In March, Dydacomp Corp – makers of Multi-Channel Order Manager (MOM) software – announced a new addition to their family. The new cloud-based product – Freestyle – is becoming known for what it is not designed to do, rather than for what it is able to do. As Dydacomp executives have conveyed to me, Freestyle is not designed to replace the flagship MOM on-premise application, nor Dydacomp's Sitelink shopping cart. If MOM is the fully equipped family car (that has served Dydacomp well for over 20 years), then Freestyle is the new, shiny electric car in the family – a lean but necessary addition to stay abreast with today's cloud-favored marketplace. And, as in the electric car metaphor, Freestyle is limited in its functionality. By all accounts it fits the definition of a version 1.0 release.
Design architecture: The decision by Dydacomp to add to – rather than replace – MOM with a cloud-hosted product perhaps may come as a surprise to industry observers. The DNA of MOM's front end is Visual FoxPro, which is no longer supported by Microsoft. This would seem to make the MOM platform ultimately obsolete. Yet it continues to be a workhorse in the Order Management Systems community, with upwards of 2,000 active installations, and overall market dominance among SMB users. Dydacomp execs stressed that Freestyle does not create an end-of-life date for MOM. The Freestyle initiative appears to be spawned by the rise of Magento. Freestyle has been in development for a relatively short time (1 ½ years), and Dydacomp admits it is still in the Beta testing phase. Dydacomp does not expect nor encourage current MOM/Sitelink users to convert to Freestyle. There are no plans to build conversion utilities for that purpose. Rather, they are targeting early adopters with a growing web presence that need order management, inventory, and fulfillment processing.
Functionality: Freestyle will provide the advantages of any cloud-based solution: ease of upgrades, automated backups, minimal startup expense, and user access from any browser anywhere at any time. Dydacomp senior staff are promoting these virtues to clients, from the standpoint of freeing up client resources for other more profitable uses. Some key functionality not yet included in this release includes credit card processing, and a shopping cart presence (to be provided by the Magentos of the world).
Pricing: Freestyle pricing is based on a tiered approach of user counts and order volume. The typical price ranges, quoted from a Dydacomp webinar, are:
Monthly fee: $400-$1,000/month, contracted annually, including licensing and support.
One time setup: $2,000 - $6,000
As one would expect, Dydacomp is providing price incentives for early adopters. Competitively, these prices are certainly much lower than more full featured SaaS solutions (e.g. OrderMotion).
As a follow-up to a Freestyle webinar, I asked Fred Lizza, Dydacomp CEO, about cannibalization:
"With the pricing that you indicated, do you expect some cannibalization of MOM sales, who opt for Freestyle instead?" His answer was "Yes, some cannibalization for the smaller of the new customers. Better us than to a competitor – a lesson learned from Apple. Anyone with even slightly more sophisticated needs will still be a strong MOM prospect."
The future: Looking forward, the evolving 3 car family model will need to coalesce into some sort of "hybrid" solution. How that plays out may be difficult to see. Who knows – someday our freeways may be empty due to enhanced telecommuting. In the case of Dydacomp/Freestyle, a possible scenario may be a merger/acquisition event that neatly creates a consolidated solution. Stay tuned!
Randy Hlavac, a Lecturer Professor of Integrated and Social Marketing at Northwestern's Medill IMC program – has once again agreed to share his excellent thinking and research on Social Media with our DMSI audience.
Please feel free to give us your thoughts on this guest blog:
In the last blog article (Part 1 of 2), I examined social media and the IMC [Integrated Marketing Communications] marketing model to make three important points. 1] Most companies are executing social strategies which do not provide any identifiable ROI to their company. 2] Successful marketers don't focus on all markets but only on market segments which produce high returns for the company (high value markets). 3] Social media has three characteristics which makes it unique as a potential marketing channel. These are:
- Social networks are different from social communities – Networks are for connecting with every one of your interests while communities are self-forming and focused on one particular passion or to address a key life trigger event.
- Social communities interact on many different types of social media – blogs, forums, video sites, aggregator sites, and many others.
- Private communities dwarf open communities – most communities require a log-in to become a members
These were emphasized in the first blog because they are critical to identifying the best social media strategy for your company.
Today, there are three strategies companies are developing and deploying using social media. While I recommend you will use all three, it is important to understand the roles each of these strategies will play in growing your market share and in building stronger relationships with your current customers. In this final article, we will examine each strategy and identify the roles, strengths and weaknesses associated with each one.
Strategy 1 – Social Networking Strategy
Most companies are using a social networking strategy. As social media usage grew across all demographic groups, it just made sense to join in the conversation. After all, it was easy to start. Create a company Facebook page, same with Twitter and, perhaps, LinkedIn. Customers and prospects will find you and, if you develop some content, you could engage them in a conversation. Fast, simple and, if you did it right, you would soon have hundreds, if not thousands, of friends and re-tweeters.
The strength of this strategy is that it is fast and easy to deploy. Creating sites on the major social networks takes a couple of hours and you are in business. Post occasional articles on your new products and services or key topics of interest to your customers and prospects and your friends will grow.
But there are problems with this strategy. The most critical is that the relationship between you and your visitors is, for the most part, anonymous. While you will get to know some of the more active people from their names, companies cannot database them or measure key relationships. Because we cannot link social networks to our marketing and sales systems, we can't really tell if an individual is a prospect or a customer, the value of the relationship, or whether our social initiatives are creating new purchase activities. In other words, we don't have hard numbers to support whether our social networking investment is creating new revenues and profits for the company.
Another problem with the social networking strategy is all of your best and worst markets are online at your site at the same time. As a result, brand positioning and tailoring messages to each unique high value market is impossible. Creating content or discussions with one segment might alienate another, more valuable, segment. It is impossible to talk to everyone in a focused manner on Facebook or other social networks.
As a result, social networking strategies are, for the most part, used by companies much like mass media was used in the past. In a 2012 Social Habit survey conducted by Edison Research, the survey found most people follow brands on social networking site for sales, discounts, and coupons. And this makes sense. These types of offers and engagement devices are perfect for a marketing channel which cannot tailor to the needs of individuals or differentiated market segments. With coupons, for example, you can place them on Facebook and the visitors can either use them if appropriate to them or ignore them if they are not. Much like a mass marketed TV or magazine ad, either you are interested or you are not. There is no targeting...that is left to the reader or the visitor.
One final note on developing a social networking strategy. Keep in mind that the ease of building a social site you experienced also applies to everyone else. This means while you have people visiting your official company site[s], they may also be visiting sites from your employees, disgruntled employees, external experts and others who will be talking about you, your products and your brands. In fact, at 2012 study by the Altimeter group found most medium sized companies have 178 different social "facings" – some official and some not! This makes it even more difficult to market using a social networking strategy.
Strategy 2 – Social IMC Strategy
The Social IMC marketing strategy is designed to achieve very different end goals. It is designed to engage with communities of high value to your company, move them to a community site you develop to help them achieve their objectives, and acquire [database] them. It is designed to link your social activities with your sales and marketing databases to track these high value individuals from first social interaction to final product purchase. Companies deploying a Social IMC strategy are able to answer key questions like "What is the ROI of our social investment?" "Are the individual attracted to our social programs customers or prospeccts?" "What is the first product purchased and when does it occur?" "What does each member like on our community site and how frequently do they visit it?"
What is required to develop and deploy a Social IMC marketing strategy? While it is complex to develop and requires a deep knowledge of social monitoring, social levels, and other social tools, it is easy to explain. The Social IMC strategy requires companies develop the following components:
- Identify High Value communities – Identify the high value markets for your company and, using social monitoring tools, identify the communities they use to discuss their passions, needs, and wants. In this phase, also identify the influencers and key "super connectors" at the center of each community
- Become Exceptional – Develop a plan to do something exceptional for community members. Do this right and your concept will go viral
- Community support site – Create a private community support site requiring community members to register with you. Use their registration event to learn about what they want from the community and also give them total control of your marketing process [opt-in]. Design ways to link their registration to your marketing database system.
- Create a viral marketing plan – Create a marketing plan to engage community members with the exceptional event to move them to the community support site
- Be there when they are ready to buy.
Want a quick example? Look at the Members Project by American Express. American Express wanted to sell cards and increase card usage in younger adults. But selling through traditional channels is costly. American Express looked at these individuals and found they were passionate about improving their local communities through environmental, educational, and social activism. They used this knowledge to create the Members Project.
They created a site dedicated to helping the young activists achieve their goals...not selling cards. It is a "think globally... act locally" site where you can recommend local causes and add them to the site. You can then "vote" for your causes by donating dollars and time. If you get an American Express card, you get additional votes. Same if you use it. The card is not the center of the strategy...just an enabler of community members to achieve their goal. Does it work? They got 1,7MM members in year one and it has been going since 2007.
Strategy 3 – Big Data Strategy
Big Data is a very broad concept and is in its infancy in terms of its impact on marketing. To a great extent, marketers today are awash in data. We have data flowing in from our marketing database systems, our social activities, our website, our sales and CRM systems and even from social monitoring systems. For the most part, these new marketing sources of data are real-time, non-integrated, and provide us with insights and opportunities we need to respond to NOW. In many respects, marketing is moving from a look-back, lifetime value, predictive modeled look at market to a real-time interaction with people who are indicating they are ready to buy your product and service. While we aren't there yet, there are Big Data strategies being developed now that will impact marketing in the future.
Non-aggregated Marketing Systems
A major computer component manufacturer sells its products to businesses and consumers. One of their major concerns is how to learn of manufacturing or service problems as soon as possible. If they can address problems quickly, they can proactively address the situation before it becomes a major problem for their customers.
To accomplish this, they use the three non-integrated systems highlighted in the equation above. They use social monitoring software to monitor social chatter for their specific products. These social monitoring systems [which we develop at Marketing Synergy] use very focused social monitoring to identify changes in sentiment by product. When they detect a shift from positive to negative sentiment, they quickly examine the social sources to determine the nature of the problem and if there is a specific geography affected.
When a sentiment shift is detected, they then begin scanning their customer service system to detect the problem. They want to know when business or consumers begin calling in with the problem. At the same time, they look at their manufacturing systems to see if the problem might be with the product – especially if there is a geographic skew – or if the problem is a customer support or application issue.
From these various sources, they quickly can pinpoint the problem and develop a response to it...before more than a few calls are received by customer service. They proactively manage their markets using a combination of social, marketing, and other corporate systems. Rather than react to problems, they can increase customer satisfaction by addressing problems before they become viral issues.
Now for the key question – Which strategy is for you?
The answer is simple – all of them. Social networking is great for broad based discussions appropriate to all markets, addressing customer service issues, and distributing coupons and sales offers. While it will – for the near future – be an investment and not a profit center for a company, it is necessary because of its wide use by your customers and prospects. In addition, when you deploy a Social IMC strategy, social networking sites can "funnel" high value community members to your specially developed sites.
Social IMC is the way for marketers to do that they do best. Build relationships with high value market segments, database and learn from them, and move them from prospect to customer. The key is it must be done differently on social. However, once you understand the process, it gives you the entire test and learn and analytics capabilities of all other marketing channels. In fact, using Social IMC allows you to measure social like all of your other marketing channels.
Big Data is an area you need to monitor for the future. Early applications have proven very successful for B2B and B2C marketing organizations. As marketing managers and C-level executives, you need to begin moving from a marketplace where you control everything to a social world where you need to engage with your high value markets as they address their needs.
Thank you for reading this two part blog. If you enjoyed it, send it to others and feel free to link to me to discuss any points of interest to you.
Randy Hlavac is CEO and founder of Marketing Synergy Inc – an integrated and social marketing company located in Naperville IL. Founded in 1990, Marketing Synergy works with companies to build measurable, highly profitable marketing programs and the database and analytical systems to drive them. Randy works with B2B and B2C organizations ranging from start-ups to Fortune 100 firms. In addition to Marketing Synergy, Randy has been a Lecturer Professor of Integrated and Social Marketing at Northwestern’s Medill IMC program for the last 21 years. His graduate and undergraduate courses focus on the development of high impact Social IMC marketing programs and many of the course "graduates" work in social marketing today. Dialog with Randy on Twitter @randyhlavac or discuss social issues with this hash tag #NUSocialIMC. Randy can also be reached through his company website.
Customer Lifetime Value is a topic that appears often in our blog and others – and yet it still seems to struggle to gain traction. LTV discussions appear from time to time dismissing the concept in whole or in part. Perhaps as marketers, in today's culture of immediate gratification, we can do better. After all, who among is truly sticking around a "lifetime" to measure this stuff?
Some time ago I was introduced to an alternative to Customer LTV – namely, NTV: Near-Term value. I have mentioned NTV casually in previous blog posts, but a couple of new initiatives have put it on the front burner.
One of our clients, who is planning a large prospect mailing campaign, wanted to know more about the prospective yield of their campaign, before investing serious dollars. In other words, will the prospects that they convert generate enough repeat business to justify the campaign expense? Would they be able to break even (or take a small loss) at the campaign level, but win the war if enough big spenders became repeat buyers? Enter NTV analysis – via our WiseGuys Marketing software.
At the same time, I ran across an article about an NTV initiative from Abacus – a large database marketing organization. Elisa Krause, VP of analytical services for Abacus, was quoted as saying:
"...with rising postal increases and rising paper and gas prices, a lot of people were cutting prospect speculation. But when NTV is used correctly they can get a better bang for their buck for the same circulation. We heard from clients that they couldn't wait a lifetime for payback on a customer, and they needed to generate revenue in a short period of time," she added.
The article goes on to say that, to discover a prospect's NTV, Abacus compares a number of first-purchase indicators – including the amount paid at the first purchase, the month or season of the purchase and the origination source and channel. The NTV analysis forecasts a consumer's net profit over time as well as the point when marketing investments will become profitable.
Finally, a third use of NTV – which we have spoken about previously – is the desire of pay-per-click advertisers to know the true yield of their keyword advertising. In our scheme, the following calculations occur:
- NTV calculates customer acquisition costs, from PPC conversion rates and PPC keyword expenses.
- NTV then backs out cost of goods sold, thus providing a true picture of the net yield.
- The resulting NTV can then serve as a guide for future keyword bidding – higher or lower – depending on a higher or lower NTV result.
A recent marketing best seller introduces the concept of "near time value", a variation on NTV.
In "Data-Driven Marketing: The 15 Metrics everyone in Marketing Should Know", Mark Jeffery describes an even more timely approach, using "Near-Term Data". According to Jeffery,
"campaigns and marketing activities must be designed for agility, with near-time data collection on a time scale shorter than the length of the campaign. The network (Internet or cell phone) is a tool that can facilitate this near-time data collection. Marketers (should) design decision points into the campaign execution plan – and be prepared to act at these stage gates".
There is general agreement among marketing analysts that the loyalty of on-line shoppers is reduced from what we expected in earlier days from retail and catalog customers. The ease of browsing to compare and contrast product features, as well as the ease of price shopping, would seem to reinforce this belief. If this "What have you done for me lately" trend is true, then perhaps the time has come to consider NTV at least as valuable as LTV.
The net result of these events is a renewed commitment at DMSI to bolster the NTV functionality in our core WiseGuys product. Look for more about the details in posts to come, as we work with current clients to flush out the most useful ways in which NTV metrics can be used. Better yet, share your own ideas as we continue to move this topic forward.
Many of you know that I am an Adjunct Professor in CRM at the Carey Business School of Johns Hopkins Univ. I have invited a fellow instructor and colleague – Randy Hlavac, a Lecturer Professor of Integrated and Social Marketing at Northwestern's Medill IMC program – to share his very excellent thinking on Social Media ROI.
Please feel free to give us your thoughts on this guest blog:
Bruce Gregoire kindly asked me to provide a guest blog posting on our recent success with tracking ROI on social media initiatives. This is my first of two blog articles - covering the misconceptions of social media and social marketing. The next will discuss how to transform your social programs into measurable, testable & more successful marketing programs.
I teach social marketing in the graduate and undergraduate marketing programs in the Medill IMC College at Northwestern. While there are thousands of pundits who recommend marketing on Facebook, Twitter, PInterest, LinkedIn or the thousands of other social sites, we have found this is the wrong way to go. It’s not successful to focus on these social channels but to focus on marketing using social media. In other words, it’s focusing on marketing – not media.
Most companies are “lost” in social media
In a 2011 survey by Marketing Sherpa, they surveyed over 3000 B2B and B2C marketing managers and found over 80% of them have no way of measuring the bottom line impact of their social marketing programs. They can measure growth in friends, re-tweets, thumbs up or whatever, but they cannot show these activities are actually increasing the profits of the company. They cannot determine if these social visitors are customers they already have, prospects they would like to develop, or just other low potential prospects. Furthermore, if they are customers, they cannot tell if the social interactions strengthen the relationship and, if they do, by how much. Social marketing today is primarily done on "faith and hope"...which is not a very good way to run a company.
Better understand what marketing is and you can create an effective social marketing strategy
When I teach social marketing, I "force" the grad students to discuss – in great detail – the IMC marketing model. While I will not make you do it, I use the model to establish the following points:
- The IMC marketing model starts with a high value market - For success, you must connect by targeting each market with the products, services, messages, and information they find important. And each market has a different message. If you don’t start with markets, you will not have success in your social [or any other] program.
- Messages and Channels must be the ones preferred by the high value target market – These two elements must be selected and built to the desires and preferences of the high value target market. Don’t offer the right product with the right message: forget it. Offer it in a channel they don’t use [like direct mail for younger people]: forget it. They must align.
- Success occurs in the overlap of the 3 circles – This is where the ‘magic’ happens. You must have all three synchronized [integrated?] to have a successful program.
In addition to having marketing programs which are built on the IMC marketing model, each of your marketing programs – including your social marketing programs – must meet several other criteria. They must be:
- Significant – they must produce significant bottom-line results for senior management to consider and fund them
- Able to be replicated – our marketing programs must allow marketers to re-use the strategy to further grow market share
- Testable - we need to be able to test and learn on every aspect of our marketing program
- Customer-centric – they must acknowledge the customer relationship and grow it from first order to last.
Why is this important? We must have social programs which meet these marketing essential criteria. How do we do that? We must not focus on Facebook or Twitter or whatever and focus on how to make social a marketing weapon for our company. And, to do that, we need to better understand what social is...and it’s a lot more than Facebook and Twitter.
What makes social unique?
In my new book – Social IMC [to be published soon] – there are three concepts often misunderstood by marketers. Better understand these three concepts and you can develop a strategy to build a social program with ROI [bottom-line impact].
- Social Networks are different than social communities
Social networks are sites like Facebook, Twitter, LinkedIn, and others. They consist of individuals who are discussing everything "under the sun". There are people talking about every topic, every company, and everything else. Marketers often start with these social networking sites because it is intuitive potential markets are there and it is easy to get started. You can create a Facebook site in minutes and be attracting followers a few minutes later. Simple, easy, and wrong.Social networks are great places to talk to everyone but not for marketing. Because marketing requires you to give a targeted message it means you must 1] understand who they are, 2] have a way to address their needs, and 3] be able to talk with them in a controlled way. NONE of these attributes is available on Facebook or other social networking sites. As you meaningfully talk to one person, others with different interests "go away". You cannot make a sale here. HOWEVER, you can use these social networks to segment and engage key high value markets...provided you take them somewhere where you can talk to them in a controlled conversation.Social communities are PRIVATE sites [you must register with them] that are discussion specific topics. These are generally self-formed by community members and are focused on key topics of interest to the community. If you want to see some social communities, take a look at the American Express Members Project or Ridgid Tool’s plumbing forum. This type of system – a private community – is a key to using social media successfully. These types of community systems are places where people discuss their needs and wants and look for experts to help them address them. If you become a trusted expert in a high value community, you can “be there” when they are ready to buy.
- Social Communities exist on many levels
While many marketers focus their social strategies on Facebook and Twitter, these are very small sites when you look at social media worldwide. The key is to understand EVERY social community engages on multiple levels. They do cruise on Facebook, Twitter & LinkedIn to hook up with others like them. They use News and Bookmarking sites to get more focused on their passions and needs. Bloggers are often thought leaders and trusted experts within a community. While communities to write articles, they also use video [and you should to] to present ideas and responses. Finally, the biggest place they dwell is in private communities. As you build a social marketing strategy, you need to engage your high value markets WHEREVER they are in the social "cloud".
- Private Sites dwarf Social Networks
The most common misunderstanding is social networks are the "place to be" in social. While you do need to be visible on Facebook, LinkedIn, Twitter and other social networks, these are to respond to questions and show different markets places where you are addressing their specific needs. I think of social networks like an inbound telecenter. The telecenter takes calls in the order they come in and attempts to address the questions of the caller. The same is true for social networks.
Think marketing strategies not social sites strategies
This lays the foundation of what makes social marketing different from social media strategies. Before the last 'installment' of this two part blog, think about the following questions:
- What are your high value markets?
- What types of non-social media do they read or consume?
- What type of social sites are they likely to use?
We will address the importance of these questions in the last ½ of this social marketing blog.
Randy Hlavac is CEO and founder of Marketing Synergy Inc – an integrated and social marketing company located in Naperville IL. Founded in 1990, Marketing Synergy works with companies to build measurable, highly profitable marketing programs and the database and analytical systems to drive them. Randy works with B2B and B2C organizations ranging from start-ups to Fortune 100 firms. In addition to Marketing Synergy, Randy has been a Lecturer Professor of Integrated and Social Marketing at Northwestern’s Medill IMC program for the last 21 years. His graduate and undergraduate courses focus on the development of high impact Social IMC marketing programs and many of the course “graduates” work in social marketing today. Dialog with Randy on Twitter @randyhlavac or discuss social issues with this hash tag #NUSocialIMC. Randy can also be reached through his company website.
In describing the challenge for multi-channel marketers, I often fall back on the old quote from John Wanamaker, the 20th century department store magnate: "Half the money I spend on advertising is wasted; the trouble is, I don't know which half." "Knowing which half" would certainly be the Holy Grail for modern day marketers as well, and that day may be coming soon. This week, we had the chance to speak with George Michie, Co-Founder and CEO of RKG | Rimm-Kaufman Group.
The discussion was a follow-up to our "MoneyBall for Marketers" blog post, where we shared our thoughts on the relationship between PPC and the LTV.
The conversation was apropos for direct marketers in that George comes from a catalog background (Crutchfield), and thus understands completely the interface between offline and online analytics. Here are some of the high points:
Question on LTV: DMSI has begun linking customer LTV (aggregate online and offline) with PPC keywords and keyword costs. Our thesis is that PPC bidding might change significantly, depending on the LTV of customers converted by PPC keywords. Do you consider this to be a highly valuable initiative?
Response on LTV: George felt this was definitely valuable, with a bit of a caveat. In support of this approach, his experience is that there is significant variability in LTV by keyword. However, in his past life at Crutchfield, he described how they took a more short term approach, measuring 3-month and 6-month values (I have understood this approach as "near-term value.") For instance, his marketing group could accept a loss on the original order, in hopes of making a profit thereafter. But they could not afford to wait a lifetime to find out if the customer would be profitable. The early, near-term value results gave them trend metrics they could use to move forward. The question that we discussed is whether online shoppers have the same lifetime value longevity as offline shoppers from bygone days. In my view the jury is still out on this, but there is a lot of sentiment that describes many online shoppers as transaction buyers, looking for low price and lacking the same lifetime loyalty exhibited before the web. If this is true, near-term value may have greater significance than LTV when establishing PPC bidding.
Question on Offline Attribution: It appears the RKG's attribution algorithm only considers online/PPC campaign results, and ignores offline campaign stimulus – is that correct?
Response on Offline Attribution: It turns out that RKG can filter both phone and mail responses. For phone, RKG's solution allows for call-center orders to be tracked back to the individual user's click-thru (see RKG blog post: Discovering Untracked PPC Sales). Therefore, not only can they know what keyword and search engine generated the click, but also attribute credit to the click amongst other marketing channels that they track (Email, Organic, Affiliate – with the timing and ordering of each).
For mail campaigns, RKG can import offline data feeds from campaigns that include in-home dates for mail drops. The difficulty arises with prospect mailings, where the merge/purge matchback vendors sometimes "re-write history" with their own attribution – long after the fact.
Question on COGS: Since Cost of Goods Sold is so important to a LTV calculation, is it a component of your bidding process?
Response on COGS: Yes, margin is considered in the RKG algorithm. It is captured from a feed at checkout.
Professor's Corner: Are we approaching the Holy Grail?
The answer seems to be a qualified "maybe" but more steps are needed. RKG made the point that they don’t see attribution alone as a complete solution; that analyzing media mix would be a more holistic approach.
In summary, the discussion above seems to address two out of three components of improved attribution, and PPC bidding:
- NTV, not LTV: LTV is not a "what have you done for me lately" concept. From the input RKG and others have provided, I expect Near-Term Value (NTV) to become the focus of our research initiative. I would also expect a 12-month window to become the default threshold for NTV analysis.
- Online/Offline Attribution: It appears RKG has developed a very reasonable approach. Other vendors are working in this space too, of course. I understand from our clients that Clearsaleing.com has a sound attribution algorithm, albeit somewhat expensive (RKG mentioned them as well).
- Linking PPC to LTV/NTV: The difficulty here is not so much LTV versus NTV: it is customer conversion versus purchase conversion. PPC algorithms specialize in linking click-thrus to orders on a 1-to-1 basis. For cases where the order is the first customer order, linking to LTV/NTV is not a problem. But lacking complete visibility into all customer transactions, how can one tell if the click-thru generates the earliest order (customer conversion), or a trailing order (purchase conversion)? At DMSI, our WiseGuys application already has pieces of this puzzle in place, and we are moving forward to incorporate remaining functionality. Some of the core functionalities already include Refresh processes (ETL from order management systems), Matchback algorithms, and LTV/NTV reporting. We would be delighted to speak with you about your immediate needs, and discuss our plans for further development in these areas!
"Who you gonna believe: me, or your own eyes?" The famous quote from Groucho Marx illustrates a central point that I continue to make with students and clients: to ensure a complete understanding of your marketing database, you must routinely browse your customer data files. It's an old fashioned approach, but necessary when you consider that bad data hygiene is the leading cause of CRM failure (see Focus Research Ten Drivers of CRM Failure).
I was reminded of this when I attended a database marketing seminar, and the topic turned to sophisticated, expensive data mining software. After some discussion, it was generally agreed that simply browsing customer data – without using advanced statistical approaches – had as much or more "data mining" value for marketers. While the Real Estate industry emphasizes location, location, location, in data mining, it is patterns, patterns, patterns. Here are some of the patterns that can be revealed with what I call "Eyeball Data Mining."
- Faulty data hygiene patterns: These include blank fields, inaccuracies, duplicate records, incomplete data entry, missing data, outdated information. By observation, a pattern may reveal itself that contributes a great share of problems. One of the most common examples is Order entry: many operators who take phone orders may routinely key the same default source code for all orders, instead of finding the correct code to apply for each specific order.
- Database conversion patterns: when a new software program is implemented, a Quality Control process for the data conversion is often overlooked. Users would rather pay attention to the software bells and whistles. Old codes are not mapped properly to new fields. Old dates are converted badly. Contact names get jumbled with company names – you get the idea (also known as "GIGO" – garbage in, garbage out).
- Missing data: perhaps the trickiest data pattern to see is one that is not there: when the data you would expect to be database-resident is missing completely. As marketing becomes more multi-channel, the data exchanges between each platform become more challenging. Here are a few patterns to recognize:
- Customer number ranges. Gaps in your customer numbering could mean you are missing an entire set of records from a period of time.
- Inconsistency between reporting systems. Experienced marketers know that you can't expect your marketing reports to tie out exactly with accounting reports. For instance, there are always differences in order cutoff dates versus paid dates. However, you should look for large differences in customer or transaction counts, which may indicate serious problems with your data handoffs.
- Make certain that the results from your ETL (Export, Transfer, Load) utilities are checked periodically – ideally by a 3rd party independent of the process itself.
I Can See Clearly Now – The Advent of Affordable Visualization Software
Data patterns (discussed above) can be revealed with simple, low-tech sorting and filtering tools. These tools are useful for even a novice marketer, yet powerful since they can link to large SQL customer databases. Microsoft Access happens to be my favorite – many users prefer Filemaker as well.
Two quick examples:
- Filtering can detect discrepancies in customer counts by customer type.
- Sorting can reveal gaps in customer numbering and order numbering.
Eyeball Data Mining has its limitations, of course, particularly as data sets grow large and complex. Until recently, visualization software was not accessible to the average marketer, from either a budget or a technology standpoint. Happily, that has changed, and we can report on some tools that you may find helpful in seeing patterns of both bad (and good) data hygiene.
Tableau Software. If one picture is (still) worth a thousand words, than Tableau might be a good choice. Our sources report that Tableau is inexpensive ($2K), powerful and easy to use.
BatchGEO. We used this tool for a geo-mapping project for a client, to show the location of best customers. Very easy to use, you just copy/paste a zip code spreadsheet from your desktop into BatchGEO’s online interface. Then watch a map appear, with the distribution of locations from your spreadsheet. The subscription fee is $99 per month, which you can terminate at any time.
Takeaway: Visualization software won't necessarily reveal discrepancies by itself, but will raise your curiosity about customer patterns that don’t pass the smell test. It is up to you to take the next step and diagnose the root cause.
First in a series on Online-Offline Data Integration
Michael Lewis and Brad Pitt made "Moneyball" a great movie, but also a popular business concept. I'm no Brad Pitt (pause) – but marketers can use some of this same thinking – by focusing on net yield. Rather than bidding up PPC keywords to get more sales volume, only bid those up that have the best net yield, as measured by Customer Life Time Value (LTV).
Customer LTV is a subject marketers love to talk about but rarely implement. Certainly you have heard conference speakers profess that knowing the LTV of your average customer is central to effective marketing practice. The reasons for this disconnect could be many. LTV is sometimes viewed as strategic in nature: something you only need to do every year or so. Kind of like doing your bucket list – not something you pay attention to daily. Or it may be that LTV is rare for a more practical reason. Without an integrated marketing database, marketers have huge challenges bringing the components of LTV together in one place.
Customer Lifetime Value uses many metrics – average sale$, COGS, retention rates, marketing expense, the present value of money, and others – to calculate the profit you will realize on the average new customer over time. The method balances inputs (costs of acquiring & servicing customers) with outputs (profit). For a detailed discussion of Customer Lifetime Value, see our May 2012 blog posts: "Customer Lifetime Value: How much are your Customers Worth?" and how one business used LTV to assess their PPC costs in "Effectively Using Customer Lifetime Value in E-Tail."
"What If's" to Consider
In the world of digital marketing, consider your PPC keyword charges as your customer acquisition cost. What if you could do your pay-per-click bidding with LTV values at hand? Goodness, what a concept! What if your bidding was based on the ultimate LTV of a converted customer, rather than just the value of their first purchase transaction? What if you found that you can justify higher bids on certain keywords? For example, some keywords might convert high value new customers into repeat customers with multiple visits!
Professor's Corner: Measuring the Net Yield of PPC Keywords
Our project: DMSI is in the early stages of a research project to study this phenomenon. Our research thus far has been with a growing gift client, who until 2008 had a pure online presence before adding a catalog to their mix. The client uses the highly respected RKG Group, Charlottesville VA, as their Search Engine Marketing (SEM) agency. In fact, RKG has also blogged on this topic – see RKG Blog for their view. Here are some of our early findings.
- Big swings in LTV. As the project has progressed, it is clear that LTV calculations vary significantly by keyword, a good reason to pursue this project. The influence of highly variable input components – many of which are obtained only from offline analysis – strongly indicates that online-only ROI analysis (i.e. Google Adwords reporting) is incomplete. The baseball analogy here would be that on-base percentage is more significant than batting average.
- Attribution challenges. One of the clarifications we needed to make early on was the difference between a new customer conversion, and a purchase conversion from an existing customer. Our attribution model focused on customer conversion, in a two step process.
Step 1 is done by the SEM agency, to match a PPC click-thru with a subsequent customer order.
Step 2 is done by our WiseGuys software, to insure the customer order is truly a customer conversion transaction, i.e. the first transaction in a series. More on this in a future post, but suffice to say at this point the analysis is equal parts art and science.
- Keywords versus Keyword Categories. We first calculated LTV by keyword. This turns out to be too granular and overkill. Our plans now call for calculating LTV by keyword category (perhaps using what Google Adwords is now calling "Label").
- Allocation of Keyword Expenses. We distributed all PPC charges for a keyword, in a 6 month time frame, against the number of 6 month converted customers. Further discussion suggested including only converted keyword charges for assignment. In this scenario, keyword charges that led to orders – but not customer conversions – would be ignored. This seems to be a fine point but nonetheless worth further study.
- COGS. This component is probably the least variable in our approach, usually 50% of retail price.
- Repeat Buyer distribution. Some keywords may generate only one purchase – e.g., Graduation gifts – others generate many repeat purchases. Obviously the latter contributes to a much higher LTV than the former. These are the keywords worth higher investment.
Stay tuned to our blog as we move forward in our research. We will continue to publish more results from our own research, as well as reader comments and input from other practitioners.
As the final step in a closer look at Dydacomp/MultiChannel Order Manager, I attended the MOM User Conference in Chicago June 4th. This one day event was the first of its kind for Dydacomp, and long overdue. Turnout was quite strong – approx. 100 MOM users as well as a dozen sponsor and panel participants.
For many if not most attendees, this was the first face-to-face contact with Dydacomp staff – a welcome relationship-building step that was not lost on both groups. It was a good reminder that a simple "high touch" outreach effort is still appreciated in the low touch era of Internet communications that we are accustomed to.
This sentiment was reinforced by Fred Lizza, Dydacomp President, who spoke about a introducing a culture of openness since taking office 18 months ago. As you would expect, the words he chose in describing this culture change (e.g. "pro-active" versus "reactive") resonated quite positively with users.
He also highlighted how, from a design standpoint, Dydacomp continues to open up the MOM software platform as well. As an example, one speaker – a MOM user – spoke openly about choosing the Magento shopping cart (over Dydacomp’s proprietary SiteLink). He cited open source and flexibility as the reasons for his decision.
Tim Parry from Multi-Channel Merchant set the stage as the keynote speaker. Social media, as always, was front and center. Tim repeated a warning (from Forrester Research) about Facebook that dramatized what I and many other marketers share:
"There was a lot of anticipation that Facebook would turn into a new destination, a store, a place where people would shop. But it was like trying to sell stuff to people while they’re hanging out with their friends at the bar."
Tim also cited his own caution about the Facebook challenges in targeting and privacy issues.
Two senior development staff from Dydacomp – Kevin Loo and John Wu – led discussions about coming MOM features and functions. In particular, an e-Commerce Channel Manager module captured significant interest. This approach, beginning with Miva, is meant to integrate MOM with more Internet platforms – and of course furthering the openness initiative. In terms of favorite things, Sitelink seemed to get a favorable review from 2 of the 4 user representatives in a panel discussion – principally for its real time update capabilities.
Other conference sessions were targeted toward report writing details and SiteLink-specific interests. Surprisingly, recent Dydacomp "bumps in the road" (with license verification bugs) mentioned in my earlier blog did not come up for discussion. Indeed, the only random topics that seemed to generate groans included Quickbooks integration, and inventory reconciliation.
Audience inquiries about a timetable for MOM to release a web-hosted SaaS product were addressed by Fred Lizza at least twice: basically, no announcement can be made. Lizza offered that SaaS is where the industry is going, and investments are being made, but nothing more can yet be said.
A final congratulations offered by a participant to the Dydacomp staff -"the conference was a real winner" – brought universal applause. I believe this sentiment signaled that, with conferences of this type, MOM users feel they will now be heard, valued, and understood.
In my May 18th post, I wrote a blog piece about how, in many ways, I feel things are definitely looking up at Dydacomp, makers of Multi Channel Order Manager (MOM). Coincidentally, since that time, the MOM Users group, an unofficial forum of often outspoken customers, has been on fire about repeated incidents of getting locked out of the MOM application. Specifically, at login, users were prompted to enter a registration key, without which they could not proceed. And no registration key was at hand to enable their machine.
After several days of user postings, and Dydacomp responses to the postings, the problem became clear. Dydacomp reported that a built-in communication script at each user site is programmed to occasionally fire off a registration signal with a Dydacomp server, which verifies that the registration is valid, and then returns a new, updated registration key. The problem reared it’s ugly head when the Dydacomp server began failing to respond properly, leaving the user in the lurch.
On Monday, May 21st, I did a little digging and talked to the Dydacomp folks to confirm a few things. I was able to confirm that the reg key approach is used to combat software piracy. Although I have been around MOM for more than a dozen years, I was unaware of this approach. However, I think many would agree that software piracy is a front-burner issue for anyone in the software industry. Whether you agree with this approach or not is another matter, but I personally would hesitate to put it into the “terrorist” incident, as it was labeled by at least one user in the forum. Unfortunately for many of us, that is a trigger word that has no meaning in this discussion. Having said that, Dydacomp is now facing what Facebook, Google and others are dealing with daily: that privacy continues to be the #1 issue for businesses in relationships with their customers.
I also confirmed that very soon, Dydacomp will be sending out more information on this issue, in the MOM Users Group forum. Finally, in the next week or two, I will be posting a follow-up piece in this blog, addressing some of the outcomes for both Dydacomp and MOM users. Feel free to let me know your thoughts – good, bad or indifferent.
The old Jazz standard illustrates the guessing game faced by today's multi-channel marketers: how to link matchback responses to a specific marketing campaign. Veteran DM staff from postal campaigns will remember when this was a straightforward process. The returning source code and/or response device identified the proper campaign to credit. That, of course, has all changed.
Problem: This multi-channel issue was dramatized by an e-commerce client who had just completed their very first print catalog campaign. They were, of course, looking for an excellent response after the catalog dropped in July, However, matchback response reporting gave little encouragement – original results were dismal. Further research revealed that a June e-mail campaign was being credited with July responses – i.e. the June campaign was "stealing credit" for the July campaign results.
Solution: Using WiseGuys, we quickly implemented an enhancement that allowed a variable segment-specific response window-in this case, 7 days for email promotions, 90 days for the print catalog. Now the July catalog received complete credit for all the July responses, matchback results doubled, and our client was much happier with their catalog. And an A/B split test showed the catalog outperformed the control group by almost double.
Learn more: An Atlas Institute study found that users exposed to both search and display ads convert at a rate of 22% higher than search alone, and 400% higher than display alone.
Matchback analysis is the process of analyzing an incoming order/sale, determining the source of the response, and crediting back a previous promotion/campaign for that response. Easier said than done – especially when multiple overlapping campaigns could each take credit for the response. Many complex algorithms have been written to accomplish this process. Our mantra has always been to keep it simple. Minimum Requirements: Since Matchback processing is usually outsourced, here are 6 fundamental rules to discuss with your vendor to maximize success.
- Source code capture – start with this fundamental step, knowing that today's multi-channel environment makes this more difficult. First, determine the information value that a source code provides in your organization. For instance, the original source code of a new customer is critical to determining LTV. Then, consider online incentives for web customers to increase your source code capture rate.
- Shelf life – establish the useful life for each of your promotions (e.g. a "response window"). For email, it is probably 7 days or less. For a wholesale parts catalog, we have seen clients use as long as 12 months.
- Rules for counting responses – per the shelf life question above, should more than one response be credited back to a campaign? Our recommendation is yes, provided the response time window is reasonably short.
- Rules for overlapping campaigns – If a catalog is sent the first day of the month, then an email 7 days later, which campaign should get credit for a response on Day14? Most of our clients prefer crediting the last promotion that the customer sees. Or you may want to pro-rate the response among multiple campaigns.
- Rules for matching – to boost your count of matched responses, establish whether Matchback should include "Pass-alongs". A mailing that is sent to one household member often generates a response from another. In B-B, counting each pass-along is even more important (e.g., a mailing to a decision maker passed to a purchasing agent).
- Rules for testing – for customer mailings, be sure your Matchback can compare "hold-back" test records with those that are mailed. Some of your customers will respond to you even without your mailings. By holding back a sample, you can measure this, by testing the "lift" of those mailed over the held back control group.
As always, call today to take advantage of our free 15 minute consulting session. "The Professor is in" at 703.941.8109.