E-commerce Insights: Multichannel Planning Is a Complex Endeavor

Just as catalogers mail their most recent buyers, online retailers should buy search clicks on brand terms. They’re low-cost and high-converting, although the resulting sales largely are non-incremental. While you receive lower efficiency on nonbrand paid search ads — you need to pay a greater share of revenue in advertising — more of these orders are incremental, capturing marketshare from competition.

Order Allocation Rules

In the past, when households received your marketing messages less frequently, allocating orders to customers was simple: Give the last marketing communication credit for the order. This rule doesn’t work anymore, as our messages barrage potential buyers in overlapping torrents. Perhaps the last touch before the order was an e-mail, but the prospect received a catalog the week before. Or the last touch was an e-mail, but the e-mail sign-up was driven by a paid click.

The irony is that increased ability to track orders and marketing due to the Web and technology advancements has cut the true understanding of response. The multichannel order allocation problem is far from solved. While the industry struggles to develop accurate methods for multichannel planning, try to expose and discuss your current order allocation rules. Don’t bury these assumptions deep in your business logic. Bring them to the forefront to determine if your strategic models are sensitive to these assumptions. They will be, and that’s terrifying. The “right” way to determine the true marketing drivers of customer behavior are ongoing, cross-channel, hold-out tests, which are difficult to design and implement, slow, and costly.

Conclusion

Multichannel has changed direct marketing’s physics. Search has reduced “customer loyalty via ignorance.” Simple rules of housefile vs. acquisition economics aren’t so simple. Order allocation rules matter, more than you think.

Track sales and marketing costs at the customer level across channels. Differentiate sales from brand vs. nonbrand search phrases. Monitor efficiency just above and below your advertising cut-off, and start hold-out testing to determine your true marketing drivers of behavior.