Forecast Forensics + Digital Profiles: Growth And Decline

Before we get to spreadsheet-intensive simulations, let's take a quick look at how counts within each Digital Profile evolved over the past three years (click here to contact me for your customized Forecast Forensics + Digital Profile project).

The red lines represent the most valuable Digital Profiles.  The biggest growth profile is "The Future of Multi-Channel", a profile that includes significant Mobile and Social purchases.  Declines are in the older-school e-commerce and multi-channel segments.  It may well be that cannibalization is underway, given that these profiles possess comparable value.


The biggest level of growth happened in "Mobile Mavens", a mid-value Digital Profile inhabited by mobile shoppers.


Catalogs Are Dead is growing at a significant rate, recall that this is a pure e-commerce Digital Profile.  Couple this with declines in Cheap Catalog Items and Pricey Catalog Items, and we may be seeing the continued evolution of the customer base.  Also notice that Web Masters and Pricey Website Performance are in decline.  This is a customer file that is evolving in stages, away from catalog to e-commerce, then away from e-commerce to emerging channels.


This is stuff you probably want to know about your business, right?

Forecast Forensics + Digital Profiles: How Channels Fit Together

Each of our Digital Profiles are defined.  Now let's see how channels fit together (contact me if you'd like to have your own custom Forecast Forensics + Digital Profiles project).

I run a query, identifying the top three Digital Profiles that customers in each Digital Profile migrate to in the subsequent year.  This relationship yields the following relationship (click to enlarge):

Oh boy.  OH BOY!

The secrets of your business are unlocked, they are visually apparent in this image.

New customers migrate in from the upper left hand corner of the image.  Loyal customers are in the bottom right hand corner of the image.

Newbies filter into lower-value segments, like Adores Email, Pricey Website Preference, Web Masters, and Gaga For Google.  In other words, the online channel is the primary source of acquisition for this brand, with e-mail and search playing a role in acquiring new customers.

Take a look at the upper right hand corner of the image.  Here's where the "catalog" portion of this business exists ... it is almost separate from the rest of the business, isn't it?  Customers can get to this part of the business through The Future Of Multichannel profile, and customers in this quadrant can become loyal customers (Classic Multichannel).  By and large, however, the catalog portion of this business is separated a bit from the rest of the ecosystem.  Pay attention to your own business ... if you notice this within your business ecosystem, well, that says something about the future of your business, and your downstream marketing strategy, doesn't it?

There are five Digital Profiles that yield loyal customers.

• Classic Multichannel (from the catalog ecosystem).
• Search and Shopping.
• The Future of Multichannel (including mobile & social buyers).
• Email Loyalists.
• Crazy for E-commerce. 

Notice that one profile includes the catalog ecosystem, one includes the e-commerce ecosystem, one includes the e-mail ecosystem, one included just about everything, and one includes search, too.  This business can yield high-value customers from a single channel, or from multiple channels.

The Digital Profile process yields several strategic questions.

• Is the catalog ecosystem separate from the rest of the customer ecosystem because the channel is dying, because it is unique and interesting to a subset of customers, or because the brand failed to integrate it properly?
• Social customers are surprisingly mainstream, among the better portion of the customer file?  It does not look like this is a big customer acquisition channel.  What value does a social channel deliver to a brand if it is skewed to best customers?
• Mobile customers are also surprisingly mainstream.  Does this mean that e-commerce will be cannibalized or enhanced, going forward?
• Search customers seem to be linked to e-mail customers.  Does e-mail marketing cause a customer to conduct a search, and if so, does e-mail marketing actually encourage customers to shop the competition? 

Forecast Forensics + Digital Profiles: The 16 Profiles

Last week, we introduced the concept of marrying Forecast Forensics and Digital Profiles (contact me for your own customized project).  This week, we get to see what the geeky math created for us!


Let's review the attributes of each of the sixteen Digital Profiles we generated.


Digital Profile #1 = The Future Of Multi-Channel

• 2,278 households.
• $642.25 spend last year.
• $40.10 price per item.
• 39% shop via Telephone.
• 13% shop Online.
• 74% shop E-Mail.
• 27% shop via Search.
• 15% shop via Social.
• 41% shop via Mobile.
• This customer has a propensity for shopping via any channel, including Social and Mobile, representing the future of multi-channel e-commerce.

Digital Profile #2 = Classic Multi-Channel

• 4,483 households.
• $735.11 spend last year.
• $43.24 price per item.
• 87% shop via Telephone.
• 60% shop Online.
• 20% shop E-Mail.
• 1% shop via Search.
• 15% shop via Social.
• 13% shop via Mobile.
• This is the classic situation, with the customer shopping via the phone and online.

Digital Profile #3 = Mobile Mavens

• 3,344 households.
• $249.55 spend last year.
• $64.62 price per item.
• 16% shop via Telephone.
• 8% shop Online.
• 13% shop E-Mail.
• 25% shop via Search.
• 21% shop via Social.
• 67% shop via Mobile.
• This Digital Profile is most likely to shop via the Mobile channel.

Digital Profile #4 = Social Mom & Dad

• 3,309 households.
• $374.61 spend last year.
• $80.44 price per item.
• 72% shop via Telephone.
• 41% shop Online.
• 2% shop E-Mail.
• 0% shop via Search.
• 36% shop via Social.
• 10% shop via Mobile.
• This customer is most likely to shop via Social, and it turns out that nearly 3/4th of this audience also shop via Telephone, suggesting this is an older audience.

Digital Profile #5 = E-Mail Loyalists

• 5,938 households.
• $692.09 spend last year.
• $41.58 price per item.
• 0% shop via Telephone.
• 85% shop Online.
• 95% shop E-Mail.
• 18% shop via Search.
• 9% shop via Social.
• 11% shop via Mobile.
• Notice that the customer also shops online ... with none of the customers shopping via the telephone.

Digital Profile #6 = Crazy For E-Commerce

• 2,026 households.
• $719.99 spend last year.
• $39.99 price per item.
• 0% shop via Telephone.
• 100% shop Online.
• 1% shop E-Mail.
• 0% shop via Search.
• 21% shop via Social.
• 26% shop via Mobile.
• An e-commerce customer with a propensity for shopping via emerging channels.

Digital Profile #7 = Searching And Shopping

• 2,078 households.
• $582.75 spend last year.
• $70.89 price per item.
• 0% shop via Telephone.
• 93% shop Online.
• 48% shop E-Mail.
• 72% shop via Search.
• 14% shop via Social.
• 16% shop via Mobile.
• Anytime you see this distribution, you worry a little bit ... the customer is brand loyal, but may not be achieving her potential due to a propensity to shop via Search.

Digital Profile #8 = Catalogs Are Dead

• 2,629 households.
• $438.68 spend last year.
• $72.46 price per item.
• 0% shop via Telephone.
• 100% shop Online.
• 0% shop E-Mail.
• 0% shop via Search.
• 35% shop via Social.
• 39% shop via Mobile.
• This customer does not fit the catalog profile (0% via phone).  Granted, the customer could shop online via catalogs, but given the high percentages associated with Social and Mobile, it's more likely this customer is aligned with emerging channels.

Digital Profile #9 = E-Mail Plus Search

• 4,214 households.
• $272.63 spend last year.
• $34.99 price per item.
• 6% shop via Telephone.
• 0% shop Online.
• 70% shop E-Mail.
• 36% shop via Search.
• 0% shop via Social.
• 0% shop via Mobile.
• This is obviously a discount-type shopper, with a low price per item, shopping online.

Digital Profile #10 = Cheap Catalog Items

• 7,380 households.
• $243.21 spend last year.
• $37.74 price per item.
• 100% shop via Telephone.
• 10% shop Online.
• 0% shop E-Mail.
• 0% shop via Search.
• 0% shop via Social.
• 0% shop via Mobile.
• Another budget customer buying low price-point items.

Digital Profile #11 = GaGa For Google

• 6,652 households.
• $146.07 spend last year.
• $71.59 price per item.
• 3% shop via Telephone.
• 0% shop Online.
• 7% shop E-Mail.
• 94% shop via Search.
• 0% shop via Social.
• 0% shop via Mobile.
• A one-time or two-time per year buyer using Google to place the order.

Digital Profile #12 = Pricey Catalog Items

• 7,168 households.
• $142.02 spend last year.
• $74.92 price per item.
• 100% shop via Telephone.
• 2% shop Online.
• 0% shop E-Mail.
• 0% shop via Search.
• 0% shop via Social.
• 0% shop via Mobile.
• Pure catalog shopper buying expensive items.

Digital Profile #13 = Adores E-Mail

• 9,832 households.
• $152.68 spend last year.
• $37.34 price per item.
• 0% shop via Telephone.
• 28% shop Online.
• 97% shop E-Mail.
• 5% shop via Search.
• 0% shop via Social.
• 0% shop via Mobile.
• E-mail shopper who enjoys buying inexpensive items.

Digital Profile #14 = Web Masters

• 12,014 households.
• $195.17 spend last year.
• $33.66 price per item.
• 0% shop via Telephone.
• 100% shop Online.
• 0% shop E-Mail.
• 0% shop via Search.
• 0% shop via Social.
• 0% shop via Mobile.
• Online buyer who purchases inexpensive items.

Digital Profile #15 = Pricey Digital Preference

• 3,040 households.
• $184.88 spend last year.
• $71.40 price per item.
• 0% shop via Telephone.
• 44% shop Online.
• 63% shop E-Mail.
• 43% shop via Search.
• 0% shop via Social.
• 0% shop via Mobile.
• E-mail shopper who buys online and buys pricey items.

Digital Profile #16 = Pricey Website Preference

• 17,345 households.
• $130.79 spend last year.
• $74.29 price per item.
• 0% shop via Telephone.
• 100% shop Online.
• 0% shop E-Mail.
• 0% shop via Search.
• 0% shop via Social.
• 0% shop via Mobile.
• Expensive items, only purchased online.

Vera Bradley Outlet Event

The image might be hard to see, so click here to visit a web-based image of this e-mail campaign.

One way to measure the strength of your brand is to charge customers money to attend an event.

In this case, for $5.00, you get to be one of up to 24,000 individuals who are allowed to attend a Vera Bradley Outlet Sale.  Sure, you get to go for free the final three days, but as anybody knows, the good stuff is snatched up quickly, so for $5.00, you get access to the good stuff.


I'm not saying this works, or doesn't work, or that I do/don't support this.


I'm simply asking you, the marketing leader, how you might think about creating urgency in your business ... how might you foster an environment that causes somebody to feel that they have to spend $5 just to have the opportunity to participate in an event?


It's certainly the opposite of 20% off plus free shipping for Cyber Monday, isn't it?

Dear Catalog CEOs: Chicos And Three Key Customer Trends

Dear Catalog CEOs:

By now, you've already read the comment from Chicos about catalog circulation.  If you haven't, here's a link to the article, and here is an important quote:

• "Our CRM group [has] done a lot of very good work.  As a result, we were able to mail more efficiently.  We were able to increase business with less circulation."

This is the great mystery of our time, isn't it?  One set of experts tell you that catalog marketing is "dead".  And then you have the catalog vendor community demanding that you mail MORE catalogs, telling you that 85% or more of your online orders are caused by catalog marketing, suggesting that you must mail catalogs or you'll be out of business ... pointing to flawed matchback analytics to make their case. 

The reality is that there is a BOATLOAD of profit to be had by taking an average of each position offered by the experts.


In the past sixteen months, customer behavior seems to have shifted at an accelerated rate.  There are three key customer trends for catalogers to pay attention to.

1. Frequency and Pages.  Two 64 page catalogs is better than one 128 page catalog.  The amount of profit to be made here is HUGE ... smaller books can be mailed far deeper than larger books, and the incremental contact generates more demand than one contact.
2. Best "catalog" buyers (those who live in rural areas and shop via the telephone) are frequently UNDER-CONTACTED (from a frequency standpoint), if you can believe that.  There is a lot of profit to be had by optimizing the contact strategy among best catalog buyers who shop via the telephone in rural areas.
3. Online buyers ... even those who buy online after being matched-back to a catalog, are most often being significantly OVER-CONTACTED.  There is a ton of profit to be had by greatly reducing the number of contacts to this audience.

By capitalizing on each of the three key customer trends (the trends are now accelerating, though they've been around for a decade), catalogers can become SIGNIFICANTLY more profitable.  In my projects, the average amount of profit is about a million dollars per year for a $100,000,000 demand-per-year (across all channels) business.


The Catalog PhD methodology capitalizes on the three key customer trends ... the methodology enables one to grow catalog sales while reducing catalog marketing expense.  Yes, it is possible!

• Contact me for your own customized project ... these projects are very popular right now.
• Buy the physical copy of Hillstrom's Catalog PhD at Amazon (easily the most popular self-published book I've written, with sales growing each month as word gets out).
• Buy the Kindle version of the book, click here.

Dear Catalog CEOs: How Customers Find Out About Products

Dear Catalog CEOs:

I've been harping on the fact that cataloging isn't dead, but it is becoming increasingly focused on a 55+ rural audience, with the under 35 audience orbiting different marketing channels.

That being said, please click here and view the catalog set of bars in this chart in a blog post from Greenlane SEO.  I'll let you draw whatever conclusions you like from the chart.

Dear Catalog CEOs: Do All These Channels Matter?

Dear Catalog CEOs:

Back in 1995, we managed 20 catalog mailings a year, and we liked it.

Back in 2000, we were being introduced to websites and e-mail marketing.

In 2011, we're drowning in channels.  Mobile (apps vs. websites, Apple vs. Android), Social (Facebook, Twitter, Foresquare, Blogs), Search, Affiliates, E-Mail Triggers, E-Mail Campaigns, on and on and on.  We are told to maximize offline, we're told to A/B test our way to online bliss.  Toss in geo-targeted email-based social commerce providers, and you've got a whole bunch on your plate!

And everybody has an answer how you use all of these channels to your benefit.  If you just follow the prescription, all is good.  Follow an online tactic and experience a 239% conversion rate increase, woo-hoo!  Forge deep, emotional connections with somebody on Facebook, and you're told that you will "reap the rewards", as the publications like to tell us.

With all of these 239% increases, we should be seeing unfettered, 100% growth per year, year-after-year, right?

Right?  Be honest.

This brings us to the graph at the top of this post.  Go ahead, click on it.  Across the 50+ brands I've worked with, this is an average, GLM-adjusted annual rebuy/repurchase rate for each of the past eleven years.

Annual repurchase rates are, in my opinion, the best indicator of customer loyalty.  I mean, if you keep 62% of your customers, and then you keep 55%, and then you keep 48% of your customers, then you have a loyalty problem, right?  So the metric quickly gets to the heart of the matter ... are you able to hold on to your customers.

Since we dove, head-first, into the multichannel pool of marketing bliss, our repurchase rates have, on average, decreased.  Sure, you can blame 2008 and 2009 on the economy, but you can't blame 2003, 2005, 2006, and 2007 on the economy, now can you?


There's one thing we can say ... the explosion of channels is not correlated with increased customer loyalty.  You could just as easily make the case that, after accounting for the collapse of the economy, that the explosion in channels resulted in a decrease in customer loyalty.

We were told we would be successful if we simply adhered to the best practices of every single new, burgeoning channel.  

My goodness.  How could it all have gone so wrong?



Make the rest of 2011 a year where you focus marketing efforts around merchandise.  Instead of trying to make channels work, why not spend some time working on making your merchandise work!??!

Make merchandise the focus of 2011.