Do You Want To Be The Vice President Of Marketing At This Online/Catalog Company?

I spoke with a leader today who is trying to hire a Vice President of Marketing at a large catalog/online business. When discussing the qualifications of the individual, I was told "We have already turned down a great candidate with outstanding online credentials. What we need is somebody who can fix the catalog business, and keep it growing and thriving."

I asked this individual several questions. Among the things I learned:

• The catalog business continues to decline, and in response, catalog circulation has been cut over the past few years.
• The online business is growing and thriving.
• The catalog business must be grown, because it is the "heritage of the company".

The latter comment is telling. Would you take this job, knowing the power of the online channel, shifting consumer behavior, and the desires of the President/CEO?

Having accurate multichannel forensics is the first step in answering the question. The table below shows a hypothetical relationship between catalog and online channels.

Multichannel Forensics	Catalog	Online
	Metrics	Metrics
Corporate Repurchase Rate	55%	48%
Catalog Repurchase Rate	40%	5%
Online Repurchase Rate	30%	45%
Total Catalog Buyers per Year	500,000
Total Online Buyers per Year		200,000
New Catalog Buyers per Year	100,000
New Online Buyers per Year		75,000

In this hypothetical example, the catalog channel is "transferring" customers to the online channel. However, the online channel is in "isolation". It receives customers from catalog, but does not send customers back to the catalog channel.

The catalog channel is losing 60% of its customers, meaning it has to replace 300,000 customers to keep the business chugging along. As you can see, the channel is only getting 100,000 new customers. As a result, the catalog is in a death-spiral. You do not want to become the Vice President of Marketing at a company with these dynamics, given that the President/CEO wants to grow the catalog business.

In this example, catalog has a fighting chance:

Multichannel Forensics	Catalog	Online
	Metrics	Metrics
Corporate Repurchase Rate	65%	48%
Catalog Repurchase Rate	60%	5%
Online Repurchase Rate	20%	45%
Total Catalog Buyers per Year	500,000
Total Online Buyers per Year		200,000
New Catalog Buyers per Year	250,000
New Online Buyers per Year		75,000

In this case, catalog retains 300,000 of the 500,000 customers it had. It also gets 250,000 new customers to replace those lost. As long as catalog customers can be acquired in a cost-effective manner, there is a chance of being successful as the Vice President of Marketing at this company.

It is very important to understand the multichannel forensics at any company. It is even more important to understand them before you become the Vice President of Marketing.

Shopping Cart Abandonment

The Marketing Experiments Blog featured an article about shopping cart abandonment. The article stated that nearly sixty percent of shopping carts are abandoned online.

My question to all of you is this. Assuming you have done everything possible to eliminate problems in the check-out process, is there anything wrong with a sixty percent shopping cart abandonment rate?

In a store, you don't physically abandon your shopping cart, leaving ice cream sitting in the aisle for a store employee to restock. You have a social contract with the store. You respect people, and don't want to create extra work for employees. Worse, you don't want to get caught abandoning your shopping cart. You might get kicked-out of the store. You might have to purchase the melted ice cream.

Online, the social contract breaks down. Who is going to penalize you for abandoning the shopping cart? The shopping cart becomes much more of a "wish list" than a "shopping cart".

Assuming your business has done everything in its power to eliminate check-out problems, an abandoned shopping cart is a non-issue. Don't feel frightened about an issue that isn't always a problem.

Multichannel Buyers, And The Migration From The Catalog To The Online Channel

In the process of writing my next book, I ran across a situation that caused me to rethink what "multichannel" means.

Here's the deal. I was forecasting the mix of catalog and online buyers, I started with a customer file that was almost exclusively catalog buyers. Then, customers began to migrate to the online channel. Pundits believe that these "multichannel" buyers, those who purchase from both catalog and online channels, are more valuable than single channel buyers.

The simulation indicated that eventually, almost all customers convert from the catalog channel to the online channel. As a result, almost all buyers are now "single channel" customers. They only buy online, they don't purchase via the telephone/catalog.

This suggests that "multichannel buyers" are not really more valuable. They are simply customers who are going through the process of migrating from catalog to online. Once everybody has migrated, there is only one channel, the online channel.

This process has occurred in the past. Prior to the days of call centers and credit card purchases, customers wrote down the items they wanted to purchase on an order form, and mailed their check. In four to six weeks, their merchandise arrived. The arrival of call centers and credit card processing created a new "channel".

At first, there had to be early adopters who mailed their orders in with a check, and purchased over the phone, via credit card. These customers were using two purchase channels.

Eventually, everybody purchased via the phone, using a credit card. The channel where customers mailed a check disappeared.

It seems reasonable to assume that the majority of customers will convert from catalog to online. When this happens, the term "multichannel" should disappear ... and then reappear when the hologram channel replaces the internet!

As a result, "multichannel buyers" are not more valuable than single channel buyers. They are simply going through the transitional process from catalog to online.

Hallmark Doorbuster, CRM and Loyalty Programs

Loyal readers ... by now, you know that I am not a huge fan of CRM. To be fair, I am a fan of well-executed CRM programs. Unfortunately, it is very hard to execute a CRM program well. Very hard.

Take Hallmark, as an example. My wife is part of Hallmark's Gold Crown Preferred Member Program (a loyalty program for 'best' customers). When receiving her rewards certificate, she received an invitation to shop a Holiday Open House on November 4 and November 5 (she also received an e-mail notifying her of the event). The best part of the invitation, according to my wife, was the Holiday Instant Scrapbook, a $36.00 value, on sale for $14.95*. The asterisk next to the price stated "Offer valid 11/4/06 - 11/5/06 while supplies last at participating retailers. Not valid on past purchases. Tax not included".

On Saturday afternoon, my wife navigated Interstate 90 on a twenty minute drive to the closest Hallmark store. Not surprisingly, supplies did not last. Staff in the store told my wife that they were given eight scrapbooks, and that the eight scrapbooks sold immediately. In fact, anybody could have purchased the scrapbooks, not just the loyal customers that were notified of the promotion. A first-time buyer, walking in off the street, could have purchased all eight available scrapbooks at the discounted price, if she wanted to.

This afternoon, my wife drove twenty-five miles to the next-closest Hallmark store. And guess what? All eight of their scrapbooks were sold to three customers (one purchased four, one purchased two, another purchased two) within the first few minutes of business on Saturday. A sales associate told my wife that customers from sixty miles away (Olympia) called to see if any of the scrapbooks were available.

I have no idea how Hallmark measures the success of programs like this. I imagine increased sales and gross margin are key contributors to a successful program. With $4.2 billion in annual sales and 40,000 stores (according to their website), it is possible that the average Hallmark store sells about $300 of merchandise a day.

This means that Hallmark sells the eight scrapbooks quickly, driving about $119 of increased sales, at cost. In addition, all the customers who are lured into the store by this promotion have the opportunity to purchase other merchandise that is regularly available. This might increase sales by an additional ten or twenty percent. Here is where the profit is generated.

If each store generates an additional $30 of sales on Saturday, and an additional $30 of sales on Sunday, then Hallmark generates $2.4 million in additional net sales for the weekend, across 40,000 stores. Because Hallmark is a privately held company, we can't easily identify their gross profit percentage. It is likely it is in the neighborhood of fifty percent. If that is the case, Hallmark generates over $1,000,000 of increased gross profit for the event.

From a company standpoint, this "CRM / Loyalty" event is a huge success. 320,000 scrapbooks were sold at sixty percent off to a group of delighted customers. It is entirely possible that an incremental $1,000,000 of gross profit were generated, profit that would not have happened without the promotion.

For the customers who were lucky enough to get the scrapbooks, they are selling them on eBay for more than $40 each. Maybe Hallmark could have put a limit on the number of scrapbooks per customer, like one per customer?

But for maybe a half-million customers (an estimated 6 customers per day times 2 days times 40,000 stores), the hour they invested out of their lives to attend this "Holiday Open House" was a waste. What was the increase in loyalty that Hallmark generated among these customers? How much did Hallmark improve "customer relationships" with this promotion?

Undoubtedly, the marketing folks at Hallmark did not devise this promotion with the intent of disappointing a half-million customers. The marketing folks tried to do something that helped their company. By executing this promotion, they likely increased sales by between $2 million and $3 million dollars, and likely increased profit by $1 million dollars (all numbers are based on assumptions I made, actual results could be greater or less than what I estimate). Was it worth it to disappoint 500,000 customers to obtain $1 million in profit?

Multichannel Haiku #2

When he presented
the results of the study,
they said, "He's clueless!".

Vice President of Web Analytics, and Don Libey

The web analytics folks are rapidly taking over ownership of the database marketing world, and for good reason. These individuals have the ability to mine more information about customer behavior than anybody in the history of marketing.

Web analytics folks would be well-served to read a document produced by Don Libey about essential metrics. Many of the catalog metrics can simply be changed to fit an online environment. Click on this link for the document.

Those who do the best job of translating these metrics into the online world may be the individuals who seed the first generation of 'Vice President of Web Analytics' positions that are part of our online future.

Copywriting and Spiders

Internet Retailer brings us this discussion about spiders on the internet, and how search engines comb the copy on your site.

If you don't think that Google, Yahoo! and MSN own a seat at your executive table, read this article. Gone are the days when a copywriter could freely communicate the brand to the consumer. Today, the copywriter must write words that meet the style requirements of Google, Yahoo! and MSN spiders. This yields new forms of copywriting, including blogs.

The copywriter is not selling to the customer. Search engines make the determination whether your site is credible or not. Colleges should be teaching students how to write "spider-friendly" copy.

Being an anti "brand" person most of my life, this is one of the instances where I am proven wrong. Never has it been more important to have your business be "top-of-mind" with the consumer, so that the consumer bypasses search engines.