Monthly Archives: February 2008

MultiChannel / Omnichannel Mayhem – CAO Solution

Well, the deluge of comments on the Managing MultiChannel Mayhem post was underwhelming for such an important idea, and I bet I know why.

You thought the system of checks and balances on communicating properly with customers was overly complex and unwieldy.  You could not imagine a self-correcting marketplace of permission within your company that would boost Marketing Productivity and the bottom line.

You’re right, it probably won’t happen at the company you are working at now, even though it’s the right way to go about it.  So let’s look at an alternative that might achieve the same result, shall we?

Even when this kind of marketplace system is set up, there are a couple of problems worth mentioning.

The first is a “black market” in permission to avoid the scrutiny of ROMI.  Channels / divisions can “cheat” in a number of different ways – using backdoor customer contact trading agreements, withholding / hiding customers, keeping and re-using copies of lists, etc.

It takes a lot of enforcement and a lot of effort, unless the company was born into this marketplace mode of thinking, and has a centralized customer database.  Then people tend to play fair, which happens at a lot of pure DM companies.  It’s just the mindset; Database Marketing people play it by the numbers – win, lose or draw.  Nobody fears analytics; failure is a learning experience to them, they say “Bring it On!”

The other cheating problem you run into is data torture by the analysts in each channel or division.  In a marketplace model, everybody wants to win, so there is incentive to bend the rules at every turn to produce stats that push your channel or division ahead of the others.  Modify the definition of a customer slightly, for example.  Stretch or compress time periods.  Intentionally use data that has not been cleansed.  Take advantage of slippage in the data update process.  All of that good stuff.

So what’s the answer, how do we solve the MultiChannel Mayhem problem?  How do we correctly implement the Interactive Customer Marketing triad of Relationship MarketingMeasuring dis-Engagement, and Control Groups, but avoid the cheating problems that go on with the Marketplace approach?

Here’s the answer: Every MultiChannel Company involved with at least one Interactive (always on) medium needs a Chief Analytics Officer (CAO), independent and reporting directly to the CEO, with all the senior analysts in the company reporting directly to this CAO.


One of the things you find out when trying to apply the permission marketplace concept is you need lots of standards and a way to enforce them.  So you have to build this CAO capability / authority anyway, and rulesets to manage the whole thing.  Then everybody still tries to cheat the marketplace but with a CAO sometimes they get caught – usually only after the deed was done.  That’s Suboptimal.

So, to address that, the next phase of the marketplace fix consists of dragging all the analysts that matter out of all the silos, and having them report directly to the CAO, creating a giant Research & Analysis group (R & A).  Then you easily have standards and controls for everything across all the marketing silos.  Standard definition of a customer.  Standard definitions of customer dis-Engagement and defection.  Standard definition of ROMI.  Standard data cleansing and list pull procedures.  Standard data update sequences.  Standard implementation of Control Groups.  All of it.

And then, magically, the importance of the complex marketplace idea actually goes away.  Because with an independent CAO and R & A group reporting directly to the CEO, you get all the benefits of the marketplace without the marketplace itself.

The CAO only has one directive from the CEO – maximize profit.  Allow the strong Customer Marketing ideas to blossom and the weak Customer Marketing ideas to fail.  It’s the same result as the Permission Marketplace, only with a lot less complexity.

Here are some direct benefits of this approach:

1.  If you have at least one always on, interactive channel, you cannot measure the success of marketing without using Control Groups.  Let’s say you want to implement them.  How are you going to keep other channels / divisions from stomping on your controls and destroying your tests if anybody can access the database at any time and pull contact information for Customer Marketing Programs?

It’s impossible.  You need centralized control of the database and one entity pulling the contact data so that tests are flagged, controls are flagged, and as a result extracts for contact are pure and free from the outside influence of any other direct-to-customer marketing efforts.

2.  There is something quite magical that happens when you put many analysts, each specializing in a different piece of the business, together in the same space reporting to the same person.  They talk to each other.  They go to lunch together.  They discover things the business would never know about otherwise.  Linkages.  Correlations.  Root Causes.  Because much of the analytical gold is buried not in a silo, but across and through a silo into others.

There’s really no way to put a value on the kind of exploration and discovery that can occur when you put many smart people, each concentrating on a different piece of the business, in a group reporting to one person, who in turn reports directly to the CEO.  Standards are clear and alliances are to the customer truth, not to the marketing silo.

I can hear the wailing already on the centralization of analysts.

“Jim, analysts are always more productive and have a better understanding of the channel if they report to and live with the other channel people”.  Personally, I don’t think that’s true; I know of very successful centralized groups that have great knowledge of the units they cover.  And from a management perspective, the reality of analytical oversight is you don’t want the analysts to become best friends with the folks whose work they are analyzing.

Without the analysts physically near each other, I think you miss out on much of the analytical synergy.  With the communication tools we have today, it’s just not clear to me why a great analyst cannot have intimate knowledge of a channel just because they report elsewhere or even live elsewhere.

As I said, the highest ROI analytical gold is often found understanding what happens between and across silos – since when the analysts are each in a silo, this cross-border work is rarely pursued and tends to be undiscovered.  You want to encourage a “world view” of the company at this senior analyst level, not a silo-specific view.

I mean MultiChannel, by definition, means across channels, right?  Who is responsible for that analysis?

And I’m not just talking about “customer” analysts.  If I had my way, I’d have sales, customer, merchandise, supply chain, service, fulfillment – all of the senior analysts – in the same tank to encourage this world view.  You can always have operational analysts in the silo itself – your future senior analysts.

Think about it.  Who is doing cross-silo analysis at your company?  An analyst in a silo?  Right.  Who is going to figure out a check-buyer Marketing Program is not working because they are shredding checks over in Customer Service?

But if physical location is truly important, fine, the reporting relationship – the loyalty / trust chain to the CEO – is the most important part of this idea, not the physical location of the analyst.  The reason this is so important is these folks need to be protected from the inevitable pressure and flack that will be coming at them from silo heads, if the CEO is really looking for the truth.

3.  With the centralized analytical setup, rather than the trading complexities and vagaries of the Permission Marketplace, you simply have smart people who play by the numbers controlling Marketing access to the customer.  So you’re the Catalog Division and you want to mail to new customers of the TV Division?  Fine.  We’ll let you try that a few times, and if it looks like an incredibly bad idea financially, then we simply won’t let you do it any more.

In other words, the message from the CEO to the CAO on down through the R & A Group is this: Folks can test anything they want.  But we will not allow channels / divisions / Marketing silos to interfere with anybody else’s test programs, and we will not allow channels / divisions / Marketing silos to intentionally and repeatedly destroy customer value.  That goes for every business unit and Marketing silo, regardless of who they are or where they are from.

When you get to this point, you know Customer Marketing is actually being run by the numbers.

What does this analytical culture look like in practice?

You can still have your own analysts in your silo, that’s fine.  Each silo with analytical folks gets a standardized, clean data feed to work from – minus contact information if that is what is required to stop cheating – from R & A.  Same data set for everyone.  Nobody from outside of this R & A group pulls from the customer database.

And as far as any contact data to be used for Marketing, programs that will actually touch the customer, you get your lists from the R & A group, and you get your customer marketing campaign results from the R & A group.  You can track things on your own, sure.  But the final bottom line analysis on customer impact / ROMI comes from R & A.

Any kind of Marketing Success analysis from outside R & A is not used for significant decisions.  If you are trying to argue budget, priorities, people, program success, Strategy, whatever at the senior level, analysis from outside the R & A group doesn’t even make it through the door.  And this has a really interesting effect on senior people.

They actually start making very large and significant decisions based on the data.  Why?  Because they trust the results.

Perhaps for the first time in the history of the company.

Think about it.  If every silo creates their own results, then why would a senior exec really trust them?  These senior folks are not stupid.  So as long as the decisions being made are not that important, as long as the company doesn’t really “live and die by the numbers”, it’s OK to have self-produced, un-audited, un-controlled, “who cares if this is reality” numbers.

Because the numbers don’t really matter.

If you are serious about running a company by the numbers, and that company has any interactive, always on components, you need a R & A Group that is completely independent of any channel or Marketing silo.

Otherwise, you can’t trust any of the Customer Marketing analysis.

Interactivity is, indeed, different.

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MultiChannel / Omnichannel Mayhem – Example

It’s been over 10 years since I left Home Shopping Network, so I’m pretty sure I can tell this Relationship Marketplace story without enraging the Gods.

The mail order channel had a jewelry-only catalog that did quite well, in terms of mail order ROMI.  This book generated the majority of the profits in the mail order division.  What we wanted to know was this: if you looked at the book from the company perspective – across all channels at the customer level – what was the contribution to profits this book made?

When we started using Control Groups on the book and looking more deeply into the Relationship Marketplace, here is what we found:

1.  The book actually lost money versus control.  It virtually had zero impact on sales at the customer level, meaning it was almost completely cannibalistic to TV.  That means the entire cost of the book, plus the cost of discounts, was a net loss on every book mailed.  The more they mailed, the worse the losses were.

I remind you this book generated the majority of the profits at the mail order divisional level.  This revelation was not pretty.

2.  Like the good Marketers they were, the mail order folks had tested all kind of segments across the entire customer database, and found brand-spanking new TV jewelry buyers to be the most productive target.  In other words, they were mailing to the folks with the highest level of Engagement.  This is why the book was very productive at the divisional but not at the company level.  The “always on” nature of the TV channel demand was pulling in buyers all by itself, and the book was essentially just getting these sales that would have happened anyway to switch channels.

3.  Further, and perhaps even scarier, the mail order division was involved with a list exchange that had a “hotline” (new buyer) component.  That meant as soon as TV acquired these highly Engaged jewelry buyers, their contact info was rented by the mail order division to competing jewelry catalogs if they became mail order buyers.  That’s OK for the mail order division, which gets to keep the list rental income.

I should also say list exchanges of this type are standard practice in the catalog business.  So the catalog folks were not doing anything “wrong”, from the catalog division perspective.

But I think we could all agree that situation sucks for the TV channel, which deployed assets to acquire the customer in the first place.  Not only is TV getting hosed on the (company perspective) non-incremental sales stolen by the catalog division through this book, TV is not getting a piece of the list rental income from selling the contact info of their best customers to the competition!

Further, as one might guess would happen with highly Engaged customers, when we held back a control group from the list rental process, those folks who were not rented out delivered higher profits to the company overall than those rented out.

Just makes sense, right?  Relationship Marketplace, indeed.

What to do?  We simply re-configured the targeting of this catalog to dis-Engaging TV jewelry buyers.  As they stopped buying from TV, this very well-executed book was able to extract another purchase or two from the customer and actually maintain some of them longer term.  Sales for the book dropped dramatically, but these sales were truly incremental versus control, and the book was still profitable.  This also affected list rental, but since the buyers had already dis-Engaged from TV, this issue was not nearly as critical.

Got any multichannel misallocation stories of your own you can share?

Background on this post here; solution I’ve seen succeed, here.


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Managing MultiChannel / Omnichannel Mayhem

So, you’re saying to yourself, all this talk about Control Groups and Measuring dis-Engagement and Relationship Marketing, is there any other reason to care about this stuff besides Campaigns?

Yes – addressing MultiChannel Mayhem – the fact that few companies have a solid plan for really optimizing the multichannel system.

Kevin shows us why MultiChannel Mayhem matters here.  Turns out multichannel customers are not always the best customers.  Of course, you knew that, right?  I mean, you have relationships with multichannel vendors you conduct through a single channel, right?  And you would consider yourself a pretty darn good customer, right?

The reason Control Groups, Measuring dis-Engagement, and Relationship Marketing are so important is they comprise an entire MultiChannel Interactive Marketing System.  It is pre-built and ready to go, customized to take advantage of and optimize Interactive Customer Relationships, where sometimes the most profitable Marketing is to do none at all.

If you are an analyst / technical background, you would probably be more comfortable studying the system from the bottom up, from the very measurement-oriented idea of Control Groups up through Measuring dis-Engagement to the Marketing Strategy idea of Relationship Marketing – what, how, then why.

If you are a Marketer, you would probably be more comfortable studying the system from the top down, from the Marketing Strategy idea of Relationship Marketing down through Measuring dis-Engagement to the measurement-oriented idea of Control groups – why, how, then what.

Why should you care about this system?  Because addressing the problem of MultiChannel Mayhem is built right into the model, along with all the cultural and organizational tools you need to implement.

Let’s go though a common challenge with Multichannel Marketing and see how the system solves it.  First, we need some assumptions:

1.  The goal is to optimize the MultiChannel system for Return on Marketing Investment – not sales, not share, etc.
2.  Given proper measurements, people will make rational decisions.
3.  The general concept of long-term customer value is important to the company and people act accordingly

Now, let’s address a common problem – no controls on who uses the customer database or what it is used for.  Any division or channel can market to any customer at will, doing whatever it is they want to do, regardless of previous messages.

This is a mess, and you know it.  Customers are being bombarded with conflicting brand and offer messages.

Here’s how the above system solves that problem:

1.  The division or channel that acquires the customer owns the customer exclusively for some period of time.  After all, they started the Relationship, they invested in acquiring the customer, they should get the rewards of the Potential Value they have created.  No other divisions are allowed to communicate with the customer without the permission of the acquiring entity.

2.  The acquiring entity retains this exclusivity to the customer only as long as they can maintain an active Relationship with the customer.  Once dis-Engagement has grown significantly, the customer is open season for any division or channel.  This is why it is so incredibly important to define and measure the dis-Engagement process.  The customer is evolving, and this rule ensures the company is flexibly responding and evolving with the customer, following the Relationship, and maximizing value.

3.  After the initial acquisition and subsequent dis-Engagement, whichever channel or division has the most current relationship owns the customer.  If a customer defects from one channel to another, the “ownership” passes as well.

4.  The channel or division with the most current relationship can at any time sell communication permission (basically, rent the list of customers Engaged with it) to other channels or divisions if it wants to.  This is not only a nice way to help offset acquisition costs, it also creates an internal marketplace of relationship permission, where only the communications which generate incremental customer value survive the Controlled Testing process.

If you have to rent a list of new customers from the acquiring entity and pay for that list, you are going to be more thoughtful and careful regarding what kind of communications you send.  Realizing that prior communications are going to affect the success of your communications to this rented list, you are going to tend to stay on brand message and within established communications guidelines.

In other words, this construct enforces financially responsible testing.

The rental fees are negotiated between buyer and seller.  The seller can charge different fees for access to different segments, for example, known best buyers cost more to rent than predicted dis-Engagers.  Any segmentation you want.  This is a CPM-based rental fee arrangement to keep list access prices fair across channels.  I suppose you could go to CPA, but that’s probably going a bit too far, given the lack of ability for some channels to track such things.

5.  If the customer is a true multi-channel customer – active in multiple channels or divisions simultaneously – then all channels the customer is active in have permission to communicate with the customer.  Any activity with any division or channel – including service requests – indicates Engagement is current and resets the dis-Engagement clock to “Currently Engaged”.  This addresses the above scenario Kevin has painted, which is more like the reality of multichannel relationships – they ebb and flow between channels over time.

From the company point of view, this system is a self-regulated, self-optimizing customer value generating machine.  It ensures that from whatever channel or division perspective you view the system, the strong survive and the weak fail, but the Potential Value of the customer is always maximized.

6.  If, from a Strategic perspective, the Company wants to intervene in this system, that is permitted, as long as there is compensation to the Relationship-generating asset gatherers.

For example, when launching a new channel or product line with no customers to start with and no cash flow.  The Company, on behalf of the new channel or line, pays rent to all the other channels for the permission assets they have generated.  The channels still get a return on their assets, and for the Company, it’s simply accounting for a real cost – the cost of cannibalizing existing sales in another channel / line or acquiring the customer.

From a practical perspective, whether money actually changes hands or not in the permission marketplace is a company culture thing.  The more sophisticated database marketing companies will often force real monetary exchange because they understand customer value so well.

Other companies might simply run debits and credits in a spreadsheet, creating more of a “list exchange” type of scenario but one that still provides controls on (for example) inundating best customers with communications and ignoring defecting customers.  These credits can be used to pay for other cross-channel marketing activities as well, for example, the mail order division wants to put catalogs in the web division’s outbound shipments and pays with credits received from the web division’s use of catalog e-mail addresses.

A self-regulating, self-optimizing system for Managing MultiChannel Mayhem, built on Relationship Marketing, Measuring dis-Engagement, and Control Groups to keep everybody in the system honest.

It’s really no different than, say, optimizing a PPC campaign – except it’s only about customer communication, and instead of optimizing across keyword sets and landing pages, you are optimizing across the entire company, every campaign in every channel against each other.

So, do you have Multichannel Mayhem at your company?

If so, does it matter to you or not?  Matter to anybody?

If it does matter to you, do you think the system above would address the problems you have?


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