(Multichannel Merchant) Not long ago, marketers thought it sufficient to plan catalog mailings and e-mail campaigns in concert with one another, acknowledging that the e-efforts would support and bolster the printed and mailed catalog. This approach is fine as far as it goes, but it’s limited. Now it’s critical to think beyond the integrated mail plan to the integrated marketing plan.
The list of challenges that catalog marketers face is long, and getting longer, what with astronomical postal increases and an ever-present cadre of Web competitors chipping away at catalogers’ profitability. Statements like “Perhaps we shouldn’t mail as often to prospects in order to keep costs down” and “Well, most of our customers are buying online, maybe we should focus primarily on e-mail to support the business” are being heard everywhere. These may be common thoughts, but they aren’t necessarily the solutions.
Catalogers are concerned because the heart of their business model is being eroded away and it’s becoming more and more difficult to start, grow, and maintain a successful venture. The idea of the catalog as a branding piece designed to drive traffic to the Web is becoming a reality. But there is still a place for the selling catalog, and for using the print catalog to profitably generate revenue.
A key is to stop planning “mailings” and to cease sending “e-mails.” Instead you need to start building marketing efforts — integrated marketing efforts — designed to get, keep, and escalate customers. Like any building project, this one starts with a foundation, and the foundation is your brand.
A brand isn’t a swoosh. It isn’t a set of arches. A brand is a set of promises you make to your customer each and every time he interacts with you — on the phone, on your Website, at your store, in your catalog, through e-mail. It can be boiled down to three simple questions: 1) Who are you?, 2) What do you sell?, and 3) Why does it matter?
What makes a good direct marketing product? A good product for a direct offer is one that cannot readily be purchased at retail. And what makes a good multichannel marketing business? A good multichannel company combines a unique product assortment (items that cannot readily be purchased at retail) with a unique and relevant brand promise. So before you plan another mailing or send out another e-mail, ask of your company: “Who are we? What do we sell? Why does it matter?”
Answering the three questions
Question one: Who are you? This isn’t a trick question, but it is deeper than the obvious. The question gets to your tagline: What makes you special? What are you bringing to the table that none of the competition are?
Question two: What do you sell? Again, there’s a deeper meaning here. Home Depot doesn’t sell wood and paint; it sells help and assistance creating a home that one can be proud of. Pottery Barn doesn’t sell furniture; it sells a lifestyle of comfort and warmth. You must determine what it is that your company truly sells. Beyond the products, beyond the services, you have to offer something more — because right this instant, there are a thousand other Websites that come up when someone searches for your product on Google.
Question three: Why does it matter? Relevance, relevance, relevance. If your message, your offer, your brand doesn’t matter to your customers, you’re already losing the battle to the next StealYourCustomers.com that’s willing to bid more than you on your most important keywords.
Answering these three questions will help you define one essential aspect of your success: Why us? If you’ve done the work right your answer isn’t “Because we have great service” or “Because we have great prices.” Just about everyone in this industry can (and does) say that. The real answer, the deeper answer, helps you get, keep, and escalate customers.
Brand and the marketing plan
Your brand promise and your “higher order benefit” (the culmination of the three aforementioned questions) should begin to drive much of the focus of your multichannel business. Ideally this brand exercise leads you to a logical place, one that your existing database of customers is already familiar with and that they find relevant and meaningful.
If your brand is a true representation of who you are as a company, it should serve as a compass for your future direction. The merchandise assortment should fit together, threaded through with unique and relevant attributes fundamentally associated with your brand definitions. The creative look and feel of your catalog and Website should help establish or deliver on the brand promise. Your customer service, checkout process, product packaging, and shipping methods should all filter through your brand as well.
With the product right, the message right, the presentation right, and the fulfillment right, it’s time to think about the communication plan. Customer acquisition and retention are still the goals, but the process is refined. Metrics are still critical, even more so, and allowable dollars per piece and allowable cost per customer acquired are essential to understand. It’s no longer okay that customers acquired through pay-per-click (PPC) efforts are breaking even on acquisition; you must know how they perform when you put them into your marketing rotation.
Understanding how customers acquired through different channels perform will ultimately help on the segmentation front. How long can you mail a Web-acquired customer? How deep can you e-mail the file? How are marketing cost and breakeven affected by mailing and e-mailing one customer segment vs. only mailing or only e-mailing another? These important questions can be answered only through an in-depth study of the file, a solid segmentation plan, and diligent tracking and measurement.
The outcome should be a communication plan that uses the brand definitions to identify good prospect lists, craft solid ad text for PPC programs, home in on the most appropriate and profitable long-term keywords, prepare an efficient mail plan with relevant supporting e-campaigns, and maximize lifetime value not just through customer retention but through more-selective acquisition as well.
The multichannel environment has changed the way marketers must look at data. Where customer acquisition (or “front end” marketing) and customer retention and reactivation (“back end” marketing) were once linked in a very straightforward way, the linkage today is blurred by conversion and migration from channel to channel and a still not-completely-understood relationship between Web buyers and phone/mail buyers and the drivers of their collective purchasing behavior.
The three stages of an integrated plan
It isn’t reasonable to expect a multichannel cataloger to go from traditional segmentation to a fully integrated contact strategy overnight. You might want to ease into an integrated marketing plan though a three-stage approach: simple segmentation, advanced segmentation, and marketing mix modeling. (Note: The marketing plan we’re discussing below applies to customers, not prospects.)
Stage one: simple segmentation This assumes that you can add a simple level of segmentation — you do or don’t have an e-mail address on file for the customer — to your existing methodology. The same segmentation that’s always (presumably) worked stays intact, with one added wrinkle. Now instead of launching e-mail campaigns to tens or hundreds of thousands of customers under one single campaign code or a handful of promo codes, you can use the same segmentation practices for your e-mails as you do for your print mailings, and you can measure response down to the segment level.
When the season is complete, you don’t measure response and profitability solely for the e-mail campaign or the catalog campaign but rather for the entire communication string — all e-mails, catalogs, postcards, and whatnot that contributed to those orders. Now it becomes less important whether X e-mail or Y catalog “drove” the sale; the focus is put on two more-important questions: How much was spent to get each order, and how profitable was each order when it came in? All associated costs for a segment are considered against all associated sales. No longer are e-mail campaigns measured separately against catalog mailings and decisions made, perhaps incorrectly, that “the catalog is no longer necessary, because e-mail is working so well.” Instead a truer picture of overall performance is evaluated based on the complete set of contacts to a customer group.
Stage two: advanced segmentation Applying a more advanced segmentation model to your multichannel business means moving from traditional RFM, where recency of purchase, frequency of purchases, and monetary spending levels dictate the categorization of customers, to a schema where RFM is enhanced, particularly by channel. While RFM variables alone may determine how deep and how frequently a file is mailed, CRFM (“C” representing purchase channel) looks first at channel to determine the sequence and type of communications (catalogs, e-mails, postcards, etc.).
There are two questions to address for each customer regarding purchase channel: through which channel did he make his first purchase, and through which channel did he make his most recent purchase? Then ask if the first purchase was driven by a mailed catalog or an online marketing effort. If you know that the customer was mailed a catalog as a prospect but responded through the Web, it’s apparent that even though the customer is an online buyer, he still responds favorably to catalog mailings. If the same customer is a multibuyer and has always responded through the Web, you might be tempted to say, “Never mail him again.” This could be a mistake avoided by evaluating what drove that first channel purchase.
If a customer is a catalog responder or has responded to a catalog mailing by phone or mail at any time during his life on your file, the mailings are playing a role in his responsiveness, so he should be put on a communication plan that includes both e-mail and catalog mailings. Customers acquired through online marketing efforts who have only ever responded by way of the Web may very well be candidates for far fewer catalog mailings (note “far fewer,” not “none”) without a significant drop in performance.
Stage three: marketing mix modeling Marketing mix modeling builds on the concepts of media mix modeling applied by advertisers to determine the most effective frequency and flighting of space, television, radio, mailings, and other media. By factoring for when communications are put into the market and how response ebbs and flows accordingly, you can take a more mathematical approach to projecting response.
A multivariate approach, marketing mix modeling takes into account the typical RFM variables along with first and most recent purchase channel, purchase frequency by channel, e-mail “type” by response (for instance, if a customer responds to promotional e-mail but doesn’t buy online otherwise), monetary by channel (cumulative and average), and more. Working with a qualified modeling company or a database co-op to determine the right channel mix can add a significant level of sophistication to any direct marketer’s contact strategy.
Test and measure
Most multichannel marketers will find themselves capable of executing stages one and two with relative ease. Still, there’s no magic answer that says, “Mailing eight times and e-mailing 46 times is the perfect mix.” The key is to test various contact strategies against one another with clear objectives and control measurements. Using sample sizes from which reliable results can be obtained, create hold-out and frequency tests with various combinations of catalog and e-mail campaigns. The goal should be to find the marketing mix that produces the maximum sales and the minimum cost and greatest profit. In other words, the goal is to maximize sales and ROI simultaneously.
By creating a unique, relevant, and enduring brand position and developing a solid understanding of your customers’ purchasing behaviors, you give yourself perhaps the most important tool of all: a fighting chance. The role of the catalog may be shifting, but the opportunity for the multichannel merchant is as strong as ever when integrated with brand and executed through a complete understanding of the data.
Steve Trollinger is executive vice president of J. Schmid & Associates, a Mission, KS-based direct marketing agency and consultancy.