Your new business requires the development of a marketing strategy for each of your selling channels
At 30,000 feet, all forms of commerce look pretty much the same. The essence of most profitable direct marketing models is the relationship between the cost of acquiring a customer, the lifetime value of a buyer, and the resulting return on investment.
Simple, right? Of course, at 30,000 feet, a tank often looks like an armadillo. As we get closer to the ground, the differences are magnified.
Each distribution channel has its own nuances as it reflects different customer attitudes, shopping desires and cost structures. And let’s not forget the opportunities unique to each channel. As a result, each channel requires its own marketing plan. Period.
But most multichannel merchants are not yet creating unique marketing plans and organizational structures to meet the needs of each channel. I conducted an informal, non-projectible survey of a few dozen medium- to small-sized catalogs involved in more than one channel (catalog, retail, Internet) and found the results to be surprising. It turns out the vast majority of catalogs have no formal written marketing plan – other than a circulation plan – from which they are directing their efforts. And not one multichannel merchant I spoke to had created plans for each channel.
I obviously didn’t speak with every multichannel merchant in the country, and I assumed (perhaps wrongly) that the larger companies are better planners. But this evident lack of planning may be telling us a lot about how little we really understand the differences between the channels and the users thereof. Do we know for a fact that a retail buyer acts similarly to an e-commerce shopper when making a purchase decision? Does the catalog shopper have the same mindset as someone behind a computer who is empowered by “shopping bots” and other friction-free ways of cruising for products?
The amount of specialization required to understand each channel’s options, business models, and reaction cycle time requires a separate plan for each. (And each plan, of course, has to be rolled into a corporate budgeting process.) But the components of the new marketing plans by channel aren’t radically different from the old plan. They simply recognize the channel differences and the differences in organizational needs. For example, your dot-com business needs a business development function to help drive traffic from related Websites. This function simply doesn’t exist in the retail and catalog businesses.
Where to begin
So where do you begin the marketing planning process? While the marketing objectives defining catalog, retail, and e-commerce plans are similar, the strategies and tactics required to achieve the objectives in each channel are quite different.
For example, traffic-generating strategies for your online effort are very different from the mailing strategies created for the catalog plan. Similar differences hold true in the areas of customer retention, media, creative, and maximizing average orders. That’s why each channel should be responsible for its own plan. All of the channels should share information and follow the same steps, but the general approach to the plan will be unique to each channel.
– Conduct a situation analysis
The first step in creating a marketing plan is to conduct a thorough situation analysis, or a summary of the competitive environment, industry growth, segment growth, and other data that will help paint an accurate picture of the business situation in a specific channel at that specific time.
Pure play e-commerce sites (e.g., those without a brick and mortar or catalog presence) frequently compete in a different – and larger – space than catalog and retail companies. For instance, a print catalog selling camping supplies competes directly with other camping catalogs, and to some extent, local camping stores. But a pure-play Website of camping products competes with other pure-plays, as well as catalogers and retailers that also have sites, and manufacturers that may have started selling direct to the consumer online. It’s not just that there’s more competition on the Web. An online customer may find a tent he wants on your site, and then may search for a better or cheaper version elsewhere in cyberspace. These differences need to be noted, quantified, and attended to in the marketing plan.
– Identify your marketing objectives
You’ll need to define your target market and brand positioning for your niche and set goals. The objectives for each channel need to be specific and measurable. For example, generating 2 million unique visitors to your Website on a monthly basis is a clear objective. Creating a “really cool” site to attract the target audience is a vague, immeasurable, and fluffy objective.
– Develop a business strategy
For starters, you’ll need a strategy for acquiring customers. This is your circulation plan for the print catalog, and traffic-building techniques for the Website and stores. You’ll also need to develop strategies by channel for:
– Creative
– Media
– Customer retention
– Maximizing average order values
– Run a financial recap
You have to develop a total budget for each channel, encompassing the cost of acquisition, anticipated lifetime value, and the estimated marketing return on investment. You then have to convert your marketing costs to gross profit dollars.
These numbers will vary by channel. Catalog objectives generally identify response, average order values, revenue-per-catalog, in-the-mail costs, gross profit contribution, and other key metrics responsible for a successful catalog business model. E-commerce marketing objectives tend to identify traffic, conversion rates, average order values, cost-per-prospect, revenue, gross profit contribution, and the like. And retailers look at sales per square foot, comparable store sales, traffic counts, and average order values.
During the planning process, marketing people from each channel need to get together and identify the synergies created by colaborating to achieve one another’s goals. I’m a big believer that established cataloger/retailers are better leveraged to dominate their respective online niches than are pure play e-commerce companies. Leveraging circulation, traffic, brand, creative, operations, and other resources not only creates competitive barriers to entry, but it also provides a platform from which you can dominate.
Bottom line: Integrate your efforts to ensure you realize a maximum return.
Don’t be a poseur
If customer demands, motivations, and purchasing decisions vary by channel, we clearly need to develop different mindsets for how we market to each segment. By failing to approach each segment differently, we risk wasting marketing dollars, increasing the overall cost of acquisition, and outright embarrassing ourselves.
Embarrassing ourselves? How so? I’ll give you an example. But first, a confession: After 15 years in the catalog business, I have become an avid online shopper. It’s faster, more efficient, and always available. Without mentioning names, I am a loyal customer of the largest catalog in Dodgeville, WI. A few months ago, I placed an online order with this company for a pair of shoes (Yes, even consultants who work out of their homes need to cover their feet on occasion, if only to get the mail and the occasional hit of Vitamin D from the sun). Being a frequent online shopper, I expected to have my order confirmed within minutes of placement. But it didn’t happen. Instead, three days later I received an out-of-stock notification. Via a snail mail postcard!
So what was the real message I received? This particular merchant was still thinking like a cataloger. It had retained a print catalog mentality. Paper. Ink. Inkjet messages. Postage. In the digital venue, shoppers have no patience for snail mail. They sniff out poseurs like bloodhounds scent out a fox. This small, well-intentioned action left me believing that this organization was online only because it had to be, but it still viewed itself as a traditional print catalog merchant.
I don’t mean to dump on large Wisconsin catalogers. This happens to be one of the best in the business. I am using this as an example of what happens when some catalog people act like new media merchants. It ain’t pretty. And that’s why I am suggesting that each channel have its own plan. Its own staff. Its own budget. And its own initiative. That’s not to say that all functions must be kept separate by channel. It makes sense to share many functions across channels, such as photography, fulfillment, credit card clearance, and much more.
With the Internet, speed is everything. The medium is very reactive and cannot function on the same cycle as other marketing channels. But don’t let the emphasis on speed prevent well-thought-out planning. Solid planning is still required for marketing success. So is hard analysis. It just needs to be faster and more flexible in its structure so that you can change quickly and react faster to market conditions.
As I indicated earlier, marketing success is all about reducing the cost of acquisition and increasing the value of customers over time. In the future, there will be two kinds of catalogers: Those that understand and embrace multichannel marketing as an opportunity to build a business as never before, and those who become part of our collective memory.
If you are a multichannel merchant, you’ll need a robust and very flexible database capable of tracking customers within and across all available channels. In fact, this type of database will be crucial to your continued growth.
As more homes become connected to the Web, more of your prospects and customers will begin shopping online. I’m sure you’re already feeling the effects. But most catalogs with an online presence can’t – or don’t – match the online sales data back to their catalog customer base or prospect mailing plan. Consider this to be the direct marketing equivalent of mailing catalogs without key codes!
And here’s what happens. Results from a particular list you’ve been mailing successfully for years begin to fall below your marginal breakeven. Without matching online revenue to catalog results, it is impossible to know whether the list is becoming less effective or if more of its shoppers now prefer to buy online. Most catalog marketing departments – whose job security is based largely on catalog results – will opt to pull the list from the mailing plan. But matching names and addresses with the catalog database, or capturing the key codes when taking a transaction online will enable you to place the sales and order information in the appropriate acquisition bucket and perform the proper database analysis.
Thus, if your online shoppers are responding to a catalog mailing, you must figure out how to induce them to enter their catalog key code into the online order information screen. For instance, some marketers are trying a “how did you hear about us” prompt on their Websites. The company might offer users that press the “catalog” option a $5 discount on a purchase for entering the key code from the catalog address label.
It’s still tricky to try to get key codes from Web customers, but if you don’t, your future prospecting will begin to look pretty bleak. More and more catalog customers will opt to shop via your online store, which will reduce apparent revenue per catalog to the point that you’ll drop many of your prospect lists and begin mailing fewer names. This will not only punish catalog sales, but will also result in a decrease in online revenue because fewer would-be customers will be pushed to your site by a catalog mailing.
In addition to tracking and attributing revenue properly, your new database must be capable of handling some heavy lifting. It needs to keep track of what is bought by channel and even what kind of navigation is taking place online. Generally, online behavior is not coincidental to offline purchases. For example, a shopper who spends a lot of time in your shirt department online is probably a better shirt-buying candidate offline than the average shopper. You can target online and offline promotions geared at this behavior – if you can manage the information flow.
Further, the same shopper frequently buys certain product categories online and others offline. Categories that don’t require customer service input are much more likely to attract online shoppers than more technical or size-specific products. Ergo, your database needs to measure these variances and your marketing department – online and offline – needs to react accordingly and target the offers.
You can typically react to online database information much faster than with print catalog marketing. Putting together specially paginated catalogs and mailstream timing is tough for all but the largest and most sophisticated catalogers. But with opt-in email, collaborative filters (recommendation prompts based on behavior), personalization techniques, and other technologies available to online marketers, a well-oiled database with some smart database managers will become the lifeblood of your efforts. As a result, most well run e-commerce companies include an inhouse database manager who works closely with the online marketing team to develop contact strategies. Don’t forget to include this person in the online planning process up front.
Finally, use your database to let your customers know about each channel you offer. I’m not talking about simply mentioning your Website address on your catalog cover, but asking for e-mail addresses in the order-taking process across the retail and catalog channels. E-mail your retail customers to notify them of a retail event. E-mail your catalog customers when they place a catalog order to let them know the order shipped. Integrate your efforts to ensure that you realize a maximum return.