Posted by: Marshall Sponder | February 24, 2008

Revelation – MultiChannel Customers might cost more than they’re worth

I’m streching it a little but I found Kevin Hillstrom’s post Multichannel Customers Are Not The Most Profitable Customers worth taking a closer look at – perhaps because few people are writing about multichannel metrics or even have published a book on it  (Hillstrom’s Multichannel Forensics at ForBetterBooks.com )

But what he says – that if you could measure your Multichannel sales activity (some sites can actually do this but most everyone I have worked with, can’t – so while I have written a lot about it, I can’t actually say I’m working with anyone that does this, or not well, anyway) you’d find that people are going to buy probably already have a preferred channel and the extra effort and money spent to reach those customers might make them less profitable.

Well, he’s proved it – at least, with the data he has

Future Twelve Month Value Of Last Year’s Buyers: $200 – $300 Spend Last Year








Catalog Web Cases Rebuy Spend Sales Mktg Profit








Yes No 8,839 50.2% $295.08 $148.13 $20.00 $24.44
No Yes 6,217 43.6% $288.39 $125.74 $9.00 $28.72
Yes Yes 2,374 55.2% $295.67 $163.21 $23.00 $25.96

Then he asks “Oh oh. Those vaunted multichannel customers are not the most profitable. Why?”

You know why?

“..One of the realities of multichannel marketing is that the “best” customers are most likely to be receptive to the “most” advertising channels. So in this case, the catalog brand bombs this customer — saturating her with a veritable plethora of catalog and e-mail campaigns.

In addition, this customer does her own shopping, independent of catalog and e-mail marketing. She uses Google to search for merchandise. She utilizes affiliates, shopping comparison sites, portals, you name it. The cataloger spends money on all of those channels, so in essence, the customer is spending your marketing money on your behalf!”

Ok, do I get this right?  So the best customer takes more money to market to, so in the end, they’re actually less profitable because you spent more money trying to reach them.

Then he says, you need to find a way to spend less money marketing to the best customers (which, will further depress the economy, btw, which probably depends on inefficient marketing to fuel some of the growth).

I don’t know, what do you think?


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Responses

  1. Marshall,

    If you believe in the concept of “Engagement” you have your answer. Customers who are Engaged require little, if any, traditional marketing spending to generate new value.

    They simply help themselves.

    “Preaching to the choir” is expensive and wasteful – and you can easily prove this.


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