Multichannel Marketing's Greatest Challenge

Point of view

Multichannel marketing’s greatest challenge By David Scrim

Integrating online and offline So, in fact, direct mail and online marketing are growing It’s no secret that since 1995 the Internet has together at a combined ad spend totaling $64.5 billion completely upended consumer-shopping patterns. In in 2005, topping total television ad spend for the first fact, the Web now claims the record as the most rapidly time ever. adopted new communication media in history — There’s a great reason that online and offline direct unseating television. And according to a 2006 Forrester marketing are growing together. At their core, they rely Research study, during 2005 the Internet became the on the same basic marketing principles: They are targeted, most frequently used in-home shopping channel — addressable media, and they provide measurable results. outpacing newspapers, catalogs, direct mail and the This applies not only to e-mail, but also to banner ads, telephone, including 800 numbers. The report search marketing and affiliate marketing networks. These forecasted that in 2006 consumers would “go online” online disciplines employ the same data-driven tactics that to either browse, research or purchase goods in more are the foundation of old-school direct marketing, such as than 70 percent of their individual shopping episodes. testing, segmentation, targeted messaging, measurement, accountability, transactional database and analytics. Online However, while the Internet has become a very powerful, and direct mail are like database marketing sisters. pervasive and cost-efficient medium, it has hardly put old- school direct marketing out to pasture, as many young While these sisters share many common values and practices netizens once predicted. in theory, in the real world they basically have remained strangers. They have grown up isolated by technologies that In fact, media spending numbers show that the opposite are worlds apart, by separate databases, by generational has occurred. Spending on addressable, data-driven direct gaps and by unique market pressures. As a result, today marketing has been on the rise for decades, at the expense they are very disconnected. of mass media, and Web-based marketing clearly has served to extend, if not further advance, that trend. Trends in advertising spending share Source — (DMA) 2006 Statistical Fact Book Beginning in the mid-1980s, marketers, faced with 26.6% fragmenting mass-media audiences and a lack of adequate 25 accountability, began shifting money away from traditional 22.3%

20.5% advertising media and into direct marketing and marketing 20 20.2% databases. According to the Direct Marketing Association’s 18.8% 17. 4 %

16.4% 15.7% (DMA) 2006 Statistical Fact Book, total U.S. spending on 16.2% 15 direct mail grew by more than 24 percent between 1985 13.9 % 13 .1 % and 1995.

10.4% 10 During the next 10 years, online was born and grew up as 8.5%

7. 2 % 7. 2 % 7. 0 % the ultracool new marketing channel. The same DMA report 6.8% 6.8% 6 .1 % 6 .1 % 6.3% 5.5% 5.2% 5.3% shows us that total U.S. spending on Internet ads reached 5 4.7%

$7.9 billion in 2005. However, this rapid growth in Internet 2.9% 2 .1 % advertising had no negative effect on direct-mail spending, .8% 0 0% 0% which also grew — actually increasing its share of total U.S. Media Direct mail Newspapers Spot TV Network TV Cable TV Radio Yellow pages Magazines Internet All others advertising expenditures. 1985 1995 2005 In the final analysis, however, any business has just one majority of Web analytics systems do not use any historical set of customers. Today’s marketing challenge is to bring customer database information, such as customer profiles, all messaging and response options together by looking at segmentations and promotional histories, in their reporting. the world from the customer’s view. This requires online Most data warehouses do not collect actionable Web and offline to join forces in a marketing family with a single information about what existing customers might “want focus on customers. to do” based on their searches, click-throughs, shopping carts and online surveys. Since customer touch-points do Most marketers have now learned that their multichannel not share operational information horizontally that could customers are their best, most valuable customers. They greatly improve overall customer service, the result is know that Web sites drive retail traffic and that catalogs and misunderstanding and infighting. e-mail drive sales in all channels. Certainly these are reasons enough to break down the silos. And now there’s one more. Where is that 360-degree view? Where Earlier this March, L.L.Bean, the famous Maine outdoor gear is the consistent customer experience? cataloger, reported that in 2006 more than 50 percent of Now is the time to act and to get connected. The offline its $1.5 billion in annual sales came through its Web site. camp must fully embrace the new technologies, which But these orders aren’t from new customers responding are the future. They need education, and they must make to online ads. Up to 70 percent are renewal orders driven room at the marketing strategy table for the e-marketing to the Web site from the company’s catalog mailings to professionals. The online group must become team players existing customers. This means that most of L.L.Bean’s and realize that proven concepts, systems and techniques past customers are now offline-to-online customers. The for effectively managing customer relationships have been company’s core business is fully multichannel whether around for more than 20 years. They need to adopt these L.L.Bean likes it or not. concepts and take them to a higher level. Many merchants are already in this same situation. The digital marketing revolution isn’t going to end here. It Remember that 70 percent of shopping episodes engage will soon impact television, radio, newspapers, magazines, the Internet in some fashion. To execute effectively, outdoor advertising, cell phones and other forms of businesses simply have to make their Web site, catalog, marketing communication. Multichannel will become direct mail and corporate marketing databases all work megachannel, with many additional marketing database together. Most cannot, and the evidence of online and opportunities. Customers will continue to seek messages offline direct-marketing disconnects is not hard to find. that are more targeted, more relevant, more consistent, Most marketing organizations are divided into channel- more immediate and more attractive. And they want a specific silos governed by their channel-specific measures variety of easy links to the Internet or whatever other and channel-specific biases. Many retailers collect only response channel that best suits their own immediate needs. a small amount of customer data at the point of sale, We can’t deliver a seamless customer experience without where 90 percent of their sales occur, but they crunch integrating online and offline. It’s time “all” the database terabytes of Web session data trying to improve conversions marketers got together. After all, it’s what the customers want. on Web sites that deliver just 10 percent of sales. The

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