November 23, 2008

How We Got Into This, How We Will Get Out

How We Got Into This Mess?
  • Trusted others to keep USPS costs down.
  • Didn't see the significance of CAN-SPAM and do-not-call, didn't understand that these movements empowered customers to choose, and they would begin to choose control over the mailbox too.
  • Considered social networking as something that kids do, looked to monetize conversations instead of participating in conversations.
  • We templatized e-mail into a stale creative offering of vapid off-price promos and free shipping.
  • Didn't understand that online customer acquisition requires a veritable plethora of micro-channels to scale in a manner like catalog customer acquisition scales.
  • Focused on offers, not merchandise.
  • Focused on customer retention, a metric that is too hard to move.
  • Failed to acquire enough customers to get us through tough times.
  • Failing to recognize that customers need new information on a constant basis, instead we employed remail strategies to minimize expense.
  • We trusted algorithms first, people second.
  • Spent nearly a decade trying to prove, via matchbacks, that direct marketing drives sales to other channels. Should have spent a decade trying to drive sales to any channel using new micro-channels.

How We Will Dig Ourselves Out Of This Mess?

Understand That There Are Five Kinds Of Customers (Hint, Those At The Top Are Best).
  • Organic: These customers buy because the love us, and are most profitable. These customers continue to purchase without any advertising.
  • Social: These customers buy for social reasons, and are highly profitable.
  • Algorithm: These customers buy because an algorithm (Google) drove them to our business. We give control of our business to the algorithm, a good thing for small brands.
  • Advertising: The realm of the marketer. Traditional advertising is dying, including catalog and e-mail marketing.
  • Begging: The realm of the marketer in 2008. The customer buys because of free shipping, discounts, and promotions. This is the worst form of marketing, yet marketers are increasingly addicted to the combination of advertising and begging, while customers are increasingly migrating to Social/Algorithm solutions.
Realize That Geography Dictates Multichannel Marketing Strategy
  • Urban Customers are saturated with retail opportunities. Your website is a research-based tool, not necessarily used for e-commerce. Mobile marketing and social media need to be retail focused among these customers.
  • Suburban Customers represent the traditional "multichannel customer" that marketing experts love to talk about. This is where mobile marketing and social media have potential, where catalog and e-mail marketing truly drive business across all channels. This is the home of the matchback analysis.
  • Exurban Customers are direct marketing customers. Retail is too far away to be convenient. E-commerce rules here, and catalog marketing can be used to drive e-commerce.
  • Rural Customers represent the future potential of catalog marketing. In the land of dial-up internet access and a lack of cell phone coverage, traditional direct marketing is still relevant.
  • Zip Code Forensics prove that there are geographical locations that are highly responsive to catalog marketing --- specifically, rural New England and the Rocky Mountain states.
We Operate In A Giant, Connected, Non-Linear Ecosystem. We Measure Too Many Things In An Isolated, Linear Manner
  • Web Analytics experts must integrate their tools and data with all company data, or risk becoming irrelevant as the Business Intelligence community integrates data for them.
  • E-Mail Analytics must move beyond open rates and click-through rates and conversion rates. What is the long-term value of e-mail marketing? How does e-mail marketing influence behavior across micro-channels?
  • Social Media influences activities, it usually doesn't directly cause sales to happen. We need to measure influence, not cause.
  • Mobile Marketing may be the "next big thing". Until then, we need to experiment and measure influence, focusing less on direct sales.
  • Video Marketing may be the "next big thing". Until then, we need to experiment and measure influence, focusing less on direct sales.
  • Business Intelligence needs to move beyond drill-down queries and fancy software interfaces. Measure how customers interact with products, brands and channels.
  • Multichannel Forensics offer a framework for understanding the behavior of customers in a giant ecosystem.
The Future Of Our Business Is Tied To Micro-Channels
  • Mass audiences no longer exist.
  • Catalog customer acquisition no longer scales in a sustainable manner.
  • And no single online channel offers the size of audience that catalog customer acquisition currently offers.
  • Therefore, the future of direct marketing leverages hundreds or even thousands of micro-channels.
  • Today, there aren't enough micro-channels to "switch to". So we're in limbo for awhile.
  • This is the time to experiment, to test hundreds of micro-channels, to use Multichannel Forensics to understand how customers flow between micro-channels.
And There Are Two Things We Must Measure, To Be Successful
  • The Organic Percentage tells us what happens if we don't market to customers. It is the most important metric for a direct marketer to track. Catalogers who know this percentage do not over-mail, do not saturate the majority of the customer base. They save a lot of money that can be re-invested in online micro-channel development.
  • The Net Google Score is critical for understanding whether Google is helping or hurting your brand. It is my belief that catalog brands are posting very negative net Google scores, caused by advertising that drives catalog customers online, resulting in those customers buying from brands that shine online.
The Future Is So Bright, I've Got To Wear Shades!
  • The next two years are not likely to be a lot of fun.
  • But after that, there is a lot of potential!
  • Potential will be realized once the innovation of 2009-2010 bear fruit.
  • Expect catalog marketing to evolve to an opt-in customer retention vehicle for customers in Exurban and Rural areas.
  • Expect that some retailers will completely re-invent e-mail marketing, fusing the best of e-mail selling with social media warmth and humanity.
  • Expect consolidation among co-ops as customer acquisition performance implodes. Co-ops that survive will focus on consumer intelligence, delivering brilliant insights that fuel understanding of customer interactions with products, brands and channels.
  • Expect to see the Business Intelligence community integrate Web Analytics, providing a more complete view of customer behavior than illustrated by Web Analytics tools.
  • Expect to see Business Intelligence analysts fail to explain customer interactions with products, brands and channels at a level needed by Management.
  • Expect a shift away from marketing to lists.
  • Renting and exchanging names is a dying practice (see here). Third party opt-out services will exert influence, severely harming the business model of the co-op database. This battle could get testy, folks.
  • Printers will try to help direct marketers migrate from "campaign-based" mailers to personalized mailings with product tailored to the interests of the customer.
  • Expect a shift to participation with communities. Hundreds or thousands of communities.
  • Traditional multichannel marketing is suffering from vendor-itis.
  • Micro-channel marketing is about to take off.
  • Marketers will continue to saturate the same customers with the same message across channels. Smart marketers will realize that each micro-channel offers an opportunity to reach new audiences, increasing total sales.
  • Hologram Marketing is only ten years away, and when it comes, expect major disruption among the current online leaders (Google, Amazon, etc.).


  1. Anonymous1:07 PM

    Like this thinking however I would question that Organic is 100% from non-marketing efforts.

  2. I suppose it comes down to how you define what marketing is.

    Good thought!

  3. Anonymous7:50 PM

    How do you measure influence rather than direct sales?

    If you can't connect the dots to sales, will it die a slow and agonizing death? Or can it be related to sales in some way?

  4. Ted, I'll write a separate post to cover your comment --- it should be up on Friday, if all goes well.

  5. Anonymous4:02 PM

    I'm looking forward to it.



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