Customers, Marketing, Technology
The Impact of Technology on Catalog Marketing, and
Thirty-Five Strategies That Will Improve Company
Profitability Tomorrow
Kevin Hillstrom
President, MineThatData
My Projects
My projects focus on a concept called
“Multichannel Forensics”, the study of how
customers interact with different channels.
I’ve analyzed customer interactions between
channels for nearly four dozen brands in the
last three years. Today, we’ll integrate the
findings of my studies with current and future
trends. Here we go!
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Oh, Those Pundits!
From time to time you hear the pundits say
that “print is dead”. Just look at the newspaper
industry for a veritable plethora of examples!
Is print dead?
As a mass marketing vehicle, maybe.
As a niche marketing vehicle, probably not.
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1995. 2003. 2010
In 1995, print meant everything. The Internet
was the wild west!
In 2003, print was possibly the most important
part of an integrated multi-channel business.
In 2010, your website the most important part
of an integrated multi-channel business. Social
/ Mobile are like the wild west! Print?
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Customer Behavior Is Evolving
Customers are being pulled in different
directions, away from Classic Direct Marketing:
1. Algorithms. They make decisions for us,
pulling us to algorithmic preferences.
2. Mobile. A natural evolution …
mainframe – desktop – laptop - mobile.
3. Social. Customer behavior evolves with
every single Social Media innovation.
4. Media/Content. Bordering on infinite.
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Technology Driven Change
And within/across boxes, customers scatter in
infinite directions … 40,000,000 Ning users
across 1,000,000 networks, for example … a big
audience, but only 40 users per network.
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A Problem: Time and Media/Content
Time is now a currency that competes with
money.
Who has time to interact with classic direct
marketing when there are mystery eggs to be
claimed in Farmville?
Media/Content consume time, and actively
compete with us for attention & money.
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A Problem: Customer Acquisition
New/existing businesses and infinite
media/content choices compete for the
resources of our prospect audience.
This combination of competition, channels, and
media/content drive down traditional
customer acquisition productivity. In my
opinion, this is the #1 challenge we face … how
do we acquire customers?
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Three Problems: No Clear Solution
Problem #1: Customer acquisition via
traditional methods is imploding slowly.
Problem #2: Online customer acquisition isn’t
growing very fast anymore, and is often
coupled with lower-than-average future value.
Problem #3: Mobile/Social simply “don’t work
with my target customer”, as one Exec told me.
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Opportunity: A Transition Plan
Let’s look at thirty strategies that a direct
marketing business can employ to save money,
so we can transition to the future without
breaking the bank.
My Reason For Being: Save $$$ on classic
direct marketing to existing customers, use $$$
money to test different strategies that may
bring in new customers in other channels.
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Strategy #1: Pages
If you market via catalogs, start thinking about
smaller page counts. Each additional page
causes a reduction in circulation depth,
because additional pages are less and less
productive.
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D em and
Strategy #2: Contacts
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# of Contacts
If you market via catalogs, you have a choice.
You could mail a monthly 128 page catalog, or
you could mail a 64 page catalog ever-otherweek.
Contacts are becoming more productive than
pages. Use the web as “your store”, use print to
“feature the store”.
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Strategy #3: Order Starters
In modern marketing, the merchandise that is
offered to the customer dictates interest.
Strongly consider doing an “order starter”
analysis. Identify the order that each item is
entered when a customer purchases. Feature
items in the first position in the first twenty
pages of print campaigns, or feature them in email marketing campaigns.
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Strategy #4: Mail/Telephone Shoppers
Customers who usually order via mail or the
telephone are fundamentally different than are
customers who shop other channels (it used to
be the other way around, remember?).
This is the customer audience that is most
likely to be responsive to traditional direct
marketing strategies. For the most part, you
can market to these customers “like it’s 1999”!
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Strategy #5: Online Via Direct Mktg
Customers who purchase merchandise online
after receiving direct mail (catalogs, postcards)
are the classic “multi-channel” customer that
our industry loves.
Carefully test how many offers and the type of
offer that causes this customer to purchase. In
many cases, you can reduce the number of
contacts to this audience, saving $$$.
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Strategy #6: Online-Only Shoppers
Customers who purchase exclusively online are
often different than the core customers who
shop via traditional direct marketing
advertising channels. This audience is like the
bank customer using an “ATM”, they are a “selfservice” audience.
This audience frequently warrants a significant
reduction in direct marketing contacts.
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Strategy #7: Rural Shoppers
Customers who live in rural zip codes are
usually responsive to traditional direct
marketing Use zip code filters to minimize
marketing expense to existing/new buyers.
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Strategy #8: Know Your Organic %
Everybody should know what percentage of
your business will still exist if traditional direct
marketing (mail-based) is discontinued within a
segment of housefile buyers.
This metric can be surprisingly high (above 55%
for two businesses I analyzed this spring).
When it is high, a dramatic reduction in
mailings is warranted, causing increased profit!
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The Organic % Is So Important!
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Strategy #9: Mail / Holdout Tests
Every business should have an active testing
strategy, one where 10% of the active housefile
does not receive catalogs or e-mail campaigns
for at least three months at a time.
These tests are analyzed across key customer
segments, allowing you to calculate the organic
percentage accurately! Hint: You are overmailing your customers, costing you profit.
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Strategy #10: Matchbacks
Matchback analytics are 100% valid for
understanding the impact of new customer
acquisition.
Matchback analytics frequently overstate
housefile performance, causing traditional
direct marketers to spend too much mailing to
housefile customers. Be very leery of what
your matchback analytics are telling you.
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Strategy #11: Know E-Mail Productivity
Almost every company I work with either
significantly over-states or significantly
understates e-mail marketing productivity.
Make sure you know how e-mail productivity
changes as you increase/decrease frequency.
Measure “beyond the click”, using
mail/holdout tests to measure true
incremental value.
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Strategy #12: Merchandise + E-Mail
Segment your housefile list into groups of
customers, based on merchandise preference.
Develop an e-mail strategy with customized
panels allowing variable merchandise
presentation, or at least have multiple versions
of an e-mail campaign that are targeted to
customers with specific merchandise
preferences --- upside = +20%.
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Strategy #13: Search + Print
Carefully evaluate the interaction between
search marketing and print-based marketing.
At some companies, search volume decreases
when print-based marketing is reduced … and
print-based volume decreases when search
spend decreases. These two channels can
interact with each other, they often depend
upon each other to generate incremental sales.
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Strategy #14: Annual Retention Rate
Do not take your foot off of the customer
acquisition gas pedal if you retain fewer than
40% of last year’s customers.
You can work on loyalty-based program
improvements if you currently retain more
than 60% of last year’s customers.
Make this one of your top five metrics to track.
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Strategy #15: Business Models
Do me a favor: Visit http://bubbleroom.se
Business Model: No catalogs. Six product
managers read 2,000 blogs a day. They identify
trends, design product, and have it delivered
from Indonesia/China in two weeks! 13,000
paid bloggers earn 8% of order if customer
clicks through their blog, syndicated on the
Bubbleroom website. 30% m/o/m growth rate.
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Strategy #16: Merchandise Path
Know the path that customers take as the
customer moves from a first to second to third
purchase.
Often, customers evolve their purchase habits
(i.e. best customers buy new products, new
customers buy existing products) over time,
allowing your to target your marketing
strategies accordingly.
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Strategy #17: Sales & Promotions
Segment your file by customers who either buy
a disproportionate amount of merchandise on
sale, or buy more than half the time using a
free shipping or %-off promotion.
Test reduction of full-price merchandise offers
to the sale / promo segment of your housefile.
Try to minimize “file pollution” where possible.
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Strategy #18: The iPad
Own an iPad. Seriously. Go buy one, now.
Has there ever been a device more tailor-made
for a digital catalog? You’re flipping pages with
your index finger, tapping an item you want
and executing a one-click purchase, potentially
without ever visiting a traditional website.
The iPad can be a mobile mailbox.
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Strategy #19: Indirect Buying
If the last two orders a customer placed are not
directly sourced to a direct mail activity, then
consider testing a reduction in direct mail
contacts to this customer.
Be vigilant in identifying customers who are
moving into new cells in our customer
evolution chart.
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Strategy #20: Marketing = Humans
In every Multichannel Forensics project I’ve
worked on, customers who have actual contact
with a live human being have increased longterm value over self-serve online customers.
While it might be considered “expensive”, I
would do anything possible to make my
business “warm” (i.e. human) instead of cold,
templatized, and algorithmic.
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Strategy #21: Awareness
If there is a place for Social Media in traditional
direct marketing, it is in the “awareness” phase
of marketing.
We need to craft strategies that communicate
who we are and what we stand for, so when
the customer is ready to finally consider a
purchase, our businesses are top-of-mind with
the customer. Beware: Classic ROI may be low.
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Strategy #22: Content
Traditional catalog brands were really good at
creating content that led to a purchase.
Strategy will evolve over the next few years as
tablet-based devices could make catalog-style
content more relevant in a digital format.
Strongly consider experimenting with emerging
platforms. Go where your customers go!
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Strategy #23: Integrated Data
It will become increasingly important to
identify customers who are less and less likely
to respond to traditional direct marketing.
Integrated data helps make this possible. Every
effort must be made to integrate clickstream
data with offline purchases, mobile, and social.
Test withholding traditional direct marketing to
audiences that are increasingly “digital”.
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Strategy #24: Map The Future
Thoroughly understand how customers are
likely to evolve over the next five years, and
use this behavior to reduce marketing expense
among segments (my most popular client
project in 2010).
Example: What happened to search+e-mail
buyers in 2007, how did their 2008-2009
behavior evolve vs. a pure catalog buyer?
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Strategy #25: Demographics
Immediately overlay age information on your
customer file.
Measure differences in customer behavior
between the 50+ audience, the 35-49
audience, and the 18-34 audience.
Use this information to craft customer
acquisition strategies.
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Strategy #26: Take Risks
Our knowledge base makes us unwilling to take
risks. We were first movers in e-commerce.
We are terribly slow to adopt mobile, social,
rich media, and algorithmic opportunities.
Save money by contacting existing buyers less,
use that money as part of a “testing budget”
for emerging technologies. Give Marketing a
bigger role in the direction of your website.
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Strategy #27: Seasonality
So many of the businesses I analyze have a
“seasonality component” … businesses who
order once a month or once a quarter or once
a year … or have customers who only buy
during the Holiday season.
Segment your customers, and save $$$ by not
targeting those who only buy during particular
“seasons”.
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Strategy #28: Months 1-3
The analytics I perform strongly suggest that
months one, two, and three are critically
important in the development of a “new
customer”.
If there was ever a time for “human contact”,
this is a really good time. For many businesses,
half of all newbies who will ever buy again do
so in this three month window.
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Strategy #29: Merchandise Categories
Too often, we focus our marketing efforts on
“channels” (catalogs, e-mail, search, social,
mobile).
We should focus our efforts on merchandise
categories. Customers who buy from multiple
merchandise categories are often more
valuable than customers who buy from
multiple advertising channels.
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Strategy #30: Small Numbers
The mass audience, lack of competition, lack of
information, cost structure, and amount of free
time consumers enjoyed in the 1990s is not
likely to return.
Instead of renting 1,000,000 names from a coop, our future includes 250,000 names from a
co-op and 750,000 names from 750 different
sources. We must make small numbers work.
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Strategy #31: Filtering
Existing customers will increasingly determine
the communication strategy they want.
Some will want catalogs and direct mail. Some
will use search & e-mail & our websites. Some
will use mobile & social & algorithms. Some
will use the iPad. All will consume media.
We will decide how profitable we want to be.
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Strategy #32: Retail Shoppers
Retail shoppers do not behave like DirectChannel shoppers behave.
Direct-Channel shoppers are willing to shop in
retail stores.
Retail shoppers are usually unlikely to buy
merchandise online. This has big ramifications
for the usability of your e-commerce website.
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Strategy #33: Comparable Segment
Want to really know how your business is
performing? Pick a “comparable segment” of
customers, and measure their performance,
year-over-year, each month.
Typical Comp Segment: Two orders last year,
last purchase 0-3 months ago. Measure
performance in subsequent month, compare
with prior years. Measure channel shift, too!
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Strategy #34: Clickstream Data
If your systems allow you to do this, be sure to
integrate online clickstream data with offline
purchases and online purchases.
Secret: Customers who buy twice a year visit
your website 6-8 times a year!
Secret: What the visitor looks at and where
the visitor came from influences e-mail.
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Strategy #35: Digital Profiles
The days of “Recency / Frequency / Monetary”
segmentation have passed us by.
Complex businesses with multiple channels
require a different style of segmentation.
Combine channels, merchandise, clickstream
data, and demographics to form what I call
“Digital Profiles”. Hint: They’re actionable!
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Cover The Board!
Save money in housefile marketing, allocate it
to the areas on the grid where your customers
are most likely to reside.
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Customer Acquisition In 2015?
Think ahead, five years from now. How will
you acquire new customers?
Use the strategies outlined in this presentation
to reduce marketing expense, then use your
savings to test your way into the future.
We can get to 2015, and we can innovate, too!
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Questions?
Kevin Hillstrom
President, MineThatData
Website: http://minethatdata.com
Blog: http://blog.minethatdata.com
Twitter: http://twitter.com/minethatdata
E-Mail: kevinh@minethatdata.com
Phone: 206-853-8278
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