October 31, 2010

Dear Catalog CEOs: Efficiency And Page Counts

Dear Catalog CEOs:

You're obviously aware that the USPS and your Printer have conspired against you, forcing you to produce catalogs with large page counts.

I say that, because every single time we have a discussion about page counts, you tell me that you won't produce a small catalog because of "discounts" and "efficiencies" provided to you by the USPS and your Printer. You tell me that they encourage you to produce larger catalogs.

Of course they tell you that you need to produce larger catalogs!

And you listen to them.

Isn't it time for you to listen to your customers? Put your vendors on the back burner and listen to what your customer is telling you.

Here's what I am seeing out there.

  • I'm routinely seeing that you can easily generate 85% of the demand on 50% of the pages mailed. Seriously! In many cases, the percentage is closer to 95%.
  • I'm routinely seeing that a targeted merchandise assortment, offered to a targeted audience, generates 100% of the demand on 50% of the pages circulated. For instance, if you were PC Connection, and the customer never buys Mac products, you eliminate those pages and you don't see a fundamental change in total spend on a reduction of pages.
Why is this important?

Well, you want to mail as many catalogs as you profitably can, right?

Let's assume that the 85% demand on 50% pages rule holds. You have a 96 page catalog, and you want to consider offering a 48 page prospect catalog.

Here's the profit and loss statement for an outside list (say from Abacus) in the 96 page catalog.
  • Demand = $1.30 per customer.
  • Profit Flow-Through = 40%.
  • Cost of Catalog = $0.60.
  • Profit = $1.30 * 0.40 - $0.60 = ($0.08).
Here's the profit and loss statement for an outside list in a 48 page prospect catalog that generates 85% of the demand on 50% of the pages. Remember, it costs more to mail the 48 page catalog on a cost-per-page basis, this is why the vendor community discourages you from doing it!!
  • Demand = $1.30 per customer * 0.85 = $1.10.
  • Profit Flow-Through = 40%.
  • Cost of Catalog = $0.38 (more expensive per page).
  • Profit = $1.10 * 0.40 - $0.40 = $0.04.
Oh oh.

You mean the smaller catalog is more profitable?

You mean that I can mail the smaller catalog to more customers, customers that I couldn't afford to mail the larger catalog to?

The vendor community sold you a bill of goods, one that benefits their bottom line, not your bottom line. Execute a test. Try a smaller catalog. See if your Chief Merchandising Officer can pick the best product and best creative to go in a smaller catalog ... if she can (and I'm confident that she can), you'll easily generate 85% of the demand on 50% of the pages.

And if you can generate 85% of the demand on 50% of the pages, you'll easily offset the 67% of the cost on 50% of the pages that the vendor community uses to discourage you from mailing smaller catalogs.

And you'll be more profitable.

And because you can mail deeper, you'll generate more top-line sales.

And because you can mail deeper, you'll have more buyers, yielding a stronger customer file.

What's not to like about that scenario? More sales, more circulation, more profit, more customers. Aren't those metrics that you adore?

Stop listening to your vendors.

Start listening to your customers!

And if you need help with the %-demand and %-cost curves, contact me, and I'll be happy to help you craft a few scenarios.

October 27, 2010

FAQ For The Vendor Community

A percentage of those who read this blog are members of the Vendor Community.  

Increasingly, the Vendor Community is looking to leverage this blog to obtain free access to those of you who work for B2C and B2B brands.

This post serves as a "Frequently Asked Questions" document that the Vendor Community may refer to in the future.

Question:  "Our CEO would like to write a guest post on The MineThatData Blog about an exciting new product we are offering that may be of interest to MineThatData readers.  Could you please offer us a date when we can publish our article?"

Answer:  I only post original content that I write, I will not accept guest posts unless I originate the discussion with the individual who is responsible for contributing content. 

Question:  "We would like to offer readers of The MineThatData Blog a 20% discount on our products and services.  Would you be willing to write an article about our products and services, offering your readers our generous discount?  We will pay you a commission for each qualified lead you provide us.  Thank you, we look forward to working with you."

Answer:  "I do not publish content that offers readers discounts on products and services offered by the Vendor Community.  The vast majority of content written here supports my consulting practice.  If I am speaking at a conference, and the conference wishes to offer readers a discount, I will consider offering the discount on a case-by-case basis."

Question:  "We are hoping that you could help our marketing campaign 'go viral' by sharing a link to an offer we have on Facebook.  Please notify your readers of our campaign at your earliest convenience.  Can we count on your support in this viral initiative?"

Answer:  "No, I will not use this blog to participate in your marketing endeavor.  Thank you for your interest, and good luck with your viral marketing initiative."

Question:  "We frequently disagree with your point of view, and would like an opportunity to have you publish a rebuttal on your blog, so that your readers can gain a balanced view of marketing and analytics.  Would you be willing to offer us this opportunity?"

Answer:  "If your argument is backed-up with actionable and realistic facts that are crafted after controlling for recency/frequency/monetary value, past channel activity, past merchandise preference, and other customer behavior factors, yes, I will consider publishing your rebuttal on a case-by-case basis."

Question:  "Would you be willing to mention our products and services in an upcoming episode of Gliebers Dresses?"

Answer:  "No, Gliebers Dresses is a fictional account of an online/catalog brand.  The stories are designed to highlight various marketing issues that all of us sometimes run across, via parable.  Product placement is not congruent with the message being promoted in the Gliebers Dresses storyline, though Roger Morgan would find the concept interesting."

Question:  "Would you be willing to mention a new research report we are about to publish tomorrow?  I'm sure your readers would be delighted in the research we've conducted, and we would be willing to offer your readers a special discount on the research report."

Answer:  "No, I do not publish solicited content on this blog."

Question:  "Would you be willing to sell our products and services to your client base, in exchange for promotion of your Multichannel Forensics framework with our client base?  I'm sure your clients would greatly benefit from our new products and services."

Answer:  "No, I do not engage in cooperative arrangements, as my clients would have a hard time telling whether I am being honest or if I am being given an incentive to sell services from a Vendor.  The work I do has to benefit a client, and has to be unbiased."

Question:  "Is there any kind of content (interviews, podcasts, videos, events, blog posts, Tweets, Facebook credits) that you would be willing to share with your audience?  We believe that there are synergies between your audience and our products and services.  It is really important that your readers learn more about what we have to offer."

Answer:  "No, I will not publish any content that is solicited to me by the Vendor Community."

The short answer is that I do not accept content from the Vendor Community.  The content on this blog is largely original or is content that I find interesting and therefore I decide to link to it.  The content is designed benefit industry CEOs, CMOs, Vice Presidents, Marketing Leaders, and Analytics Experts.  The content is largely designed to help sell my consulting products and services.  

I have spent nearly five years providing unique and original content that, to date, attracts an audience of nearly a quarter-million visitors, more than two-thousand followers on Twitter, and nearly two-thousand blog subscribers.  Interrupting a relationship that has been built one subscriber per day, every day, for five years with Vendor-Based Advertising is not in the best interest of anybody associated with this blog.

Thank you for understanding the purpose and goal of this blog.


October 26, 2010

Digital Profiles: Loyalty Dynamics

If customers can downgrade their loyalty, they can also upgrade their loyalty, right?

Let's do something fun.

The top four Digital Profiles are, in terms of customer value:
  • Gold Mine
  • Multi-Channel Mavens
  • Shop Online, Buy In-Store
  • Retail Fanatics.
We'll call these four Digital Profiles "Valuable".

We'll call the remaining twelve Digital Profiles "Marginal".

I ran a query against this dataset. I wanted to see how customers migrate between "valuable" and "marginal" Digital Profiles. Here are the results.

Last Year's "Valuable" Digital Profiles:
  • 8,852 customers downgraded to "Marginal" Digital Profiles.
  • 10,272 customers maintained "Valuable" Digital Profile status.
  • 7,150 customers did not purchase in the next twelve months.
Last Year's "Marginal" Digital Profiles:
  • 27,510 customers maintained "Marginal" Digital Profile status.
  • 8,011 customers upgraded to "Valuable" Digital Profile status.
  • 55,935 customers did not purchase in the next twelve months.
Clearly, the customer file is going through a dynamic transformation, as "Valuable" Digital Profile customers downgrade their status, while a small number of "Marginal" Digital Profile customers upgrade their status.

Another interesting query is to see "where customers come from". Let's look at this year's "Valuable" Digital Profiles, and see what their status was in 2009:
  • 8,011 upgraded from "Marginal" Digital Profile status.
  • 10,272 maintained their "Valuable" Digital Profile status.
  • 7,062 did not purchase last year!
Again, the customer file is a dynamic ecosystem, with considerable customer turnover.

You won't read about this stuff in the marketing literature, folks. But it is important ... really important. Once you realize that your customer file is truly an evolving ecosystem, you approach it in a different way. For once, I'll side with the Multi-Channel Pundits ... there are times when you want to "diversify your portfolio", constantly recruiting customers in a profitable manner from many channels in order to protect the health and diversity of your customer file!

October 25, 2010

Digital Profiles: Best Customers Downgrade Their Loyalty

One of my favorite ways to use Digital Profiles is to analyze where a customer moves from year to year. We talked about this topic previously, but it is an interesting and important topic, so we'll re-visit it today.

Take the "Gold Mine" profile from our analysis.

Let's look at all of last year's "Gold Mine" customers, and see what Digital Profile they migrated to this year, if the customer purchased something.
  • "Gold Mine" = 2,913.
  • "Multi-Channel Mavens" = 746.
  • "The Digerati" = 353.
  • "A Long Drive" = 359.
  • "Shop Online, Buy In Store" = 401.
  • "Direct Newbies Looking For Eight" = 136.
  • "Online One/Twos" = 231.
  • "Ship It To Me" = 108.
  • "Retail Fanatics" = 748.
  • "Retail 4/5/6" = 387.
  • "Retail 1/2/4" = 258.
  • "In And Out" = 278.
  • "Retail 1/2/3" = 240.
  • "Retail Newbies Looking For Eight" = 92.
  • "Retail 1/2" = 173.
  • "Rotary Phone" = 19.
Notice that a large chunk of customers stayed in the most productive Digital Profile (Gold Mine).

Notice that a much larger chunk of customers who purchased "downgraded" to lower-quality Digital Profiles.

You'll see this over and over again. Best customers seldom stay as "best customers". Customers evolve and change over time. Our job is to constantly refresh our pool of best customers with new customers from new sources.

Use your Digital Profiles to understand how customers migrate in and out of your best segments!

October 24, 2010

Dear Catalog CEOs: Selling

Dear Catalog CEOs:

These days, it's really hard to find nuggets of valuable information.

Too often, we navigate slush like this:
  • "In these challenging economic times, leading brands are reaping the benefits of integrated promotions. There are just three steps to success. First, identify product that resonates with your target customer. Second, create promotions that enhance the brand experience for the consumer. Third, deliver outstanding customer service."
So it came as a complete surprise last week when this particularly lucid comment from Sarah Fletcher of Catalog Design Studios landed on my desk. She's talking about the potential sale of Orchard Brands:
  • "You can't just present merchandise, you have to actively sell it. It isn't enough to send out catalogs and assume they will be read. You have to really engage the customer."

If we were actively selling, we wouldn't observe cases where 87% of the demand is generated on 39% of the pages. We'd be selling, and the customer would demand more pages, because the customer would be enthralled with our message, our presentation, our merchandise.

That's just not the case anymore. I recently saw a test where 90% of the demand was generated on just 8% of the pages ... the business tested a huge book vs. a very small book ... and found that almost all of the demand happened because of the incremental contact ... incremental pages had almost no impact on customer response.

That can't happen when the customer is enthralled with the catalog.

We really don't sell anymore. We love our channel. We love the idea of putting spreads together. We're obsessed with free shipping and 20% off. We beat the living daylights out of Abacus for not improving our response rates from 1.0% to 1.1%. We align channels. We ignore e-mail marketing. We obsess about catalog delivery ... if I had a dollar for every time a business leader said that a catalog wasn't performing to expectations because delivery was slow, I could, well, you get the picture.

Heck, we've even outsourced selling to our customers ... we obsess about "user generated content" and "customer reviews". Since when did the customer become a better copywriter than, well, than a copywriter?

Why did we let that happen?

It's time to sell again. We can't just mail catalogs and hope the customer goes to Google and then pay Google to be our "traffic cop advocate".

October 21, 2010

Incremental Sales Week: Attribution

There are a lot of really smart people out there who do attribution work. They use complex statistical models to try and tie orders back to the advertising that drove the order.

But attribution models have one fatal flaw ... they incorrectly attribute orders that would happen organically (i.e. without advertising) back to advertising activities, causing us to spend way too much money on marketing activities.

If you agree with me that we're over-attributing orders to marketing activities ... then give this presentation a read, where I'll share with you a mail/holdout methodology for properly assigning attribution rules.

October 20, 2010

Incremental Sales Week: Merchandise

It is not uncommon for merchandising teams to introduce new product lines. In fact, merchandising teams have to introduce new product lines, without new product, a business will die a slow and painful death.

But new product lines do not always yield Incremental Sales.

Let's say you have an e-commerce business that generates $2,000,000 sales a month, and you are expecting sales this month to be distributed as follows:
  • Merchandise Division #1 = $700,000.
  • Merchandise Division #2 = $500,000.
  • Merchandise Division #3 = $300,000.
  • Merchandise Division #4 = $300,000.
  • Merchandise Division #5 = $200,000.
  • Total = $2,000,000.
Your merchant team adds a new division, #6, to the fold. After one month, your sales look like this, by Merchandise Division:
  • Merchandise Division #1 = $600,000.
  • Merchandise Division #2 = $500,000.
  • Merchandise Division #3 = $300,000.
  • Merchandise Division #4 = $300,000.
  • Merchandise Division #5 = $200,000.
  • Merchandise Division #6 = $200,000.
  • Total = $2,100,000.
An interesting thing happens in companies. Business leaders with sales decreases "feel the pain". Business leaders with sales increases "get rewarded".

In this case, total sales increased by $100,000. This is the level of "Incremental Sales" that we want to credit to the business. Merchandise Division #6, the new product line, generated $200,000 sales. Therefore, 50% of what Merchandise Division #6 generated is "incremental", 50% is "cannibalized" from the rest of the business ... in this case, cannibalized from Merchandise Division #1.

There is an art involved in analyzing a business. All of our real-time metrics suggest "truth". Reality is different, however. In this case, Merchandise Division #1 didn't necessarily "fail", rather, it was the victim of business evolution, and that is ok as long as everybody understands that the business evolved with the addition of a new Merchandise Division.

October 19, 2010

Incremental Sales Week: Free Shipping

Let's say that you have a business that generates $2,000,000 of sales in a normal month.

This month, you want to "drive sales", you want to increase business. So you offer customers a promotion ... free shipping if the customer enters promo code "FREESHIP" during his/her order.

At the end of the month, you have the following facts:
  • You did not execute a test to identify the incremental sales generated by free shipping.
  • Total monthly sales were $2,250,000.
  • 70% of sales were attached to a "FREESHIP" promo code.
  • 12,600 orders had a "FREESHIP" promo code.
  • 40% of sales convert to profit.
  • Each order that had a "FREESHIP" promo code lost $10 of shipping and handling revenue.
Ok, armed with this information, we can estimate profitability. First, we have to identify incremental sales, sales that would have been generated above-and-beyond normal circumstances. In our case, that amount is $2,250,000 - $2,000,000 = $250,000. Even though 70% of sales were attached to a "FREESHIP" promo code, sales only increased by $250,000, so that is the amount of incremental sales we perceive to be generated by the promotion.

Next, 40% of the $250,000 converts to profit, so $250,000 * 0.40 = $100,000 of contribution.

Third, there were 12,600 orders that received free shipping, those orders lost an average of $10.00 shipping/handling revenue, for a marketing cost of $126,000.

Finally, profit is calculated as $100,000 - $126,000 = a loss of $26,000.

Too often, we attribute all 12,600 orders to the sales line, causing us to believe that the promotion was profitable.

Instead, we have to have some marketing discipline. We can only take credit for the incremental sales we generated. We must take credit for all expenses caused by the promotion.

The result is a loss. Our marketing activities caused us to lose money, the exact opposite outcome desired by a marketing activity.

October 18, 2010

Incremental Sales Week

The least understood concept in Direct Marketing (and Retail for that matter) is the concept of Incremental Sales.

Incremental Sales are sales that are generated above-and-beyond what would normally be expected. For instance, you have an e-commerce website that generates $2,000,000 a month. If you maintain the same marketing strategy you maintained previously, you need to do something to create additional sales. The additional sales, above-and-beyond the $2,000,000 you expected, are Incremental Sales.

Why are Incremental Sales important?

Because nearly everybody wants credit for sales that would have happened anyway.

This "lust for credit" causes us to be less profitable than we could be. Our "optimization culture" can do an amazing job of not yielding an optimal outcome!

Tomorrow, we'll begin to explore this important topic.

Social Media Truthiness, And Four Metrics That Truly Matter

Here's an example of the truthiness we're forced to navigate each week:
  1. Facebook Sharing Is Worth 6x As Much As Twitter Sharing.
  2. Twitter Crushing Facebook's Click-Through Rate.
Who do you believe?

Both articles, of course, demonstrate the problem with using faux metrics to make a business argument.

Yes, both articles are right. Both articles, however, only pertain to the exact circumstances and timeframe that the studies were conducted in. When we publish this kind of research, we delude folks, we mislead them, we ask people to suspend reason in order to accept the argument that the author is selling to us.

Always ask yourself ... "What is the author selling to us, and why is the author selling it?"

What always matters is what works for your business.

And what matters for your business are tactics that cause customers to generate incremental profit.

There are four metrics that are consistently linked to profit. Three metrics are directly linked to short-term profit. One metric is directly linked to long-term profit.

Metrics directly linked to short-term profit.
  1. Annual Retention Rate: The percentage of last year's customers who purchase again this year.
  2. Spend per Repurchaser: Among those who are retained, how much did these customers spend?
  3. Profit per New Customer: Total customer acquisition profit divided by the number of newly acquired customers.
And a metric directly linked to long-term profit.
  1. Number of New + Reactivated Customers: The number of new customers acquired in the past twelve months, plus the number of lapsed buyers who purchased again in the past twelve months.
Carefully parse these social media and mobile and e-commerce and e-mail and catalog marketing and digital marketing articles. Identify the exact conditions where the research is likely to be accurate. Then do what is right for your business.

The four metrics I outlined above are never going to lead you astray. They are old-school metrics that stand the test of time, and they are directly correlated with company profitability.

October 17, 2010

Dear Catalog CEOs: Building The Customer File

Dear Catalog CEOs:

You already know the importance of growing your customer file.

You probably know that it is critically important to grow your customer file in September and October.

New customers in September and October are "hotline" customers in November and December. In my Multichannel Forensics studies, about 40% of all first-time buyers who will ever buy again do so in the first three months after being acquired.

Yup, you guessed it. You want to acquire as many customers as you can in September and October, so that they convert to a second purchase in November and December.

October 14, 2010

Digital Profiles: Let's Get Started With Your Project

Ok folks, it is time to get busy!!

I am taking reservations for Digital Profile projects. Contact me by clicking here, send an e-mail, and let's get started on your own customized Digital Profile project!

If you're a catalog brand, you'll want this done before the postage increase happens next year, so that you can take action now.

If you're a retailer, you'll want this done so that you can get an idea of how your online channel is helping/hurting your retail comp store sales performance.

If you're an online marketer, you'll want the business intelligence that comes from knowing that certain customers are unwilling to convert while other search customer segments convert across various keywords.

If you're an e-mail marketer, you can use Digital Profiles as your targeting platform, increasing sales and profit and open rates and click-through rates and conversion rates.

If you're a social media marketer, you'll get to see if your fans/followers are actually causing you to have a stronger business.

If you're a mobile marketer, you'll get to see if the usage patterns of mobile customers are fundamentally different than other online customers.

Let's get busy!!

October 13, 2010

Digital Profiles: A Blogchat Case Study

There are many ways to use Digital Profiles to understand user behavior. Let's take an example from a Social Media Sunday Night tradition called "Blogchat".

In this example, I summed activity across 155 users from a 2009 blogchat. Each user could contribute in one of five ways:
  1. Statement: The user makes a comment without referencing any other users. In other words, the user is creating original commentary, something that is pretty darn important, right?
  2. Response/Comment: The user is responding to somebody else, or is making a comment that the user wants a specific user to read.
  3. Mentions: The user is specifically mentioned by another user in a tweet.
  4. Re-Tweeter: The user re-tweets something said by another user.
  5. Re-Tweeted: The user makes a statement/response/comment that somebody else re-tweets.
We sum the number of times each twitter_id has activity in one of those five buckets. Now, we apply the Digital Profile methodology to 155 users.
  • Factor / Principal Components Analysis.
  • Choose Top Three Factors.
  • Find Median Value For Each Factor.
  • Score Each Customer As Being In Top/Bottom Half Of Each Factor.
  • 2*2*2 = 8 Digital Profiles.
Let's review each Digital Profile.

Digital Profile #1 = The Elite.
  • 17 Twitter Users.
  • 5.5 Original Statements.
  • 15.6 Responses / Comments.
  • 20.6 Mentions By Others.
  • 3.1 Times User Re-Tweeted Other Statements.
  • 6.8 Times User Was Re-Tweeted By Others.
Digital Profile #2 = Heavy Users
  • 8 Twitter Users.
  • 4.1 Original Statements.
  • 11.1 Responses / Comments.
  • 12.4 Mentions By Others.
  • 0.1 Times User Re-Tweeted Other Statements.
  • 3.1 Times User Was Re-Tweeted By Others.
Digital Profile #3 = Valuable Commenters
  • 7 Twitter Users.
  • 0.6 Original Statements.
  • 10.3 Responses / Comments.
  • 8.6 Mentions By Others.
  • 2.7 Times User Re-Tweeted Other Statements.
  • 3.4 Times User Was Re-Tweeted By Others.
Digital Profile #4 = Other Commenters
  • 34 Twitter Users.
  • 0.1 Original Statements.
  • 4.6 Responses / Comments.
  • 4.3 Mentions By Others.
  • 0.0 Times User Re-Tweeted Other Statements.
  • 0.6 Times User Was Re-Tweeted By Others.
Digital Profile #5 = The Audience
  • 53 Twitter Users.
  • 0.4 Original Statements.
  • 0.2 Responses / Comments.
  • 0.6 Mentions By Others.
  • 0.8 Times User Re-Tweeted Other Statements.
  • 0.4 Times User Was Re-Tweeted By Others.
Digital Profile #6 = The Ignored
  • 19 Twitter Users.
  • 1.6 Original Statements.
  • 0.6 Responses / Comments.
  • 0.6 Mentions By Others.
  • 0.0 Times User Re-Tweeted Other Statements.
  • 1.0 Times User Was Re-Tweeted By Others.
Digital Profile #7 = Spreading The Word
  • 13 Twitter Users.
  • 0.1 Original Statements.
  • 1.9 Responses / Comments.
  • 1.7 Mentions By Others.
  • 3.9 Times User Re-Tweeted Other Statements.
  • 0.9 Times User Was Re-Tweeted By Others.
Digital Profile #8 = Outsiders
  • 4 Twitter Users.
  • 0.0 Original Statements.
  • 0.2 Responses / Comments.
  • 1.3 Mentions By Others.
  • 0.0 Times User Re-Tweeted Other Statements.
  • 1.3 Times User Was Re-Tweeted By Others.
Ok, there are eight Digital Profiles. Each Digital Profile describes a specific type of user.

Of the 155 individuals, only 17 qualify as "The Elite". They create the most original content of any Digital Profile, in fact, 50% of all original content produced in this event came from just 17 of 155 users. This is an important fact ... almost none of the audience is producing original content, but this original content is going to get spread across the entire community, shaping the views of the other 138 users.

"Heavy Users" are different in one important way ... these folks do not "re-tweet" the content of other individuals. They create content, they respond to others, but they do not purposely share content created by others. This is in stark contrast to the majority of users.

"Valuable Commenters" are a very different but important user. These folks do not create original content, but they are quick to respond to the content created by other folks, and their responses are re-tweeted and shared by others. In other words, they modify and amplify original content in a valuable manner.

"Other Commenters" play an important role in sustaining the community. At 20% of the total audience, they respond to original content, but their feedback is not re-tweeted by others. This is an amazing group, as their content is largely unselfish, propping up the social status of The Elite and Heavy Users.

The largest group is "The Audience". These folks are undoubtedly paying attention to the rest of the conversation, but are generally not participating. The Audience represent a full 33% of the total audience. Their primary job is to re-tweet a comment from The Elite or from Heavy Users just one time, sampling something useful from the overall stream of information and then sharing it with their audience.

The next Digital Profile is "The Ignored". These folks create content, and their content is ignored by the remainder of the community! This is another 15% of the audience. To me, this is a fascinating profile, as they are one of only a handful of folks that create unique content ... but the content is not embraced by the community.

The next Digital Profile is "Spreading The Word". 13 users play the role of extensive re-tweeting. In fact, these 13 users (less than 10% of the community) represent almost a third of all re-tweets.

77% of the users in this analysis either commented on original content, re-tweeted content, or created original content that was ignored by almost all users. This is a key problem in social media, or maybe it is a key problem in life. 3/4th of the community provide support that directly benefits The Elite / Heavy Users.

The final Digital Profile is called "Outsiders" ... these four individuals represented user_ids that were not really part of the conversation, but were mentioned by folks participating in blogchat.

Digital Profiles can be applied to just about any dataset. In this case, we use Digital Profiles to ultimately learn that, in this example, a small number of social media elite create original content that is spread to a wide audience by the majority of this community.

A Marketing Tactic: Your Vote Counts

Here's an experience from this morning:
  1. I visit a popular e-commerce brand that I previously purchased from.
  2. I view products on a few pages, I do not put any items in my shopping cart.
  3. I leave the website.
  4. Four hours later, I receive an e-mail from this popular e-commerce brand. The trigger-based e-mail message says that I abandoned the website earlier in the day, so they would like to offer me 15% off my next order.
You make the call.
  1. Is this a brilliant, trigger-based marketing strategy to convert a visitor to a buyer?
  2. Is this a ridiculous method for gouging existing customers, charging them full-price if they "convert" on a first visit, but charging others much less because they exhibited "less loyal" behavior on a first visit? Is it wrong to steal $15 from an existing customer because the existing customer exhibits "better" behavior?
Use the comments section to "join the conversation".

October 12, 2010

Digital Profiles Part O: Complaints

As with any endeavor, the public is free to offer a critique of the endeavor ... and in our modern world, if you create something, somebody will critique it. Let's address some of the complaints you'll hear about Digital Profiles.

"If you're going to go to all of this trouble, the least you can do is give us the source code, so that we can replicate the methodology for ourselves and see if it works. Why won't you let us do this for free? What good is this if I can't run the methodology for free?" Here's the funny thing, folks. I've basically given you every single step that you need, so you can truly do this for free. I showed you the variables I collect. I showed you how to standardize the variables. I told you that I use a Factor Analysis / Principal Components Analysis, I told you I use the coefficients from the Rotated Component Matrix to pick the factors that I want to use in the creation of the profiles, I told you that I use the coefficients from the Component Score Coefficient Matrix to score the standardized variables, and I told you that I use 50th percentiles to create 1/0 indicators for four factors, yielding sixteen Digital Profiles. Go ask any vendor on the planet if they give that much proprietary information away, for free. Seriously, go ask them. If you are a cataloger, go tell Abacus that you want to see the computer code behind the algorithm that chooses names for you. If you are an online marketer, go ask Google to share with you how they rank web pages for various search terms. You have the tools to do this for free, so go do it, start programming!

"Your use of Factor Analysis is completely inappropriate and semi-irresponsible." I am not trying to find a cure for cancer via clinical trials, and I am not trying to identify the corn hybrid that is most likely to grow well in Northern Missouri. I'm creating segments of customers who have similar traits, so that we can better understand and act upon customer behavior.

"If you can't use Digital Profiles in a tool like Google Analytics, then your methodology is useless to me. Why can't you create something that I can implement using the software tools that are considered a 'best practice solution'?" At some point, folks, we have to be willing to do a little bit of hard work. If you want simple answers to simple questions, then go ahead and ask Google Analytics to tell you the percentage of Twitter visitors that converted when they visited your website. If you want to know who your Twitter visitors are and you want to know what they are likely to do in the future, you're going to have to do some hard work. We've taught an entire generation of analytics experts to only depend upon simple answers to simple questions via simple software solutions. I know people who wrote computer code on punch cards, using mainframe computers, and they solved more complex questions than are solved by Google Analytics. It's time for all of us to step-up our game a bit!

"All of your examples are from retail or catalog or e-commerce. My business model is different, and my business is different. Why can't you create a methodology that ports well to my industry?" The methodology should work in any industry, though my focus is retail, catalog marketing, and e-commerce.

"My business is unique in that it has a strong seasonal component, so your methodology won't work for my business." Actually, it will work just fine ... just plug in seasonal variables (i.e. 1/0 indicator for customers who buy on Cyber Monday, for example), and the methodology works!

"My business is unique in that it is a gift business. Your experience in fashion retail isn't relevant to my business." Actually, the methodology will work just fine ... you could sell widgets and the methodology will work fine. I hear this argument a lot. Nobody has a business model that is so unique that somebody outside of the business model cannot digest the subtleties.

"Few of the big web analytics vendors ever talk about Digital Profiles. If they don't think much of your methodology, why should I bother to use your methodology?" Ok, give this a thought. In 2007, who talked about the importance of tablet-based computers that allowed you to navigate the web with a simple flick of a finger? And yet, today, the iPod Touch, iPhone, and iPad have fundamentally changed web navigation and use of the web. Apple may lose out to Android in the long run, but so what, they are the ones that changed how we will use the web, forever. Sometimes, folks, you have to do something that is a little bit different, if you fail, so what? If you succeed, well, what is the upside? Just because somebody at Omniture, Coremetrics, or the other big Web Analytics vendors doesn't think much of Digital Profiles doesn't mean your business won't be more profitable by using them!

"Catalogers typically work with Abacus or Merit Direct, depending if they are B2C or B2B. Neither of those vendors are using Digital Profiles to my knowledge, and they are industry leaders. Why aren't they adopting the methodologies you frequently talk about?" I'm here, folks, they can contract with me if they think this is valuable to their clients, and I'll show them how to do it. Or they can read my instructions, word-for-word, and do it themselves.

"How are you going to charge for a Digital Profile project?" My projects are based on the number of twelve-month buyers I have to analyze, the fee is based off of an equation that charges less and less for each incremental twelve month buyer. Small companies pay less, large companies pay more. I require 50% of the project fee up-front. Contact me now for a pricing worksheet.

"Your Digital Profiles do a bad job of incorporating channels. We want to see segments with only retail customers, segments with only online customers, and segments that have customers buying from both retail and online channels. We market via channels, so any Digital Profiles must account for this, right?" There are three easy answers for this. One, simply stick with your channel-based RFM strategy, and reap the benefits of that strategy. Two, you can run Digital Profiles only on merchandise preference, then overlay Digital Profiles across your classic RFM strategy. Three, you can trust a newer methodology that seeks to combine attributes across channels and merchandise divisions and geography and whatever other attributes you want to incorporate, yielding a modern, customer-centric segmentation strategy.

"What do we do when we need to add a new channel or merchandise division?" You probably need to create new Digital Profiles, just like when the online channel arrived and you had to add a channel component to your RFM scheme. If the new merchandise division will only account for less than 5% of annual sales, you probably don't need to make changes in the short-term.

"Why do you have to have sixteen Digital Profiles? That's too many in my opinion." Ok, go ahead and use just three factors, and you have eight profiles. Or use just two factors, and you have four profiles. You use just two factors broken down into low/medium/high criteria, and you have nine segments. You have the flexibility to basically do what you want. I've found, via experience, that sixteen segments based on four factors yields robust and actionable outcomes.

"Why do you have to have sixteen Digital Profiles? That's way too few in my opinion." Executives tell me that sixteen profiles are too many. Web Analytsts tell me that sixteen profiles are too few. You get to pick the number of profiles you want created, how's that?!

"Is the merchandise a customer purchases really that important? Our web analytics solution tells us that marketing channels and referring URLs and search keywords are really important." Your web analytics solution tells you that those attributes are important because the software solution is calibrated to serve online and search marketing applications. Yes, the merchandise a customer purchases is really that important, you've just not been exposed to software solutions that help you see that it is really important. Your web analytics solution only tells you answers to questions that the web analytics solution can answer ... and, by the way, that fact alone is really limiting our ability to learn more about the businesses we work for.

"You use only one year of purchase history, so clearly your methodology is flawed." Well, that's an assumption, isn't it? Here's something the big vendors don't tell you ... they don't tell you that data has a "half-life". In other words, something that happened fifteen months ago doesn't carry the same weight as something that happened two months ago. Now, I've created Digital Profiles that use older data, and here's the problem ... the solution quickly iterates to one that segments customers on the basis of being a customer for a long-time, vs. being a new customer ... the richness of individual channels (Mobile/Social/E-Mail/Search) is washed out, and the richness of merchandise divisions are washed out. So, depending upon what you are trying to accomplish, you may wish to use a lot of customer history ... so be it, do what you want!!! I score each customer on the basis of what that customer did in the year the customer most recently purchased.

"Why are you even charging for a solution that is, to me, nothing more than a glorified RFM scheme? You can get RFM software for a few hundred bucks, but you're going to charge so much more, so tell me why would I ever pay for your solution?" If you believe this to be the case, then go ahead and reap they benefits of your $150 RFM segmentation software solution. If I had an average catalog client that generated $100,000,000 a year in sales, I can find that client $1,000,000 in annual profit without a ton of work by using Digital Profiles in the targeting strategy ... classic RFM variables used in a statistical model account for half of the profit, Digital Profiles account for half of the profit. Basically, the Digital Profiles are pretty important.

"Can't I just pick out customers who bought via e-mail and purchased from merchandise division #8 and send them a trigger-based e-mail campaign when they act in a way that benefits me? I mean, why make things more complicated with Digital Profiles?" Of course you can do that! The majority of clients who are using Digital Profiles are doing so because they want additional business intelligence that cannot be obtained via other tools. They want to know if they have more "A Long Drive" customers than a few years ago, they want to know how "Gold Mine!" customers behave in Search marketing. They have a different set of needs that are well-served by a more-complex segmentation strategy.

"Your methodology misses out on all of the richness of today's Social Media environment. I want to know how networks of engaged fans/followers behave." Collect the right data, and you can easily use this methodology to analyze the richness of today's Social Media environment!

"We're an online startup, and we only have a year of history. Your methodology doesn't work well with our business model." I think it can work pretty well. Use the limited amount of data you have, and then adjust the methodology as you get more data.

"Can we import your Digital Profiles into our customer data warehouse, or into our web analytics solution?" Absolutely! In fact, Digital Profiles provide great results ... say you work with Webtrends or Unica or Coremetrics or Omniture ... yes, they can help you score visitors and help you analyze how well various Digital Profiles convert, or you can import the profiles into your customer data warehouse and yield very interesting results.

Do you have any questions? Please ask them in the comments section of this post.

Gliebers Dresses: The Logo Fiasco

Gliebers Dresses is a work of fiction. The purpose of Gliebers Dresses is to teach marketing concepts via the magic of parable.

Today, Roger Morgan asked me to sit in on the Executive Meeting via Skype.

Roger Morgan (Chief Operating Officer): "Ok folks, let's get down to business. I asked Kevin to sit in on this meeting via Skype, and no, we're not paying Kevin's hourly rate, we just thought it would make good business sense for him to sit in on our discussion ... next time he's out here, we'll buy him lunch or a Mt. Dew. I also wanted to invite Libby Benson to our meeting today. Libby, as you know, is our new Director of Public Relations and Social Media. Libby is responsible for the development of our new corporate logo, a logo which ignited a firestorm in the Social Media community over the past few days."

Libby Benson (Director of Public Relations and Social Media): "Hi everybody, thanks for your attention today. As you already know, our new corporate logo ignited a Social Media firestorm on Monday. We contracted with a well-known design company and invested two months of time developing a logo that we felt expressed the essence of the Gliebers Dresses brand. We released the new logo to the public on Monday, and by Monday night, we were inundated by negative customer feedback, and I mean really, really negative customer feedback."

Robert Morgan: "Give us an example of the type of negative feedback you received, Libby."

Libby Benson: "For example, @dressmonger88 said on Twitter ... 'Gliebers Dresses just tossed 40 years of brand equity out the window.'"

Robert Morgan: "Oh my God, that's terrible."

Libby Benson: "And @fashionista221 said on Twitter ... 'The iconic value of the brand instantly evaporated with this vapid attempt to manipulate me.'"

Robert Morgan: "It's like our brand is collapsing right in front of our eyes."

Libby Benson: "Exactly. And this goes on and on and on. Just shy of 600 folks on Twitter and Facebook mentioned our new logo, and 96% of the comments were an expression of negative sentiment."

Meredith Thompson (Chief Merchandising Officer): "Pepper, what happened to sales on Monday and Tuesday, vs. our plan?"

Pepper Morgan (Chief Marketing Officer): "Sales were actually 1% above forecast on Monday, and were on forecast on Tuesday."

Meredith Thompson: "So this logo fiasco that we're talking about resulted in an increase in sales, is that right?"

Roger Morgan: "Oh Meredith, no, you're looking at this all wrong. Corporate logos are part of the equity of a brand. This is the kind of thing that could do serious long-term damage. You don't measure this thing on a daily basis."

Meredith Thompson: "But you're measuring negative sentiment on Twitter and Facebook on a daily basis, you are reacting to close to 600 folks who didn't like the new logo. What is the relationship between a logo, sales, and profit?"

Roger Morgan: "I recently read a Woodside Research report that suggests that the corporate logo is the tenth most important part of the overall relationship consummated between brand and consumer."

Libby Benson: "And you can't forget about engagement. An engaged customer who feels compromised because of a new logo is likely to voice her concern via Social Media, and that's exactly what we saw over the past two days. You simply cannot put engagement at risk, I mean, where would the brand be without engaged consumers?"

Lois Gladstone (Chief Financial Officer): "Libby, what is the relationship between engagement and profit at Gliebers Dresses?"

Libby Benson: "Well, I'd assume that engagement means everything to a brand. We've done a lot of research, and our research shows that 10% of our most loyal Social Media followers ... we like to call them 'fans', are so highly engaged with the brand that they mention the brand on Social Media and visit our website an average of 22 times a year. You simply cannot put that level of engagement at risk if a subset of these same individuals think our new logo is inappropriate."

Lois Gladstone: "When Meredith sells an item, we know that, say, $20 of profit is generated by the sale of that item. How much profit do we generate when we increase engagement by 10%?"

Libby Benson: "Who knows? And why is the question even relevant? It just makes common sense that if an engaged fan turns on us and bashes our brand because of a new logo, then at some level, our sales must decrease in the future, and without doubt, our brand equity is likely to hemorrhage."

Lois Gladstone: "Have you created a link between those engaged via Social Media and annual spend at Gliebers Dresses? In other words, are those who are commenting about us in a negative manner customers who spend $200 a year with us or $500 a year with us or $0 a year with us?"

Libby Benson: "Who knows? How would you even do that? All I know is that folks are joining the conversation all over America, bashing our brand all because we changed our logo. We can't have that. I have to protect the brand."

Meredith Thompson: "Roger, it was your idea to create a new logo in the first place. You wanted to 'stimulate the spirit of Glenn Glieber', as you said two months ago. You spent God knows how much creating the logo. You created the Multichannel Logo Development Committee, or MLDC as you like to call it, you hosted two hour weekly meetings for eight weeks discussing this. You hired an outside agency to craft the logo. And now, after all of this effort, you roll out the logo and just under 600 individuals hate it."

Roger Morgan: "I know, it's painful. But we have to listen to our customer base, and our customer base has spoken, with more than 90% of the just under 600 individuals expressing negative sentiment. That's some seriously bad stuff."

Meredith Thompson: "Pepper, how many customers purchased from Gliebers Dresses in the past twelve months?"

Pepper Morgan: "220,000, give or take a few."

Meredith Thompson: "So let me get this straight. About 600 folks, folks that we don't even know are our customers, and if they are our customers, aren't necessarily even valuable customers, decide to toss a guano storm at us because we changed our logo, 600 out of about 220,000 customers who purchased in the past year, 0.3% of the customer file if we assume that all 600 are current customers, and we're having a meeting right now discussing how important it is that we appease 0.3% of our customer file because they don't like our logo? Is that right? We are sitting here discussing the opportunity to appease 0.3% of our customer file, because 0.3% of our customer file doesn't like our logo? I mean, does this mean that 99.7% of our customer base likes our logo or is neutral to our logo? My goodness, have we all lost our minds?"

Libby Benson: "But these folks are so highly engaged that they will poison our brand by spreading their word to their network of individuals. You have to take into account the impact of an engaged customer disengaging with us and spewing negative sentiment at their network. Heck, their comments could reach hundreds of thousands of customers and prospects. Imagine the damage, Meredith? I mean, Meredith, don't you remember the saga with Motrin Moms and how catastrophic that was to Motrin at the time?"

Meredith Thompson: "Did Motrin go out of business?"

Roger Morgan: "I'm thinking it is time for us to look at this in a different way. Maybe we can save our Social Media reputation by crowdsourcing this new logo. Why don't we ask the Social Media community to 'join the conversation', maybe we let them design the logo? We'll choose the three best logos, and we'll let the Social Media community decide what the logo should be. That would appease the Social Media community, wouldn't it?"

Lois Gladstone: "Can somebody answer a question for me? If we assume that we generate $1,500,000 of pre-tax profit on an annual basis, how much of that profit is generated by our Social Media presence, and how much of that profit is generated by our logo?"

Libby Benson: "Oh brother, now we want to start beancounting again. You financial people, you're really something, always wanting to reduce everything down to actionable metrics. You don't say that the logo is responsible for $150,000 of profit, the logo is too tightly embedded in the overall brand essence. And you don't want to destroy our brand essence, do you?"

Lois Gladstone: "I'm not counting beans, Libby, I'm asking you and Roger to know what the financial impact of your decision is. What is the financial impact of changing a logo, and what is the financial impact of allowing the Social Media community to dictate what the logo is? Does anybody know the answer to that question?"

Meredith Thompson: "And while we're at it, Roger, why don't we let the Social Media community, the 600 folks who are on the verge of disengaging with us, why don't we let them determine the merchandise we sell?"

Roger Morgan: "Actually, Meredith, that's not a bad idea! Woodside Research recently released a report that ..."

Pepper Morgan: "If we rank-ordered all of the things we, as an Executive team, should be talking about, where does this issue fall on the rank-ordering of issues?"

Roger Morgan: "I'd say it is in the top five."

Libby Benson: "I'd say it is in the top two."

Meredith Thompson: "I'd say it is issue number 2,488,991".

Lois Gladstone: "I'd answer the question if somebody could tell me what the financial impact of changing a logo is on our business?"

Libby Benson: "Meredith, why is your behavior so condescending? Do you not understand the power of Social Media? The world changed, Meredith. You can either get behind the power of Social Media and join the conversation, or you can become a Luddite who is tethered to the world via snail mail and e-mail. Your choice. I'd rather side with our rabid fan base."

Meredith Thompson: "Libby, when is the last time you decided you weren't going to buy from a brand because they changed their logo? And please be honest, offering specific examples! Or did you turn off NBC a few decades ago when they canned their peacock, did you decide that you weren't going to watch St. Elsewhere anymore because the peacock was gone?"

Libby Benson: "And now NBC is in last place. Hmmmmm."

Meredith Thompson: "Would you decide not to watch Fox News or MSNBC if they changed their logo? I mean, come on, people. You're letting 0.3% of the customer base, assuming all of these online trolls are actual customers, dictate what you should do."

Libby Benson: "These aren't trolls, they are engaged users, they are fans."

Roger Morgan: "And Woodside Research said that Facebook fans are worth $1.88 each."

Meredith Thompson: "So if we lost each fan for good, we'd lose $1,128?" We probably spent $100,000 creating the new logo, Roger, and now we're worried about losing $1,128?"

Libby Benson: "$1,128 and we're worried about losing out on a highly engaged user."

Lois Gladstone: "And nobody here can demonstrate for me that a highly engaged Social Media user generates any profit on an annual basis."

Roger Morgan: "Ok, I think we're done here. I've listened to all points of view ..."

Pepper Morgan: "You didn't get Kevin's point of view, Roger."

Roger Morgan: "... and I've decided that we are going back to the old logo, and I've decided that we won't crowdsource the new logo. I think we need to 'join the conversation' and be open to listening to our most loyal fans. A modern digital marketer is willing to incorporate fan feedback into corporate decisions, and I'm clearly a modern digital marketer, so we'll go with this as our strategy going forward. It's a shame this ended up being so negative, because we could have gotten a lot of free marketing out of this."

Pepper Morgan: "Somewhere, Glenn Glieber is smiling, saying 'I Love Free Marketing'!"

October 11, 2010

Digital Profiles Part N: Statistical Modeling

Alert: This post is for statistical computer geeks ... people like me!

Digital Profiles are an absolutely perfect complement to the statistical modeling process.

In this simple example, I am using Logistic Regression to predict the likelihood of a customer purchasing in the next month, given how much the customer spent in the past year (divided by 1,000) and the Digital Profile that the customer belonged to.

Fifteen of the sixteen digital profiles are listed ... the sixteenth digital profile (Rotary Phone) is assumed to have a value of zero.

Three Digital Profiles have coefficients greater than one, suggesting that they significantly contribute to future response (Gold Mine!, Multi-Channel Mavens, Retail Fanatics).

Digital Profiles with a negative coefficient are those that deflate future response.

I use Digital Profiles in my Multichannel Forensics projects, as well as my Online Marketing Simulations.
  1. Digital Profiles are combined with historical recency and historical spend by year to predict the probability of a customer purchasing.
  2. Digital Profiles can be used to predict how much a customer will spend if the customer chooses to purchase again.
  3. Digital Profiles are THE MOST IMPORTANT DRIVER in calculating the "ORGANIC PERCENTAGE", the percentage of future demand that will happen catalogs are no longer mailed to customers. Digital Profiles do a very nice job, especially when your organic percentage is close to fifty percent.
It's been my experience that, after recency/demand, Digital Profiles are the most important predictor of future response, future spend, and future organic demand.

October 10, 2010

Dear Catalog CEOs: Marketing Profit and Loss Statement

Dear Catalog CEOs:

I am assuming that you already ask your Marketing VP to produce for you a Profit and Loss Statement, measuring the effectiveness of all marketing activities.

You do ask for this, right?

Here's what the Marketing Profit and Loss Statement looks like:

Marketing Profit and Loss Statement

Net Sales Expense Profit Profit %
Catalog Marketing $40,000,000 $12,000,000 $2,800,000 7.0%
E-Mail Marketing $15,000,000 $500,000 $5,050,000 33.7%
Search Marketing $10,000,000 $3,000,000 $700,000 7.0%
Affiliate Marketing $2,000,000 $160,000 $580,000 29.0%
Social Media $150,000 $10,000 $45,500 30.3%
Mobile Marketing $150,000 $100,000 ($44,500) -29.7%
Other Online Marketing $1,000,000 $450,000 ($80,000) -8.0%
Organic Demand $31,700,000 $0 $11,729,000 37.0%
Totals $100,000,000 $16,220,000 $20,780,000 20.8%
Fixed Costs

Earnings Before Taxes

$10,780,000 10.8%

This is a healthy, 10% pre-tax profit business. But take a look at where profit comes from. Of the $20,780,000 variable operating profit generated by this business (before subtracting fixed costs), different marketing channels deliver different levels of profit, rank-ordered from best to worst.
  • Organic Demand = $11,729,000.
  • E-Mail = $5,050,000.
  • Catalog Marketing = $2,800,000.
  • Search Marketing = $700,000.
  • Affiliate Marketing = $580,000.
  • Social Media = $45,000.
  • Mobile = ($44,500).
  • All Other Online Marketing = ($80,000).
Good golly, Miss Molly!

Those of us who measure the "organic percentage" (you know your organic percentage, right? RIGHT?!) can easily calculate the amount of sales generated without the aid of marketing. In this case, only 32% of total company demand is organic, but it accounts for more than half of company profitability!

And take a look at e-mail marketing. So few marketers ever parse the profit and loss statement by marketing channel. If you do this, be prepared to realize that e-mail marketing delivers a disproportionate amount of profit.

Now go think about the number of human beings you have working on catalogs, and the number of human beings working on e-mail marketing. Tally up the counts, and be prepared to be shocked!

This is a typical catalog profit and loss statement, by marketing channel. This is not unusual. Notice that the catalog only contributes $2.8 million of the $20.8 million in variable operating profit generated by this business.

Run the numbers, my friends. Be prepared to be shocked.

And if you don't have the right information to do this, hire me to calculate your organic percentage!

October 06, 2010

Digital Profiles Part M: Search

Is Search something that is embraced by your best customers, or is Search something that helps you attract new customers?

A surprisingly small number of marketers actually know the answer to this question.

Why not use Digital Profiles to help explain the phenomenon known as "Search"?

In this example, we freeze our customer file at the end of the month, we assign every customer a Digital Profile based on activity during the past twelve months, and then we count how many Search buyers in the next month are sourced by each Digital Profile.

Here's the results:
  • Gold Mine! = 104 customers.
  • Multi-Channel Mavens = 86 customers.
  • The Digerati = 32 customers.
  • A Long Drive = 70 customers.
  • Shop Online, Buy In Store = 46 customers.
  • Direct Newbies Looking For Eight = 40 customers.
  • Online One/Twos = 58 customers.
  • Ship It To Me = 32 customers.
  • Retail Fanatics = 7 customers.
  • Retail 4/5/6 = 15 customers.
  • Retail 1/2/4 = 7 customers.
  • In And Out = 17 customers.
  • Retail 1/2/3 = 3 customers.
  • Retail Newbies Looking For Eight = 6 customers.
  • Retail 1/2 = 7 customers.
  • Rotary Phone = 2 customers.
  • Non-12-Month Buyers = 283 customers.
Oh oh.

In this case, Search is overwhelmingly preferred by last year's customer base ... about 2/3 of the customers purchasing via Search in the past 30 days were buyers in the past twelve months.

Do you know what this percentage is for your business?

If you don't know it, and you are responsible for Search marketing, why don't you know it?

Search is viewed in a different light when it is a tool that is used by your best customers ... and in this example, Search is clearly preferred by the high-value customer who shops all channels. It means that your good customers, the ones that you call "loyal", those customers are comparison shopping. Even worse, it can often be demonstrated that when this situation exists, your direct marketing activities (catalogs, e-mail in particular) cause your "loyal" customer to comparison shop your competition.

That doesn't sound like it's that much fun, does it?

This does highlight the importance of Search. Your Digital Profiles clearly indicate who is using Search, and you can quickly surmise what might happen if you didn't have a great Paid Search program, or if your Natural/Organic Search program was in the tank.

We usually think of Search as a way to "intercept" a customer ... in this example, Search is a way to "save" a customer! Use Digital Profiles to see if this is a situation you should pay attention to!

October 05, 2010

Digital Profiles Part L: Social Shoppers

There are two directions that marketers are taking with Social Media.

Direction #1 = Counting followers, engaging users, creating conversations.

Direction #2 = Looking for actionable outcomes that drive sales increases and profit improvement.

Having been a VP at an eight billion dollar a year apparel/shoe department store, I have a feeling that most Executives are looking for you to head down "Direction #2".

If that's the direction you're heading down, then you want to analyze what I call the "Social Shopper". This is a customer that purchases because of your social presence, or because of a social media reference from another individual. These customers are not difficult to track, heck, you have the referring URL information in your web analytics platform to do this ... it just takes a little work, doesn't it?

Once you've done the work, you can review your "Social Shoppers" via the Digital Profiles framework. Let's count the number of "Social Shoppers" in the past year, by Digital Profile:
  • Gold Mine! = 1,079 customers.
  • Multi-Channel Mavens = 683 customers.
  • The Digerati = 397 customers.
  • A Long Drive = 516 customers.
  • Shop Online, Buy In Store = 241 customers.
  • Direct Newbies Looking For Eight = 219 customers.
  • Online One/Twos = 294 customers.
  • Ship It To Me = 66 customers.
  • Retail Fanatics = 0 customers.
  • Retail 4/5/6 = 0 customers.
  • Retail 1/2/4 = 0 customers.
  • In And Out = 0 customers.
  • Retail 1/2/3 = 0 customers.
  • Retail Newbies Looking For Eight = 0 customers.
  • Retail 1/2 = 0 customers.
  • Rotary Phone = 0 customers.
Oh oh, what do we see here? There's those darn "Gold Mine!" customers once again, followed by "Multi-Channel Mavens". In other words, the Social Shopper, predictably, is an online individual (duh) with an affinity for shopping in stores. Ask Kohl's if that's the case!

We can look at where next month's social shoppers will come from ... here, we freeze Digital Profile assignments at the end of a month, and then in the next 30 days, we measure the probability of a customer purchasing via Social Shopping, by Digital Profile. Take a look!
  • Gold Mine! = 0.81% response rate.
  • Multi-Channel Mavens = 0.79% response rate.
  • The Digerati = 0.44% response rate.
  • A Long Drive = 0.39% response rate.
  • Shop Online, Buy In Store = 0.32% response rate.
  • Direct Newbies Looking For Eight = 0.26% response rate.
  • Online One/Twos = 0.26% response rate.
  • Ship It To Me = 0.16% response rate.
  • Retail Fanatics = 0.05% response rate.
  • Retail 4/5/6 = 0.05% response rate.
  • Retail 1/2/4 = 0.02% response rate.
  • In And Out = 0.05% response rate.
  • Retail 1/2/3 = 0.00% response rate.
  • Retail Newbies Looking For Eight = 0.01% response rate.
  • Retail 1/2 = 0.02% response rate.
  • Rotary Phone = 0.00% response rate.
In other words, the most responsive customers to "Social Shopping" are the customers with an online presence, coupled with an affinity for store purchases.

Here's another thing we can do. Let's dig into our "Gold Mine!" segment, and for the past three years, count the number of customers with a Social Shopping purchase, and the number of customers without a Social Shopping purchase.
  • 2008 = 8,773 with no Social Shopping, 576 with Social Shopping.
  • 2009 = 8,235 with no Social Shopping, 720 with Social Shopping.
  • 2010 = 7,544 with no Social Shopping, 1,079 with Social Shopping.
Notice that the "Gold Mine!" segment isn't growing ... in fact, it is shrinking. Just as important, it is being overrun with Social Shopping. It does appear that Social Shopping is becoming more important, but it isn't necessarily causing the overall customer base to become "more valuable", because if it caused the overall database to become more valuable, there would be more "Gold Mine!" customers, right?

Here's what the counts look like for "Multi-Channel Mavens" ... you'll see the same story here as well:
  • 2008 = 7,000 with no Social Shopping, 393 with Social Shopping.
  • 2009 = 6,399 with no Social Shopping, 506 with Social Shopping.
  • 2010 = 5,541 with no Social Shopping, 683 with Social Shopping.
If you are a marketer, responsible for growing your Social Shopping presence, you have a unique opportunity to see if your activities are truly improving the overall customer file. In this case, for this business, it appears that Social Shopping is inevitable, and is becoming a preferred channel for a minority of customers, but isn't causing more customers to be populated in the best Digital Profiles.

October 04, 2010

Digital Profiles Part K: E-Mail At A Crossroads

The e-mail community look at e-mail as the most important relationship-building tool that exists, one with the best ROI (when measured as a percentage of sales).

Can we look at e-mail within the context of Digital Profiles? Certainly!

Too often, we look at customers who possess an e-mail address. More important, of course, is the customer who purchases after clicking-through an e-mail campaign.

Let's count how many customers purchased via e-mail in the past year, by Digital Profile.
  • Gold Mine! = 3,194 customers.
  • Multi-Channel Mavens = 2,227 customers.
  • The Digerati = 1,447 customers.
  • A Long Drive = 2,637 customers.
  • Shop Online, Buy In Store = 1,114 customers.
  • Direct Newbies Looking For Eight = 1,040 customers.
  • Online One/Twos = 1,908 customers.
  • Ship It To Me = 671 customers.
  • Retail Fanatics = 1 customer.
  • Retail 4/5/6 = 0 customers.
  • Retail 1/2/4 = 0 customers.
  • In And Out = 0 customers.
  • Retail 1/2/3 = 0 customers.
  • Retail Newbies Looking For Eight = 0 customers.
  • Retail 1/2 = 0 customers.
  • Rotary Phone = 0 customers.
Look at that darn "Gold Mine!" segment ... once again, it is truly a Gold Mine ... about 20% of the customers who purchased via e-mail belong to this Digital Profile.

Now tell me, dear e-mail direct marketers, how does this change your perspective on e-mail marketing? Do you treat these customers the same way you treat a customer who has an e-mail address in the "Rotary Phone" Digital Profile, or do you treat them differently? Heck, you already know the answer!

Within the "Gold Mine!" and "Multi-Channel Mavens" Digital Profiles, your e-mail marketing message is likely to highlight products and benefits that apply across all channels.

Look at the "A Long Drive" Digital Profile ... that's where the second-most active e-mail buyers exist. If these customers don't live near a store, don't you think the marketing message should be calibrated to the online experience, satisfying the customer via convenience ... this customer doesn't have to drive a long distance to retail stores, you're bringing the store directly to this customer!

There are 1,114 e-mail buyers in the "Shop Online, Buy In Store" Digital Profile. The name tells you what the marketing message needs to be ... your job as an e-mail marketer is to stimulate this customer to get off her butt, get into a car, and visit a store!! It's the opposite message of the one provided to "A Long Drive", isn't it???

E-mail marketers frequently talk about segmenting customers, personalizing messages, using trigger-based campaigns, you name it. Why wouldn't you, if you are an e-mail marketer, apply Digital Profiles to your database, leveraging the results to your benefit, and to the benefit of the customer?

The Milkman

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