Keep Up With Dramatic Changes

Editor’s Note: This is the third of a three-part series on becoming more adept and adapting to the multichannel world. Parts one and two appeared in our February and June issues.

Smart multichannel merchants let customers decide how to order. You can visit a J.Crew store and order a pair of jeans via its in-store Web kiosk while talking to a service rep on the phone. What generated the order? In this case, it was a mailed catalog. Which channel gets the credit? That gets a bit complicated.

Our first installment of this multichannel mastery article series detailed the key issues you should focus on. The second discussed how to build the right company culture. This article deals with understanding merchandising and branding in a multichannel environment, and how to reach customers whose buying habits are dramatically changing.

The traditional lines of marketing and channel now bend beyond pure identification. It’s the customers, not the merchants, bending them.

Consider just how customer buying habits — both B-to-C and B-to-B — are dramatically changing. There was near total reliance on phone ordering in the ’80s and ’90s. Web ordering now accounts for more than half of most consumer cataloger orders, and it continues to grow. Though B-to-B online sales were slower to take hold, many B-to-B catalogers also have surpassed the 50 percent threshold.

Store retailers face the biggest challenges, and they’ve been the slowest to espouse the online aspect of their marketing. Retail must embrace the Web with e-mail communications, integrated databases, a customer-centric sales approach and sophisticated online order taking, rather than the traditional store-centered tact.

6 Drivers of Online Activity
1. Web Site Search. Google, Yahoo! and comparison shopping search engines are changing the way people shop and think. Not only do you no longer need to spend the day shopping at malls or hunting through the Yellow Pages, you don’t even need a computer anymore. With your iPhone and a free download, you can compare prices for just about anything that has a universal product code.

2. Strong Value Orientation. Customers expect to find the best deal or value online. If they don’t find that deal at your Web site, they’ll find it at another. How do you compete in this environment?

3. Free Shipping and Discounts. Though related to point 2, free shipping and time-sensitive discounting can quickly fix soft sales. Catalog offers are planned and printed weeks and months in advance. You can add an online offer this morning and turn it off before you go home tonight. Or program a bounceback or trigger e-mail to reactivate an abandoned shopping cart.

4. Wider Merchandise Assortment. The Metropolitan Museum of Art’s 24-page Spring 2008 catalog contains about 130 products. The back cover boasts that the museum’s Web site offers another 2,000 items.

Rising paper and postage costs will force the mailing of smaller catalogs. The catalog’s mission then will be to drive customers online for a wider and more robust assortment of products.

5. Top-Notch Fulfillment. This attribute doesn’t apply just to Web activity. But customers expect Web orders to be fulfilled immediately. This expectation has improved the timeliness and quality of service and fulfillment across the board.

6. Going Green. Catalogers are under attack. Whether through CatalogChoice.org or other channels, consumers are being encouraged to opt out of catalog mailings. On the other hand, in a recent U.K. market research survey by the GfK Group, 69 percent of responding consumers said online shopping is good for the environment. What’s more, 43 percent said they believed they’d reduced their personal carbon footprint by shopping online.

Effect on Core Practices
Two core competencies of successful multichannel merchants are merchandising and branding.

These skills are interdependent. Merchandising often is called the foundation of the business because product selection, pricing and breadth of merchandise assortment drive every transaction. Branding represents how the company positions itself to customers.

Catalogers can set themselves apart through:
● superior selection and unique merchandise;
● outstanding and consistent creative execution across every customer touchpoint, including catalog, Web site, store signage, e-mail blasts, direct mail, customer service letters and telephone contacts; and
● quality customer service and fulfillment that doesn’t just meet industry norms, but exceeds customers’ expectations.

Align Merchandising & Brand
1. Be Involved in Every Creative Effort. Two specific creative efforts — the catalog and Web site — require extensive coordination and concentrated efforts from merchandising and branding to be outstanding and consistent. With the creative group, both the merchandisers and the team responsible for brand consistency need to combine their collective skills to ensure that the design, look, feel, color, typography, photography, type of models, copy style, etc., are planned and executed to the brand image.

2. Proper Merchandise Analysis. Here are a few of the post-analytical tools employed by successful multichannel merchants.

Square-inch analysis, especially when looking at product categories and price points. This analysis can be done for both catalog sales and catalog-driven Web sales.

Ratios of winners to losers within each product category. A winning catalog or Web site product category should see 70 percent of the items produce a positive contribution.

Analysis of average price sold vs. average price offered. A product category should never have variance of more than 20 percent to 25 percent between the two.

3. Creative Post-analysis and Critique. Schedule regular and formal post-mailing reviews of your catalog, Web site and accompanying e-mails. With your multiple methods of customer contact, take a step back to evaluate your execution.

The benchmark will be your brand manual, which highlights and defines the brand and creative expectations. Plan these formal reviews at least twice a year.

4. Web and E-mail Sales Analysis. Most multichannel merchants who began as catalogers know the importance of catalog analysis. But as their businesses have shifted to greater Web sales, their analytical skills haven’t kept pace. More understanding and application of Web analytics will be needed if this aspect of the business is to keep pace with the non-Web side of the company.

5. Look at Lifetime Value by Selling Channel. Lifetime value is one of the, if not the, most important analytical measurements. It measures the willingness of customers to continue to do business with you: to become loyal, repeat-buying customers. Measure propensity to rebuy by mailing list, space advertisement or other “front-end” media.

Beyond that, in a multichannel environment, measure lifetime value by selling channel. Do Internet-generated customers have the same propensity to repurchase over time as traditional catalog customers?

Find out whether customers generated via search engines perform equal to, better than or worse than traditional customers who respond to a list rental. Add retail to the mix and you increase the complexity of the question, “Where are my best customers coming from?”

6. Customer Research. Today, smart multichannel merchants employ all kinds of research to gauge customers’ attitudes and preferences, and to learn more about merchandise assortments and price points. They also can get customers’ reactions about their brands. It matters little whether the research is done with focus groups, telephone or Internet surveys, direct mail questionnaires, or a variety of other techniques.

Multichannel sellers must use research techniques to improve their businesses and keep in touch with customers’ changing habits.

Conclusion
With changing purchasing habits, multichannel sellers are being challenged to adapt their marketing; learn new metrics; and rethink their merchandising, creative and branding strategies. Becoming a brand and merchandise expert means knowing what your customers are thinking and how they perceive your company.

George Hague is senior marketing strategist at J. Schmid & Assoc. You can reach him at (913) 236-8988 or at GeorgeH@JSchmid.com.

Brent Niemuth is creative director and brand evangelist at J. Schmid & Assoc. You can reach him at (913) 236-8988 or at BrentN@JSchmid.com.