Ditching the Guesswork
Count Neal Cohen among the direct marketers looking to refute John Wanamaker's statement, “Half the money I spend on advertising is wasted. The trouble is, I don't know which half.”
“We could argue that we aren't wasting any money,” says Cohen, the former vice president of marketing for Sur La Table.
Sur La Table uses a wide range of online, retail, experiential (cooking classes) and direct outreach strategies. “At an given moment, a customer or prospect could have been exposed to any or all of those marketing campaigns,” Cohen says. “The question is whether we should change how we allocate ROI based on that.
“Direct marketing has become less scientific,” he continues. “It used to be very easy: If you only had a catalog, you had a control group and a mail group. You did version testing and it was cut and dried as to what the winning formula was, in regards to how you structure a test.”
But the preponderance of channels has changed the landscape. “There is no such thing as a true control group that never receives marketing,” Cohen says. “So this is where, within direct marketing, we need to make assumptions, to make a best estimate of how to allocate those marketing resources.”
Cohen's tenure at Sur La Table coincided with the kitchen products marketer outgrowing its database. When it came time to upgrade, Sur La Table found the new version would have doubled its costs.
Sur La Table went with a database from Pluris Marketing. The new structure allows the company to analyze queries originally made based on one set of criteria by another. This will enable Sur La Table to adjust its mailing quantities by targeting messages — or, potentially, versions — to the most likely purchasers, Cohen says.
Sur La Table doesn't use advertising channels it isn't able to get customer level results on, he adds. “[It doesn't] do any magazine advertising. I've tried to avoid being in that situation where half of my spend is wrong. [Sur La Table is] not just looking at who is picking up the phone and placing an order, but who is receiving the marketing effort and how they are responding anywhere,” Cohen says.
Sur La Table's new reporting system incorporates the ads it determines customers have been exposed to. Timing is an important part of its calculations. If a customer comes to the company through an online search for, say, egg poachers, doesn't buy one, but six months later makes a purchase through a catalog, the search term would get very little credit. But if a customer was exposed to more than one piece of marketing within a time frame — an e-mail corresponding with a paid search term, for instance — the sale could be allocated evenly between channels.
“But what if the e-mail was a week later, and the purchase was right after the e-mail?” asks Cohen. “How much credit do you give to the paid search?”
Sur La Table is considering using a rate-of-decay algorithm, under which the value of known media decreases with the passage of time. “It's not going to be perfect, but we have to make our best effort to come up with an equation and a list of assumptions, so we can generate a report that lets us spend our money wisely,” Cohen says.
Perhaps the biggest question is how Sur La Table's new system will aggregate data on individual shoppers. “Our attribution strategy is based on every individual having a personal ID number,” says Diane Lucero, Pluris Marketing's strategic relationship manager.
The company does not use IP addresses: It assigns a number after a customer volunteers personally identifiable information, such as by requesting a catalog or making a purchase.
“We can then take that personal identification number and match it to a company's marketing database, against all open marketing campaigns,” Lucero adds.
But there are limits, even to this: The new system is not capturing clickstream data as browsers navigate the Sur La Table Web site.
So what percentage of Sur La Table's advertising is wasted? “Ideally we are looking for it to be zero,” Cohen says. “But I'm hoping we'll find it's around 10%.”
