no hard evidence to prove one way or another. Click on the image to enlarge it.

My theory suggests that catalog marketing is as effective as it has ever been. However, Google and Social Media have stepped in and redirected demand that would have gone to your brand.

Redirection (otherwise known as "transfer" in Multichannel Forensics) happens in many different ways.
  • Google and SEO --- think about how many of you found my blog via Google/SEO?
  • Google and Paid Search.
  • Social Media --- Check out Manolo's Shoe Blog as an example.
  • User Generated Reviews --- You see an item advertised in the Crutchfield catalog, you read a review from a customer on Amazon.com, and you ultimately buy the item on Amazon instead of Crutchfield.
Redirection is lethal for a brand that doesn't play along. Since this is just a theory, I don't have any solid numbers to back up my thesis --- I would surmise, however, that maybe 25% to 50% of your demand is "at risk" for redirection.

This theory suggests that we have two important objectives.
  1. Prevent redirection of demand away from our brand.
  2. Induce redirection of demand to our brand.
A metric like the "net promoter score" would be useful, wouldn't it? You look at the percentage of demand that is redirected to your brand, then subtract the demand that is redirected away from your brand. The net is your score --- positive is good, negative is bad. Think of Zappos. Their score has to be amazingly good, right? Footsmart sends a catalog, the customer checks prices online, and buys at Zappos where she gets the item tomorrow via free shipping. Footsmart gets a negative score in this instance.

Abacus/Epsilon --- what do you think? You could so easily help the catalog industry that pays your freight by generating an index of this nature for your clients. There you go, free product development information from The MineThatData Blog! You've got bright people, make something happen! Heck, toss me a few pennies, and I'll develop the prototype.

Too often, we view the world through tactics, like catalog marketing or e-mail marketing or paid search or SEO or affiliate marketing. How often do we view the world in the context of "redirection"? How might we approach competitive advantage via the concept of redirection?

Multichannel Forensics A to Z: Equilibrium Mode

As business leaders, we're very comfortable with Multichannel Forensics projects (book, study) that demonstrate products, brands or channels in Equilibrium Mode.

Catalog marketers believe that paper drives customers online and into stores.

E-Mail marketers believe that best practices drive customers into all channels.

Online marketers want to demonstrate the offline benefits of online marketing.

Equilibrium Mode happens when customers are willing to shop in other channels. Say you have 1,000 customers who purchased online in 2007. During 2008, 500 of these customers will buy again, and 150 will buy in stores. The repurchase index for stores (150 / 500 = 30%) illustrate that the online channel is in Equilibrium Mode with stores (any index between 20% and 50% is in Equilibrium Mode). Online customers, in this example, are willing to shop in a store.

The magic of Equilibrium Mode is that customers seldom stay at the same rate of equilibrium --- instead, behavior changes over time. In 1999, catalog buyers seldom purchased online. In 2003, catalog buyers were willing to buy online. In 2008, catalog buyers happily buy online.

The magnitude of the metrics we evaluate are always changing.

And the metrics, when used to forecast the future, illustrate the future trajectory of your business. Given the downturn in the economy, it is important to forecast what the future looks like, important to forecast how a lack of file momentum will drag down business.

July 20, 2008

The Failure Of The Catalog/Multichannel Marketing Model

"The internet is the wild west. I keep advertising, only to send my customers out into the wild west. And they never return." Catalog Merchandising Executive, 2007.

When we conduct the post mortem on the failed experiment known as multichannel marketing, we'll look at this quote as being a key piece of the puzzle.

Back in 2001, it was a good idea to be "multichannel". We sent catalogs to customers, like we always have. Our analytics suggested that customers used our catalogs to shop on our e-commerce enabled websites. Woo-hoo!

And then Google took command of e-commerce. Ever since then, we've been leaking customers and prospects.

This manifests itself in the phrase I hear nearly every day ... "catalog customer acquisition performance continues to get worse".

Many smart people correctly point out that catalog marketing "creates demand". In other words, many customers do not intend to buy anything, but will buy something if advertised to. The catalog creates demand for an item. Paid search, in general, does not create demand --- it simply intercepts demand that is looking for a home.

Our industry mistakenly went down the multichannel path, believing that this form of demand creation was good. And in a pre-Google world, it was really good!

Today, demand creation is usurped by demand interception.

Go to Quantcast, and view the profile for Orvis. Notice that customers who interact with Orvis also interact with companies like RiverBum. To my knowledge, RiverBum does not have a catalog or stores.

So here you have the good folks at Orvis, doing the multichannel thing, sending paper out into the catalog ecosystem. They do a good job of creating demand for dry attractors.

But the customer isn't 100% sold on buying dry attractors on the Orvis website. He goes to Google and conducts the following search: Dry Attractors. Lo and behold, look who comes up #1 ... RiverBum!

Orvis creates demand for dry attractors. Google intercepts the demand, and funnels it to RiverBum. The customer places the order at RiverBum. The circulation manager at Orvis looks at the metrics, noticing that response continues to decrease.

Catalog marketing still works ... especially for the folks at RiverBum, folks who are not executing multichannel marketing the way the pundits told Orvis to execute it.

Sure, you can criticize Orvis for failing to capitalize on an obvious search opportunity (they don't appear in the top ten for the term dry attractors and did not appear in paid results either). But that criticism misses the point entirely.

The point is that traditional multichannel marketing, executed via catalogs and stores and websites, is a leaky bucket that can never be fixed in a world dominated by Google. No matter how effective you are at catalog marketing, no matter how hard you work to optimize page counts and stimulate demand via enticing copy and manage trim size and use recycled paper and send remails and remails of remails, you will constantly send customers to Google. And Google will send customers to your competition.

E-mail marketers ... you're in the same boat.

This is the grand failure of the catalog/multichannel marketing model, a failure nobody in our industry wants to talk about. When we get away from over-thinking catalog productivity, when we focus on executing the nuts and bolts of online marketing, we begin to view the world differently. And maybe, we can stabilize the leaky bucket problem we face.

July 19, 2008

Multichannel Forensics A to Z: Database Marketing

In many ways, Multichannel Forensics (book, study) is a logical extension of popular techniques that fall under the title of "Database Marketing".

The goal of Database Marketing is to store information about the behavior of customers or users, then combine the information in an actionable way to either increase sales, or increase profit.

Unfortunately, the easiest way to increase sales or profit is to impact marketing campaigns. As a consequence, Database Marketing (as well as Web Analytics and Business Intelligence, both logical extensions of Database Marketing) became campaign-focused, looking to optimize short-term sales and profit. And by doing so, Database Marketing lost relevance among the mythical folks that occupy the coveted wing of the corporate office known as the "C-Suite".

Multichannel Forensics move beyond campaigns, looking instead to quantify the long-term health of a business, as a function of prior customer behavior and anticipated future trends.

If you want to capture the imagination of an executive, hold a crystal ball that tells the executive what the future looks like. Multichannel Forensics make for a good crystal ball.

July 18, 2008

Steve & Barry's. Oh oh.

A few months ago, I challenged all of us to think about the success of Steve & Barry's, driving sales with just one channel and no advertising.

Dry up sources of cheap cash, and Chapter 11 is upon Steve & Barry's.

In other news, Charming Shoppes is looking for a new CEO.

We can focus on the gloom and doom in the economy. Conversely, a myriad of opportunities are being created by this downturn. I know of too many people that have been downsized, rightsized, fired, forced into resignation, you name it, all in the past few months. Hopefully, we can view this as an opportunity to thrive in a new role with a new organization.

July 17, 2008

Multichannel Forensics A to Z: Cannibalization

Almost all of my Multichannel Forensics projects (book, study) are meant to, in some way, demonstrate whether cannibalization is a problem across merchandise divisions or physical channels.

Cannibalization is a vexing problem in business. Many online marketers and web analytics experts were not raised in the era of paper-based direct marketing, and therefore, were never made aware of the ills of cannibalization.

Cannibalization creeps into every aspect of our lives, we're just not good at measuring it. At the dinner table, cannibalization happens when your child would eat an apple, but chooses instead to eat Cheetos if offered next to the apple. In Web Analytics, cannibalization happens when you add six new products to the six existing products featured on a landing page --- sales almost never double, they grow incrementally, at maybe fifteen or twenty percent. The six new products increase sales, but also reduce sales that would have been recorded among the six existing products.

Multichannel Forensics help demonstrate the long-term impact of short-term cannibalization issues. If we cause a customer to switch product lines, and as a consequence, the customer is more valuable, then we've done a good thing. But if we cause the customer to switch product lines, causing the customer to spend the same amount of volume, we're simply dealing with sku proliferation, an issue that is seldom positive for anybody other than Amazon.com.

Multichannel Forensics projects use merchandise divisions as micro-channels, evaluating the way customers move in and out of merchandise divisions over the course of the customer life cycle.

July 16, 2008

Are You Happy With Your Web Analytics Software Solution?

Here are the results of the most recent survey question ... "What Is Most Important In Web Analytics?"
  1. 42% = Sr. Management Uses The Findings.
  2. 27% = Great Analysts.
  3. 15% = Great Database Integration With Other Channels.
  4. 12% = Best Practices.
  5. 4% = Great Software.
Only 4% of you thought software was most important of the five topics.

Are you happy with your web analytics software solution? If you are not happy, tell us why.

Another interesting tidbit --- only 12% ranked Best Practices as being high in importance. Why? Do you not believe in the best practices preached by others, or do you simply think other issues are more important?

July 15, 2008

Multichannel Forensics A to Z: Backorders

In Multichannel Forensics (book, study), channels are typically viewed at a physical channel level, classifying customers by retail purchases, online purchases, or telephone purchases (among others).

However, most projects these days go deeper, exploring the concept of micro-channels. Backorders fall into the micro-channel category.

You're likely to learn that customers who are willing to wait for an item that is not available are more valuable than customers who purchase merchandise that is always available.

You're likely to learn that each item that is backordered lowers long-term value (lifetime value, LTV, long-term ROI).

And you're likely to learn that if every item the customer wanted to order is not available, long-term value significantly decreases.

Multichannel Forensics add value because one can demonstrate the long-term impact of short-term customer service issues. For the first time, you'll be able to demonstrate to your inventory management team the role they play in the long-term health of your business.

For the Web Analytics community, Multichannel Forensics significantly complement your activities. You can see if customers look at various items that sell out, and you can see if the customer looks at complementary items if the item the customer wants is sold out. Combine that information with long-term value, and you really have something!!

July 14, 2008

MeritDirect Co-Op Wrap-Up

Few things I've done have generated as much interest and feedback as the talk on Non-Traditional Online Customer Acquisition at the MeritDirect Co-Op. Thanks to Ralph Drybrough for putting on a unique conference, a conference that is about delivering value for the attendee, not about creating value for the folks putting on the show.

Much of the chatter surrounds the story I told about selling our home in forty-eight hours. Here is a link to The Cascade Team, the real estate agency that uses online marketing, business intelligence, and a huge discount on fees to gobble up market share and move homes in a sluggish economy.

We spoke with the owner on Saturday. He simply cannot keep up with the need to hire new staffers. When new employees see how he uses data to make decisions, he tells me the employees are floored. You'll probably think that their website isn't beautiful, and that's fine. We spend too much time working on beautiful sites. They work on moving homes using business intelligence.

Many of you expressed interest in the concept of using copy as a customer acquisition tool. Few folks ever talk about copy as an important element of the conversion process. It is important!

If you don't use copy to increase conversion rates, you may as well use copy to gain intelligence.

For instance, take a look at the article from Friday. Look closely at the two links that I used to allow you to download the presentation.

Notice anything odd?

Each link points to the same presentation.

The link that says "if you weren't in attendance, download this version instead' has been clicked five times as often as the link for folks who attended the session. In other words, folks who did not attend the session want to learn what was presented.

Many online marketers thoroughly understand this stuff --- but for most of us who aren't thoroughly immersed in using copy as a conversion tool, we have opportunities.

Online copy marketing (here's a new acronym for you --- OCM) is different from blogging, different from SEO. Blogging is all about the writer, or all about the community --- no wonder it doesn't drive sales increases for most brands employing the strategy. SEO is often a niche led by technical experts and web analytics gurus, audiences that are critically important, but not audiences that capture the fancy of the "C-Suite" leader.

Online copy marketing is different. We identify the topics that drive audience engagement, then we modify our message to be even more relevant to the audience. The process takes A LONG TIME, no quick fixes here. The process allows us to acquire customers the old fashioned way, via a relevant relationship that benefits the customer.

We'll explore the topic in more detail in upcoming posts.

July 13, 2008

Multichannel Forensics A to Z: Acquisition Mode

We begin a series on Multichannel Forensics (study, book) with the letter "A". Our first topic is "Acquisition Mode".

In Acquisition Mode, you retain fewer than 40% of last year's customers. In other words, if 1,000 customers purchased merchandise from your brand in 2007, fewer than 400 will purchase again during 2008.

Too often, we take a "Starbucks" view of the world, one where there is a 40% chance that Starbucks will retain our business today! In those situations, we think about loyalty programs and all the stuff that goes into cross-selling and up-selling the customer --- it's all about getting more from the customer today.

The majority of the brands I study retain fewer than forty percent of last year's customers, in fact, many retain less than thirty percent of last year's customers.

The media, trade journals, and vendor community seldom focus on this business model. A business can make a boatload of money catering to customers who purchase infrequently --- how often do you buy from your local furniture store, after all? Somehow, they stay in business (most of 'em!).

For products, brands or channels locked in Acquisition Mode, it doesn't make sense to try to increase loyalty, as the pundits would have you do. Instead, have a steely-eyed focus on acquiring/reactivating customers at the lowest cost possible.

July 12, 2008

Nordstrom (JWN) Stock Price

On January 8, 2001, I began my employment stint at Nordstrom as Vice President of Direct Marketing. The stock price was $8.33.

On March 9, 2007, I completed my employment tenure at Nordstrom. The stock price was $50.63.

On July 11, 2007, the stock price is $27.38.

How much of the stock price is due to my brilliant shepherding of the Database Marketing function at Nordstrom?


This is one of the challenges we face when evaluating talent.

Leaders are caught in updrafts and downturns. How the leader deals with updrafts and downturns manifest itself in the profit and loss statement. And during a time when Nordstrom stock declined by thirty percent (fiscal year ending 2/2008) Nordstrom actually posted a year of record profits.

July 11, 2008

MeritDirect Co-Op Slides: Non-Traditional Online Customer Acquisition

For those of you who were in attendance today and asked for digital copies of the presentation, here you go: Non-Traditional Online Customer Acquisition.

If you weren't in attendance, download this version instead.

Thanks to all of you who stopped by to say hello at some point over the past three days, I really enjoyed meeting so many enthusiastic direct marketers!

And for those of you who quizzed me on my position about best practices, I'm not against best practices, I'm against blind adoration of best practices without testing what is appropriate for your brand. I did enjoy the discussion!

July 10, 2008

$4.25 For A Bottle Of Water

The tag on the bottle of water in my hotel room encouraged me to "refresh" myself.

Cost to refresh myself = $4.25 per 20oz bottle of water.

In algebra class, we learned that we can determine the cost per gallon, using the following equation:
  • $4.25 / 20 = "x" / 128 (equation corrected from earlier error!)
Solving for "x", we learn that the cost of this refreshing bottle of water is actually $27.20 per gallon.

These are the luxuries we'll forgo as we adapt to $5.00 gasoline.

July 09, 2008

Five Easy Steps To Jump-Start Your Struggling Business

Of course, there are never five easy steps to jump-start your struggling business, are there? If there were five easy steps, you'd already be executing them!

So why, then, do so many articles sound like this? Why do we write like this? Do we believe articles written using this format?

Five Easy Steps To Jump-Start Your Struggling Business

July 9, 2008: In today's highly competitive direct marketing environment, savvy marketers are increasing shareholder value by placing emphasis on understanding a dynamic global marketplace that rewards integrated multichannel strategies that empower consumers challenged by a recessionary environment predicated on sub-prime mortgage indulgence.

Visionary brands are already taking advantage of five easy steps, guaranteed to jump-start any struggling business. Complex financial markets require that we thoroughly understand these principals.

Step 1 = Know Your Target Audience: Leading brands have an in-depth understanding of who their target audience is. Wal-Mart, for instance, executes their brand promise against a hundred million shoppers who love getting the lowest price on everyday commodities.

Step 2 = Implement Advanced Multichannel Strategies: Brands that ignore the diverse needs of a fickle customer audience risk obsolescence in a complex and integrated multichannel environment.

Step 3 = Calculate Return On Investment Across All Strategies: Brands implementing return on investment (ROI) reporting using integrated business intelligence platforms often derive earnings before tax percentages exceeding mainstream brands.

Step 4 = Trim Unnecessary Programs: Shareholders fail to share in the benefits of a integrated strategic approach if management blindly ignore the findings of a strategic evaluation of the brand. By eliminating unnecessary programs, capital is reallocated to endeavors that are likely to generate a higher return on investment.

Step 5 = Repeat! No strategic process is complete without a thorough re-evaluation of every program for brand appropriateness. Iterative strategy yield superior pre-tax results.

By employing these five easy steps, brand leaders can increase shareholder value and weather any economic storm.

What are you doing to improve business performance?

July 08, 2008

Simple Tip: Customer Value By Day Of Week

Those of you who enjoy measuring long-term value might want to research customer behavior according to the day of week the customer purchases from your brand.

Retail customers purchasing on Saturday or Sunday have different future value than customers who purchase on a weekday afternoon or evening.

Online customers purchasing early in the week have different future value than customers who purchase evenings or weekends.

Catalog customers who buy during the in-home week have different future value than customers who buy two months after a catalog was mailed.

Those of you who analyze online visitation behavior will observe unique trends, based on the day/time the user visits your website.

Give it a try!

July 07, 2008

Google, Yahoo!, MSN, and Multichannel Forensics

Web Analytics practitioners do a very nice job of summarizing visit-specific customer behavior. They can tell you that 29% of the customers who visited a landing page were new, 71% existing visitors. Our world of marketing and measurement fundamentally changed when we were given access to the information provided by Web Analytics.

Now it is time to complement the veritable plethora of information provided by Web Analytics with Multichannel Forensics.

Most online marketers generate considerable sales from customers referred by Google, Yahoo!, and MSN searches.

Now let's consider future behavior. In other words, does the Google purchaser purchase again after conducting a search using Google? Does she purchase again because she becomes loyal to your website, visiting it frequently? Does she purchase again because of your catalog marketing activities? Does the MSN purchaser stay loyal to the MSN micro-channel, or does she switch to Google?

Multichannel Forensics provide answers to all of those questions.

Often, Multichannel Forensics suggest that Google is a unique micro-channel, separate from your e-commerce channel. My projects routinely indicate that Google customers have comparable future value, compared with Yahoo! or MSN customers. But subsequent behavior is fundamentally different! This means downstream marketing activities can be executed differently for the Google shopper than the MSN or Yahoo! shopper.

The Yahoo! and MSN shopper are occasionally less loyal to their portal than are Google shoppers. Loyalty to your brand may be similar, but you may find these customers elsewhere on the internet in the future, whereas the Google shopper may continue to be loyal to Google.

Results across brands are frequently unique, so it is important that you give Multichannel Forensics a try, considering each online marketing vehicle as a unique micro-channel.

Focusing on Tiny Things

Sometimes on LinkedIn you'll see "all the good stuff" from the CEO. An image of twelve people sitting inside a restaurant, gla...