Allocating the Sale

Mar 01, 2001 10:30 PM  By

Determining which channel drove the sale is key to continued multichannel success

Like true love, multichannel marketing is a wonderful thing. Multiple distribution channels enable customers to shop how and when they prefer, while enabling marketers to reap additional sales. But just as with love, multichannel marketing can be incredibly complex and staggeringly frustrating. Perhaps one of the biggest hurdles to multichannel success is properly allocating sales to the respective channel.

Typically, when marketers expand into another channel, they’re so thrilled about the sales rolling in that they don’t much care if a Web hit stimulated a catalog order, for instance, or if a catalog mailing encouraged a visit to the store.

“Strategically, our philosophy is `a sale is a sale is a sale,’ regardless of the channel,” says Gus Pena, spokeperson for Nashua, NH-based multichannel gifts and gadgets marketer Brookstone. “Making the sale and making sure the customer is satisfied are what’s ultimately most important to us.”

For that reason, the $319.6 million Brookstone doesn’t worry much about the source of the sale. “When we prospect, we prospect specifically to catalog customers to build our list and generate catalog sales,” Pena says. “If a prospect ends up walking into our stores or logging onto the Website, we might not be able to measure that sale as having been catalog-driven, so the results are a little bit skewed, but the prospecting was still a success.”

The importance of allocation Yet if you don’t know which channel your sales originated from, you won’t know how much to spend on customer acquisition per channel. Say you rent a list for a catalog mailing. You don’t see a significant rise in telephone and mail orders, so you assume the list was a bust. Those prospects who received the print catalog, though, may have been responsible for your dramatic increase in online sales the weeks immediately following the drop. But if you don’t assign credit for those Web sales to the catalog, you likely won’t rent that list again – and you risk missing out on additional Web sales.

What’s more, “each channel may have different average order amounts,” says Mary Ann Kleinfelter, vice president of sales and marketing for Nashua, NH-based educational products cataloger Delta Education. “So ideally you would want to calculate the cost to acquire an order by channel. It’s crucial in a multichannel world to keep a close eye on the cost you pay to acquire an order.”

Then there’s the importance of proper sales allocation for planning, operations, and staffing purposes. If you don’t assess what percentage of telephone sales are driven by a Web promotion, for instance, you may not have enough call center staff on hand.

“Catalogers’ need to allocate sales to different channels, such as the Web, catalog, retail, and sales force, exacerbates the problem of order tracking and sales allocation that used to exist mainly on a level of which mailing list or which catalog [edition] worked better,” Kleinfelter says. Now the stakes are higher. Instead of which mailing lists are working, she says, “it’s which channels are working?”

Making, not breaking, the code Most catalogers base their sales allocation reports on the cross-marketing of media, says Theresa Horn, senior vice president of list brokerage for Cos Cob, CT-based list firm AZ Marketing Services. For example, print catalogs typically include 800-numbers for orders, the company’s Web address for customers to go online, and if the mailer has stores as well, a listing of retail locations. Since catalogs are source-coded by list or media, mailers typically ask Web customers to key in their customer or source codes from the back of their catalog. “When compiling performance statistics, this lets the cataloger know that the sale was made on the Website but driven through direct mail,” she says.

Not all Web customers want to bother typing in their source codes, of course. And if you make it a requirement, you risk increasing your cart-abandonment rate. To get around this, some industry experts suggest amending your Web address with a suffix to reflect a special offer, such as “www.XYZcatalog.com/special offer.”

Another way to capture source information online is to make it worth the customers’ while to input a code. Kleinfelter suggests offering a discount that’s applicable only if the Web customer inputs the code. “The ideal is to have special products and promotions that are channel-specific,” she says. You could also offer in your print catalogs discount coupons to drive traffic to your stores; the coded coupons in the store registers would indicate the number of retail sales driven by the catalog.

For some catalogers, the solution might be as simple as pairing up recent store- or Web-buyers’ names to house file names. “Stores sometimes collect names from instore giveaways or other promotions, and then they match those names back to the house file,” says Katie Muldoon, president of Sugarloaf Key, FL-based catalog consultancy Muldoon & Baer. Matching names might then help the cataloger better understand if its catalog buyers are responding heavily to instore promotions.

Another way to capture which channel drove the sale is to use different item numbers for each channel or to add channel codes to existing item numbers. “A widget on the Web may have item number WB1234, and the same product in a catalog may have the number CT1234,” Kleinfelter says.

Brookstone, for one, has different item numbers for the same products in its different channels. “We also use key letters to track sales of the products that overlap in the Brookstone and Hard-to-Find Tools catalogs,” Pena notes.

Don’t rush ahead with this solution without doing a bit of research first, however. Assigning new SKUs by channel might be difficult to integrate into your catalog’s infrastructure, Kleinfelter warns: “You should check with your operations and IT departments before trying this technique, as it can wreak havoc” on your database.

Not making any effort to properly assign sales by channel can wreak havoc, too, on your business in the long run. Basing your prospecting, marketing, staffing, and operational decisions on faulty information and erroneous assumptions can erode your bottom line. On the other hand, the companies that invest in the time and research to allocate sales accurately are poised to make the most of all their multiple channels.

Many catalogers, particularly business-to-business marketers, not only seek to allocate sales by channel, but also by individual consumer.

“B-to-b catalogers have a great asset in that they enjoy pass-along among employees that consumer catalogers may not experience in mailing to a home,” says Mary Ann Kleinfelter, vice president of sales and marketing for educational products cataloger Delta Education. “But we have a tremendous challenge inherent in that pass-along: Who is the real buyer – the purchasing agent who placed the order, or the worker who specified it?”

“We may mail to a director of physical therapy,” notes Bill Demas, executive vice president of Anatomical Chart Co., a cataloger of medical charts and educational supplies, “but the orders might come from the purchasing department.”

What’s more, in the course of being passed along, pages may be torn out or covers ripped off – and with them, the source code that enables the catalogers to allocate the sale accurately. Demas says that doctors, for instance, frequently tear out the page for the item they want the office managers to order. “So capturing the source code is a challenge, since we don’t list the source code on each catalog page.” Skokie, IL-based Anatomical avoids this obstacle by assigning such orders a bulk media code. “We do our best on the phone to capture our customer type,” Demas says, “and in this case we’ll code the buyer as a doctor and give him a bulk media code.”

As for Web sales, Anatomical’s site doesn’t even ask buyers if they were directed to the site by the print catalog. “We count all online sales as Web sales,” Demas says, regardless of where the sale might have originated.

Katie Muldoon, president of catalog consultancy Muldoon & Baer, says sourcing problems are not uncommon among b-to-b catalogers: “Addresses are not always accurate, so the catalog goes to the wrong person in the first place.” What’s more, she says, many purchase orders come in without source codes, which makes it even more difficult to correctly allocate the sale.

Modesto, CA-based wholesale seed cataloger Harris Moran Seed Co. allocates sales to a geographic region rather than to a channel.

“No matter what the venue, whether it’s an order phoned in from the catalog or placed with a field rep, any sale that comes in is tracked by its geographic territory,” says Karen McGuire, manager of Western regional sales. “Our sales reps also work in product development, so it’s important for us to assess the performance of our product, and we do that by seed type and by region, not sales.”

While McGuire won’t disclose the company’s annual catalog circulation or sales, she says that Harris Moran has more than 70 dealers in North America. The company’s Website is not yet commerce-enabled.