SHOP TALK: Cross-Channel Sales and Budget for Multichannel Retailers

Q: "Are there any best practices for multichannel retailers 
around how to allocate cross-channel sales and, in conjunction, budget?"
— Steve Cates, vice president of multichannel marketing at Carrot-Top Industries

A: There are many best practices 
for allocating cross-
channel sales. Many popular vendors offer analytical solutions for attributing percentages of orders to the marketing channels that may have been responsible for making it happen.

The most important things to execute are mail/holdout tests within direct mail and email marketing. Take email marketing, for instance. For the next three months, take 5 percent of your email marketing file and don't send one single email campaign to that audience. Randomly choose another 5 percent of your email file and mail them as you normally would. At the end of the three months, compare demand generated in all of your marketing channels across the two segments.

If you don't see any difference in sales across any of your channels, then you know sales from email are incremental and should be attributed to email. If paid search sales increase 10 percent when emails are sent, you know to take 10 percent of future paid search sales and attribute them to email marketing. If affiliate sales decrease 10 percent when emails are sent, you know email cannibalizes affiliate marketing. Therefore, you re-allocate 10 percent of email sales to 
affiliate marketing.

Doing this, you employ the most reasonable best practice of all — testing! If I were you, I'd test all my direct marketing programs in this manner, and then use business rules obtained from the tests to determine how to allocate multichannel sales.

Some sales allocation methods are a bit more complex. It's really hard to determine if customers who visit an e-commerce website on Tuesday and shop in a brick-and-mortar store on Thursday placed retail orders because of the website, or if they used the website because they were going to shop in a store on Thursday. There probably won't ever be a perfect answer for these instances, regardless of what smart mathematical minds might tell us, because marketers can never truly ascertain customer intent to complete certainty.

— Kevin Hillstrom, president of MineThatData, a database marketing consultancy. Reach Kevin at kevinh@minethatdata.com.