Multichannel Marketing, The Patagonia Way

In some respects, Patagonia marches to the beat of its own drum. The Ventura, Calif.-based marketer of rugged mountain climbing and backpacking apparel marketer adheres to strict product quality, catalog style and lifestyle values, all keys to its raison d’être that it never compromises.

In other respects, Patagonia’s multichannel approach -- including not only catalog, Web and retail, but also wholesale -- represents something of a textbook model of today’s multichannel retail business model. Putting both elements together, two Patagonia executives -- Morlee Griswold and Chris Todd -- delivered a session at this week’s DMA06 Conference in San Francisco on how they compile and evaluate the company’s customer database incorporating the diverse attributes of catalog, search, and affiliate marketing customers and prospects.

Looking first at its catalog buyers, Griswold pointed out that once you “slice and dice the whole recency/frequency/monetary thing, you’re going to mail all of your 24-month buyers. Then you can look at what merchandise they’re buying, where they buy in the country and most importantly, where they fall out in the customer lifecycle.”

She broke out three types of Patagonia buyers: casuals, loyalists and cheerleaders. Casuals are one-time buyers who are new to the brand. Patagonia estimates that 64 percent of first-time buyers don’t buy again. Loyalists, who become avid buyers, are worth $134 over two years to Patagonia. They understand the company’s core values, appreciate the clothing’s durability and performance, as well as the company’s liberal guarantee. Still, “we lose about 50 percent of these buyers after two years,” Griswold said.

Cheerleaders start identifying with Patagonia’s core values and appreciate its socially conscious business practice. They’re avid buyers, 95 percent of whom recommend the company to friends and family, often via online communications. “You find these pockets of people who think like yourself and become extremely good buyers,” Griswold said. In two years, cheerleaders have a contribution of $406.

Online advertising contributes to a balanced marketing approach, Todd said. “We’ve noticed that when we’ve worked on some models that had purely online-acquired customers and removed those types from prospect models, that we’ve seen a lift from people who purchased from search and affiliate marketing,” he said.

Through its search marketing program, about 64 percent of those prospects who come to the Patagonia site are new to the brand. Patagonia focuses its search using industry-specific terms such as “organic cotton” or “waterproof jacket.” “We look at customers who come through search or affiliate by near-term value,” Todd said. “Net profit after a six-month time frame, these customers have a $78 value to us; among those who also buy out of the catalog, their value is $112. So the catalogs remain a really powerful vehicle for Patagonia.”

Patagonia, whose business model adheres to being a premium brand marketer and not a value/off-price cataloger, nevertheless has seen much activity from consumers using shopping comparison search engines over the past two years, Todd said. The six-month net profit among these buyers is $71 compared to search engine ($79) and affiliate program ($65) buyers.

“We didn’t think shopping comparison engines warranted any action at all initially,” Todd said. “We tested them out and found we have more customers shopping comparison engines.”

Also on the panel was Elisa Kraus, vice president of analytics for Abacus, which works closely with Patagonia. She outlined six key tips to maximizing response for multichannel marketers, such as Patagonia.

1. Institute a database architecture that facilitates insight and execution.
2. Have the right organization internally to make it happen. “Patagonia,” she said, “has a direct side and e-tail side and everything’s very much in sync.”
3. Create dashboard report metrics to get a baseline and ongoing read.
4. Build your own customer lifecycle and profile by segment.
5. Develop a contact strategy across multiple channels -- direct mail integrated with e-mail. Have a unified voice to the customer through these various channels.
6. Measure results and modify as needed.