Q: In this multichannel environment, how do you measure success and allocate promotion dollars? While you spend money on your catalog, for example, you may get many orders through search. So, do you allocate more promotion money to catalog or search each year?
— Sam Fong, circulation manager, School Specialty
A: The answer, in my opinion, is that you often have to allo- cate more money to both catalog and search each year. This isn't necessarily the answer people want to hear, but it basically reflects the reality of the customer experience.
The best way to learn what you really need to do is to execute mail and holdout groups. For your catalog, select 50,000 households, dividing them into two groups — one group is mailed all catalogs for a quarter, one group isn't mailed any.
Once the test period is complete, pay close attention to search demand. If the mailed segment has more search demand than the holdout, this means catalog marketing "causes" search to happen: You mail the catalog, the customer goes online and comparison shops, then based on the results displayed by search, makes a purchase decision. If you pull back from search, then you're less efficient because your catalog causes customers to go online only to shop with your competitors. If you stop mailing the catalog, you won't even drive customers online.
In a perfect world, you'd analyze this behavior at a customer segment level. You'd measure all demand, then costs (catalog plus search) including all paid search clicks that didn't res- ult in purchases. If you can do this, the results are fascinating. If you can't, make an assumption.
If you have 10 clicks that result in search purchases across a segment of 1,000 customers, you probably have 250 clicks that didn't, so you simply make an assumption of the true cost of search that's "caused" by a catalog mailing.