2 Developing A Multi Channel Marketing Strategy Profitable Multi Channel Marketing March 2010

Developing a Multi Channel Marketing Strategy

www.sterlingmarketing.co.ukwww.ivantage.co.uk

Where to begin?

Key issues:

• What are my sales targets for each channel?

• What is my target operating profit?

• How much can the business afford to spend on marketing to deliver the profit objectives?

• What profit contribution can I expect from my customer base?

• How much can I afford to spend in acquiring a new customer?


Developing Sales targets per channel

• Business 1 – strong retail base, investing in more shops > growth potential, channel switching from mail order to online

• Business 2 – strong online base supported by trade sales > potential to grow online but minimum slow growth

• Business 3 – small business aimed at older customer, slower rate of channel switching

• Sales planning should look at growth over last two years and in the next year, objectives for the business, cash available to support any growth, channel migration

Business 11 Business 2 Business 3year -2 year - 1 plan % year + 1 year -2 year - 1 plan % year + 1 year -2 year - 1 plan % year + 1

Onlineonline 750 1250 2000 13% 2750 2700 3200 3300 57% 3300 50 100 200 16% 350From offline marketing 2250 2750 3000 19% 3250 1000 1250 1500 26% 1500 200 275 350 28% 400Total online 3000 4000 5000 31% 6000 3,700 4450 4800 83% 4800 250 375 550 44% 750

Mail order 2500 2000 1750 11% 1500 1000 800 700 12% 700 750 725 700 56% 650

Retail 6000 7500 8500 53% 9000 0 0 0 0% 0 0 0 0 0

Trade 500 500 750 5% 750 300 250 250 4% 250 0 0 0 0

Total sales 12,000 14000 16000 100% 17000 5,000 5500 5750 100% 5750 1000 1100 1250 100% 1400


Establishing Marketing Budgets

• Marketing budgets are established to achieve overall business objectives

• In these examples the budget has been cut back as % of total sales to improve profitability

Marketing budget Business 1 Business 2 Business 3year -1 % Plan % year -1 % Plan % year -1 % Plan %

Sales 14000 100% 16000 100% 5500 100% 5750 100% 1100 100% 1250 100%

Cost of goods 5600 40% 6400 40% 2200 40% 2300 40% 440 40% 500 40%

Margin 8400 60% 9600 60% 3300 60% 3450 60% 660 60% 750 60%

Marketing 4250 30% 3640 23% 1400 25% 1270 22% 331 30% 338 27%

Operational costs 2100 15% 2080 13% 825 15% 748 13% 154 14% 175 14%

Fixed costs 2800 20% 2880 18% 825 15% 863 15% 165 15% 188 15%

Total costs 9150 65% 8600 54% 3050 55% 2880 50% 650 59% 700 56%

Profit / loss -750 -5% 1000 6% 250 5% 570 10% 10 1% 50 4%


Target contribution from Marketing Activities

• Before detailed planning by each activity assess overall contribution you need to cover operational and fixed costs plus profit requirement

• The required contribution will focus the marketing spend on:– Assessing what has worked in

terms of contribution order order

– Optimising sales and contribution from customer base

– Developing profitable areas of new customer recruitment

– Testing new ideas– Minimising risk from un

proven activities– Developing increased

customer loyalty– Optimising customer contact

strategy

Business 1Plan

Marketing spend 3640

Contribution requirement 5960

Business 2Plan

Marketing spend 1400


Business 3Plan

Marketing spend 331



Importance of customer base

• The figures below show the importance of 0-24 mth customers in providing the contribution for the business


Business A

Customer Group Sales % of Sales Total

Marketing Cost

% Total Marketing

Cost Contribtn

% of Total contribtn

00 - 24 Month Buyers £620,049 53% £104,331 37% £132,729 82%

Non-Active Buyers £135,250 12% £47,249 17% £2,027 1%

New Customers £420,454 36% £130,841 46% £27,027 17%

Grand Total £1,175,753 100% £282,421 100% £161,783 100%

Business B

Customer Group Sales % of SalesTotal

Marketing Costs

% Total Marketing

Cost Contribtn

% of Total contribtn

00 - 24 Month Buyers £1,670,022 52% £325,566 37% £701,974 67%

Non-Active Buyers £636,868 20% £271,755 31% £98,107 9%

New Customers £904,983 28% £287,414 32% £248,246 24%

Grand Total £3,211,874 100% £884,735 100% £1,048,327 100%

Drive more contribution from your active customer base

• Understand the way your customer shops across the channels

• Understand channel and activity overlap > existing customers responding to new customer activities (ppc, affiliates, adverts, inserts), direct channel driving retail sales

• Develop customer groups based on propensity to purchase– Mix of frequency, recency, channel, spend

• Develop effective contact strategy to these groups:– Frequency of contact– Format – e-mail, catalogue, cards– Targeted promotions– AOV builders– Optimise contribution


Develop a modelling tool

37 views of data taken to optimise contribution

Mailing sizeoptimised

Option 37 selected with segmentation

variables of lifetime order value,

frequency, recency & channel preference

New Customer Recruitment Planning

• How many do I need to recruit >leaking bucket syndrome• How much can I spend per new customer• How do I budget for overlap with existing customers (ppc,

affiliates, advertising, inserts…)• How do I track channel interface i.e offline driving sales at

retail, online driving sales at retail• How many were recruited last year at what cost• Planned volume and average cost this year• Lifetime value for different recruitment routes• Growth opportunity for each recruitment route


New customer requirement to grow the business

• Develop a tool to determine the volumes of new customers required to reach sales goals

• Determine marketing budget required to achieve these goals and investment available

• Determine sales growth rate relevant to your business niche


Historical data Forecasts

CY-4 CY-3 CY-2 CY-1Current Year

(CY)Year 1 Year 2 Year 3 Year 4 Year 5

Prior year non new to file Buyers 35,205 39,828 44,693 36,735 32,752 35,087 35,150 34,993 37,027 41,867

(00 - 12 Month Multi) % Retained 53.8% 56.9% 47.6% 42.8% 55.8% 55.0% 55.0% 55.0% 55.0% 55.0%

Number retained 18,950 22,658 21,252 15,708 18,261 19,298 19,333 19,246 20,365 23,027

Total demand from segment £4,033,939 £4,768,889 £3,656,809 £1,973,730 £2,367,013 £2,574,333 £2,578,964 £2,567,455 £2,716,662 £3,071,772

% of total demand for year 44.4% 49.4% 56.0% 48.9% 49.2% 50.7% 47.5% 40.5% 36.0% 34.2%

Prior year, new to file Buyers 14,657 13,640 12,330 8,596 7,320 13,815 15,000 20,000 30,000 40,000

(00 - 12 Month Single) % Retained 29.5% 31.0% 24.7% 24.1% 36.9% 35.0% 35.0% 35.0% 35.0% 35.0%

Number retained 4,318 4,229 3,050 2,071 2,704 4,835 5,250 7,000 10,500 14,000

Total demand from segment £667,695 £624,805 £386,423 £186,895 £243,670 £450,162 £488,775 £651,700 £977,550 £1,303,400


Prior year, 1 year inactive Buyers 20,593 26,581 26,578 32,721 27,516 14,491 15,789 15,818 15,747 16,662

(13 - 24 Month) % Retained 27.7% 27.0% 22.4% 22.4% 25.3% 25.0% 25.0% 25.0% 25.0% 25.0%

Number retained 5,698 7,185 5,941 7,323 6,965 3,623 3,947 3,954 3,937 4,166

Total demand from segment £876,884 £1,061,018 £705,114 £646,532 £665,151 £351,044 £382,492 £383,180 £381,470 £403,639


Prior year, 2 year inactive Buyers 14,505 14,894 19,394 20,637 25,369 20,551 10,868 11,842 11,863 11,810

(25 - 36 Month) % Retained 17.1% 17.4% 10.7% 12.8% 15.6% 16.0% 16.0% 16.0% 16.0% 16.0%

Number retained 2,477 2,585 2,066 2,632 3,953 3,288 1,739 1,895 1,898 1,890

Total demand from segment £338,804 £350,663 £243,376 £213,382 £335,352 £271,273 £143,461 £156,313 £156,594 £155,895


Prior year, 3+ year inactive Buyers 17,857 27,938 37,674 53,336 69,152 87,364 100,521 104,926 109,941 114,739

(37+ Month) % Retained 10.9% 9.2% 4.4% 4.2% 4.6% 4.7% 4.7% 4.7% 4.7% 4.7%

Number retained 1,940 2,570 1,666 2,220 3,204 4,106 4,724 4,932 5,167 5,393

Total demand from segment £255,724 £351,168 £195,650 £178,944 £265,331 £348,198 £400,635 £418,191 £438,182 £457,304


Current year acquisition Customers added 20,017 17,777 11,356 10,071 13,815 15,000 20,000 30,000 40,000 50,000

£/new buyer £145.41 £140.22 £118.14 £83.47 £67.97 £72.00 £72.00 £72.00 £72.00 £72.00

Total demand from segment £2,910,694 £2,492,694 £1,341,568 £840,623 £939,001 £1,080,000 £1,440,000 £2,160,000 £2,880,000 £3,600,000


Total Demand £9,083,739 £9,649,237 £6,528,940 £4,040,106 £4,815,519 £5,075,011 £5,434,328 £6,336,839 £7,550,458 £8,992,010

Customer file 122,834 140,658 152,025 162,096 175,924 186,308 197,328 217,578 244,578 275,078

Demand growth 6.2% -32.3% -38.1% 19.2% 5.4% 7.1% 16.6% 19.2% 19.1%

File growth 14.5% 8.1% 6.6% 8.5% 5.9% 5.9% 10.3% 12.4% 12.5%

Acquisition as % of demand 32.0% 25.8% 20.5% 20.8% 19.5% 21.3% 26.5% 34.1% 38.1% 40.0%

Forecasting Tool

Input historical actuals for housefile &

new customers

New CustomersNumber added

Average no. of ordersAverage order value

£ new buyerDemand

% of total demand

Growth

Extrapolate to forecast future growth.

Adjust volumes of new customers to calculate

impact of total sales.

Housefile% retained

Number retainedAverage no. of ordersAverage order value

£ per buyerDemand

% of total demand

How much per new customer

Assess lifetime value overall and for specific recruitment activities

• Determine actual marketing cost and profit / loss per new customer• Determine actual sales in year 1 and beyond• Determine profit / loss per new customer in 1 and beyond• Determine profit objectives in year 1 and beyond• This determines marketing investment that is acceptable to your

business model

Examples:• High end fashion retailer with frequent high order value purchases> higher

investment level• Maternity business with limited lifetime relationship > maximum profit from first

order• Seasonal business with mid to low average order value > recruit at above break

even


Determine overlap with existing customers

• Activities with overlap:– Advertising– Inserts– PR– PPC– Affiliates

• Allocation of marketing costs?


Use prior year results to plan future strategy


Review:•Number new customers year on year•Cost of customer by activity year on year•Target numbers and target costs by activity

Reactivation versus New Customer Recruitment

Allocating spend = cost per reactivated customer versus new

Ways to improve performance:• Profile non active file versus active to target best prospects• De dupe external lists / multi pool to determine actives

elsewhere• Use data pools (Abacus, Transactus, Experian) to target

those actively purchasing similar products• Use less expensive communication formats – emails, cards /

mini catalogues (last chance) • Promote


Minimise Risk

• Test and roll out• A B testing• Low cost options• Proven routes• Effective data analysis• Review constantly• Be flexible to adjust spend in line with performance


2 Developing A Multi Channel Marketing Strategy Profitable Multi Channel Marketing March 2010

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Transcript of 2 Developing A Multi Channel Marketing Strategy Profitable Multi Channel Marketing March 2010