October 2006 - Multichannel Marketing in a Digital World

The Internet isn’t necessarily the newest game in town anymore. But it still may be the hardest part of the multichannel puzzle to get right.

By Jack Gordon

It isn’t as if the basic concept of multichannel marketing has changed in the past decade. Neither has its fundamental advantage, which can be summed up in a single cliché: Don’t put all your eggs in one basket. And neither has its central challenge, which is to integrate a marketing campaign so that all of the channels reinforce one another instead of pulling in opposite directions. What has changed is that technology has rendered multichannel marketing vastly more complicated by presenting a myriad of baskets instead of relatively few.

The term itself means the same thing it always did-or rather, the same two things, resulting in the same confusion. “Multichannel marketing” can refer either to distribution or to advertising-or both. A multichannel marketer may be a supplier that uses more than one means to distribute its products and complete sales transactions (both wholesale and retail, for instance; or, via stores, catalogs, call centers and e-commerce sites). Or the term can refer to a supplier that advertises and promotes a product via more than one media channel (TV, radio, print, Internet), regardless of whether customers actually can buy the item by one means or several.

On the distribution side, the advent of e-commerce opened an enormous new channel for direct sales. And on the advertising side, the “digital channel” now offers so many options, including paid search, display banners and ads in RSS subscription feeds to mobile devices. Marketers also can utilize virtual stores in virtual worlds-such as secondlife.com-which makes “digital” a multichannel universe in its own right.

From a big-picture perspective, the history of marketing over the past decade is easy to encapsulate as a great stampede of sellers and advertisers to the Internet. This is especially true of those targeting younger consumers. “My 17-year-old son rarely watches television,” says Peter Koeppel, president and founder of Koeppel Direct Inc. in Dallas, a media buying firm specializing in direct response advertising. “He spends 90 percent of his entertainment time on the Internet and with video games, and maybe 10 percent on TV. That’s radically different from 10 years ago.”

Eleven years later, the multichannel customer has become more defined, while the web’s role in the marketer’s consideration process is more ubiquitous.

Ten years is a very long time on the Internet calendar, however, and the movement no longer flows just one way. “We run into companies that come at us from two directions,” says Bill Parkes, senior vice president of nFusion, a full service marketing agency in Austin, Texas. One group of prospective clients has little experience with digital advertising and wonders how to use it effectively, Parkes says. But another group of companies “have been focused on digital advertising and are reaching the saturation point. They need to get into other media. They say, ‘We think we need to go into DRTV or print, we’re not sure.’”

On the advertising side of the multichannel equation, new options are appearing not only online but in video games and on television, in the form of interactive television (iTV) and video on demand (VOD). And on the distribution side, the newest major purchasing channel just beginning to emerge in the United States is appearing not on the Internet but on television, in the form of systems that allow consumers to buy products using only a TV remote-control unit. In August, HSN announced that it would make this type of service available in New York City and Hawaii, where it had been tested in some homes.

At bottom, multichannel marketing has to do with reaching customers wherever they may be and allowing them to buy from you in any way they like. That argues against an isolated view of any particular channel. To paraphrase Koeppel, you’re nuts if your DR advertisement in any medium doesn’t point shoppers to your website. But you’re also nuts if your website doesn’t provide an 800 number for shoppers who would rather talk to a live person.

It’s important to remember that the Internet is no longer the only new game in town. That said, however, the toughest multichannel-marketing challenge for direct response retailers today may be to get the digital advertising piece right. So let’s focus there.

DR advertising is a metrics-driven business, and media buying is all about efficiency. How many dollars do you get from an advertisement or a particular media channel in return for the dollars you spend? Upon entering the online world, agencies agree, advertisers thinking strictly in those terms will tend to put all of their money into paid-search ads on engines, such as Google and Yahoo. Paid search usually has the highest efficiency, by far, of all forms of online advertising, so that strategy seems obvious.

But it quickly leads to problems, says Jeremi Karnell, president and co-founder of One to One Interactive, a Charlestown, Mass., marketing agency specializing in digital media. “It’s a mistake to throw all of your money into paid search,” Karnell says. “It’s like a drug: Companies see how efficient it is at the beginning, and they can’t get enough. They pay no attention to testing other channels, and then they’re left hanging when the inventory runs out and the efficiency is gone.”

Paid search often is the best place to start with online advertising, Karnell says; it just isn’t the place to stop. “Any single channel [for DR products] has a short lifespan,” he says. “That’s true everywhere, but especially online.”

It’s easy to track and measure the number of clicks on a paid-search ad that translated directly into sales on your website. What isn’t so easy to figure out is what motivated those ready buyers to click through to you in the first place. Did they recognize your name when it popped up among the paid listings on Google, because they had seen some of your seemingly inefficient banner ads previously? Or, maybe visitors clicked on one to check you out before they were ready to buy. Karnell points to recent research by the Atlas Institute showing a 20-percent increase in sales when campaigns mix paid-search ads with display (banner) advertising, rather than relying solely on one or the other.

Whether you think of the Internet as a single “channel” (distinct from, say, radio or print) or of different advertising “channels” within the Internet (search vs. display), “when you analyze them separately, you miss the cross-channel effects,” says John Rodkin, CEO and co-founder of ClickShift, a San Bruno, Calif., company that manages and monitors online advertising campaigns in multiple formats.

The same principle applies, Rodkin says, even when you analyze a single online-advertising format, such as paid search. “If you look at [results from] each search term separately, you’ll decide to buy only your branded words. But in fact, non-branded search terms may be driving more traffic to you.”

How’s that? People may click your search ad that pops up under a non-branded term, shop at your site, then shop at competitive sites, Rodkin explains. “When they come back later to buy, they’ll click your branded ad because now they know they’re looking for you.” If you focus only on that last click, he says, you’ll see that your branded term was a clear winner in efficiency-but you’ll miss the reason why it was so efficient. Kill your advertising under non-branded terms, and you’ll soon wonder why your numbers dropped so dramatically.


How much of the advertising budget should a marketer allocate to each channel? That’s the wrong question, says Karnell. It leads to thinking that it works like this: “We’ll spend X dollars on advertising this year. Online [media] will get Y percent of that, television will get Z percent, and so on.”

A better question, Karnell says, is, “What efficiency are we getting from each channel [or sub-channel]?” Until a given channel stops being efficient, he says, “There is no limit to what you should spend on it. If every buck I spend on paid search brings me $3 in return, that’s great-for as long as it lasts. And the same applies to every channel.”

The two complications, again, are that one channel’s results often are influenced by activity in other channels, and that no single channel is likely to continue producing great results forever. To avoid an eventual crash, a marketer cannot just keep milking the current, most profitable media alternative, but must test others.

Koeppel says the good news is that effective tests can be done relatively cheaply. “It’s a misconception that you have to spend $100,000 to get a viable test of a media channel,” he says. “You can test most channels for $10,000 or $20,000.” This applies across the board, he says, from online options to TV, radio and print. “It takes a lot of planning, but not necessarily a lot of money.”

Considering only the digital-advertising world, Koeppel says, the best approach for a marketer with a modest budget is to start small and with a mainstream, high-potential format, such as paid search. “Once the campaign is going and money is coming in,” he says, “then you have the luxury to test some of the more exotic stuff.” For instance, unless your product relates directly to mobile devices, such as cell phones or iPods, you would be ill-advised to begin a campaign by placing ads in podcasts or other RSS feeds in order to chase mobile consumers.

Rodkin offers a similar caution with regard to the multitude of digital advertising options: “If you have only $10,000, don’t spend $1,000 on each of 10 different channels. You’ll make all of them ineffective.”

Karnell says that the difference between companies that do multichannel marketing well and those that do it poorly often is a matter of internal culture. “When there is no connective strategy to a campaign,” he says, “you often find a very siloed organization-where separate people deal with online and offline channels or where the online-advertising strategy is determined by different people than those who run the website.”

In fact, this may be the most fundamental advice for multichannel marketers. As Karnell puts it, if you want multiple marketing channels to work together instead of undermining one another, the first requirement is that “your company needs to be structured to let that happen.”

Jack Gordon is editor at large for Electronic Retailer magazine. We would appreciate your feedback. To submit comments, please e-mail the magazine at [email protected].


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