kevin hillstrom's merit direct 2009 presentation

Understanding The Relationship Between Micro-Channels And

Catalog Productivity

Kevin HillstromPresident, MineThatData

Micro-Channels

What the heck is a micro-channel?

Simply put, a micro-channel is defined as “any combination of physical channel and advertising channel that a customer uses to place an order”.

Micro-channels matter. Micro-channel patterns dictate how customer behavior evolves.

Old-School Micro-Channels

Back in the day, a micro-channel represented the catalog we mailed, coupled with the key code the customer used to place an order.

Based on this combination, we determined short-term ROI and long-term value.

My, how times have changed!!!

Check-Mark Marketing

Catalog Marketing

Online Marketing

Social Media

Live Human Interactions

These days, marketing is fundamentally different.

Customers slide along a checkmark, with profitability featured along the “y-axis”.

Our job is to evaluate where on the check-mark the customer resides. The more “human” the relationship, the more profitable the customer becomes.

Modern Micro-Channels

Question #1: You send a catalog to a customer on June 8, 2009. You also send an e-mail to the customer on June 9, 2009. The customer buys online on June 11, no catalog key code, no e-mail click-through. The micro-channel is …

1. Online Buyer.2. Catalog Matchback Buyer.3. E-Mail Shopper.4. E-Mail + Catalog Influenced Online Buyer.

Modern Micro-Channels

Question #2: You send a catalog to a customer on June 8, 2009. Your sales rep calls the customer on June 15, 2009, and the customer purchases merchandise during that phone call. The micro-channel is …

1. Catalog Matchback Buyer.2. Sales Rep Attributed Buyer.3. Telephone Channel Buyer.4. Sales Rep Buyer, Catalog Influenced.

Modern Micro-Channels

Question #3: The customer received a catalog on June 9, clicked-through via paid search on June 10, then purchased online on June 12. The micro-channel is …

1. Catalog Matchback Buyer.2. Paid Search Influenced Buyer.3. Online Buyer Influenced By Catalogs And

Paid Search.

Modern Micro-Channels

Question #4: The customer purchased via a monthly replenishment program on June 1, and added an item to the order from a marketing e-mail received on May 30. The micro-channel is …

1. Replenishment Program.2. E-Mail Marketing Campaign.3. Replenishment Program + E-Mail Marketing

Campaign Influenced.

Modern Micro-Channels

Question #5: The customer received a catalog on May 1. The customer received an e-mail marketing message on June 9. The customer clicks through a Twitter promotion on June 16, and purchases on June 16. The micro-channel is?

1. Twitter Shopper.2. Twitter + E-Mail Influenced.3. Twitter + E-Mail Influenced + Catalog

Influenced.

Modern Micro-Channels

Question #6: The customer received a catalog on June 1. The customer purchased from an affiliate on June 8, using a 20% off offer. The micro-channel is:

1. Catalog Matchback.2. Affiliate Buyer.3. Catalog Influenced Affiliate Buyer.4. Affiliate Influenced Catalog Buyer.

Modern Micro-Channels

Question #7: The customer received a catalog on June 1. The customer received an e-mail marketing campaign on June 8. The customer ordered over the telephone on June 15, giving a catalog key code. The micro-channel is:

1. Catalog Buyer.2. E-Mail Buyer.3. E-Mail Influenced Catalog Buyer.

Modern Micro-Channels

Question #8: The customer received a catalog on June 1. The customer visited your website on June 8. The customer ordered online on June 15, using a catalog key code. The micro-channel is:

1. Catalog Buyer.2. Online Buyer.3. Website Influenced Catalog Buyer.

Micro-Channels: Why Bother?

Our industry is moving in three different directions.

One path requires us to attribute orders to the primary advertising vehicle that caused the order.Another path looks to fractionally allocate orders.

A third path uses micro-channels to predict future behavior. It is here that we save $$$$$$$$.

The Database

New Objective:

When we can prove an order came from an advertising source, we create a field for a “proven source”.

When we cannot prove an order came from an advertising source, we create a field for an “influenced source”.

Remember Question #1?

Question #1: You send a catalog to a customer on June 8, 2009. You also send an e-mail to the customer on June 9, 2009. The customer buys online on June 11, no catalog key code. The micro-channel is …

1. Online Buyer.2. Catalog Matchback Buyer.3. E-Mail Shopper.4. E-Mail + Catalog Influenced Online Buyer.

Remember Question #1?

In our customer database, we could record the following information:• Catalog Influenced Order.• E-Mail Influenced Order.

We use typical matchback rules (say 30 or 60 or 90 days for catalog, 1-2 days for e-mail). But the key is to use “influenced source” fields instead of “proven source” fields.

Here’s An Example

Customer receives a catalog on June 1. Customer purchases on June 12, via a paid search keyword.• Paid Search Proven Order.• Catalog Influenced Order.

Most of us would credit this order to the catalog.

Why not give full and partial credit?!

Segmentation And Migration

Once we have “proven” sources and “influenced” sources, we can predict future customer behavior on the basis of each source.

We track the migration of customers from one source (proven or influenced) to another (proven or influenced), to understand how customers are evolving and changing.

Migration Probability Table

Migration Probability Table: Map

Why Do This?

Remember the earlier graph, talking about “check mark marketing?” It turns out that the more customers “do their own thing”, the fewer catalogs we have to mail to these customers.

This data is frequently validated via “mail and holdout” tests.

Catalog Proven Test Panel

“Catalog Proven” customers tend to require catalog marketing in order to buy something. These customers require a steady diet of direct marketing!

Catalog Influenced Test Panel

“Catalog Influenced” customers will spend some money without the need to mail catalogs to the customer. This is a place where catalogs can be reduced, increasing profit without much impact on sales.

E-Mail And Search Channel

As customers move away from catalogs, the influence of the catalog can become reduced. These are customers who might warrant a diet of half to a third of the normal contact strategy.

Back To The Check-Mark

Catalog Proven Buyer

Website Only Buyer

Marketing Influenced Buyer

Social Media , Human Interaction

Sales Rep Customer, Loves Human Interaction

Catalog Proven buyers require analog marketing.

Most “influenced” buyers require a mix of analog and digital marketing.

Website-Only buyers require the least amount of analog marketing.

Human interactions tend to yield the most valuable customers.

The New Methodology

Step 1 = Assign “micro-channels” based on proven and influenced advertising channels.

Step 2 = Use Multichannel Forensics to measure how micro-channels interact with each other.

Step 3 = Take advantage of test/holdout groups for catalogs and e-mail marketing, to measure the “organic percentage”.

The New Methodology

Step 4 = Create housefile models to grade customers (A/B/C/D/F) based on their responsiveness to catalog marketing --- reduce contact strategy to customers on the “right side of the check mark.”

Step 5 = Re-invest money in customer acquisition or pocket the additional profit!

Improve Profitability

Going Forward

Micro-Channels tell us where the customer is in their relationship with our brand.

As customers evolve, we can change our catalog advertising strategy --- maintaining much of the demand we receive while saving expense.

Use the expense savings to acquire more customers!!!

Questions?

Kevin HillstromPresident, MineThatData

206-853-8278kevinh@minethatdata.com

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