March 21, 2009

Mega-Metrics: Address Value

We in the "multichannel" industry are pulled in a lot of different directions. We're told we need to be everywhere, offering everything to the customer.

Our Multichannel Forensics projects suggest that each piece of information about a customer offers a different amount of business value.

For instance, take a look at the following table:

Incremental Value Of Various Addresses

% of 12mo. Address

Pop. Value Value
Mailing Address 98% $100.00 $98.00
Internet Connection 85% $50.00 $42.50
E-Mail Address 80% $20.00 $16.00
Mobile Phone w/SMS 50% $15.00 $7.50
Twitter Account 2% $10.00 $0.20

Having a mailing address is important. The mailing address allows us to market to customers wishing to receive our marketing activities. And we can easily prove that our efforts generate a considerable amount of revenue. Given that most folks have a mailing address, we can multiply the audience percentage by the demand value, arriving at "potential", in this case, $98.00.

Having an internet connection is important, too. Customers generate organic demand. Customers also respond to paid search efforts, interact with shopping comparison sites, you name it. Therefore, internet access is important.

E-mail addresses are important, but less so. They are dependent upon having an internet access, and for many catalogers, they are dependent upon catalog marketing as well (the e-mail address doesn't happen unless a catalog generates an order, causing the customer to volunteer an e-mail address). Still, the e-mail address provides a good amount of potential, given that most people have an e-mail address.

Now take a look at Twitter. This is an area that has relatively unproven marketing potential, coupled with the fact that fewer than 2% of US Citizens have a Twitter account. Multiply both facts together, and you quickly learn that Twitter has minimal potential (as of today). Twitter certainly has less potential than, say, mobile marketing, a generally untapped channel with significant potential due to the prevalence of cell phone users. Of course, this doesn't mean you don't experiment with the shiny new tools, you absolutely should. But we should also be cognisant of the sales potential of any activity today, while still planning for the future.

Today's multichannel marketer does a good job of assigning value to each marketing channel, based on two dimensions.
  1. The future value of the marketing channel, in dollars (sales, or better yet, profit0.
  2. The penetration of the marketing channel (mailing address = 98%, Twitter = 2%).
The table listed above is adjusted as each channel changes in value (i.e. as Twitter increases in penetration while direct mail performs marginally worse over time), and experiences penetration changes. The table gives us a view of the world that is far different than the marketing literature we read on a daily basis.

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