How to profit from multi channel marketing
by Arthur Middleton Hughes

 

How to profit from multi channel marketing


By Arthur Middleton Hughes

 

Multi channel today usually concerns the web. When marketers first began to use the web, there was a question as to who should be responsible for it. Some companies made the mistake of thinking of the web as a technology project, putting the leadership in IT. They produced websites that did not sell very much. Today, most companies see the web as a marketing function with the direction and funding coming out of the marketing organization.

 

What is multi channel?

The word is widely used, but has various meanings. Strictly speaking there are two multi channel avenues: promotion and product ordering. Multi channel promotion includes direct response ads (including web ads) that contain a phone number, and a web site, or invitation to visit a retail outlet with a coupon. Multi channel promotions also include direct mail and catalogs, email and outbound telemarketing. Multi channel product ordering includes phone and web ordering plus retail visits. Using these terms, multi channel marketing would include an email or direct mail piece containing a link to a web site where the customer could print out a coupon for a retail visit. 

On the web, there is a difference, however. Except for travel, books, porno and music the web is not really a separate selling channel. Web sites without a catalog, TV, radio or print promotion to drive people to visit the site seldom sell much. The web tends to be more of an ordering channel for customers who are stimulated to buy by another medium. 

Those responding to multi channel marketing are different from single channel customers. They tend to be more affluent. Even more significant: customers that make purchases on two or more channels spend more per year than single channel shoppers.  Early research in this field was done by Sears Canada. They learned that Canadians who bought both in retail and through the catalog spent almost twice as much as those who bought goods on only one of those two channels. The same thing can also be true of customers who use the web plus retail or phone ordering. Multi channel customers buy higher priced options, are less price sensitive, and are cheaper to serve. This can be learned by any company with a customer marketing database that consolidates purchases from all channels.

Since these benefits exist, companies have been trying to get more customers to use the web to make their purchases. Web ordering has advantages and disadvantages. On the plus side, web orders can be processed faster and at less expense. On the negative side, a good phone operator can often get more cross sales than a web site. A cross sale occurs when a customer calls up to order one thing, buys it, and while she is on the phone is talked into making a second purchase that she had not been thinking of when she made the call. Cross sales like this occur when a good customer sales rep is equipped with the customer’s purchase history on her screen, plus a suggested Next Best Product which is created dynamically by collaborative filtering software while the customer is on the phone. The web can do the same thing, but in most cases web sites do not do as good a job as a live operator. 

 

The goals of multi channel marketing

Most marketing strategies have five similar overall objectives:

Acquire new customers both directly and through referrals.

Increase the retention rate ­ the number of customers that return next week, month or year.

Increase the number of visits, orders or sales per week, month or year.

Increase the average order size ­ get people to buy higher priced items, or more of them, or through cross selling, to buy additional new products.

Reduce the administrative costs of handling customer purchases. The web is usually much cheaper than phone or mail. 

 

To achieve these objectives and measure their effectiveness, marketers have been experimenting with a number of new techniques. They include:

Sending emails in conjunction with catalogs (“Look in your mailbox this week for…”) 

Inviting customers and prospects to visit a web site to print out a coupon that they could take to a retail outlet.

Paying retail customers for their email address with permission to use it. Lens Crafters pays customers $10 cash for their emails. 

Viral marketing whereby customers are given an easy way to (and a reward for) recommending a product to a friend.

Capturing a customer’s phone number on a POS system, reverse appending the name and address, and sending them a post card with an offer to return. Sports Authority got an 11% response rate with this technique. 

Putting the URL of a web site on a product inviting the purchaser to come to the site to register, get more information, and buy more.

Providing lower prices to web purchasers than those who purchase through other channels -- airlines now do this routinely.

 

How can you measure the effectiveness of multi channel marketing?

Where possible, marketers should always set aside control groups of identical customers that do not get the multi channel promotions to determine the lift from the promotion. It is also possible to measure the effectiveness of multi channel promotions by using a spread sheet that relates the promotion to each of the five basic marketing objectives. Here are some examples.  None of them have adopted all these techniques:

Explanation: 

Gold Customer Gifts. Some catalogers have found that a free gift to their gold customers (60% of sales) increases sales by these customers by 18%. It improves their average order size, number of orders and retention rate.

Web coupons. Lane Bryant gives 25% off on entire web orders using a web coupon. 

Viral Marketing. Sending an email to persuade your customers to become advocates by sending emails to their friends. Hotmail.com began by attaching a tag at the bottom of every free message sent out: "Get your private, free email at  HYPERLINK "http://www.hotmail.com" http://www.hotmail.com". People who saw the message signed up for their own free e-mail service, and sent the message to their friends and associates

A major cataloger used emails with catalogs to increase sales by 18%

Delta has internet only web fares to drive customers to book there.

Amazon pioneered with one click ordering. Customers who use it get hooked. It boosts the retention and sales rate. 

Cross sales improve dramatically with Next Best Product. GUS in the UK increased cross sales from 20% to 40% using this technique. Banks use it extensively. Amazon is a leader in this field.

Using Caller ID, many companies bring their customer records and next best product on to their CSR screens and web sites. Result: increased retention, orders and order size. 

A sporting goods chain with a web site created a loyalty club that increased member sales by eight times the rate of other customers.  


So what should you do? Find out what percentage of your customers are multi channel. Quantify their annual purchases as compared to your single channel customers. They will be significantly higher. Next, develop some strategies to shift more of your single channel customers to multi channel using your analysis to support your programs. Result: increased retention, sales and profits at little expense. 

 

 


Arthur Middleton Hughes is Vice President of The Database Marketing Institute. Ltd. (Arthur.hughes@dbmarketing.com) which provides strategic advice on relationship marketing. Arthur is also Senior Strategist at e-Dialog.com (ahughes@e-Dialog.com) which provides precision e-mail marketing services for major corporations worldwide. Arthur is the author of Strategic Database Marketing 3rd ed. (McGraw Hill 2006). You may reach Arthur at (954) 767-4558 .


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