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Direct mail: Not dead yet (and won’t be any time soon) November 12, 2007

Posted by Elana Anderson in Customer Analytics, Database Marketing, Integrated Marketing, Marketing, Online Marketing.
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Thank goodness it’s Veteran’s Day — I have a USPS-free day to clean up all of the mail that is piling up all over my house. Must be the season, but I’ve dedicated a few posts to the direct mail industry lately (I promise that I’ll find someone else to pick on once we get through Christmas). Just to give you some more proof that direct mail isn’t going to die on the vine any time soon (article from Direct Magazine):

Early next year, Neckties.com going to make its first foray into direct mail, says Herschberg.

We have a direct mail campaign we’re going to be working on after the fourth quarter,” he says, noting that while the firm’s younger customers prefer to shop online, they tend to spend less than their older counterparts.

“People in 50s and 60s more likely to be swayed by combination of online and direct mail,” says Herschberg, conceding that the direct mail effort is “something of an experiment.”

Neckties.com is not alone. Per my previous assertion that ecommerce is actually responsible for increased direct mail circulation… I get a ton of mail from Netflix. If Netflix bothered to match its rented list to its own customer database, they would find that my household (thanks to my husband) is already one of its most active customers (my husband rents movies weekly and has rated over 1900 movies Netflix.com to date!). I have also recently received mailings from online mailings from ecommerce stalwarts like Overstock.com.   

To continue my rant… The most ridiculous catalog I’ve gotten so far this holiday season is the one that was entirely dedicated to field hockey from Longstreth. I’m sure it’s a fine company, but my household has no interest in field hockey (I’d love to know where the shoddy analytics that determined I am into field hockey came from)…. The connection must have been that mouth guard I ordered for my daughter (as required by her SOCCER coach) through one of Amazon.com’s merchants…. My request to Amazon: Don’t just pass me off to the to the privacy policy whim of your partner merchants! Take some ownership and add functionality to your ecommerce site to allow customers to opt-out of catalogs and email when they buy from a partner. 

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Home Depot: Say it ain’t so! November 5, 2007

Posted by Elana Anderson in Customer Analytics, Database Marketing, Marketing, Marketing Measurement, Marketing Strategy.
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Home Depot Kids WorkshopIf you have kids, maybe you’ve heard of the free workshops that Home Depot runs the first Saturday of every month. My kids just love these events. When we go, they don their bright orange aprons (courtesy of Home Depot) and announce that they are going “to work.” This weekend, as the remnants of hurricane Noel hit our coastal town, my husband and I decided to head over. While he shopped, the kids and I built pirate ships (I only suffered a few hammer bruises). I also chatted a bit with the employee running the workshop who told me that corporate is planning to cancel the program. NOOOO!

Why are marketers forced to be so short sighted? 

Please keep in mind that I don’t have confirmation that the program is indeed being canceled – my intel here is a short exchange with an employee who may have been misinformed. But, it did get me thinking about marketing and how focused on the short-term marketers are forced to be. Sure, measuring the impact of a marketing program like this is hard. Maybe the short-term ROI of program is limited (although our exit bill was ~$120), but Home Depot execs shouldn’t discount the fact that the program fosters a bunch of little do-it-yourselfers who become Home Depot brand advocates at the tender age of 5.Before canceling this program to save costs, Home Depot needs to examine the impact:

  • According to Home Depot’s website, an average of 75 kids/store attend the workshops each month. With 2100 stores (and an average of 1.5 kids/adult), that’s 105,000 adults in the store on the 1st Saturday of the month that likely wouldn’t have been there otherwise. Now assume that 10% of those adults spend $100. That’s $1,050,000 each month. Now, consider the flip side, cancel the program and the parents don’t come in and spend – that’s an annual loss of $12.6 million.

  • It’s also not unreasonable in the least to think that the program has some additional brand impact on the parents of these kids. Again, let’s conservatively assume that 10% of the parents make one additional trip to Home Depot and spend $100. That’s another $1,050,000 per year.

  • Home Depot says that over 17.5 million projects have been completed in the workshops since 1997. I’m sure there are quite a bit of repeat visitors so let’s assume that the program has reached 6 million kids since it was initiated. That’s a lot of brand advocates with future purchasing potential. Once again, take a conservative assumption: let’s say 1% of those kids grows up to spend $300/year. That’s $18,000,000 per year (in today’s money).

Starts to add up, doesn’t it? Now, I don’t know much about Home Depot’s business or have any insight to average order size and that sort of thing so it’s hard to go on, but I think I’ve made my point. I wonder if the execs are evaluating the program based on costs and fluffy returns or quantifying the fact that the program:

  • Drives traffic into the store.

  • Yields (by my back of the napkin estimate) $13.7 million/year now.

  • Creates future buyers.

I sure hope the marketing folks at Home Depot are presenting the powers that be with numbers and not just shrugging their shoulders about the value of the program. Even though some of the numbers may not be auditable based on available data, I’ve always found that presenting numbers based on realistic (i.e., totally believable estimates) is a very powerful tool for getting senior executives on board with a marketing strategy or a program idea.

Net Promoter Score is not a customer metric October 31, 2007

Posted by Elana Anderson in Customer Analytics, Customer Experience, Database Marketing, Marketing, Marketing Strategy, Marketing Technology.
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Did the title attract your attention? Good! I’ve heard a lot of people talking about Net Promoter (NPS) as the “one metric” – the “killer metric” – that marketing needs to worry about. This concerns me!  I’m not here to bash NPS, there are others who are taking that on. As for me, I think Net Promoter is indeed a useful metric – primarily because it is so simple. And that simplicity is what has the marketing community falling head over heels over it. Well folks, let’s not go too gaga.

Why do I say NPS is not a customer metric? At an aggregate level, according to the research led by Fred Reichheld, a high NPS score correlates to business growth. But, aside from a segmentation of promoters, passives, and detractors, it doesn’t tell you much at an individual customer level. Most importantly, it doesn’t give you any insight into your customers’ needs, desires, and motivations or help you determine what to do or how to treat individual customers. Sure, you might think, “we need to turn the passives into promoters,” but how are you actually going to do that when what motivates one passive is completely different from what motivates another?

There is no killer metric

Sorry to say it, but there is no killer marketing metric. Yep, you need to take a balanced approach. You need value metrics to help evaluate the value and impact of marketing investment. You need operational metrics to help run the operation, diagnose issues, and improve efficiency. The way I’ve heard some executives talking lately, I fear they are focusing their marketing team solely on NPS and turning their businesses upside down to turn every customer into a “promoter.” My response? Pull back the throttle and apply a measure of basic business logic – you don’t want to end up with a lot of happy customers and an unprofitable business. If you review the details of what they have to say, this is certainly not what Reichheld and the folks at Satmetrix intended.

NPS, among others, can be a very useful gauge of the satisfaction and general well being of your customer base. But, it must be combined with other customer metrics (like retention, profitability, etc.) and insight (like life stage, attitudes, etc.) in order to effectively inform customer interactions. The bottom line? Business and marketing executives out there need to recognize that building an effective marketing measurement and customer analysis capability requires resources, focus, new skills (analytic and technical), and a lot of elbow grease.

Catalogers, green is in! October 24, 2007

Posted by Elana Anderson in Customer Analytics, Customer Experience, Database Marketing, Integrated Marketing, Marketing, Online Marketing.
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9 comments

Last week’s article in the New York Times about Catalog Choice got me thinking about the catalog industry.

Now a new online service called Catalog Choice (www.catalogchoice.org) is facilitating attempts to unsubscribe. The site was developed by three nonprofit environmental groups — the National Wildlife Federation, the Natural Resources Defense Council and the Ecology Center — to relay requests en masse to specific retailers. Since it was introduced last Wednesday, more than 20,000 people have registered.

Now, I know a little something about how a catalog operation works because I ran very large database marketing technology projects at Staples and Eddie Bauer in the mid-late 90’s. So, here’s my take…

The Internet is partially to blame for increased catalog circulation

Despite predictions that the Internet would decrease direct marketing postal mail volumes, a 2005 study by Forrester Research (disclosure: I edited the report) showed that 60% of high-volume direct marketers (those that mail 50M or more pieces annually) planned to increase their mail spend. What that report didn’t say is that the Internet is actually deserves some of the blame for the increase.

Maybe this bucks conventional wisdom, but think about it. In the old days, catalogers could only build their house file by buying lists and participating in cooperative data sharing initiatives like Abacus. Now, if someone comes and buys on my site, then of course I’m going to add them to my house file. And, I’m also going to add them to my list for my sister brands too. It’s a no brainer. So, today, catalogers still use tools like Abacus and they also assume that every online shopper also wants a catalog. Pretty presumptuous, don’t you think?

Well, today’s over marketed and increasingly environmentally conscious consumers won’t have it. That’s what gives rise to organizations like Catalog Choice. And, this is just the beginning.

The industry needs to take action

I definitely don’t have all the answers here. Catalogers are in a tough place and I sympathize. When each catalog turns a profit, it’s hard to come up with a business case to stop. But I think the industry needs to take the lead and start working on the problem. Here are a few ideas to get the ball rolling:

  1. Enable online customers to opt-out (better yet, IN) of catalogs on your site. You do this for email right? Technically you don’t have to –the CAN-SPAM law only mandates that you honor an opt-out. But, you do it because consumers fought back against email spam. So do it for your catalogs too (catalogs are a lot more expensive than email after all). It’s not hard to add another flag to your database that you check in your campaign list pull process. I am not aware that any retailers are doing this today – it’s time to start.

  2. Allow customers to limit the number of catalogs they receive. Some retailers I’ve worked with send as many as 60 mailings a year to a single household – that’s a lot of paper! Take the catalog opt-in a step further and give your customers a choice to limit the number of catalogs their household receives every year. Now, it’s up to you to figure out – through modeling and contact optimization techniques – which catalogs will drive the most return from that household within the customer’s set limit.

  3. Tighten up the deduplication rules. So, my husband and I don’t have the same last name. That doesn’t mean that we want duplicates of every catalog in our house. I had this argument with a client in 1995. The response I got was, “The catalog could be going to a sorority house or an apartment – we want to get as many eyeballs on each book as possible.” Well, with a little external data and a tad more technical elbow grease, you can easily determine that I live in a residential suburb in a single family home. So, please, don’t send me two catalogs and save yourself a tree and a few bucks in the process.

Sure, the ideas I’m proposing will limit your reach, but they WILL help the environment and be viewed as a step in the right direction by your greening customer base. You can get some leverage from this – publicize the fact that you are committed to being more green and helping the environment. But be careful with this part, don’t say you are green and fail to walk the talk – today’s consumer is watching and now has plenty of channels through which to be heard.