The Challenge in a Tech-Savvy World

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Are you about to go through another season of not knowing whether your marketing dollars are being allocated to the right medium? If you are, you are not alone. This is the reality for more than 95 percent of multichannel retailers that say they engage in multichannel marketing according to the recent Direct Marketing Association 2001 Interactive Industry Report.


In addition, BCG and Accenture 2000/2001 reports reveal respectively that more than 75 percent of these retailers cannot effectively track customer behavior across channels and 76 percent of marketing executives said their company is unable to measure a campaign's return on investment. Further challenges arise since catalogers generally wait at least three months for a standardized matchback analysis to analyze results.


What's more, the market is set to grow tremendously for the interactive direct marketing business. Sales revenues attributed to U.S. direct and interactive marketers are forecast to exceed $1.86 trillion by the end of the year, representing a 9 percent increase over 2000 sales, according to the DMA's 2001 Economic Impact Report. As a result, multichannel retailers increasingly need to understand how to accurately allocate marketing dollars across multiple channels enabling more precise circulation, list and promotion decisions. In addition, they must understand how and where consumers are spending online and offline and tailor their plans accordingly.


The issue is that multichannel retailers are not seeing all of the demand that their marketing programs are driving across multiple order channels. This leads them to make decisions based on a narrow view of the world. In fact, looking at results across retailers from multiple industry segments, we've seen that multichannel retailers are realizing only about 50 percent to 70 percent of demand by looking at only one channel. When all channels were taken into account, the actual demand generated across all channels ranged from a 132 percent to 200 percent difference than what was visible to the client through the catalog channel alone.


Multichannel retailers must understand where and how consumers are spending. Retailers need to integrate their channels in order for their customers to have consistent interaction with the brand from any point. A study by J.C. Williams Group and BizRate.com found that more than two-thirds of online shoppers look for and purchase items online that they previously saw in the same retailer's catalog. In addition, the report found that the Internet is the most effective pre-purchase influencer among all channels.


The study also identified the "super" multichannel shopper who is more likely to be a customer of all three channels and purchase four times more frequently than the average online shopper. Super shoppers purchase from a retailer's store 70 percent more frequently than the average store customer and 110 percent more frequently from the retailer's catalog. The basic message of the report is clear -- retailers that do not support their online channel face big risks.


As customers continue to buy across channels, e-mail has become a compelling offer channel that multichannel retailers should take advantage of. E-mail has a faster response time, it is cheaper thanks to its cost per unit, and it is an effective means to maintain an ongoing dialogue with customers. A recent NFO study found that more than 88 percent of daily Web users report they have made a purchase as a result of a permission-based e-mail campaign. The study revealed that e-mail is critical to increasing repeat purchases and, therefore, lifetime customer value. Nearly 80 percent of consumers want to receive special offers from online merchants on a weekly basis.


Multichannel retailers must emphasize the link among multiple channels. Retailers need to do a better job of informing their customers about available multichannel options. The current problem is a lack of information about their channel integration and, most importantly, a lack of true integration among their channels internally. Retailers should take note of a recent Shop.org study that states that shoppers who use multiple channels -- store, catalog, online -- tend to spend more and be more loyal. The highest incidences of tri-channel shopping are in the electronics and clothing markets.


In addition, advanced multichannel retailers need to evaluate the way they examine ROI. These retailers must look at more intangible metrics such as brand equity gains as well. ABizRate.com study found that a number of multichannel retailers look at ROI in a narrow sense. They use only traditional metrics such as direct sales, which may not show the role that Internet plays on purchases through a catalog or made in a store. The report also found that the move toward becoming truly multichannel involves integrating data from all order channels. In addition, the study found that 30 percent of multichannel retailers have no customer data integration.


Multichannel retail excellence remains elusive. As marketing budgets are being slashed across the industry, now more than ever, multichannel retailers must move toward building an integrated marketing strategy to understand true ROI. They no longer can deliver "everything to everyone, everywhere." To refine future marketing programs, retailers need to measure results across channels. Furthermore, these retailers need to create an organization that facilitates centralized, or at least coordinated, decision making based on cross-channel data. An integrated strategy can deliver a truly successful customer experience by sending the right offers to the right customers through the right channels.


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