I don’t know, you tell me

When Steve August joined Brookstone in 2001 as its vice president of customer marketing, source allocation meant matching a purchase back to a specific catalog mailing.

No more. Brookstone now uses fractional allocation, attributing a sale to multiple channels. And it isn’t the only firm to do so, although it may be unique in crediting 70% of its online sales to catalogs. Some merchants would say that’s too generous.

Worse yet, skeptics argue that there is no sure-fire way of allocating sales back to every source.

Brookstone started doing fractional allocation in 2003, working with its service bureau Datamann. Coremetrics, the Web analytics company, helped it find out how customers got to its Website. Did they enter through search engines or affiliates, or did they simply type “www.brookstone.com” into the browser’s navigation bar?

From there, the firm assigned a fraction to all the touch points that led to the sale. This has helped it to better direct its media spending, among other things.

Brookstone changed to co-op database Abacus in January, and now uses that firm’s ChannelView ME allocation product.

How does the mail channel end up getting so much credit?

If the purchased SKU appears in a catalog mailed in a specific time frame, it will get a larger share of the credit. But the allocation will change if the item also showed up in other targeted messages, or if the customer came in via a search engine.

Whatever the source, the firm also adds every new customer to the catalog circulation list. And this has helped it grow its list to three times its size in 2001.

Why? The company has discovered through testing that Web buyers who regularly recieve catalogs stay loyal to the brand.

“You could be a chronic Googler, but the catalog is still going to drive the behavior,” August adds. “We can eek a little more out of the Web buyer by sending a catalog.”

But not everyone agrees that a catalog should share the credit when the buyer comes in through a search engine.

One such critic is Travis Seaton, circulation director at consultancy Lenser. He cites a customer who was mailed a West Marine catalog, then searched Google for a Danforth Anchor chain and wound up on the West Marine site.

Why assume the catalog was the spark? It could still be sitting in a pile of unread mail, Seaton argues.

He adds that fractional allocation is only appropriate if the business is large and has a sufficient number of touch points.

But others remain in August’s camp.

“As general rule, it makes sense to allocate to the catalog if the person received it, and then ordered on the Web within six to eight weeks of receipt,” says Jim Coogan, president of the Catalog Marketing Economics consultancy.

August adds that some firms may be spending too much on search and not understanding the investment. “I love it when we hear someone say their SEM is doing great and their catalog is not doing well,” he says. “There’s a relationship between the two, and they may be doubling their Internet sales.”

For example, the firm might report “$1 million from search engines and $1 million from the catalog,” he says. “And yet they have $1.8 million in total sales. How is that possible if they are doing source allocation correctly?”

August continues that catalogs tend to stand out. “I get 200 to 300 e-mails a day at work, and another 20 to 30 when I get home,” he says. “But how many catalogs am I going to get in my mail box?”

The Victorian Trading Co. also credits both the online and offline channels. “We have a lot of customers ordering items from the catalog, then they see our closeouts [online] and buy some of those,” says the gifts cataloger’s CEO Randy Rolston. “You can’t penalize the source that brought the person there in the first place, so you’d weigh it evenly across the board.”

He adds that you can put an infinite number of SKUs online, but you are limited by how many you can fit in your catalog.

It’s the same with other online media.

Let’s say a customer who gets your catalog is also signed up for regular e-mail alerts. Any sale resulting from them would be allocated totally to that medium.

But if the buyer clicked through and purchased another item, you may want to split the credit, attributing half to the catalog.

Coogan’s rule of thumb? Look at the response rate and figure out what percentage of the sale e-mail should get.

Source codes

And what about those older allocation tools — like source codes?

They’re useless online, according to Seaton. He estimates that only 5% to 10% of all Web customers will enter them. And when they do, they tend to mangle them.

“The problem is that they can’t read the numbers,” Seaton says. “We spent more time trying to weed out source codes and translate them.”

The alternative? Promotional codes accompanied by discounts or free shipping.

Coogan counters that source codes can show the proportional response between different segments and enable you to read the results early in a mailing before matchback reports are available. He adds that you should look at your daily sales report to measure the increase from a catalog drop. You can adjust circulation on your next mailing accordingly.

This makes special sense if you are using bouncebacks, direct mail, e-mail, alternative advertising, space ads, and other messages in tandem with the catalog.

And don’t forget to match your retail store sales with your catalog mailings.

“If I’m circulating the catalog for what’s best for my direct sales, I’d drop my mailing out of my trade areas,” Seaton says. “It will look like they’re performing lower in the trade areas, and it hurts both arms.”

Not everyone gets this, as Seaton found out in 1999 when working for another multichannel retailer. He was managing the catalog circulation, and the retail team refused to kick in any money. The reason: They felt catalogs weren’t driving incremental sales, and that customers would come into the stores no matter what. So they decided during a slow period not to mail any catalogs to the trade areas.

Bad move. Comp sales fell by 30% in trade areas, and management agreed to shift marketing dollars from retail to catalogs.

“Sometimes you have to find out the hard way,” Seaton says.

Their mistake? Thinking only of their own channel. “They are getting better at it, but there are $250 million companies still running that way, making mailing and marketing decisions based on each individual silo,” Seaton says.