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The New Rules of Multichannel Marketing

The rules for multichannel marketing have changed. The Internet has removed all boundaries making it a global market. I have written a guide to the new rules. It is the result of in-depth review of my clients’ analytics. The information included is beneficial to every multichannel or ecommerce business. 

It began a year or so ago when a client asked me to review his analytics. There were some disturbing trends appearing. The company’s sales were increasing, but the average order and lifetime value were declining.

We launched an in-depth analysis of customers, promotions, and inventory. The results were compelling and frightening. The Internet has completely changed the way consumers buy. Our global market requires new business models with low acquisition and fulfillment costs.

We started the review by looking at the usual suspects: merchandising, promotional content, and delivery. We couldn’t find anything that explained why the average order and lifetime value were declining.

The merchandising was fresh and consistent with the brand. The promotions followed the marketing plan. There was a slight decrease in response rates but not enough to explain lower lifetime value. There were not any delivery issues.

The next step was to look at the rise in revenue. What was driving the increase in sales? We found some answers there. New customers were coming in at a higher rate than before. Their average order was lower in value than the historical average. And, they were not returning at the same rate of previous buyers. It was as if they were hit-and-run customers. They placed an order and then ran away.

We dug deeper to look at the items ordered by the newcomers. We found that the hit-and-run customers primarily ordered “C” category items. This started a review of the inventory movement to see how the change in customers affected inventory management.

There was a shift in product sales distribution. The ratio for “A” products was decreasing while the “C” sales ratio was increasing. If the inventory movement was changing, we wondered what was happening with the best customers.

They were still buying on a regular basis, but they were buying less. The decrease in incremental sales was offset by the increase of new buyers. If you looked at sales revenue alone, everything looked great. Double digit growth is always good unless the costs exceed the sales.

The story has a happy ending. My client realized that there was a problem in time to apply corrective measures. His company worked to lower acquisition, management, and fulfillment costs. They expanded their marketing to fringe customers. They could do this profitably because of the lower costs.

Their best customers and products are not as valuable as they used to be. Their new model allows lower lifetime value and more inventory movement. The lower costs help maintain profitability.

Since this first experience, I have seen the same phenomenon in several other clients. Others have noticed shifts, too. Chris Anderson writes about the inventory transition from “A” products to “C” products in The Long Tail. Every multichannel or ecommerce company will feel the negative effects of the changing market if they don’t revise their business model.

The rules of multichannel marketing are changing. I have written a guide to the new rules. The executive summary is available at this link:

http://www.wilsonellisconsulting.com/newrulesmcm/newrulesmcmexec.htm

If you would like a copy of the complete guide, please email me at dellis@wilsonellisconsulting.com. I will be happy to provide it for your review. It includes the rules with examples and steps for getting started.

Thank you,

Debra Ellis

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