Head On, Apply Directly To The Forehead

If you are like me (and you probably aren't), you take the occasional weekend break from watching CSPAN-2's coverage of Book TV, and turn on a sampling of the riveting programming available on approximately two-hundred channels of satellite television. Maybe you watch a TBS feature presentation of "You've Got Mail", a 1997 movie that only appears on TBS once every five or six days. Just maybe, you decide to not mute the commercials. And then you see this:

The product is "Head On", and is available without a prescription from many retailers, including Wal-Mart, according to the "Head On" website. Slate Magazine recently wrote a story about this ad.

On this website, I've discussed my opinion of the difference between branding and selling. Nowhere is that distinction more apparent than this commercial. The commercial tells you the name of the product (several times), it tells you how to use the product (several times), and it tells you where you can find the product. The commercial doesn't even tell you what the product is for. And according to the Slate article I referenced earlier, this advertisement was designed this way. The ad was based on focus group research.

The commercial is in stark contrast to so many of the advertisements we see today. So often, advertising tries to imitate art. The middle-aged mother wakes to a sun-splashed morning, her golden retriever puppy licking her face, and her three-year-old daughter tugging at her pajamas. Gentle piano music supports images that change every two seconds. The mother walks downstairs. The puppy bolts outside through an open screen door and scampers down concrete steps into a backyard with lush, green, dew-covered grass. The husband appears, well-groomed, teeth brushed, not shaved, hair perfectly manicured, toned muscles visible through his shirt, and hands the mother a piping-hot mug of delicious, refreshing, life-giving coffee. The mother offers a warm smile, cradles the mug of coffee like it is a long lost friend, sips the perfectly prepared beverage, and realizes that life is perfect on this sunny Sunday morning. We see a well-designed logo appear on the bottom of the screen, introducing the "brand", and are left with the image of the husband and wife embracing each other, as the child chases the golden retriever puppy back into the home.

Of course this commercial doesn't exist, but you can imagine that it might.

There are pros and cons of each style of advertising. Do you have a favorable image of "Head On"? Do you have a favorable image of the fictional coffee company I described earlier? Does the "Head On" product inspire you to purchase their product the next time you are at Wal-Mart? Do the images of an idyllic Sunday morning inspire you to purchase coffee the next time you are at Safeway?

I tend to skew toward advertising that sells, though I am curious as to what you think. What are the pros and cons of each style of advertising, and if you were running your own company, which advertising style would you use to promote your organization? How do you balance selling and branding?

"In Today's Marketing Environment ..."

Sitting comfortably at home, I opened my email, and read an article from a B2B organization trying to sell me a "solution". Here is a quote from their email newsletter (this quote represents one sentence):

"In today's marketing environment, the proliferation of segments, channels, and product categories is forcing companies to identify and prioritize opportunities at the points where these components intersect in order to stimulate growth."

I have a few questions for you, my loyal reader:

• Is it easy for you to understand what this company is saying to you?
• Does this organization appear more credible to you than a competitor that uses simple language?
• Does this writing style inspire you to learn more about the "solution" this company is offering?

I would prefer a writing style that is more direct and simplistic. That being said, I frequently observe this style of writing in B2B marketing. Is this style successful? I don't know. What do you think?

E-Commerce Productivity

An executive at an e-commerce pureplay asked me a question about how best to measure the productivity of his website. He mentioned that his business experienced a significant increase in traffic, year-over-year, but experienced a reduction in conversion rate, year-over-year.

One way to analyze the sales productivity of a website is to take the Internet Retailer Top 500, remove outliers and smaller companies (leaving 251 observations) and plot demand-per-visitor (y-axis) against average monthly traffic (x-axis).

The scatterplot indicates that there is a diminishing rate of returns. As traffic increases, the productivity of each individual visitor decreases.

The relationship can be modeled using a "power" function (the word "demand" is used in this post, however, the relationships actually depict net sales, not demand, FYI).

• Demand per Visitor = 816.2 * (Monthly Visitors ^ - 0.3754)

Using the relationship, we can predict an average Demand per Visitor, given average monthly traffic volumes:

• 100,000 Monthly Visitors yields $13.33 per visitor.
• 250,000 Monthly Visitors yields $9.61 per visitor.
• 500,000 Monthly Visitors yields $7.50 per visitor.
• 1,000,000 Monthly Visitors yields $5.85 per visitor.
• 5,000,000 Monthly Visitors yields $3.29 per visitor.
• 10,000,000 Monthly Visitors yields $2.57 per visitor.

Clearly, as a "brand" increases traffic to the site, it attracts traffic that will spend incrementally less (be less likely to convert to a purchase). Like all things in life, there is a law of diminishing returns. It is possible that my executive friend was observing a trend that is perfectly fine (traffic increase, productivity decrease).

The equation can be used to evaluate your e-commerce productivity. If you have 500,000 monthly visitors, you can expect $7.50 per visitor. If your site has $10.00 per visitor, you may be doing better than average. If your site has $5.00 per visitor, you may be doing worse than average.

Ah, the magic that occurs when you mine that data!!

Insensitive: Radio Shack

From a former co-worker of mine at Lands' End, Jeanne Bliss, on Radio Shack informing employees that their jobs had been eliminated via email.

I have fired people, I have also informed employees that I had eliminated their job. It is a humbling and emotional experience for the person on the other end of the table. It is really hard to be on my end of the table. But that experience builds character for both parties. You feel alive, full of feelings and emotions, when going through either side of this experience.

How Radio Shack chose to execute this strategy is just cold, cruel, and insensitive, if the story is true. How likely are you to recommend this company as a place to work? How likely are you to apply for a job there, knowing this is how they treat the very people that keep them in business?

Executives, Directors, Managers and Supervisors. Please be human, sensitive, kind, warm, and understanding when it is your turn to do something unpleasant. Your character, your integrity, your reason for being is at stake at a moment when a job comes to an end. If you are an Executive, this is when you earn that insanely large salary plus bonus plus stock options. Please demonstrate some leadership.

Is Email Really A Customer Retention Tool?

Had you asked me this question prior to today, I would have said "NO"!

But I was reading an article about open rates, click-through rates, and conversion rates in this month's Internet Retailer magazine, and the article caused me to do some thinking.

Let's mine that data! Here are the assumptions:

• Assume you have an email subscriber list of 10,000 addresses.
• Assume that fifty percent of these addresses will purchase again in the next twelve months. In other words, your company retains fifty percent of these customers.
• Assume you send one email campaign per week to each of these 10,000 addresses.
• Assume that half of these email addresses either unsubscribe or become invalid, distributed evenly during the year.
• Assume that the average email campaign has a ten percent click-through rate. In other words, ten percent of recipients click-through the email to your website.
• Assume that the average email campaign has a three percent conversion rate. In other words, three percent of recipients purchase something on your website because they received the email.
• Assume that the average person who purchased because of an email campaign purchases twice a year. In other words, each order does not come from a unique customer. Some customers respond multiple times per month/year to email, purchasing multiple times per year.
• Assume that half of the customers who purchased due to email would have also purchased during some other time of the year, and therefore, email cannot take credit for causing the repurchase.
  

For just one campaign, you can expect 10,000 * 0.10 (click-through rate) * 0.03 (conversion rate) = 30 purchasers. You send 10,000 emails, and you get 30 customers to purchase something.

Remember, of the 10,000 emails, half will unsubscribe or become invalid during the course of the year. We will assume these email addresses receive 26 campaigns per year.

The other half receive every one of 52 campaigns per year.

The total number of orders is then calculated as 5,000*0.10*0.03*26 + 5,000*0.10*0.03*52 = 390 + 780 = 1,170 orders per year.

Remember, I stated an assumption that the average email responder purchased twice per year due to email campaigns. Therefore, 1,170 / 2 = 585 customers purchase because of email campaigns.

Lastly, remember that half of the customers would have responded during other times of the year when email campaigns were not happening. This means email did not drive the response. Therefore, 585 / 2 = 293 customers repurchased because of email campaigns.

I stated that there is a fifty percent annual retention rate. Among the 10,000 email addresses in the list, 293 / 10,000 = 2.93% repurchased due to email.

In other words, the annual retention rate increased from 50.00% to 52.93% due to email.

This analysis is based on a huge number of assumptions. It is very important for companies to actually quantify each assumption, and plug in real numbers measured by analytical folks.

This example illustrates that email can have a marginal impact as a customer retention tool. It is not easy to move annual retention rates by three points. With a different set of assumptions, and multiple email campaigns per week, retention rates could improve even more.

So, I am not convinced that email is a powerful retention tool. But the math indicates that executing email campaigns can improve retention. Making significant incremental changes to an email campaign, like creative, promotional offers, subject line testing and merchandise offering, are likely to have a very, very small impact on customer retention.

Four Questions with Angie Brown, VP Marketing, PC/Nametag

This week, I am pleased to welcome Angie Brown to our "Four Questions" segment.

Angie is Vice President of Marketing at PC/Nametag, a leading catalog and online seller of meeting registration supplies, including nametags, ribbons, lanyards and tote bags. With nearly fifty employees, Angie expects the business, led by Nick Topitzes, to grow by more than fifteen percent this year. Angie's job is to nurture an environment where talented and skilled employees can attract, develop and keep customers forever. Angie has been at PC/Nametag for more than twenty years, but did miss some time while earning her MBA. Amazingly, Angie has three children starting college this fall as freshmen!


Let's get to the questions!


Question #1: Internet marketing changed how marketers measure effectiveness, especially when catalogs are included in the marketing mix. How should a marketer evaluate whether her marketing activities are driving new customers to the website, or are driving repeat traffic?

Measuring the effectiveness of marketing activities has gotten more complex in the multi-channel environment. On top of that, the customers that we want to cultivate and grow are the customers who are operating in more than one channel. Studies show that the best customers are customers who operate in more than one channel. We need to nurture customers who order from the paper book, order off the web site and contact the call center when they have additional questions. Matchback analysis is one tool that helps analyze customer activity. This is especially useful when you do not talk directly to the customer when the customer places orders. Matchback analysis takes the orders within a specified time period and matches them back to an activity, such as mailing the customer a catalog. This type of analysis has pitfalls, since the marketer decides what the rule for matching a transaction with an activity will be. Here is an example of a rule: Any sale from a customer that is received within eight weeks of a catalog drop to that customer is matched to the catalog mailed. Is eight weeks enough time or too much time? The decision greatly affects the results. The process needs to be tweaked over time.


Question #2: In what ways can an online marketer improve customer loyalty? Without a lot of personal interaction between website and a customer, or a catalog and a customer, what does a marketer do to improve the relationship between company and customer?

Customer loyalty can be enhanced for online customers in several ways. First, customers are more likely to return and make future purchases if the process is smooth and the customer gets what they wanted when they wanted and how they wanted. This gets a ... "but of course" response but often this is not the experience that customers have. Give each online customer a customer service point of contact. When orders go awry customers want their issues handled immediately and the best way to do that is with a phone call. How many times are you on a web site and you want to call the company but you can't find their phone number? Customers appreciate working with consultative experts. Establish your company as the expert in your niche. Make it easy to reorder. Send me emails that say "Last year you ordered ...". Send me emails and make me offers for products and services I really want and need. Don't just fill my inbox with emails.


Question #3: Are there any business to business (B2B) marketers that do a good job of marketing to you, and are there tactics that these marketers use that you believe are effective?

Hmmmm, this question has puzzled me. I cannot think of any. Maybe this represents an opportunity?!


Question #4: Who do you look to in order to stay networked on the latest trends in business-to-business Direct Marketing? How do you continue to learn, and how do you continue to improve your marketing skills?

I stay connected to trends in several different ways. First, my co-workers are a rich source of ideas and information. They read something and pass it on. New employees are a good way to learn new ideas. They've had different mentors and experience. Ever time anyone in our office attends an outside conference or seminar, they must make a presentation to interested people about something they learned at the conference. Secondly, I look for variety. I don't always attend the same meeting every year, I look for new conferences. Journals and magazines, over time, become repetitive. I try to subscribe to new ones, to get more variety.


Thank you, Angie, for participating in this week's Four Questions segment!

Survivor, General Motors, and Database Marketing

What the heck do the television show "Survivor", General Motors, and my field, Database Marketing, have in common?

According to a post on the Fast Company Blog, General Motors pulled $14,700,000 of advertising from Survivor, after the show decided to group castaways on the basis of their race.

This is where Database Marketing comes into play. We Database Marketers frequently analyze the profitability of decisions made by our companies. And while General Motors appears to be taking a moral stand on the allocation of participants to teams on the basis of race, there are financial reasons that make this decision appear even more interesting.

According to General Motor's most recent annual 10-K filing, the average car sold by GM costs the consumer about $21,000, of which GM earns about $2,300 of gross profit.

Therefore, in order for General Motors to break even on $14,700,000 of Survivor advertising, they must sell 6,392 cars. It seems possible that GM could sell 6,392 incremental cars because they advertise on a show seen by at least 10,000,000 fans a week.

A few years ago, General Motors did not have to offer as many discounts and rebates to get a customer to purchase a car. A few years ago, General Motors earned about $4,000 on every car they sold. If this level of gross profit existed today, GM would have to sell just 3,675 cars to cover the cost of advertising on Survivor.

In other words, GM must sell 74% more cars in 2006 to cover the cost of their advertising, compared with just two years ago. The quality of the advertising must be 74% better than two years ago, to provide the same return on investment as two years ago.

Obviously, I have no idea why General Motors truly made the decision to pull advertising from the television show "Survivor". But it is clear that their current financial situation influences how precious cash could be spent. And when you have to sell 74% more cars just to cover the cost of advertising, it may seem like a good idea to pocket $14,700,000.

Unfortunately, companies cannot reduce expenses enough to overcome customer apathy. At some point, companies have to keep investing advertising dollars that generate an acceptable return on investment, somehow improve existing products, or develop new products that stimulate customer interest, and truly manage expenses in a wise manner, in order to run a successful business.

And if it were easy to do all of that, you and I would be running our own, highly successful companies.