Mining Data

It is July 4 on Madrona Island, so it is time for the big Coho Bay Independence Day Parade. This year, 67 local merchants, politicians, and non-profit groups are scheduled to parade through the three-block downtown corridor. The Fetzer Footwear float is #1 in the pecking order, so the picture illustrates the view that Lauren and I have as we lead the parade. Not surprisingly, Lauren is wearing a beanie cap on this 57 degree morning, but does not have her iPod Touch with her today. Lauren is munching on a hot dog she purchased at a stand hosted by the Lion's Club ($4), stationed at Madrona Bank (a bank that did not receive TARP money).

We begin the 1mph drive through the three-block business district in Coho Bay.

Lauren: "Can you believe the crowd? This might be the biggest turnout we've had in the fifteen years I've been doing this."

Kevin: "I'm freezing. Does it ever get warm here?"

Lauren: "July 5 is the unofficial start of summer here on Madrona Island. June is often called 'Juneuary' because the temperatures are in the low 60s and there is plenty of drizzle to go around. We'll be in the 70s and sunny in just a few days. Now be honest, would you prefer that it be 98 degrees with a dew point in the mid 70s, like it is in Philadelphia today, or would you prefer this?"

(Lauren adjusts her driving gloves, gloves she's wearing because it is cold out, not because she is having trouble driving the giant hiking boot that is the Fetzer's Footwear entry in the parade).

Lauren: "Here, take a handful of Tootsie Rolls and toss them to the kids. Make sure you don't throw them at the dogs, dogs can die if they eat chocolate."

Kevin: "Alright."

(I toss a handful of Tootsie Rolls at a throng of enthusiastic children. Many of the Tootsie Rolls bounce off of the skulls of the children, prompting disapproving looks on the faces of the adults lining the business district here in Coho Bay).

Kevin: "Why exactly are you paying me to ride a float in the Coho Bay July 4 Parade?"

Lauren: "What do you think the ROI is of paying $150 to have this float in the Independence Day Parade, Kevin?"

Kevin: "Probably zero."

Lauren: "That's right. I doubt that a customer in Charlotte cares that we are in this parade. This community depends upon us, Kevin. We spend $150 to be in the parade, five dozen other organizations pay $150 to be in the parade, and all of a sudden you reach critical mass. Now the parade is big enough to draw a big crowd. The crowd is big enough that you can't be a resident of Coho Bay and miss the parade, it's what everybody will talk about. These people could spend this cold morning at home watching a hot dog eating contest on ESPN, or they could be out here being part of their own community."

Kevin: "Even if it is 57 degrees with a wind chill in the low 40s in early July."

Lauren: "That's exactly why you are out here. You'll be able to tell the story of how you needed to buy a hot chocolate from the Booster Club. And not surprisingly, the Booster Club benefits as well."

Kevin: "So everybody is dependent upon each other in a way, right?"

Lauren: "Exactly. Everybody played a role in making this parade a success. Did you see entry #27 ... that guy is riding a unicycle while carrying an America flag ... that's it ... but he paid his $150 and he's participating. Now let me ask you a question, Kevin, how do you separate out his impact in making this parade a success from the impact our float is having, and how do you separate out the impact of the Booster Club selling hot chocolate and the Lion's Club selling hot dogs for $4?"

Kevin: "You couldn't. They all contribute to the success in an undefined but dependent manner."

Lauren: "This is where you fail, Kevin. You always want to parse our business into tidy little components. You want to demonstrate that the Tacoma Mall store drives 3,000 visitors to the website, you want to prove that search drives customers to a landing page the yields a 9% conversion rate."

Kevin: "I don't think I'm the only person who wants to do that. My entire industry works hard to allocate success to the marketing components that created success."

Lauren: "Will you please wave at the folks, Kevin? And smile, too."

Kevin (waving): "Alright."

Lauren: "But how do you truly know which marketing component created the success? You've done this work with my business, you'll tell us that 32% of an order came from paid search, 22% from affiliate marketing, 8% from our blog, 12% from our Facebook presence, 9% from YouTube, 4% from having a regional store presence, and 23% was organic in nature. Well guess what? We hired a consultant before you, and gave her the same task. She told us that 23% of an order came from paid search, 9% from affiliate marketing, 13% from our blog, 17% from our Facebook presence, 10% from YouTube, 0% from having a regional store presence, and 28% was organic in nature. Who is right, Kevin, you, or the consultant we fired three months ago?"

Kevin: "Well, obviously, there is a level of confidence associated with each number, each number could vary by a certain percentage. It's possible we both are right."

Lauren: "Exactly. And if both of you are right, and your numbers differ that much, then why bother going through the exercise? I mean, honestly, your paid search budget will vary dramatically if you trust your number over her number. Pay attention to your vendor partners, Kevin. The really good ones willingly acknowledge that the percentages vary, and that there isn't a right or wrong answer."

Kevin: "Must be fun to be a person in the marketing department who reports to you, huh?"

Lauren: "Why, because I challenge assumptions? I mean, honestly, the numbers are garbage, Kevin. It's fool's gold. Here's what you do. You have a marketing budget, and you trust your marketing staff to spend it in the most efficient way possible. Their job is to deliver a 15% ad-to-sales ratio. They can spend the money anyway they see fit, they can experiment, they can try new things. But at the end of the year, the ad-to-sales ratio had better be 15%, or their budget will be cut."

Kevin: "A lot of folks would say that you have dramatically oversimplified a process that is inherently complex, a process that requires complex mathematical algorithms."

Lauren: "Look at this parade, Kevin. This isn't Independence Day, this is 'Dependence Day'. Every person in the community, the businesses, the hot chocolate, the police who make sure this goes off without a hitch, the street cleaner who scoops up the Tootsie Rolls that you errantly tossed at innocent children, they all depend upon each other. This event only works if everybody plays a role. Who would ever go through the process of allocating credit to each person, then prioritize next year's parade based on who contributed the most credit to making this a success?"

Kevin: "So you're saying that all marketing activities ultimately depend on each other in some way. Does that mean that you have to execute all marketing activities, do you have to be multichannel as the pundits would say?"

Lauren: "Heck no! That guy on the unicycle probably won't be here next year. That doesn't mean that the parade will be a failure next year, somebody will enter and will juggle bowling pins with mini-flags on them and that will capture the fancy of the crowd. Every channel and every marketing activity has a season, if you will. Seasons change. I'm looking for my marketing team to adapt and change, while keeping the ad-to-sales ratio under 15%. As long as it is under 15%, they can spend more. When they go over 15%, I throw the hammer down on them. And I know your next question. Yes, I trust that my marketing folks are actively measuring the ROI of everything they do. This isn't like they are throwing darts and making guesses, Kevin."

Kevin: "And yet, people love tradition. They come to this parade because they know that the Fetzer's Footwear boot float will lead the pack through the business district."

Lauren: "People are odd, Kevin. They say they like tradition. But go watch the video of this parade from 1992 on YouTube. You had the baggy pants bunch dancing to MC Hammer songs, they aren't here today and nobody misses them. You had an entry from the local organic farmers who were upset with President Bush for saying he hated broccoli. Heck, there were a bunch of kids out there walking around with pumpkins on their heads, they literally carved out pumpkins and wore them during the parade, they called themselves the 'Pumpkinheads'. Who knows what that was about? And they haven't been seen since ... imagine if they did that today and it got on Facebook and they couldn't get a job because they were the 'Pumpkinheads'? Anyway, I digress. All I can say is that all of that stuff is gone. What people care about, Kevin, is that the 4th of July parade still happens every year."

Kevin: "So in the case of Fetzer's Footwear, nobody cares about the marketing tactics you use. All people care about is that you have quality, stylish merchandise at a fair price. Your merchandise is like the parade. The styles you offer and the marketing you use to offer the merchandise to the customer, all of that can change."

Lauren: "Exactly, you get it! Now get off the float, it is time for us to talk with the press."

Kevin: "The press? What press?"

Lauren: "The Madrona Monitor, it's been the voice of the islands for more than eighty years."

Kevin: "I thought people were odd, that they didn't care about tradition?"

Last week, we explored 16 Multichannel Myths. We probably could have explored 216 Multichannel Myths if we wanted to. This week, we flip the coin ... we look at 16 reasons why we should be optimistic.

Reason For Optimism #1: E-Mail Is Free

• Contrary to what the experts say, e-mail is, for all intents and purposes, free. And that's a big deal. E-mail is a craft that is fundamentally broken, built on the hopes of free shipping and 20% off of your order, built on the myth that great subject line content equals customer engagement. Almost nobody I speak with does any type of segmentation or personalization or customization. Free money is laying all over the floor, folks, just go pick it up!

Reason For Optimism #2: Social Media Is Free

• Contrary to what the experts say, social media is, for all intents and purposes, free. And that means that there is an endless world of experimentation here. Unfortunately, few people are doing any real experimentation. It's really easy to tweet the following message ... "dresses on sale, 20% off, they're cool on a 100 degree summer day". Be honest, nobody cares, and the 10% of your file that does care only care about you when you give them a promotion. You want a full price, loyal customer, right? This is a fertile place for experimentation. Try something new, different, innovative, it is free!

Reason For Optimism #3: Mobile Mobile Mobile

• We'll look at marketing in 2020 and we'll be floored by all of the ways that mobile changed things. Here's a hint: We create the future. Test, test, test, test, test. Try things. An Executive told me this spring that ... "It is too expensive to be on the bleeding edge and to fail, it's better to sit back and wait to see how the marketplace shakes out, then, you join in." Alright. It's not like you have to spend $2.4 million dollars a month on bleeding edge stuff, just try something, learn, and adapt!
  

Reason For Optimism #4: Third Party Opt-Out Services

• Notice how their growth stalled? I was wrong. It turns out that there aren't 200,000,000 people sitting around waiting to beat catalogers over the head with a 500 page mailer. Let 1.4 million people opt-out, use your website and marketing tools to attempt to have a relationship with the 299,000,000 folks who are left. Just because some folks express displeasure in a loud manner doesn't mean that there are a lot of folks who feel the same way.
  

Reason For Optimism #5: Search

• Search is almost universally under-leveraged. The fusion of social/mobile/search will yield infinite ways for the customer to pull you into their world. And it turns out that, in today's world, for many of us, search is an important leg in the offline/online/offline conversion process. See, many folks still watch television or listen to the radio or read newspapers ... and then they go to Google to do research before placing an offline purchase. Search plays an important role in this offline/online/offline conversion process.

Reason For Optimism #6: Website Conversion

• Sure, I poo-poo the evanescent "big green button above the fold vs. small blue button below the fold" testing that folks like to do. That being said, every one of us multichannel folk are leaving a 10% sales increase on the floor by not doing the hard work necessary to make sure our websites matter to the customer/prospect. Assign a team of folks to dive into website analytics and fix the darn thing. And here's another hint: Website conversion is more important than 'branding'.

Reason For Optimism #7: A Postage Increase Is Looming

• This is great news! Stick it to those who try to trap you in the past by encouraging you to market to customers using old-school techniques that are becoming more expensive and less responsive. Work your butt off to figure out how to be relevant through other marketing programs, print ads, online marketing, television, local radio, innovate, try something new. Stop being a victim! And if you want the USPS to see what the future looks like when you keep raising prices, ask them to look no further than the music industry ... a $30 concert ticket became a $60 concert ticket and then a $90 ticket and then a $150 ticket and then nobody bought tickets and now concerts are being canceled right and left because of poor attendance.
  

Reason For Optimism #8: Humans

• I've said it a million times ... in 90% of my projects, contact with a human being increases customer lifetime value. Instead of paying a co-op six cents for the right to force paper into the mailbox of a customer who has never purchased from you, why not earn the right to call your customer and ask what you can do to make life easier for your customer?

Reason For Optimism #9: Talent

• Back in the early 1990s, it was common for a company hiring a garden-variety manager or director to make mortgage payments or even to outright purchase the home of a new employee, as a perk to get the employee to work at a new company. Imagine if you did that today, imagine if you made it clear that you cared so much about talent that you were willing to get talented people out of a housing mess? You think you couldn't find talent that way? There are countless talented people who are trapped in dead-end jobs that they can't escape due to their housing situation. This is a rare time in history to pluck talent from the competition by making a life transition easier. Oh, I know, I can hear the complaints now, the HR folks saying that this isn't fair to existing employees or that it is just too expensive. Fine. Stick to your current process, and keep lamenting the fact that you can't find talent.

Reason For Optimism #10: Feedback

• The secret, of course, is to filter out the fanboy feedback and focus on what the average customer is saying. And when the average customer isn't saying anything, there's a problem, because what you're doing is so irrelevant to the average customer that there is nothing to talk about. But there's gold in the comments from average customers. On Twitter, I don't get too excited when the Twitterati re-tweet something I say, but I do pay really close attention to anything that the average follower re-tweets ... that's when you are making a difference (good or bad). It's free feedback, you don't need to conduct a focus group in order to obtain intelligence. So mine this stuff, folks!

Reason For Optimism #11: Smaller Is Better

• If you are an old-school cataloger, there has never been a better time to try small page counts with targeted merchandise to various segments of your housefile. Get past the efficiencies that the printers and post office provide to keep you focused on big page counts. Run the tests yourself, you, too, may find that you can get 88% of the demand on 27% of the pages.

Reason For Optimism #12: Needs

• Take the implosion of the economy and a shredded 401k statement and loss of jobs and a 40% drop in home value and you have customers who have real, significant needs. Why not try to solve problems instead of offering discounts and promotions? Why not test same-day delivery of merchandise in a small town? If your warehouse is in Omaha, why not truck merchandise by van from Omaha to Lincoln, and use Lincoln as a test market to show what could happen if you fill a customer need within 6-12 hours? Imagine the stunned look on the face of the customer as the "Widgets America" van pulls up in front of the home at 6:25pm to deliver product that was ordered at 9:15am? Figure out a way to solve a need, and test a unique strategy to fill a need, then measure whether customer retention rates actually change. What do you think is going to be more effective, moving the medium-sized blue button above-the-fold, or stunning the customer with same-day delivery via the "Widgets America" van?

Reason For Optimism #13: Old-School Still Has Staying Power

• Did you know that more hours of television are consumed today than at anytime in history? Sure, there are folks out there who are watching cats get stuck in cotton candy on YouTube, and yes, that tends to get all of the hype. Might the old-school advertising methods offer a way to get your message out to folks, given that the old-school medium still matters to just about everybody but the 1,294 pundits who make a living by promoting new technology?
  

Reason For Optimism #14: Merchandise

• This may come to you as a surprise. Customers don't buy from you because you have an affiliate marketing program, or a brilliant online retargeting program, or because @gumby49 tweeted something about your brand. Customers buy from you because of the merchandise you sell. And in the past ten years, as technology became the focus, we lost our desire to sell merchandise. Now, we think that the standard phillips screwdriver will sell better if we just get the message out there on Facebook. Come on!! Merchandise is ultimately all that matters. Customers will create buzz about great products on social media. Social media can't do a thing with mediocre merchandise. Create something truly innovative or fashionable or something so needed by the customer that the customer can't possibly do anything but speak kindly of your merchandise. We've lost our way, we don't have a passion for merchandise. Honestly, take a look at the image below ... this is what was presented to me above the fold. Show me where the passion is? Show me that this merchant cares about this item. This merchant cares more about selling clicks via Google than they care about explaining to me why this item is better than the items I can find at any of 1,500 competitors. I'm telling you, there is more fertile ground to be found in having passion for merchandise than there is in social media and website optimization put together.
  

Reason For Optimism #15: Best Practices Are Just Waiting To Be Violated

• When I arrived at Eddie Bauer in 1995, the best practice for selecting names for catalog mailings was via RFM. You used recency, frequency, and monetary value to decide who to mail ... nobody even questioned the methodology. I implemented statistical models, and boom, another million in profit dropped to the bottom line. I recall employees who said "I thought this was just a one-time thing, you mean we're going to continue to do this?" Yes, we're going to continue to do this ... you see, a best practice had just been proven to not be a best practice. Instead of being one of the sheep, blindly following best practices off the cliff of relevance, why not innovate, or even better, why not just do something goofy, just to see what might happen? Anytime something is a best practice, it means that the best practice is ready to be challenged. Your job is to challenge the best practice, not to blindly follow it.

Reason For Optimism #16: Hard Work

• If you are in the music industry, do you think it is fun to not be able to sell music via any semblance of tonnage anymore? Absolutely not. This is where the musician hits the road, and starts doing the hard work necessary to make a living. This is where we are in the multichannel marketing world. We were sold a lie. We were told that if we simply adhered to a multichannel marketing approach, everything would be fine. Well, nearly every pundit was wrong, weren't they? Our businesses are, by and large, less healthy today than a decade ago. In fact, many of us have sales declines of 10% to 30% over the past three years ... how did multichannel marketing work for you? Now is the time to do the hard work necessary to dig out from the rhetoric of the past decade.

Ok, it is time for your feedback. What makes you feel optimistic about the future?

We like to analyze customers on the basis of new/existing behavior, or the channel that the customer prefers.

Often, an analysis by price point purchased is important.

I like to pull every single purchase transaction for the past twelve months, and then divide the items into five equal groups.

• Items of $0.01 to $4.99.
• Items of $5.00 to $12.99.
• Items of $13.00 to $19.99.
• Items of $20.00 to $39.99.
• Items costing $40.00 or more.

Next, pick the categorization out of the five listed above that the customer buys the most items from.

Finally, analyze conversion rates for customers by prior price preference. Or analyze the performance of various items on your website based on prior price preference. You're going to learn interesting facts about your customers!

Jack Middlebrook from FindTheBest.com dropped me a line to tell me about the site, and specifically the matrix it generates for comparing teams playing in the World Cup.

FindTheBest describes itself thus:

an objective comparison search engine that allows you to find a topic, compare your options and decide what's best for you. Ultimately, FindTheBest allows you to make faster and more informed decisions by allowing you to easily compare all the available options.

The site provides a table of entities and attributes, similar to Google Squared.

The site then allows you to select a number of rows, which it then pivots on to provide a readable comparison set.

Dear Catalog CEOs:

One CEO told me how he responded to a trend in his market by designing and sourcing and delivering product to his customer in just two weeks.

Another CEO tells the merchandising team to invest energy in the assortment for Fall 2011.

Which business leader has a sense of urgency?

There are two components of modern catalog marketing.

The first component requires merchandising of the catalog. This process requires long lead times, thorough planning, and integration with the remainder of the business.

The second component is very different. The second component of a modern catalog business requires urgency. It is a process where the Merchandising and Marketing teams respond to trends and behaviors in real time. There is nothing wrong with the development of a product that debuts online, with support from e-mail marketing.

If you visit a media website, you'll notice "Breaking News" ... whatever content was scheduled to run is bumped for something that is happening at this moment.

Similarly, every modern catalog brand can respond to "what is happening right now". Not everything needs to be fully integrated with the catalog. Cultivate a web-based sub-business based on urgency, based on reaction to the marketplace.

When I hear that 80% of online sales are attributed back to the catalog in a matchback, I know that the business is not focusing on building an online business, instead, the business uses the online business as an order taker.

Urgency is a differentiator, it is a form of customer service that is not practiced often enough.

Today, Lauren Fetzer, CEO of Fetzer's Footwear, asked me to attend her Executive Meeting to share stats on a mobile/iPad app hear team launched in May. As I approach her office, I notice that Lauren is listening to her iPod Touch.

Kevin: "What are you listening to?"

Lauren Fetzer: "I'm Not In Love, by Will to Power. A nicely updated version of the 10cc classic, don't you think?"

Kevin: "Alright".

Lauren Fetzer: "So that you know, we're having a bit of a kerfuffle over our iPad/Mobile app. Your data suggests that existing online buyers are switching to the app, causing website visits to decrease and causing e-commerce sales to decline, correct?"

Kevin: "Correct."

Lauren Fetzer: "And your data suggests that total sales, when you add e-commerce to app sales, are essentially flat, correct?"

Kevin: "Correct."

Lauren Fetzer: "So Connie Simpson, our CFO, is going to wonder why we waste time on shiny new toys that do not deliver incremental revenue. Penny Parker, our marketing leader, will advocate pursuit of new marketing channels. Bart Cox, our Store Executive, will probably be highly disengaged."

Kevin: "Alright".

Lauren Fetzer: "Let's go, then!"

We enter the Executive Meeting Room, where a lively discussion is taking place about why South African soccer/football fans are compelled to make noise with the vuvuzela.

Lauren Fetzer: "Good morning, everybody. I've asked Kevin to attend today and share his analysis of our iPad/Mobile app, but first, Penny, let's go over sales results from yesterday."

Penny Parker (VP, Marketing): "The website was down 6% to last year, our mobile app went bonkers again, so the online channel in total was up 8% to last year. Retail was +1% yesterday, led by our Redmond store at +11%. Alderwood brought up the rear, at -16% to last year."

Lauren Fetzer: "Bart, what the heck is going on at Alderwood, their results get worse every single day?"

Bart Cox (VP, Stores): "Don't ask, I've got it under control. And I could use some marketing help to drive traffic into the store."

Lauren Fetzer: "Kevin, can you explain what is happening between the website and the app?"

Kevin: "Sure, you've now had your iPad, Android and Blackberry apps active for a full month. During that time, apps are now up to eight percent of total online sales. What is interesting is the composition of customers who use the app. Buyers using the app are 88% existing buyers, in fact, they are among the best customers you have. In addition, overall customer retention rates have not changed in the past month, and purchases per buyer have not changed in the past month. Clearly, a portion of the file shifted their allegiance from the website to the app."

Bart Cox: "My store managers tell me that customers are using the apps to identify merchandise that does not appear in our stores, the customer is literally using the app to buy online product while standing in a store. Our store managers don't like that, because it takes a sale away from them."

Connie Simpson: "If our apps didn't increase total sales, then why are we even bothering with them? Lauren, you've always preached that we need to focus on merchandise, not on channels. Well, an app is just a micro-channel, and if it isn't adding incremental customers or isn't creating incremental sales, let's just prune the channel and save expense. We can't keep focusing efforts on all of these shiny online channels that seem to add complexity but never seem to add sales."

Penny Parker: "This isn't a channel issue, this is a customer service issue. If a customer wants to shop via a mobile app, let her shop that way, who are we to tell her how to shop?"

Ashley Zimmerman (VP, Merchandising): "But the app is a terrible shopping experience. You get this boring little screen with a handful of choices. I want the customer to see my full assortment when she visits the website, I don't want for her to be given micro-choices, her shopping experience should be like an all-you-can-eat buffet!"

Bill Bledsoe (VP, Logistics): "And this takes work, folks. My team has to divert resources to our apps, we're diverting resources away from the website. The website still drives more than 90% of our online sales, but we're spending 25% of our resources right now on our mobile apps ... we tweak them, we optimize them, we respond to customer preferences. It takes a lot of work, and we're not gaining incremental sales."

Bart Cox: "Store managers hate 'em ... they take sales away from the store. Maybe that's the problem at Alderwood, Lauren, the app is killing the store, huh?"

Lauren Fetzer: "So Connie, how would you advise us on making investments in new channels? I mean, if we follow your logic, we could conceivably never launch a new channel, just because the new channel would cannibalize sales from the existing channel, right?'

Connie Simpson: "I don't think it is that simple. Take paid search. We found that paid search cannibalized half of our organic search results. But we ran a profit and loss statement, and we learned that the paid search investment made up for itself in eight months, so on an annual basis, we were making money. That's a decision that makes fiscal sense. If our apps are simply cannibalizing existing sales and we're spending developer resources on something that isn't driving incremental sales, then I'm not confident we're making the right decision."

Penny Parker: "But Woodside Research says that by 2015 we'll see 42% of all online sales happening in the mobile channel. If we're not there, we're not learning."

Ashley Zimmerman: "Did Woodside Research predict the economic collapse? What do they know, they're always wrong, and we pay them. Geez."

Bart Cox: "Store managers hate apps."

Ashley Zimmerman: "I'm just saying that if apps takes away from the merchandising experience, then I'm not in favor of our apps. We need to present the entire merchandise assortment to the customer."

Penny Parker: "But what about the customers who don't care about the entire merchandise assortment, what about the customers who only care about the deal of the day? All they need is the app, the hop on at 11:00am and see the deal of the day and they buy that specific item. Those customers don't need a full website experience, do they? Doesn't anybody care about the customer experience?"

Lauren Fetzer: "Here's where I come out on this, folks. We've always been willing to cannibalize our own sales. We did it with paid search, which sounds crazy, right? I mean, we pay for sales that we could get for free, but we did the math, and the long-term math supported the investment. We did it with e-mail, right? We found that when we don't send e-mail campaigns, we still get 55% of the sales. But we did the math, and the math supported the investment. We even do it in retail, right Bart? We opened our Redmond store knowing full well that it would cannibalize Bellevue. So we're going to make an investment in Mobile, folks."

Ashley Zimmerman: "But the merchandise experience isn't great."

Lauren Fetzer: "Ashley, don't focus on what the experience is today, focus on what the experience should be, and then put pressure on Bill's team to make the experience be one that a merchant can be proud of."

Connie Simpson: "Do we care that app users aren't visiting the website? I mean, they're missing out on the entire brand experience, right?"

Lauren Fetzer: "I don't care. We need to learn how customers interact with this form of media, and then we need to adapt to it. Make something happen, folks. Go out there and invent the future, don't act out of fear."

Bill Bledsoe: "But my development team is being stretched thin. With 25% of the development team focusing on apps, the remaining folks are forced to deal with an ever-increasing number of website issues."

Lauren Fetzer: "We are not backing off of our pursuit to invent the future. It is obvious that our customers love the app, or our best customers wouldn't all be switching to our apps, right?"

Penny Parker: "Absolutely!"

Lauren Fetzer: "So we move forward, we learn, and we adapt."

It's likely that you are already reading The Ad Contrarian. One of the most interesting things mentioned on this blog is the concept of probabilities ... that there is nothing that is certain in advertising/marketing, nothing works for everybody all of the time. In other words, when you follow a best practice, there is an "x" percent chance that it will work for you, not 100%, but "x" percent.

Nowhere is this more appropriate than in the world of marketing that we exist in. Our world is full of myths, myths based on activities that worked for one company, but cannot work for all companies.

Myth: E-Mail marketing has the best ROI (return on investment).

• This statement, of course, borders on being ridiculous. Even if you manage e-mail better than anybody in our industry, you might pull down $0.25 per recipient, generating $0.10 profit. Your old-school catalog will generate $3.00 per recipient, generating $0.60 profit. If you could only mail one piece, would you choose the e-mail campaign, or would you choose the catalog? The e-mail marketing community will take the $0.10 profit, divide it by the $0.002 it costs to send the e-mail, and claim that the 50 to 1 ROI ratio is far better than the 1 to 1 ROI ratio found in catalog marketing. This isn't even a myth, this is just plain silly! Go with the activities that deliver the most profit dollars, period.

Myth: Multichannel customers are the best customers.

• No statement has been more damaging to the craft of catalog marketing than this statement. This statement is used by the establishment to maintain existing best practices. Instead of experimenting with the future, the statement is used to keep marketers entrenched in the past by demonstrating that customers love both old-school marketing and new marketing techniques ... strongly suggesting that without old-school marketing, the new techniques won't work. It turns out that the best customers do everything in "multiples" ... they buy from multiple merchandise divisions, multiple stores, they buy multiple items per order, they buy during multiple seasons, they buy from multiple sub-brands. Catalog marketers missed a decade of innovation by chasing a myth that you could somehow generate more multichannel buyers by sending more catalogs. Be honest, did that strategy work for you??

Myth: E-Mail and Social Media are the Dynamic Duo

• Ugh. We continually see situations where the incumbent technology creates a myth, a myth designed to tie it to the technology that is destroying the incumbent. Hint: All channels have strengths, and all channels have weaknesses. Leverage e-mail based on what it is best at, leverage social media based on what it is best at, there's no need to link channels together to demonstrate the benefits of the incumbent channel.

Myth: Brands utilizing Social CRM are reaping rewards.

• Exactly what rewards are they reaping? (and why do we constantly see the phrase "reaping the rewards" these days ...how exactly are we now defining 'rewards'?). CRM is in a fight for survival ... we've been hearing about one-to-one marketing and CRM for decades and in most cases we've been blessed with endless phone trees (push nine to speak to a live person). One-to-one marketing is being obliterated by social media, customers get to choose what they want, not brands. Be wary of anything that combines the phrase "Social" with the phrase "CRM" ... it's a marketing and technology pitch not supported by the desire of a customer to be managed by a computer.
  

Myth: Bricks 'n Clicks are the future of marketing.

• Embarrassing. Who convinced direct marketers that you must have stores, and who convinced direct marketers that customers love stores? It might be the banking industry, who loves it when a direct marketer takes dollars that would have been spent generating sales tomorrow (catalogs and e-mail and search) and then funnels those dollars to interest payments to banks to cover new store loans. Bricks 'n clicks is marketing pap. If you are an operator (i.e. a person who actually tries to grow brands, not a consultant), you know that the majority of e-commerce customers will buy from a store, but the majority of store customers won't buy from e-commerce. This means that the store becomes the black hole of your business, it is a place where the rules of gravity change! Your customers eventually change behavior, become less likely to buy online, and have their entire experience dictated by the store experience. Banks who lend money to brands with stores benefit, I'm not sure that the direct marketer benefits.

Myth: Customer Centricity is the key to increased profit.

• Notice that customer centricity is seldom mentioned by businesses that provide great customer service. Customer centricity is often met with other buzzwords (one-to-one marketing, CRM). If you are fighting to make your business more 'customer centric', you are a noble and bold individual fighting a culture that doesn't care about treating customers as nicely as you believe customers should be treated. In those situations, no CRM solution makes up for the inaction of your co-workers.
  

Myth: Bricks 'n Clicks are the future of marketing.

• This topic deserves to be addressed twice! Explain this to me, folks ... explain how Amazon and Zappos and eBay and Netflix do so well without stores, while Borders and Blockbuster struggle to survive with integrated multi-channel strategies? There are always successes (i.e. Apple stores), and there are always failures (The Sharper Image, with integrated multi-channel campaigns). Everything is a probability, not a certainty. Have product that customers crave and outstanding customer service and you'll be successful no matter how you choose to market to customers.
  

Myth: Customers love interacting with brands on social media.

• Ask yourself a question ... how many brands do you like to interact with via social media? Do you love to tweet that creepy Burger King character and say "Hey, Creepy Burger King Dude, nice commercial yesterday?" Be honest with yourself, this is a confection of a marketing audience that wants the global explosion of friend-to-friend communications to extend to brand-to-customer interactions. Sure, some stuff works (like when a customer needs help and you provide great customer service via social media or when a customer wants 10% off plus free shipping) ... but for most social media marketing tactics, it is one of those cases where probabilities come into play, you have one brand that does something and succeeds, but there is only a 10% chance of everybody else doing it and having it work for them, even if they execute perfectly. Social Media for business is largely a roulette table, you put your money on the number "14", somebody spins the wheel, and then you hope that you win.

Myth: Customer Engagement is the key to unlocking profit in a one-to-one world.

• I once invited a group of co-workers to a party I was hosting at my home. One of my co-workers came with his entire family, walked in the kitchen, and grazed from the assortment of food platters, then left. One might posit that this family was engaged, they spent about ninety minutes at the party, they didn't "bounce from the home page" like other folks who came to the party and left ten minutes later. For some reason, we have this fascination with metrics that do not correlate with metrics that matter. The metric that matters, of course, is "profit" ... and when we can't find any innovative ways to increase profit, we move to other metrics we believe are loosely correlated with profit, namely, "engagement". If you can prove that there is a direct cause-and-effect relationship (i.e. customer visits, then customer buys, then customer becomes engaged, then customer becomes highly loyal only because of the engagement), then I'll buy the customer engagement argument. Otherwise, customer engagement is fool's gold, fun to measure, fun to theorize about, but uncorrelated with profit.
  

Myth: E-Commerce is the future.

• If e-commerce is so amazingly wonderful, then why does retail still account for 9 in 10 of all purchases, and has accounted for 9 in 10 of all purchases for decades? E-commerce is the logical extension of the catalog marketing model ... and we're likely to see mobile become the logical extension of the e-commerce business model.

Myth: You'll be out of business in five years if you don't jump on the social media bandwagon.

• Compare Comcast/Dell with Apple. The former brands are social media darlings, the latter is not. Which of the three brands is known for innovative products that customers crave? Hint: Great products create social media buzz ... social media buzz cannot sell average products.

Myth: Integrated campaigns are the secret to success.

• The literature is filled with marketing pap about how integrated campaigns increase response. Here's a question for all of you ... if everybody is focusing on integrated campaigns and working so hard on improving response to individual or integrated campaigns, then why has the annual customer retention rate (the % of last year's customers who purchase again this year) remained flat or decreased for the past decade? All we're doing with integrated campaigns is shifting demand from non-campaign periods to integrated campaigns. We don't measure the right things ... we measure campaign response when we should be measuring annual customer behavior. Annual customer behavior seldom changes much.

Myth: Businesses fail because decisions are made by the highest paid person's opinion (HiPPO).

• Spend five minutes with the Web Analytics crowd, and you'll be inundated with stories about how facts are continually ignored by business leadership. Horsefeathers!! Often, the story told by the analyst is incomplete or incoherent. Stories must have actionable outcomes. Stories have a better chance of success if data from non-web-analytics platforms is incorporated into the story. Hint: Executives respond to data stories when the Executive is likely to benefit from a strategy outlined in the story.

Myth: If you had the right metrics posted on a dashboard, Executives would make better decisions, and the business would be more successful.

• For some reason, we now believe that if we just display the right information to business leaders, then business leaders will make better decisions. We can have all of the dashboards in the world showing the number animals being killed in the Gulf of Mexico by the big 'ole oil leak, but that doesn't mean that the problem will be fixed any faster or cleaned up any quicker.

Myth: If you continually test and optimize your website , your business will significantly outperform the competition.

• We keep reading about tests that yield a 42% increase over the control. If this is true, and we then implement all of the positive test results, then why aren't businesses doubling or tripling in size all the time? Testing and optimization works when you are testing strategies that have a long "half-life". Testing whether to use a large green button or a small yellow button might yield a 31% increase in one strategy, but that strategy has no half-life, meaning that customers don't truly care about the strategy on a long-term basis, it was simply something that was interesting for a day or two.

Myth: Make cultivating your social media presence a ten minute task.

• This was the headline in a trade journal daily e-mail I received this week. Hint: I have written over 1,500 blog posts and have tweeted more than 3,000 times in the past four years. Nothing is easy, folks. Why are we so infatuated with easy solutions to wretchedly hard problems? Be willing to do hard work. Be willing to do innovative work. Be willing to fail.
  

Time for your thoughts ... what are some of the marketing and analytics myths out there that are routinely being debunked?

If there is one segment of customers you want to track every single day, it is the first time buyer with a purchase recency of 0-3 months.

Why 0-3 months?

Almost all of my Multichannel Forensics projects indicate that this is the most important window in the development of a loyal customer.

• If the customer does not visit your website during this timeframe, you may be at risk for losing the customer.
• If the customer does visit your website on a periodic basis over this three month timeframe, then pay close attention to what the customer is doing ... is the customer visiting pages on the website that suggest the customer is moving closer to a loyal relationship?

Tailor your offline marketing activities to growing the customer relationship among this customer segment.

Closely analyze the online behavior of this customer segment, and benchmark the behavior against prior years, to see if habits and behavior are changing.

0-3 month first time buyers are a critically important customer segment to track.

Dear Catalog CEOs:

If there is one theme that permeates all catalog clients I visit, it is a love for the craft of cataloging.

This love comes across in the way that the catalog mind thinks. The CEO based in San Jose thinks about an app as a way to engage a customer, and thinks about what needs to be in the app to make sure that the customer purchases something.

The catalog CEO thinks about the catalog as a way to engage a customer, and thinks about the content in the catalog as a way to make sure that the customer purchases something.

The online channel is a direct reflection of the craft that Management loves. When the merchandise is aligned with the catalog, when the catalog order form is still featured on the home page, when catalog request opportunities are actively promoted on the home page, you know that Management loves the craft of catalog marketing.

Sometimes, those who love the craft of catalog marketing poo-poo new technology. Catalog marketers have long had an adversarial relationship with Online marketers, and vice versa. Catalog marketers take swipes at Social Media, often for good reason, because the channel is nothing short of feckless at driving sales for so many brands employing the craft. Catalog marketers take swipes at Mobile, often for good reason, because the channel is in the embryonic stages of upstaging traditional e-commerce and is not yet, for most marketers, accounting for a reasonable share of net sales.

And, of course, the Online, Social, and Mobile folks constantly take swipes at Catalogers, considering the craft an artifact of a time gone by. All of this is pointless ... what matters is whether customers love the merchandise we offer, right?

It's easy to have a discussion about loving the craft of catalog marketing, online marketing, social media, or mobile marketing. All four camps have a preference for one form of marketing.

If you want to do something interesting, ask your Management team which craft they love more:

1. The craft of producing catalogs.
2. The craft of merchandising.
3. The craft of customer service.

Too often, folks love the craft of producing catalogs. This is where we find our downfall.

When management loves selling merchandise, the business hums.

When management loves providing outstanding customer service, the business hums when customers love the merchandise.

When management loves a marketing channel (catalogs, website, search, re-targeting, e-mail, social, mobile, and countless other channels) ... well, that result yields mixed results.

Fifty Multichannel Forensics projects across more than thirty catalog/retail brands clearly indicate that a love for merchandise and customer service outweigh a love for marketing channels. Love the craft of selling merchandise via outstanding customer service!

A reader of this blog pointed me to this interesting project Matthew Somerville which displays the live position of trains on the London underground railway system. It is a fun visualization, and a great example of free data and dev ecosystems coming together. I wonder where this could go product-wise? Analytics for train problems? delays? Many of the tube lines have trains running at a frequency such that one just hops on the next one that arrives. I'm guessing that it might be useful in a late night, mobile scenario where optimizing dynamically over connections could make a big difference to getting around.

There are a few visualizations of the World Cup knocking around.

• Clearly and Simply writes about using Tableau to visualize historical data.
• Andy Kirk has a pretty good list of a variety of approaches to both historical and match data.

As football, compared with many other games popular in the US, is often a low scoring affair, I'm interested in those visualizations that can help me understand if the result was due to consistent skill, or if it was rather a matter of luck (and poor refereeing ;-) With this in mind, I quite like the New York Times approach. The summary statistics can help get at the differences between the teams.

However, ultimately, this is not much more than a table of data points. I don't see anything in the timing that helps me understand anything other than Italy's desperation towards the end of the match.

I suspect that their hear map view of the location of play might be of interest if it could be anything more than the brief time slices that it currently provides.

 

Today, I am meeting Lauren Fetzer, the CEO of Fetzer's Footwear, to put crab pots in the ocean. The Dungeness Crab that are just off the coast of Madrona Island in Northwest Washington are among the most delicious you'll ever find.

I walk up to Ms. Fetzer, who is listening to tunes on her iPod Touch.

Kevin: "What are you listening to?"

Lauren: "Said I Loved You, But I Lied by Michael Bolton. Don't ask about my opinion of men."

Kevin: "Alright".

Lauren: "Hop in the boat, we're dropping off crab pots this morning."

Kevin: "It's 10:00am, you're not at work."

Lauren: "I work fifteen hours a day, seven days a week. If I want to drop a few crab pots in the ocean at 10:00am, I'll do it. And my employees can do it, too. They aren't slaves. You have to have a life. This isn't that Human Resources pap about work/life balance where you get to have three weeks of paid time off in exchange for forty-nine weeks of servitude. You can go do something at 10:00 in the morning."

Lauren fires up the boat, and we're on our way, patrolling the northern coast of Madrona Island, dropping crab pots in the ocean.

Lauren: "How do you compete with Zappos?"

Kevin: "Why do you ask?"

Lauren: "Our Executive team grapples with this issue every day. Zappos has a better selection of branded shoes than we do. They deliver shoes faster than we do. They use their scale to generate four cents of profit on every dollar, whereas our scale prevents us from leveraging that business model. So, ultimately, we can't compete with them, they've already won."

Kevin: "You sound defeated."

Lauren: "Quite honestly, it is the opposite. I think your job as a leader is to acknowledge what the competition does well, and then ask yourself if you can compete with the competition. If you can't compete with them, then you work around your competition instead of blowing straight through them. You probably watched 'Enemy of the State', where the Gene Hackman character talks about the advantages of being small. He talks about not challenging a large competitor at what they do best, you harass the large competitor by doing what you do best when you are small."

Kevin: "You have proprietary product, right?"

Lauren: "And that is a starting point. Our proprietary products sell 45% better than our branded products sell. You can't buy our proprietary products on the Zappos website. This is the problem with branded product. Eventually, somebody aggregates enough branded product that they become the resource, and when they are the resource, customers gravitate toward it, and customers talk about it. That's a swirl that Fetzer's Footwear cannot compete with. So why would I ever want to compete with that? We will carefully analyze what is selling in the branded world, and then create products that our customers have to have."

Kevin: "What about your stores?"

Lauren: "Well, we're experiencing the demise of the Mom and Pop store, aren't we? Again, how does the Mom and Pop store fight with the aggregation of branded product? It can't. So the only way we can survive is by having some branded product to complement our proprietary product. And then, the secret is to tell a story about our proprietary product that is so compelling, so unique, so persuasive that customers have no choice but to share our story for us."

Kevin: "That sounds risky."

Lauren: "Well that's life, Kevin. Should I go the conservative route and just let the business bleed a slow and painful death? Because that's what will happen if you compete with the monsters. If you were a department store, you'd never try to compete with Macy's or Penney, that's a recipe for disaster. You have to do something different, right?"

Kevin: "Seems like it."

Lauren: "So when you look ahead, and you put a five year plan out there, your marketing team and your merchandising team must have a compelling story to tell, one that causes the customer to be willing to purchase merchandise at a healthy gross margin. Apple has a story to tell, well, actually, their customers tell the story for Apple. Zappos technically lets customers tell the Zappos story, with employees facilitating the discussion. Amazon doesn't have a story, they have scale and price and availability. Best Buy doesn't have a story, they have scale and price and availability. Starbucks doesn't have a story, they have scale and price and availability."

Kevin: "How do you tell the story?"

Lauren: "I like the way Crutchfield tells a story. Their people appear to be more knowledgeable than anybody else, to me that's their story."

Kevin: "So you can do that via Social Media?"

Lauren: "Oh please. What a waste. Be honest, Kevin, do you want to be friends with that goofy Burger King clown figure from the TV commercials? Do you want to be friends on Facebook with that goon? Nobody, I repeat nobody, wants to be friends with a brand. You provide great customer service via Social Media, and then other people in Social Media talk about you. That's how you do it, Kevin, you don't create a bunch of campaigns to grow friend counts. Social Media is fool's gold as promoted by Social Media experts. You don't sell stuff by 'joining the conversation'."

Kevin: "So how do you sell stuff via Social Media?"

Lauren: "You don't. You just have to be excellent, and you have to tell a compelling story, one that people want to share via Social Media. I think you do that, you compete, by having your merchandising team craft the story. Your merchandising team must truly believe in the product, and must be absolutely compelled to share their passion with everybody on the planet. When you do that, and you do it well, and your marketing team is 100% behind the merchandising team, that's when you have success. Over the next five years, that's where we will find our way to growth. We have to have a vision for telling a merchandising story, and we have to have unique product at a healthy gross margin coupled with great customer service. That's the only way we are going to compete with Zappos online and with folks like Nordstrom in stores. You can't compete on price and assortment."

Kevin: "Ok."

Lauren: "You do this with your consulting. You don't consult on optimizing conversion rates, or in the catalog world, you don't figure out how to create a better co-op. You tell a unique story and you offer products that aren't available anywhere else and you let other people spread your story."

Kevin: "Gotcha."

Lauren: "Now let's go pick up yesterday's crab pots and have some lunch!"

Advertising channels go through an interesting life-cycle. The early stages of an advertising channel are full of hype. We've seen it with Social Media ... Geocities is the future, no, wait, MySpace is the future, no, wait, Blogs and Blogging are the future, no, wait, Second Life is the future, no, wait, Facebook is the future, no, wait, Twitter is the future, no, wait, Foresquare is the future ... you get the picture.

Far more interesting, however, is the opposite end of the spectrum, when channels die.

Now, obviously, channels do not die. People still place orders via fax or phone, people still purchase stuff after watching a television commercial on ABC, CBS, or NBC.

But channels are forced to morph into something else when faced with the challenges brought on by new technology ... channels that were once prominent become much, much less prominent. Let's explore the process incumbent channels go through, because the process is quite interesting!

One might call the first stage "self evidence". Sales stop growing in the incumbent channel, and it becomes self evident that something is wrong. Business leaders all know, intuitively, that the limits of the channel have been hit. Think catalog marketing in 2000, think independent music stores in 2002, think e-mail marketing in 2007, think e-commerce in 2012 or 2013 when mobile commerce truly takes off.

The second stage is "complexity". Pundits respond to inquires by business leaders by suggesting that the incumbent channel is inherently more complex than it used to be. In catalog marketing, this is represented by the "matchback", the concept that you need advanced analytics to be able to understand that the incumbent channel is still as relevant as it ever was. For e-mail marketing, the shift was to advanced segmentation and CRM techniques ... all of a sudden, you needed trigger-based e-mail campaigns based on real-time data, or you needed multiple versions of campaigns to improve productivity. In any case, one finds that sales still don't appreciably grow, even if you manage complexity appropriately ... this is a key signal, folks ... sales still don't grow after responding to complexity in an appropriate manner.

The third stage is "integration". When sales fail to grow, in spite of the addition of "complexity", the punditocracy suggest that the incumbent channel is the "peanut butter" to the "jelly" of the new channel. In catalog marketing, you are told that print is the channel that drives the customer online or in stores ... without print, you cannot make the online channel or retail channel work. In e-mail marketing, we're being told that e-mail and social media are the dynamic duo, we're being told that e-mail marketing is actually the original "social media channel", you are being informed of new terms (i.e. Social CRM) that aren't likely to resonate with actual customers. You'll begin to see a lot of case studies that "prove" that the incumbent channel is responsible for the growth of the new channel. The case studies, unfortunately, are seldom funded by the folks managing new channels, the case studies seem to come from those managing the incumbent channel. When you observe case studies coming from the incumbent channel, you know that the incumbent channel is going through "integration".

The fourth stage is "cannibalization". This is the realization that the incumbent channel is dying, that maybe the incumbent channel is truly responsible for driving sales in new channels, but eventually, the customer changes behavior and switches to the new channel ... the new channel is fully cannibalizing the incumbent channel and the pie isn't growing, meaning that sales in total are essentially growing at the rate of inflation. This is a painful stage, this is the stage that the e-mail marketers are about to enter, this is the stage that, over the next five years, the e-commerce folks will go through as mobile marketing fused with sparse elements of social media plunder traditional e-commerce. This stage is important, because it causes Management to make significant changes to advertising budgets, leading to the fifth stage.

The fifth stage is "contraction". In this stage, Management prunes budgets, actively allocating resources to new channels. This hastens the demise of the incumbent channel. Catalog marketers know all about this stage. This stage leads to many unfavorable consequences. In "contraction", business partners (like the USPS) make the unfortunate decision to increase prices in response to a contracting market, further hastening "contraction". Contraction is painful, most business leaders try to avoid contraction at any cost, diving into "complexity" and "integration" in an endless drive to avoid "cannibalization". In most cases, "contraction" is unavoidable.

The sixth stage is actually quite positive. This stage is called "acceptance". The business leader realizes that the incumbent channel is now well positioned among niche audiences, resulting in profitable opportunities across smaller but loyal customer segments. It is here that the incumbent channel finds a purpose, a reason for being. Think "AM Radio", for instance. As better technology cannibalized music, "AM Radio" morphed into a talk radio channel --- clearly a channel that didn't have the market share that other channels had, but a channel that had a purpose, a reason for being. Once the incumbent channel moves into "acceptance", the incumbent channel becomes profitable and re-emerges as relevant across a smaller but loyal audience. Management prunes the incumbent channel of unprofitable market share, allowing the incumbent channel to achieve a new (but smaller) level of prominence.

Mind you, the pundits will say that AM Radio is dead ... and the pundits are right to an extent ... except when it comes to the millions of folks who listen to Coast to Coast AM each night during the overnight hours ... to those folks, the channel that is technically "dead" is highly relevant!

The process of going from "self-evidence" to "contraction" is painful. Arrival in "acceptance" is actually quite positive. Our job is to capitalize on the profit among customers who will always love the incumbent channel, while shifting dollars to emerging channels among other customers.

The six stages are:

• Self-Evidence
• Complexity
• Integration
• Cannibalization
• Contraction
• Acceptance

Catalog marketing is about to enter the "acceptance" phase of channel evolution driven by e-commerce. Catalog marketing in 2015 will be significantly smaller than catalog marketing in 1995, but has the potential to be significantly more profitable and relevant among the niche that loves that form of shopping.

E-Mail marketing is stuck in "integration" and "cannibalization", with painful days ahead as Social Media and Mobile drive the implosion of traditional e-mail marketing. According to the Pew Internet Project, only 11% of teens use e-mail daily to send e-mail to friends, 68% of teens use e-mail for other purposes at least occasionally. So e-mail needs to evolve to respond to other channels that allow for real-time communication ... to date, leadership in e-mail marketing are not moving fast enough to respond to this shift in user behavior.

Classic Search is in the "integration" stage, but Social/Mobile Search are, in many ways, just beginning, making this a really interesting channel to watch. In Classic Search, we're just learning how customers behave after receiving an e-mail message or a catalog or after seeing a re-targeting ad. Social/Mobile Search will cannibalize the existing Search business, yielding a really interesting and exciting future.

E-commerce is entering the "self-evidence" stage in what is about to become an epic battle with the mobile channel. Pay close attention to the growth rates reported by e-commerce ... because the e-commerce folks will include mobile in their numbers (that's often a leading indicator of the "self-evidence" stage). In the next five years, e-commerce leaders will protect their channel by adding mobile volume to traditional e-commerce ... "self-evidence" comes into play when a "bean counter" asks the question ... "what happens to e-commerce sales if you strip out mobile sales?"

Think about mobile for a moment. Gilt Groupe generated 3% of their total sales off of the iPad after just three days ... think about that! eBay will generate $1.5 billion in mobile sales this year after generating $900 million last year, and their sales aren't growing much, so that's all being cannibalized from traditional e-commerce. The long-term future of traditional e-commerce is in doubt, folks ... the future of selling by distance is, and always has been, promising.

Measure the six stages of channel death, and be ready to respond to changes in customer behavior!

Tomorrow night is the launch of SPM (Salford Predictive Miner). If you are in San Diego, give them a holler to let them know you are coming. See you there!

The website http://videolectures.net/ contains a wealth of interesting lectures on a wide variety of topics, including data mining. I was reminded of one today by Ronny Kohavi entitled  "Practical Guide to Controlled Experiments on the Web: Listen to Your Customers not to the HiPPO" It's short (only 23 minutes) and filled with some very good common-sense principles.

First, it is a talk about the importance of A/B testing, or in other words, constructing experiments to learn customer behavior rather than having the experts make a best guess at how people will behave. He gives some good examples from Microsoft and the sometimes non-intuitive results from actual testing. A book he recommends is Breakthrough Business Results With MVT: A Fast, Cost-Free, Secret Weapon for Boosting Sales, Cutting Expenses, and Improving Any Business Process

The second part of the lecture I found particularly interesting is what Kohavi calls the Overall Evaluation Criterion (OEC), or what I usually call business objectives. He included the great Lewis Carroll quote, "If you don't know where you are going, any road will take you there." I find this a common problem as well: if we don't define a business objective that truly measures the impact of the predictive models we build, we have no way of determining if they are effective or not.  This objective must be tied to the business itself. For example, Kohavi argues for using Customer Lifetime Value (CLV) rather than click-through rates as they are more tied to the bottom line.

I would add that it can be useful to have two objectives that are measurable, especially if two objectives better measure the value. For example, in collections risk models, the age of the debt and the amount of the debt are both important components to risk. These are difficult to put into a single number in general, so the two-dimensional risk score can be helpful operationally.

You probably already know this, but seasonal buyers are different than other buyers.

One easy way to understand this is to segment your customers by months since last purchase. Take all of your customers with at least one purchase as of May 1, and then measure repurchase activity during the month of May. Your table might look like this:


Recency = 1 Months, Repurchase Rate = 10.0%.
Recency = 2 Months, Repurchase Rate = 8.3%.
Recency = 3 Months, Repurchase Rate = 7.7%.
Recency = 4 Months, Repurchase Rate = 7.2%.
Recency = 5 Months, Repurchase Rate = 4.8%.
Recency = 6 Months, Repurchase Rate = 4.7%.
Recency = 7 Months, Repurchase Rate = 5.9%.
Recency = 8 Months, Repurchase Rate = 5.5%.
Recency = 9 Months, Repurchase Rate = 5.2%.
Recency = 10 Months, Repurchase Rate = 4.8%.
Recency = 11 Months, Repurchase Rate = 5.1%.
Recency = 12 Months, Repurchase Rate = 5.5%.
Recency = 13 Months, Repurchase Rate = 5.1%.
Recency = 14 Months, Repurchase Rate = 3.9%.
Recency = 15 Months, Repurchase Rate = 3.6%.
Recency = 16 Months, Repurchase Rate = 3.3%.


Look at the red rows, at months five and six. These are Holiday shoppers, and Holiday shoppers often do not repurchase at the same rates that do other customers. Here's a place to reduce marketing expense.

Look at the green rows, at months eleven through thirteen. These are Seasonal shoppers, they last purchased similar product about one year ago. These are customers that require increased marketing expense, because this is the time when you can "win back" the customer, as the vendor community likes to say. These customers are likely to buy comparable product one year later.

This is about as simple as segmentation gets, and yet, it's completely actionable and it makes intuitive sense.

So go use this tip to grow your business!

Here's a unique opportunity for you. Register to hear a veritable plethora of highly credible speakers at the Retail Marketing Virtual Conference this Thursday!

More than 2,400 of your peers have already registered, so click here to visit the registration page and get busy learning about the latest advances in Direct Marketing.

My talk is called "The Bucket List". I'll discuss thirty-five strategies for classic direct marketers and catalogers to move businesses into the future.

A quick formulation of queries against BlogPulse ("world cup" AND (team1 OR team2 OR team3 OR team4) suggests that Groups A and C are getting the most attention from the blogosphere.

Dear Catalog CEOs:

Many of our loyal readers forwarded this link from Harry Joiner, a noted E-Commerce Recruiter ... it is a video showing the new 3D catalog from Crutchfield. Click below to watch is video:

http://www.marketingheadhunter.com/2010/06/best-catalog-ever-video-crutchfield-mails-in-3d-you-gotta-see-this.html.

I know, I know ... you are going to tell me all of the reasons why this won't work. You'll tell me how you tried something like this back in 2002 on a CD that you sent to a customer and that didn't work.

Give Crutchfield two points for having the courage to innovate, to try something different. Couple that with the Catholic Church and their use of the iPad, and you starting to see the early seeds of the stuff that will replace e-commerce.

And rest assured, e-commerce is dying (I can hear the screams from all across America right now as I write this in the cloudy, gloomy 54 degree Pacific Northwest). Sure, customers will always shop online. But traditional e-commerce, where you depend upon Google to act as a traffic light for brands willing to drive on the information superhighway, the form of commerce where you physically visit a website and drill up and down and plunk items in shopping carts and measure clicks and conversions, that form of commerce is dying.

Why not be like Crutchfield, and at least try something different? Why not create a new channel?

I really enjoy the idea described in this film: being able to see parts of the real world not visible to the human eye through AR-like experiences.

 

Wireless in the world 2 from timo on Vimeo.