E-commerce Insights: Multichannel Planning Is a Complex Endeavor

Acquisition vs. Retention

Catalogers traditionally have partitioned their marketing efforts into acquisition and retention programs. Many firms ran their acquisition efforts to breakeven or below, satisfied to bring new buyers onto the file without profit for the lifetime value of the customers and for the top-line benefit. When marketing to their active buyer file, catalog firms would only mail their books to fresh, highly profitable segments, as the resulting orders had to cover not only the cost of marketing to active buyers, but also of marketing to prospects, covering overhead and generating overall profit.

The tremendous economic importance of their active buyer files caused many catalogers to overestimate the loyalty of these customers. The rise of e-commerce and paid search totally has changed the concept of customer loyalty. In years past, a retailer’s catalog might be the only exposure a household received to merchandise in a particular category. No longer. The Internet puts every SKU in front of every consumer. In the age of the Web and Wal-Mart, customer loyalty is hard-won, rare and easily lost.

In paid search, the traditional catalog paradigm of acquisition vs. retention is replaced by non-brand vs. brand search. When searchers find you online using your brand name (e.g., “Lands’ End shirt,” “Harry and David,” “Chase credit card”), they’re using the search engine like a White Pages. For this search, they’ve exhibited enough loyalty to find your site by name — regardless of whether they’re on your active buyer file or not. In contrast, searchers who find you online though nonbrand search (e.g., “men’s oxford shirt,” “fruit basket gift,” “rewards credit card”) are using the search engine like a Yellow Pages. They’re comparing you to your competitors. This order is “in play” regardless of whether that customer is or isn’t on your active buyer file.