Promoting an e-mail marketing campaign by collaborating with other marketing channels is a great way to attract new customers. Incorporating e-mail signup with online price quotes, catalogs, pamphlets, company information, advertising and research papers are a great opportunity to acquire new customers through a variety of channels.

Developing videos that highlight your company's value proposition and/or product offering and then uploading the videos to networks such as YouTube and Google Videos, will provide additional visibility for your company. The videos should contain valuable content about your organization's capabilities, making sure that contact and e-mail subscription information is provided. B-to-B marketers find that using videos can help deliver their messages to audiences more effectively and are being used effectively as a tool to enhance their e-mail program.

Using promotional activities as a list growth practice is particularly useful for B-to-B marketers, catalogers, financial organizations and other businesses that may not have an e-commerce Web site to engage customers. Promotion through multiple channels is a valuable tactic to acquire new customers because many prospects are willing to give their information in return for something deemed valuable in return.

An e-mail onboarding program, which consists of a series of communications specifically developed to address new e-mail sign-ups on your list, is recognized as the single greatest marketing moment marketers will have to connect with a new prospect, but many fail to take advantage of the opportunity. It is important to develop a relationship immediately after registration because the probability of a response drops dramatically after 24 hours. In fact, only 49% of marketers send a welcome or thank you message in the first 24 hours of registration.

Onboarding programs that "welcome" a prospect to your company reinforce the value of relationships and privacy commitments. A study completed by Return Path in 2008 looked at messages from leading brands after customers signed up for e-mail and found that 60% of brands failed to send welcome messages.

Creating and sustaining a relationship with customers after they have subscribed to your e-mail marketing program is a critical part of customer acquisition because the subscriber has expressed a high-level of interest in your company. New sign-ups are up to 3.7 times more likely to click on e-mails than customers that have previously been on the file, so this is the time to engage them with relevant, timely and consistent messages and information. It is important to demonstrate what your company stands for because this is the "honeymoon" period when they are most open to engagement and have the highest click percentage. This period lasts up to 8 blasts, unless an onboarding program is firmly in place. Once their click rate falls, it is extremely difficult to re-engage them at the same initial level.

Offering something special in your onboarding e-mails is a great way to retain these new sign-ups/prospects. Incorporating a coupon, a percentage off, free shipping, a bonus download of a whitepaper or free Webinar is a great method to show your appreciation and convert sign-ups into buyers.

If you have a customer (or prospect) database of postal names and addresses, you can use this information to add new names to your e-mail file.

There are a number of data sources, such as Experian, who will take your postal names (those names that you don't have an e-mail address for) and append e-mail address information to these records. This will typically result in a 15-20% match of postal addresses with new e-mail addresses.

For example: If you have 50,000 customers without e-mail addresses and can achieve a 20% match, you will add 10,000 new e-mail addresses to your customer file.

Once this is accomplished, you can then contact them with an introductory message requesting their permission to receive e-mail from you. The intro e-mail should work hard to leverage the existing relationship, support the brand and easily allow them to unsubscribe if that is their preference. Using an opt-out technique (asking them to unsubscribe) will allow you to continue to mail far more of these names since it requires action on their part to remove themselves.

These are customers who already know you and buy from you. Capitalize on this and the fact that if you can communicate with them via one more channel, they will become, on average, three times more valuable as a customer.

I recently came across an excellent example of a rich media interactive display banner done by Target that caught my attention. By simply typing in a zip code, a localized newspaper insert is generated for a specific geographic area. It does a great job of asking for and capturing the visitor's email address so that the visitor will continue to receive the insert on a weekly basis, giving Target the additional opportunity of continual email communications beyond the weekly insert.

Another great site function is the store locator feature – it makes a strong connection to the local store through the locator and mapping, providing the visitor with the ability to order online or go to their local retail store. Because as we know, the more channels you can engage your customer and get them to buy, the more valuable they are to your business.

Attached is a link to the flash file of the click stream for anyone interested in viewing the banner and click-through to the site: http://www.ovationblog.com/images/entries/Target_Rich_Media_Ad/Target_Ad/Target_Ad.html

According to 2007 research conducted by Nielsen//NetRatings, content has overtaken communication (emailing) as the Web's primary role.

Some of the main reasons are:

• Traditional offline activities – reading or watching the news, looking for entertainment and events, and checking the weather – have transitioned to the web
• Explosion in watching video online, both for learning and for entertainment
• Faster Internet connectivity at home (better user experience)
• Search knowledge and use (knowing how to use search engines to find relevant information)
• Mobile and text messaging (taking the place of traditional email)

How can marketers capitalize on this trend?

• Use online ad placement and/or sponsorships on content-heavy media sites for awareness and brand building.
• Develop an array of online videos to engage the customer – product demos, training videos, advertising spots, behind the scenes videos, webinars, "ask the expert" interviews
• Make your search program as effective as possible to capture information-seeking prospects
  • Test numerous versions of adword copy - use call to action statements to drive response
  • Employ the "Long tail" theory of search marketing – use many highly targeted search terms to reach a more highly targeted prospect
  • Drive prospects to landing pages with specific, in-depth content based on the search term used
• Enhance email efforts by providing the customer with more information, not just about your company but about relevant industry or expert information to position you as a trusted "source."

Now that you've got your database built and are routinely capturing customer data, it's time to leverage the database with a one-to-one marketing program. But what should the budget be and how should the dollars be spent? That's the $64,000 question. Answer: It should be based on what you want to accomplish with the program.

If your goal is to reach and gain new customers, then your focus should be on effective acquisition tactics and finding new customers most like your best existing customers. Here is an example of taking your marketing dollars and budgeting for the appropriate acquisition tactics:

On the other hand, if your goal is to better leverage your current customer and incent them to purchase more/more often, budget allocation might look something like this:

As you can see, some of the same tactics are used in both scenarios, but they are used in very different ways. The key is to determine your primary goals for the year, then build the budget according to a projected return on investment, by tactic. Then, of course, track performance and be willing to adjust the marketing dollars as necessary based on successes (and failures). Don't set the budget in stone at the beginning of the year – allow for testing and rollout to make the most out of your marketing investment.

A recent study conducted by KnowledgeStorm, in conjunction with MarketingSherpa, concludes that eighty percent of b-to-b tech buyers indicate that offline marketing materials will "frequently" or "often" drive them to specific sites. Once they reach their "content destination," technology buyers place greater value on certain types of marketing material and want to have a good idea what they're getting before they commit to registering for downloaded content. The study also concluded that an offline marketing program of magazine advertisements, direct mail, seminars or tradeshows has the advantage of increasing online activity.

Finding the right content and call to action within the offline programs can make a huge impact on the success of the online program. For example, knowing the tech buyers typically place the highest value on content like white papers and case studies to influence their buying (and registration) decisions, it follows that this same information should be referenced in all offline efforts. An effective way to do this is by providing executive summaries of the white papers and teaser information from case studies to drive the buyer back online for more information.

And, to bring the marketing efforts full circle, tech buyers now in increasing numbers use and participate in online activities such as interactive blogs, Wikis, RSS Feeds, podcasts, mobile messaging, etc. to acquire knowledge and information. Promoting these channels in the offline efforts (and seeding these channels with marketing communications) will strengthen the entire program and relationship with the tech buyer.

The USPS and ComScore recently published a study that once again proves the power of a one-to-one, multi-channel approach to leveraging sales from your customers.

They performed an ROI analysis that showed a group of one million customers would produce $21 million more in revenue than 1 million customers who didn't receive catalogs ($39 million vs. $18 million).

Key findings:

• Catalog recipients account for 22% of web site traffic and 37% of e-commerce dollars.
• Online consumers who received a catalog from any given retailer were nearly TWICE AS LIKELY to make an online purchase at that retailer's web site. Additionally, they made 15% more transactions than those who did not receive catalogs and their spending was 16% higher.
• Catalog recipients made 16% more visits, viewed 22% more pages and spent 15% more time at retailers' site.
• Catalogs also drove consumers into secure sessions on web sites more often – with 75% more likely to enter this critical area of a retailer's web site where the transaction process begins.
• Catalogs play a decisive role in driving conversion (percentage of catalog recipients who visited the cataloger's web site and made a purchase) for BOTH prospects and existing customers. The conversion rate increase was most dramatic among new customers, where the conversion rate was about 260% higher than for non-recipients. Even among current customers, the conversion rate was an impressive 67% higher.
• Catalogs were also shown to transcend demographic groups. Catalog recipients across the board were more likely to buy from the retailer's web site – regardless of household income, geography or education.

The complete study (PDF) is at http://www.usps.com/directmail/_pdf/USPS_WhiteSht9.pdf

We are currently in the process of planning out our August - December 2007 email strategies for our clients. In trying to determine campaign frequency, there were two very interesting statistics we discovered when we looked at one client's email campaign over the course of the first six months of 07.

The email schedule is represented in the following graph (each email went out to the exact same database of names):

This chart shows us that it takes up to five emails to achieve a 50% duplication of clicks, indicating that you need to look at email as a frequency game – only about one in five emails from your company are opened by an actively engaged recipient at a given time.

The second statistic we found was that 68% of people click on an email within the first 24 hours of the email being deployed (the email was always deployed at 6pm). There are two noticeable peaks: within the first 4 hours, and then again 14 hours later (approximately 8 a.m.) as people are either starting their day by logging on, or logging on and viewing as they get to work.

The meaning here is simple: your emails have a very short "shelf life" so they need to be extremely compelling, relevant and timely to engage your audience.

Both of these analyses helped us to better understand that a higher level of frequency is needed to reach the intended recipient at the right time and with the right – as well as timely – message.

When developing and executing an on-site retail event or promotion, what is the best motivator to build traffic? Through market research Ovation Marketing conducted in September 2006 (450 respondents from across the country participated), we found that the sure-fire winner was a discount price offer. The types of offers and response (% is based on "likely" and "most likely" to influence me to purchase) break down as follows:

• Discount Price (88%) 
• Gift With Purchase or Trial (45%) 
• Sweepstakes (37%) 
• In-Store Contests (10%) 
• Charity Tie-in (8%) 
• In-Package Promotion (5%) 

Knowing that many companies would prefer not to discount the price of their product unless absolutely necessary, a gift with purchase or sweepstakes offer may be the best way to go to drive traffic at retail, without compromising your brand.

I was very impressed with the follow up I received from Best Buy following a purchase I made in-store at my local Best Buy. I had purchased a wireless router for my home office. The sales associate asked if I need the Geek Squad to help me install it. I declined the offer and headed to the check out line.

Two days after I made the purchase, I received an email from Best Buy with an offer ($20 discount on Geek Squad services) to install my wireless network. (They have my email address because I am a member of their Reward Zone club.) My purchase had obviously triggered this very specific offer directed specifically at me. It was perfect timing, too – I had started with the installation and then realized I needed help. I am guessing this happens quite often and that the response to this type of service offer is high. Luckily, we have our own Ovation “geek squad” to help me with my home office, so I didn’t have to pay for Best Buy’s.

Building, maintaining, and most importantly, using a robust marketing-oriented customer database should be a key initiative for most companies as they move forward in 2007.  A marketing database captures and stores your customer's transactional (purchase) data as well as demographic and behavioral information in an accessible, centralized location.  It allows the marketing team to have access to the information so marketing decisions are made and tactics are developed based on the ROI of each customer segment and ideally, each customer.

A marketing database is important because it will:

• Provide ability to speak one-to-one with your customers to strengthen brand relationships, build loyalty and ultimately increase sales of your business's products and services

• Reach and influence the customer through a multi-channel marketing approach – Email marketing, web, online advertising, search, direct mail and sales force – to increase awareness and sales

• Provide personalization and deliver the appropriate message to each customer or prospect.

• Attract new customers by being able to analyze and define the current customer in order find more customers who have similar attributes (and buying behavior)

• Create an ongoing dialog with the customer to gain feedback on the products and services offered through the use of surveys, comment cards, online chat groups, bulletin boards and product reviews.

Many companies are underutilizing the many direct-to-consumer channels available to them simply because they do not have a functional marketing database to work with.  It's time to make the investment and reap the rewards.

We are currently conducting transactional database analysis for one of our clients. The data is compiled from both catalog- and web-based sales efforts. Our analysis confirmed that email collection and subsequent multi-channel marketing to these customers can increase lifetime value of a customer and in turn make a huge impact on your bottom line.

Our analysis concluded that a customer whose email we have on file generates 20% more in catalog and web sales than a customer without an email address on file. (This 20% increase does not take into consideration additional sales driven specifically from email events.)

Therefore it is critically important to aggressively collect emails through all channels. Some suggestions we’ve had for our client:

• If the order is coming in via the phone, incent the customer service personnel to always ask for the email address. The most effective way is to have them capture the email address by offering email notification when the product is shipped. Within the notification email, ask the customer to sign up for future offers/promotions and offer them an incentive to do so.
• Make sure that email sign up is easy and visible on the ecommerce home page and throughout the site (make it a one step process)

Today I received an email offer from JC Penney telling me (not asking me) that I will continue to receive promotional offers from them. It was a nicely designed email with a catchy headline of "It's all in Your Mailbox" playing off their brand tagline of "It's all Inside." However, I noticed that the email offered only an opt out option, rather than opt in, so they are not gaining my permission, except through their "3rd party partner" cop-out explanation noted at the top of the email. I was very irritated by this. I know using the opt out practice isn't illegal, but for a major retailer like JC Penney, you would think they would err on the side of being more conservative and would employ best practices and avoid that less-than-straightforward way of building their list.

The other thing that rubbed me the wrong way was the offer deadline. I received the email on April 18th. The free shipping offer expired in two days on April 20th. Not a whole lot of time to take advantage of this offer. Most of the time I wait to click on non-business emails until later in the day, and maybe shop in the evening or at some point over the course of a few days when I have the time. If that were the case, this one would have expired before I even looked at it. This was a very disappointing first correspondence to get from a major retailer.

Not sure how anyone else feels about this or if opt out/in sentiment is changing, but I felt this was very poorly done.

Back at the end of January, I signed up for Overstock.com's "OText" service to receive promotional messaging (specials, discounts, product information, etc.) via my PDA.  It was my first foray into the text messaging arena and I was pretty interested to see how it worked.  I went through the sign-up instructions and agreed to pay the $2.95 monthly service fee through Sprint to participate. I thought Overstock did a great job in walking me through the instructions and getting me excited about the service.

I eagerly checked my SMS every day.  Two weeks went by, and no messages from Overstock.  After three weeks (and a little help from an associate here at the office), I realized that there was a double opt-in and I needed to respond to the "Welcome to OText" email with a "Go" message back to Overstock to really get the program going.  That now taken care of, I assumed I would start getting the text messages.  Well, it's now been almost three more weeks, and no promotional messages yet.  There is, of course, the possibility that I somehow did not sign up properly, or the alternative is that they are not actively delivering the program to me, but I can't really figure out how to double check and find out which is the case.

Has anyone else out there signed up for the Overstock OText service?  If so, is it working for you? I am wondering if text-based promotional programs are really working or not, and if so, who is doing it well and actively using it to drive sales.  I am also concerned about ease of use by the average consumer out there and whether there are people like me who are feeling frustrated with the experience (e.g. the double opt in feature). and could dampen enthusiasm for future programs like this one.

Any feedback would be greatly appreciated.

I recently received an email from Overstock.com with an offer to sign up for their mobile marketing effort called "Otext," which will allow them to send me text messages via my phone or PDA.  They provided excellent directions on how to sign up  (it took me all of 30 seconds to do it) and also how to allow my carrier (Sprint) to charge me $2.99 monthly for the service.  The incentive?  5% off all purchases made by using a promotional code from the text messages when going online to order.

I thought this was a clever way for Overstock to motivate their customer base of bargain hunters to sign up to potentially receive even bigger discounts for shopping with them.

With over 7 billion text messages sent in the US during June 2005 alone, and an increase of over 150% from the previous year period (June 2004)(1), consumers are comfortable with this relatively new technology and are using it in increasing numbers.  In fact, over 67% of the US population now subscribes to a mobile phone service(2), and 36% of subscribers use some form of mobile data application(3).

I am looking forward to seeing how Overstock now follows up with me on the text messaging and if it is relevant and in synch with my needs as a consumer.  I am interested in how they speak to me one-on-one through my PDA, which to me is a highly personal device and should be viewed as such by marketers.  And most importantly, whether the messaging motivates me to buy from them.

(1) CTIA Wireless Quick Facts, Oct. 2005
(2) eMarketer North America Wireless Trends Report 10/2005
(3) Yankee Group study, reported in eMarketer North America Wireless Trends Report 10/2005

No, not the number of days in the year, but the number of millions of catalogs Victoria's Secret mails in one year. That's right, 365 million, or 1 million catalogs mailed, on average, each day. Sounds like a ridiculous amount, right? I read this stat in a recent TIME article where they blasted Victoria Secret for mailing irresponsibly - both from a quantity standpoint as well as by their lack of recycled paper content in their catalogs.

I did a little research and found that their buyer list, which is available for purchase, has a current 12-month buyer count of 4.87 million responsive, direct mail order customers. They likely mail these customers monthly, if not bi-monthly, and the best customers even more often, especially preceding the holidays. Let's say they mail the 12 month-buyer file an average of 25 times a year - that equates to 121 million books (this does not seem excessive when you consider that mass media campaigns reach customers multiple times on a daily basis.) Throw in mailings to older buyers, inactive buyers and requesters, then add in prospect mailings (which likely accounts for over 60% of their mailing plan to maintain and grow their business), and suddenly the number of 365 million doesn't seem so large.

From a recycled paper standpoint, they should increase their recycled paper content dramatically. As a high profile, major player in the direct marketing world, Victoria's Secret does need to be more responsible and set forth a good example for other direct marketers who use catalogs in their marketing mix.

Should they reduce the amount of mailings and therefore reduce the total amount of paper used? I would say not necessarily. They are savvy marketers - they know that multi-channel marketing using direct print, web and retail is a recipe for success. They know that marketers who use three or more channels to sell their goods increase the lifetime value of the customer by five-fold.

With B2B email list rentals costing on average of $281 per thousand, it is still cost-prohibitive for most businesses to rent email names unless you have an extremely high average order, as well as a healthy margin. With that said, once you HAVE your customer's email addresses, email marketing is an extremely effective way to upsell, cross sell and increase the lifetime value of your customers. Therefore developing strategies to build your permission-based email file via existing channels - web, retail, catalog, etc. - is critical in maximizing your marketing investment.

Collecting email names should be done at every possible customer contact point. Just asking for it is effective if the customer believes there is value in the information they can get from your company (enewsletter, promotions, education). However, sometimes an incentive is necessary and should be tested to maximize results.

I've listed some methods that have been successful for us:

-  Within the Website

• Require registration when accessing certain information on your site, such as research studies, white papers, etc. The more relevant to a particular business customer, the more likely they are to register so consider providing segmented content by target industry.
• Include a newsletter/promotional sign up on your home page and on every page of your website to increase subscription rates
• Ask for email addresses on the order mechanism
• Open a discussion forum for registered users only

-   Through traditional marketing vehicles

• Direct mail postcards, faxes
• Catalog blow-ins, bind-ins, on order form
• From the outside sales force - encourage participation through sales incentives, contests

-   With warranty cards, billing invoices, customer service call-ins, change of address cards

-    At trade show booths

-   Through refer a friend/co-worker programs (viral marketing) with contest or promotion

And also, importantly, it is imperative that any permission-based email marketing programs be done with privacy policies clearly communicated to all.

Please stop sending me industry publications via snail mail.

I wait anxiously to get certain kinds of publications via snail mail - my Real Simple, Golf and Time magazines as well as my favorite catalogs that I truly enjoy paging through at my leisure. But when it comes to industry news and information, I prefer to get it online. I can quickly peruse my industry enewsletters and blogs as I am working on my computer throughout the day -- quickly without bogging me down.

I would hope those publishers who continue to print and mail thousands of copies of MultiChannel Merchant, 1 to 1 Magazine, Revenue, Direct, DM News, etc, etc, will recognize that we business people are getting our information and "buying our news" via the Internet. It is the new - and now in many ways preferred - method of receiving news and buying stuff. Yes, there is the ad revenue generated in the printed versions that needs to be considered as it is what has kept these companies in business. That too will have to change. Publishers will need to offer new and innovative webvertising techniques to woo advertisers to place more ads within their enewsletters and on their websites. Loadvertising (ads that appear when the pages are loading), video ads, free webinars and other unique ad placement opportunities will need to provide future ad revenue to keep pace with the new ways we consume our information. I went to quite a few of these sites and found very little innovation in terms of offering advertisers marketing opportunities beyond the traditional banners and skyscrapers which would seem to limit their opportunities to secure additional revenue.

I would hope that in the near future, the industry publishers I am familiar with will at least give me the option to "opt out" of the printed version, yet none have attempted to do so. Printing a copy for me is a waste of valuable, natural resources.

I think this is an excellent article on keeping the business/sales ramifications of hurricane Katrina in perspective and how to look forward through the end of 2005 to ensure your business sales goals stay on track. The bulk of the sales slump due to Katrina should be almost past as people get on with their lives and begin spending their money again (in the unaffected areas).
http://multichannelmerchant.com/news/Katrina_Sept_11_0907/index.html

Assigning value to a new branding initiative can be difficult at best. It's not like doing an ROI against a promotional activity where you can quite easily see how the investment impacts and drives sales within the span of that particular promotion. Investment in branding needs to be viewed from a long-term perspective and analyzed accordingly.

We recently developed an ROI analysis for a small regional bank that amortizes the brand investment over five and ten years. After the first year, and expecting incremental gains in business (conservatively between 5% and 10% annually), the ROI looked terrible and was in fact a negative number. At first blush, this would indicate that a branding initiative was a poor investment. But once the cost was amortized over five and ten years (assuming the branding would stay focused and consistent over the years), the investment was well worth it, bringing in almost $1,000,000 in incremental income to the bottom line. This resulted in a 70% increase in income after 10 years, once average yearly growth was factored into the equation.

Also of importance is to establish a benchmark in customer attitudes, beliefs and loyalties to track against the ROI and from year to year. This then ties the investment to the customer's brand perceptions and monitors whether or not there is a direct correlation with perception/intent and actual customer purchase behavior (e.g. positive brand image = growth in sales), and then how it trends over time.

I think more companies would see how important investing in corporate branding can be to their bottom line if we marketers helped better define and monitor long-term investment spending against the brand.

I just read about a controversial new marketing opportunity in Ad Age - school naming rights. You really can't blame the schools for attempting to sell naming rights to marketers. They are desperate for funding and will consider almost anything to offset budget cuts. And as a firm believer in the positive power of marketing, this could be a huge branding opportunity for marketers, especially on the local level to tie themselves closer to the community. On the other hand, are we going too far in attaching commercialism to our children's schools?  I think it is the latter. I know I wouldn't like it if my daughter was asked "what school do you go to?" to which her answer would be, "I'm in 3rd grade at Burger King Elementary." It just seems like blatant exploitation.  Read about it in Ad Age.

It's time for advertising agencies to embrace search engine optimization (SEO) as a key acquisition strategy for their clients. With revenues projected at over $4.1 billion in 2005 (according to statistics compiled by Piper Jaffrey & Co., 2004), paid search advertising now outpaces all other forms of online advertising. My hunch is that most agencies currently see it as a "specialty" field, and are thus missing out on including this incredibly powerful prospecting tool in their marketing plans for their clients.

We've had the opportunity to work on a new client pitch recently that really opened our eyes to the importance of search - both organic and paid - as a primary prospecting tool, especially for business-to-business companies. I found one stat that said that 38% of all research on business technology solutions begins online through the search engines (KnowledgeStorm, July 2004). That far surpasses more traditional methods such as magazines and newsletters (5%), vendors (6%), word of mouth (5%) and trade shows (3%).

While projecting response rates of various media in our acquisition plan, we found that more often than not, organic search, followed closely by paid search (a.k.a. "sponsored links," adwords" and "pay per click links"), provided the most efficient means of converting a prospect into a buyer. Better than print, direct mail, catalogs, trade shows and online (banner) advertising. In fact, if done right, search has the ability to bring a new customer on the file at a profit on the very first order. In more traditional efforts, you typically need to "buy" a customer, taking a loss on the first order once marketing costs are factored in, and then build a profit after 2 or 3 additional purchases.

As a seasoned agency professional, it was fascinating for me to think there was a better way to get a trackable response for prospecting more efficiently than through good old direct mail or catalog marketing. Of course, as in any solid plan, search does not work on it's own. The web site the prospect is directed to has to be highly optimized, updated frequently, and be targeted to each prospect's needs.

Good Article by Stuart Elliott on how agencies (especially the big ones) need to change their focus from traditional advertising to finding opportunities to connect with people in new environments whether that be via Internet, cell phones, ipods, PDA's, DVR's…the list goes on.  Smaller agencies are "getting it" and are giving clients more options and choices in how to reach and influence their customers.
http://www.nytimes.com/2005/05/23/business/media/23adco.html?th&emc=th

This is one of the best articles I've read about how to succeed as a retailer in a price-driven world.  It is focusing on the company's core, profitable customer and tailoring its products, retail environment and service to connect with them on a store by store level.

Online retailers have already embraced this concept through the use of microsites that speak (and sell) directly to specific vertical markets, and more recently microsites that speak specifically to the individual businesses they serve.  Will we see "microstores" from mass retailers popping up around the country that cater to very specific market segments and provide customers with extremely customized product and service offerings?  My guess is, they will be coming to a neighborhood near you….

BEST BUY PUMPS UP THE VOLUME
By John Gaffney, Executive Editor
The customer-centric strategy started last year at consumer electronics retailer Best Buy will be turned up in 2005, the company says. And in the process, it could change the entire competitive retail landscape.

"Best Buy is having success maximizing the value of each consumer," says Gary Arlen, a veteran consumer electronics industry analyst. "It will change the way every other retailer does business now. The more its competition sees its success, the more are going to follow that customer-centric strategy. Get ready for the ripple effect."

In announcing that its 2005 earnings rose 17 percent over 2004, Best Buy gave high priority to the customer value groups it has identified and targeted as a key to its growth. At the end of 2004, 85 of its 830 U.S. stores operated under a customer-centric model in which it identified customer groups such as premium or high-ticket purchasers, early adopters, and small business owners as key groups from which to grow value and revenue. It also pays less attention to low-value customers who frequently return items or make relatively low-value purchases.

Those 85 stores, according to the company's April financial statement, booked average sales gains 8.4 percent last year, compared to 2.3 percent at "non-segmented" stores. "There's no turning back," said CEO Brad Anderson. The company will convert 150 to 200 more stores to the customer-centric model this year.

"Over time, we believe that our customer centricity work will help us attract new customer segments to our stores, which leverages our existing assets," Anderson said in a recent press release. "In addition, it gives us an engine for continuing to innovate and respond to changing customer needs."

Not only is Best Buy showing that creating customer groups and treating them differently can work, it is also putting the concept of customer value on the map for many retailers. The mass retailing world that has been based on aggressive discounting and mass market ad spending is now taking notice of Best Buys efficiency and success.

"It is doing what every retailer should do," says Judy Bayer, Ph.D., director of Advanced Business Analytics for Teradata. "It is identifying its hero customers. It is developing strategies for how to acquire those high-value customers, it is developing the behaviors it wants to see from its high-value customers and they are treating different customers differently."

And it may be starting to crack the case on how to compete successfully with Wal-Mart. The uber-retailer does not compete with Best Buy on its high-end plasma screen TVs or connectivity services such as satellite and cell phone service. But it definitely competes on price for CDs, video games and low-end electronics. Best Buy has chosen to let Wal-Mart have the low end. That's part of its success, but it has also beaten Wal-Mart at customer-centric retailing in this category.

"Best Buy has taken a phenomenal step forward. It has raised the bar for everyone," says Janice Mayo, Vertis SVP of Sales & Marketing, whose company has worked closely with many regional retailers to identify customer groups and customize interactions with them. "It is competing correctly with Wal-Mart because it is putting into practice the belief that at the end of the day you have your brand and your unique customer set. You can only really leverage one of those things. And it's the customer."

According to Anderson, all Best Buy stores will operate under the customer-centric model "within three years."

Amazon.com knows what you bought -- and may know what you'll shop for next
Amazon.com Inc. has one potentially big advantage over its rival online retailers: It knows things about you that you may not know yourself.

Though plenty of companies have detailed systems for tracking customer habits, critics and boosters alike say Amazon is the trailblazer, having collected information longer and used it more proactively. It even received a patent recently on technology aimed at tracking information about the people for whom its customers buy gifts.

Amazon sees such data-gathering as the best way to keep customers happy and loyal, a relationship-building technique that analysts consider potentially crucial to besting other online competitors.

"In general, we collect as much information as possible such that we can provide you with the best feedback," said Werner Vogels, Amazon's chief technology officer.

Will this change the way people search and browse products within online retail sites? That is, will they be nervous that "big brother" is watching and will respond by removing the cookies that enable this to happen?  Sure, there will be some who do, but the majority of consumers will likely feel that Amazon really knows who they are and feel they are getting more personalized service and a more relevant buying experience.

In my opinion, Amazon is one of the very few Internet companies that actually understand what huge potential purchase behavior information has in marketing its products and services and is now doing it as well, if not better, than traditional direct marketers who used to be the hands-down experts.

For the full story: Detnews.com