Classroom Direct’s spring/summer catalog touts free shipping on its cover, but the small print specifies it’s only for customers who place orders of $79 or more online. The school supplies marketer, a division of Appleton, WI-based School Specialty, uses the promotion to lure customers across channels during peak seasons when its call center is inundated.
Indeed, free shipping for Internet orders is largely regarded as the most effective online promotion: More than two-thirds of online marketers offered it during the fourth quarter of 2002, according to Chicago-based research and consulting firm The E-tailing Group.
Free shipping of Web orders has been proven to boost sales in the short term, but its effect on long-term relationship building is not necessarily as promising, experts say. And when evaluating how effective any given promotion is, some caution that far too many marketers miss the big picture when they go for offers with an immediate payoff but questionable long-term value.
In fact, despite widespread use of Internet-only promotions, marketers are beginning to realize that they can be a mixed bag. While some companies swear by them, others are concluding that they can undermine the business in the long run, hurting customer relationships and tarnishing a company’s image.
All for one, one for all
Classroom Direct’s blatant effort to drive business online makes many marketing experts cringe. “If I’ve been a loyal customer and traditionally ordered via the catalog, why should my loyalty or value be diminished by my now being told the only way I can get the discount is by changing how I shop,” says Ernan Roman, president of Douglas Manor, NY-based Ernan Roman Direct Marketing. “It violates the customer equation.”
Ken Burke, president/CEO of Multimedia Live, a Website development company in Petaluma, CA, agrees: “The danger is the catalog customer feels you’re taking something away from him, especially if he doesn’t have Internet access. It could cause some negative customer sentiment.”
But the promotion accomplishes Classroom Direct’s goal of “relieving seasonal pressure in our call center,” counters Vickie Bruner Nagy, vice president of merchandising and marketing at the Birmingham, AL-based company. In addition, she points out, if a print catalog customer complains that he doesn’t have access to the Internet, “our call center can enter the order on the Internet for him so that he can achieve the savings. We’re not trying to punish anyone or damage our relationship with the customer. The customer always comes first.”
But Roman suggests another solution: Why not strive to better serve your customers in all channels by hiring additional call center staff during peak seasons? Bruner’s response: “We’re not a 120-item apparel catalog. The knowledge base required to be an efficient call center associate is a really high hurdle for us.”
Nevertheless, Roman suggests, many marketers are too quick to push customers online. “Marketers are making a huge mistake in saying, ‘If someone buys by e-commerce, now he’s an ‘e’ customer. Let me just push him into ‘e’ only.’”
That strategy is based on a false premise, Roman contends. Because the labor costs of taking a telephone order are an estimated 30%-50% higher than those for accepting an online order, companies “have the misguided notion that the Web is less expensive,” he says. “But it becomes a defeating strategy if you manipulate or penalize the customer.” In other words, if an online-only promotion loses you a heretofore loyal catalog customer, you should factor it in as a cost of online orders.
With growing evidence that the same customer who shops online today may shop by catalog tomorrow and at a store next week, many experts advocate treating the customer the same in all channels. What’s more, customers who shop in more than one channel tend to be the best customers, spending more than others, notes Christopher Kelley, an analyst at Forrester Research in Cambridge, MA. So multichannel marketers would be wise to offer as many shopping opportunities as possible, he says.
Bombay Co. and Restoration Hardware are two multichannel marketers that embrace consistency in promotions. “Our strategy is to mirror everything we do in the brick-and-mortar stores in the other channels,” says Matt Corey, vice president of e-commerce operations for Fort Worth, TX-based Bombay Co. The home furnishings marketer offers the same promotions in all three channels. And Corey notes that generally speaking, a good promotion is as effective in one channel as another. “If you don’t make it really, really easy for customers to shop across all channels all you are going to do is upset them. Why do that? Why make differences?” he asks.
Corte Madera, CA-based Restoration Hardware, which also sells home furnishings, shares that view. “We give the same discount in all channels,” says director of marketing Dave Glassman. “If you don’t, you really hear about it from the customer.”
A tweak here, a tweak there
Some marketers, however, say that channel-specific offers are acceptable to customers if they’re communicated in a sensitive manner. For example, using e-mails to drive online sales can be highly effective without upsetting customers in other channels, because those retail-only or telephone-only customers most likely won’t see the offer.
Like Classroom Direct, personal care products marketer Garden Botanika offers free shipping on Internet orders during peak periods. But the Redmond, WA-based company advertises the offer only on the Web and through e-mails, not in the print catalog, says marketing manager Teresa Bergstrom Rodriguez. “Honestly, I don’t know if I would feel comfortable [advertising online-only promotions in the catalog], because we have an older female customer base, some of whom may be uncomfortable with the Web,” she says, though she adds that the catalog does drive customers to the Web for clearance items.
Garden Botanika so far has made it a policy to honor a promotion offered in one channel in all channels no matter where the customer learned about it, but that can make it difficult to track response to a given promotion, Rodriguez says. As a result, the company doesn’t have a firm grip on which promotions work best in which channels. “It’s conceivable that in the future, customers will have to give source codes to get the promotion,” she says.
Catalogers in general are a little more willing to be inconsistent in promotions across channels because they better understand customer segmentation than retailers, suggests Multimedia Live’s Burke. “Catalogers get the fact that the Web is a special channel and you can do things there that you can’t do in print,” he says.
Likewise, sometimes a retail promotion won’t translate to direct media. Northbrook, IL-based Crate & Barrel, for example, sometimes runs special retail-only events, such as upholstery sales, that won’t work online, says John Seebeck, direct marketing business director at the kitchen products and home furnishings cataloger/retailer. But Crate & Barrel will use e-mail announcements to drive customers to its stores for the retail-only sales.
So far, at least, customers don’t seem to mind the channel exclusivity: One of the company’s first e-mail promotions of a retail-only furniture sale drew a 50% lift in retail sales within a week. Seebeck won’t say what impact e-mail is having on retail events now, but he confirms that it has become a regular component of the company’s promotional mix. Crate & Barrel also uses e-mail to announce store grand openings and to invite couples to attend bridal gift registry sessions on Sunday mornings before stores open to the general public, Seebeck says.
Using one channel to promote another can be effective, but it’s important not to confuse the customer, notes Elaine Rubin, chairman of Shop.org, an arm of the National Retail Federation in Washington. “The big drive today is for consistency, because what most retailers want to do is create a relationship regardless of the channel.”
It’s a switch in philosophy from a few years ago, Rubin notes. “In the past, there was a ton of customer confusion with customers saying, ‘You mean this is only for the Website? I thought I could use it in the store,’” she says.
But veteran catalog marketer Omaha Steaks, for one, will “tweak” a promotion for a particular channel. “We have to remember that a retail store is not a catalog, and a catalog is not a Website,” says Todd Simon, senior vice president of the Omaha, NE-based food marketer. “You have to keep in mind the unique qualities of each channel while also providing a consistent brand image to the consumer.”
Omaha Steaks’ gift premiums, such as a free barbecue thermometer fork with orders received by a certain date, tend to work best with catalog customers who remember them from years past. But the company offers other, quantity-driven promotions, such as special pricing and volume discounts, through e-mails or in stores. “We don’t think it’s good customer service to run out of stock,” Simon says, so the company is less likely to promote excess merchandise in the catalog, which is produced months in advance of delivery. Conversely, the flexibility of e-mail makes it ideal for last-minute promotions, Simon says.
The e-mail variable
The immediacy and cost-efficiency of e-mail is one of the biggest reasons marketers offer different promotions for their Web customers than they do for their print catalog customers, notes Jim Coogan, president of Santa Fe, NM-based consulting firm Catalog Marketing Economics. “We’re seeing a big difference in the frequency of promoting,” he says, with Web customers being contacted more regularly than catalog buyers, thanks to e-mail.
For example, Duluth Trading Co. sends e-mails as often as once a week, something it couldn’t afford to do using print. While many of the e-mails play up the same merchandise and promotions as the catalog, the Belleville, WI-based cataloger of woodworking tools isn’t afraid to try different offers in different channels.
For example, Duluth Trading tested a “buy one, get one free” offer in its catalog at the same time that it promoted a “buy two, get one free” offer online, says creative services manager Colleen Gatterman. (The company is still running the two promotions, so “it’s too early to tell how they’re doing,” she adds.) Often, its Web promotions involve a trivia question to generate interest. “Customers who are getting e-mail in general expect a little more,” Gatterman says.
Along the same lines, The Sharper Image, which generally offers the same promotions simultaneously in its stores, in its catalog, and on its Website, acknowledges that e-mail subscribers often get a few extras, such as a small gift with purchase, a gift certificate good toward a future order, or free shipping. “We want to make it worthwhile to be on our e-mail list,” says spokeswoman Mollee Madrigal.
Petaluma, CA-based Illuminations, a cataloger/retailer of candles and home accessories, offered the same Mother’s Day promotion — a special offer on a scented jar candle set and 20% off orders of more than $100 — in all three of its channels. But online customers were greeted with one extra goodie: free shipping on Internet orders only. Though Illuminations promoted the offer only on the Web, if customers heard about it and wanted to take advantage of the offer over the phone, the company would honor it through the call center.
So maybe Illuminations’ promotions aren’t the same across all channels after all. But that inconsistency is less of an issue for the company than was the fact that free shipping on Internet-only orders has been known to spur double-digit Web sales increases for the company, says Clay Lingo, senior director of direct channel sales and operations.
Free shipping works equally well for the catalog and the Web, Lingo says. But Illuminations is much more likely to offer free shipping online for several reasons. For one, so many other online gifts merchandisers offer free shipping that Illuminations feels it has to do the same online to stay competitive. Also, the lower online order-taking costs makes it easier to justify free shipping online. Or as Lingo says, “It takes some of the sting out of the promo from my side.”
Currently about 80% of the company’s orders are coming online, Lingo says, up from 60%-70% two years ago. That shift is largely due to the company’s willingness to use e-mail promotions, he adds, whether it be for a special value, to preview new merchandise, or for free shipping. “E-mail is a pretty important driver,” Lingo says. “It drives near-term demand for the Website, and we depend on it to make our weekly and monthly sales plans.”
Here, there, and everywhere
Nonetheless, consultant Ronan suggests that relying on e-mail to communicate online-only promotions will eventually generate an image of the Internet as highly promotional.
“It translates that ‘e’ as a discount vehicle, a bargain-basement medium,” Ronan says. “And that’s a terrific mistake because it diminishes significantly the value of e-mail for important communication. Long-term, that’s a self-defeating strategy.”
Indeed, some companies that have aggressively tried to drive customers online are back-pedaling from that approach. Last year, Golfsmith’s retail customers received in their shopping bags cards good for 10% or 15% off any product purchased online. Not this year. The Austin, TX-based company still puts cards offering a percentage off the next purchase in retail shopping bags, but the offer is good for purchases in any channel.
“We thought a lot about this, and it was a realization within the company that we had been cutting off a percentage of customers,” says Bob Hermansen, the golf equipment marketer’s director of e-commerce and direct marketing. “We wanted to let the customer decide how to shop.”
Golfsmith is now focused on marketing efforts that can work in all three channels. “There are so many ways people interact with you that it’s best to have a neutral footing,” Hermansen says. “Work back from the customers, and let them decide.” The last thing you want, he adds, is customers to feel that they have to check your Website before they place a catalog order to make sure they’re not missing a deal.
Wilmette, IL-based Ann Meyer writes frequently on business topics for the Chicago ##em##Tribune##/em##, among other publications.
E-mail vs. Print
While the benefits of e-mail are beyond dispute, so much focus on e-mail and the Web can detract from the print catalog, which some argue is the most effective promotional tool of all.
Research from New York-based services provider DoubleClick shows that e-mail offers drive one-third of online purchases. Yet half of multichannel shoppers input catalog codes when shopping online. And research from co-operative database services provider Abacus, a division of DoubleClick, suggests that a catalog campaign can boost the average online order size by at least 30%.
“In aggregate, the catalog drives Web demand,” says Paul Imbierowicz, vice president of product management at Abacus. He contends that 80%-85% of catalogers’ online transactions can be traced back to the print catalog in some way. “The catalog is like the promotional driver for the Website,” he says.
— AM