Disruption Tour --- Run To Survive

To Save Gas, Shoppers Stay Home and Click

J. Emilio Flores for The New York Times

Nichelle Hines says she shops from her home in Los Angeles because of “sheer desperation.”

• http://www.nytimes.com/2008/07/19/business/19shop.html?_r=1&th&emc=th&oref=slogin

By STEPHANIE ROSENBLOOM

To go shopping these days, more Americans are trading in their car keys for a keyboard.

Skip to next paragraph

Online shopping is gaining at a time when simply filling up a gas tank to head to the mall can seem like a spending spree.

A number of retailers — including Gap, Victoria’s Secret and J. C. Penney — are experiencing double-digit sales growth at their shopping Web sites, creating a surprising bright spot during an otherwise gloomy time for sales in brick-and-mortar stores.

One popular strategy for getting shoppers’ attention is offering free shipping, in contrast to many other businesses, like airlines, that are adding surcharges and other fees to offset their higher costs.

The Web sites of Neiman

Multichannel Forensics A to Z: Acquisition Model

From Minethedata.com

We begin a series on Multichannel Forensics (study, book) with the letter "A". Our first topic is "Acquisition Mode".

In Acquisition Mode, you retain fewer than 40% of last year's customers. In other words, if 1,000 customers purchased merchandise from your brand in 2007, fewer than 400 will purchase again during 2008. Too often, we take a "Starbucks" view of the world, one where there is a 40% chance that Starbucks will retain our business today! In those situations, we think about loyalty programs and all the stuff that goes into cross-selling and up-selling the customer --- it's all about getting more from the customer today.

The majority of the brands I study retain fewer than forty percent of last year's customers, in fact, many retain less than thirty percent of last year's customers.

The media, trade journals, and vendor community seldom focus on this business model. A business can make a boatload of money catering to customers who purchase infrequently --- how often do you buy from your local furniture store, after all? Somehow, they stay in business (most of 'em!).

For products, brands or channels locked in Acquisition Mode, it doesn't make sense to try to increase loyalty, as the pundits would have you do. Instead, have a steely-eyed focus on acquiring/reactivating customers at the lowest cost possible.

Customer Value By Day Of Week

Those of you who enjoy measuring long-term value might want to research customer behavior according to the day of week the customer purchases from your brand.

Retail customers purchasing on Saturday or Sunday have different future value than customers who purchase on a weekday afternoon or evening.

Online customers purchasing early in the week have different future value than customers who purchase evenings or weekends.

Catalog customers who buy during the in-home week have different future value than customers who buy two months after a catalog was mailed.

Those of you who analyze online visitation behavior will observe unique trends, based on the day/time the user visits your website.

Knowing What Business You're In Includes Knowing Who Your Most Important Customers Are

techdirt.cm

by Timothy Lee from the three-sided-market dept

One of the themes we've emphasized here at Techdirt is that it's essential to know what market you're in. We've mostly talked about that in terms of knowing when to give away infinite resources in order to sell expensive resources. But another key component is recognizing where the value of your business comes from. For example, one of the keys to Google's success has been their recognition that even though their revenue comes from advertisers, their real value is their users, and so they've focused on keeping users happy. Google knows that as long as they have a lot of users, the advertisers will come to them, but if they drive away users they may not come back. The Bits blog has an even more striking example of the same principle: Bits says that Yelp, the restaurant review site, is succeeding because they recognize that the key to success for their market was to cater to a subset of their users -- their volunteer reviewers. If they have good reviews, users will come to them, and if they have users, the advertisers will come. So they've focused on making reviewing an easy and rewarding experience. The site has focused on building community among the reviewers themselves, adding social-networking functionality so reviewers can connect with each other and follow each others reviews, and even hosting social functions where the most prolific reviewers can meet face to face. Yelp is also careful to shield reviewers from irate restaurant owners: a business owner is allowed to send a reviewer one message, but if he doesn't get a response he's not allowed to contact the reviewer again.

One way to look at this is as a multi-sided market. Traditional media outlets, for example, operate in a two-sided market, where they trade content for eyeballs, and then sell the eyeballs to an advertiser. Yelp's business model is similar, except that they exist in a three-sided market. First, they have to make the site appealing enough to reviewers that they'll write a lot of reviews. Then they use the reviews to attract eyeballs, which they finally sell to advertisers. All three of these are "customers" in some sense, but because the reviewers are what ultimately attracts everyone else to the site, they're ultimately the most important to the site's long-term success. Although Yelp certainly has its share of critics, the basic strategy of catering to reviewers seems like the right one for a review-oriented site.

Best Buy and B&H Multichannel Marketing

At ACCM, I heard a half dozen speakers drill the multichannel marketing script into the permeable heads of honorable conference attendees.

So today I am looking to purchase a camcorder. B&H sends me a catalog, a nice multichannel piece. So nice that it drives me to Best Buy to physically look at the camcorder. There, I find another camcorder I like. I notice that the price of this item appears expensive.

I go home, look at the Best Buy website, and see that the price is consistent between stores and online. Multichannel advocates rejoice! But the camcorder is still expensive. A price comparison reveals that the item is 20% cheaper at B&H, and 25% cheaper at Amazon.com.

The item will be purchased at Amazon.com.

Industry leadership continues to harp on the fact that multichannel marketing works. And today, it did work. A catalog from one brand led to a store visit at another brand, which led to an online search for the cheapest price, leading me to buy the camcorder from an online pureplay. Demand siphons out of the multichannel value chain, into an online pureplay. The multichannel marketers pay the freight for retail square footage and paper-based marketing, but lose the sale to a low-cost online pureplay that does not execute traditional advertising strategies.

An entire industry is missing the point of multichannel marketing. Pretty catalogs, integrated e-mail campaigns, and cross-channel inventory alignment is nice.

But multichannel marketing is pure pap, feckless when confronted by convenience, fast shipping, and cheap prices.

And worst of all, the multichannel industry fuels this trend by advertising the items that ultimately are purchased at pureplays that don't employ traditional advertising.

Guessing the Online Customer’s Next Want

By ERIC A. TAUB
Retailers are turning to data mining software to find links between customers’ interests and their online buying behavior.

NYTimes.com

The Overbrook Foundation vs. Direct Mail and Catalogs

http://thecatalogchroniclesblog.com/2008/05/03/the-overbrook-foundation-vs-direct-mail-and-catalogs/

So, for two days now my ears perked up when “brought to you by The Overbrook Foundation, sponsors of Catalog Choice …” was in the trailer on two different NPR programs. So I thought, well sir, let’s check this out. 

The Overbrook Foundation, located in New York City, is a family foundation established in 1948 by Frank and Helen Altschul. The Foundation took its name from Overbrook Farm, the Altschul family home in Stamford, Connecticut. Its mission is to improve the lives of people by supporting projects that protect human and civil rights, advance the self-sufficiency and well being of individuals and their communities, and conserve the natural environment.

Cool, I thought, that’s green and cozy, very politically correct, but let’s follow the money. So what’s the specific connection with Catalog Choice? I learned that Overbrook has provided $285,000 in grants directly or indirectly to “correct” the catalog and direct mail industry’s ways as follows.

ForestEthics http://www.forestethics.org/

Founded in 1994, ForestEthics is a nonprofit environmental organization with staff in Canada, the United States and Chile. The mission is to protect Endangered Forests, and to achieve that goal they have created a revolutionary new approach.

Contributions from the Overbrook Foundation in 2007 were $105,000 for Catalog Campaign and Corporate Action Program ($65,000) and the Do Not Mail Campaign ($40,000)

To learn more about these programs designed to inform and educate the catalog industry how to be environmentally friendly, visit http://forestethics.org//article.php?list=type&type=15

Overbrook also provided indirectly to Catalog Choice a $20,000 grant to Ecology Center http://www.ecologycenter.org/ for the Catalog Choice Website Development and Operations along with a grant of $160,000 in 2007 to the National Wildlife Federation. (Catalog Choice: Improving the Environmental Performance and Reducing the Carbon Footprint of the North American Direct-Mail Catalog Industry).

The Shopping Cart Experience: Some E-Tailers Just Don't Get It

 I am an unadulterated, unabashed shopper. I shop online and offline. I
window shop, make lists of things I would like to buy, and am on
intimate terms with the latest online retailers, from Amazon and
Endless.com to Woot.com, eBay and beyond. The frustrations the typical
e-commerce sites present when it comes to the checkout line are many,
but easily rectifiable.
http://www.ecommercetimes.com/story/62839.html

Mobile Social Networks To See Sky High Ad Revenues By 2012?

mashable.com

If you were to believe mobile social networks about their advertising predictions, they will by 2012 be raking in between $28 to $52 billion dollars in ad revenue. Given that normal online ad revenue only broke $27 billion for the first time in 2007, and with predicted drops in ad budgets due to the economic recession, the mobile predictions seem a bit hard to swallow.

Colin Gibbs of RCRWirelessNews brings us these predictions from Informa Telecoms & Media, and they may seem outrageous. They do to me, anyhow. Traditional online topped $27 billion globally with devices (PCs) people are more accustomed. But mobile is something that is still in a state of relative infancy in a large portion of the world. Yes, mobile handsets are everywhere, but how many places use them beyond their phone features on a regular basis? Japan is well known for their tendency to do everything from their handsets, but in countries such as the United States, you might see us doing simple checks for sports scores or the weather; intensive, fully- interactive browsing is not quite the norm. Yet.

The iPhone has changed this somewhat, and with the 3G model expected to launch soon, people may spend a bit more time doing things from their mobiles. But I have to posit a question: Will it be checking their pre-existing accounts on sites like Facebook? Or will it be going to mobile-only sites such as Buzzd? While Informa says the whole lot will boom, I think the picture is a little more complex.

Mobile networks are going to have some successes, but my feeling is that there will be fewer in operation than the current litany of traditional social networks housed in full-sized browsers. That isn’t to say some crossover will not occur. A social network that is on both the computer and the phone will of course be significantly more successful due to their ability to connect people to their one source of social information. If I’m sitting at the computer already, why should I pick up my phone to converse with friends or track their activities? Naturally, the computer, whether it be a desktop or laptop, is where I will offer my focus. However, if I’m on the go, it certainly is nice convenience to be able to check in with a site I routinely use when at my main Internet terminal.

So, for the next few years, networks with primarily desktop-based sites will logically receive a good amount of additional revenue as they release and regularly enhance feature-rich mobile applications to complement main operations. Mobile-only services may have a harder go at success. Yes, Twitter and a number of other services have grown largely due to mobile usage. But they’re still very much rooted in the traditional full-fledged browser environment. Only if they bridge that gap will the torrent of users (and, subsequently, billions of dollars) pour in.

(Image source: Mobilevenue.co.uk)

Direct Mail Still Alive but E-Mail Growing, Says Report

Direct mail is not being replaced by e-mail marketing but the latter’s use is growing, according to Mintel Comperemedia, a media monitoring service. To learn more, click here directmag.com/news/direct-042408

There is an upside to the credit crunch: Less mail...

• Mortgage and home equity direct mail down (Source)
• Credit card direct mail declines continue into 2008 (Source)

And this is with a mere recession. Imagine how peaceful it would be if we ever had an outright depression. You could go back to checking your mailbox again.

Paul Kedrosky Infectuous Greed