Digital Solid: Marketing Technology ROI

Before the internet there was little chance for enterprising types to profit from holiday-generated scarcity. I’m thinking of the Cabbage Patch Kids dolls, which were the must-have collectibles for much of the 1980s, and caused frenzied pre-Christmas rushes at bricks-and-mortar stores. Now there are online markets to help resolve supply / demand imbalances. I was reminded of this as I talked to my friend at BuyCostumes, the world’s largest e-commerce costume site.

Earlier this month I wrote that if you remove the constraints of shelf space dictated by a physical costume store, you see the same Long Tail sales trends that other categories experience (at BuyCostomes, at least). When variety of product is virtually unlimited (pun intended), niche sales can be very profitable.

Conversely, when there is a lot of demand for something in limited supply, not only will you sell out quickly, but you’ll see that product continue through the food chain until it finds its ideal price. Certainly for Christmas items, but also for Halloween, which is now the second largest American holiday in terms of spending.

A fact I was reminded of when I learned that Burger King costumes are big this year.

BuyCostumes has an exclusive deal to sell these masks this year, and sold nearly 2,000 of them over the course of about 6 hours (cumulatively, because they sold them in batches over several days).

The retail price was $39.99. Many who scooped them up immediately put them back on the market. My contact at BuyCostumes guessed they were going for as much as $80 each on eBay and finally settled down to $65, including shipping and handling. Unfortunately, the speculators, plus eBay and perhaps pay-per-click ad sites (see the ads on the Google search I did this weekend) were the only parties to profit from this demand spike.

For several years I’ve been reading that movie theaters are talking about putting their tickets for extremely busy nights up for a higher price than normal, and conversely, marketing their slow nights at lower ticket costs. That day is still a long way off, for social reasons and not technical ones.

Similarly, I wonder if holiday-related e-commerce sites should consider having their own markets for their hottest products, so they can benefit from these demand spikes. After all, oil companies do it. And isn’t a Burger King mask that can be re-sold many times on eBay and Craigslist just as fungible as a gallon of sweet crude?

The only constraint I can think of: Society may not be prepared to have a merchant with exclusive rights to a product take every action to benefit from its popularity. The negative PR implications of an online auction by the seller may be too great, leaving the opportunity in the hands of the speculators and eBay.

You’ve got to wonder. If the frantic parents outside the toy stores of the 1980’s were told there would be an auction for the last 10 Cabbage Patch Kids, and “Who will start the bidding at $100?” … would there be a riot? And would there be a flame-fest from consumers if modern-day eTailers did the same?

David Ogilvy called direct marketing, “My first love and secret weapon.” I feel the same way. The power of a handful of direct marketing techniques has turned so-so campaigns into winners for me more times than I can name. One such technique is including maps in direct mail and email marketing messages. I’ll break the marketing power of geomapping into two tips.

#1 Don’t just tell consumers that they should visit you — show them how, as specifically as possible

Social psychologist Howard Levanthal conducted some experiments in the 1960s to see if he could persuade Yale University students to get tetanus inoculations. In his efforts to see if mailed brochures would work better using fear as a motivating factor, he stumbled upon something more persuasive.

He included a change in the booklet that boosted response from 3% to 28%. As reported in “Effects on Fear and Specificity of Recommendations Upon Attitudes and Behavior,” in the Journal of Personality and Social Psychology (1965), he and his fellow researchers included a map of the campus, with the Health Department office circled, and the times when inoculations were being offered.

In other words, he made visiting the health department more real to the students by showing them how it fit into their lives and their schedules.

With digital printing, you can do one better: You can produce maps that include two dots: You are here and Here we are. I’ve used this technique, and it’s not easy when you’re mailing to a lot of neighborhoods, but seems to be well worth the effort.

#2 Tell them how close they are to you

People don’t look at maps until they are curious about what you have to sell. But you can help them grasp how easy it is to reach you if you tell them right in the headline. If they are closer than they thought, that’s great news. And to quote Oglivy again, “All advertising is news.” Here’s an example of one such headline:

We had the challenge of informing residents living near a community hospital that they should go there for the vast majority of their healthcare needs. The hospital, which was tucked away in a residential neighborhood and was easily overlooked, had witnessed much of their business being drained away by a neighboring medical center.

Our opportunity to start winning this business back came when we were hired to promote a series of open house events (by we, I’m referring to a team I led in a “former life,” as they say in business). The events were to celebrate a complete redecoration of the public-facing areas of the facility.

The headline of the mailing was blunt: You’re less than 10 minutes away from award-winning healthcare. We could say this honestly because we had done drive-time calculations, and created three versions of the mailing. One stating the above, and two others saying 5 minutes and 15 minutes. The database with drive times told us which mailing to use for each address.

When the first event rolled around, it was fascinating to watch people arrive, with mailing in hand, to claim the promotional item we were giving away. They needed to take a tour and turn in the mailing in order to get their gift. That, of course, meant that we could read their names and addresses off of the cards, and add these prospects to a customer relationship management (CRM) database. From there we could re-mail with other offers and news.

It was definitely a group of pospects worth re-marketing to, for these three reasons: 

1. They were responsive. The response rate for the group closest the hospital was 3.7%.
2. They loved us. Many raved about what they saw, saying things like, “It looks more like a hotel lobby than a hospital!”
3. They were now truly our neighbors. Thanks to the geomapping technique, they all knew exactly how to find us.

In the classic Stanley Kubrick film 2001: A Space Odyssey, based on Arthur C. Clarke’s book of the same name, prehistoric Man has a good day at the office when he realizes how to use an animal femur as a weapon. The implication is that this moment of invention bestowed upon our ancestors a competitive advantage.

What I love most about my job is being a part of a team that has these same ”Aha!” moments. Quite often we make newer, better tools that enable us to go out and kill our suppers. How cool is that? 

Even cooler is how the lines between disciplines blur, and we have invention mash-ups. Because we are involved in direct marketing and research as well as interactive projects, we get to invent in those areas as well.

Next week I’ll write about just such an invention involving geomapping. But today it’s analytics, one of the more fertile areas for innovation — and improved ROI — in business today.

I interrupt this story to recommend a free webinar on gaining a competitive advantage through analytics, put on by the American Marketing Association and Aquent (thank you, James Gardner, for the head’s up!). It takes place on October 31 and covers topics every marketer should be familiar with.

The analytics ”invention” I describe below came from a conversation I was having several years ago with Mike Czerwinski (a co-worker in a prior life), who is one of the smartest people I’ve ever met. Too bad he squandered all that brainpower by getting a PhD in mathematical physics. I joke of course. His scientific background and ceaseless curiosity help him mine data in ways that are sometimes quite unexpected.

Over a beer, Mike and I were contemplating the barcodes on the back of Wisconsin driver’s licenses. They contain all the written information on the front of the card — far more than name and mailing address. The information contains height, weight — even eye and hair color. As Mike might put it, many data points.

This led to the discussion of nightclubs. It’s a very competitive industry, where your profitability hinges on the caprices of a community’s young and social. Significantly, Mike and I had both just read Malcolm Gladwell’s The Tipping Point.

I can’t speak for Mike, but I certainly know that I was looking with a fresh set of eyes, seeing everywhere the social epidemics that Gladwell describes. More importantly, I was ever-wondering how to find Mavens and Connectors. These, according to Gladwell, are the few who influence the many. They can be found at the head of most consumer stampedes, and are to be courted and coveted by marketers — if they can be identified.

How to identify them in a nightclub? If you could see these vectors of influence, and offer them free stuff (drinks, a party room for a special occasion, etc.), they would reward you by drawing their many friends with them back to your club again and again. And if you owned a number of nightclubs instead of one, you could find Connectors or Mavens who frequent one of your clubs and coax them and their loose posses to another, on a night when that club needs the business.

Most importantly, you watch the frequency of their visits. Your club could be packed, but if these influencers (as they are often called in word-of-mouth advertising) have stopped attending, your business is about to plummet. Their departure can be a leading indicator, which can help you make decisions about advertising, staffing, purchasing — every part of your business.

But how to find these valued customers? The answer, as it occurred to us, was the scanners that nightclubs use to document, upon entry, the legality of their patrons. Because being caught with under-aged drinkers can shut a club down, entrants are often handing over their licenses to an attendant who runs the card through a video scanner. I suspect that the typical scanner just takes a picture. It doesn’t actually capture the data. But it could. Patrons give up this piece of privacy for the privilege of partying at a club, and in so doing hand over an opportunity that Mike and I suspected was being overlooked, like a pile of dry bones.

What if the database of patrons was analyzed daily? We wouldn’t be looking for the most frequent patrons (necessarily), but for those loose groupings of people — those clusters — that show up frequently in the line of ID cards. Each cluster would be like a solar system in a nightly star map of patrons. And each planet in these solar systems would invariably orbit the same recurring Connectors and Mavens.

And guess what? You’d have these people’s mailing addresses. Once you identify these influencers (or suspected influencers — you can afford to be wrong occasionally), you’d mail them offers that really matter. A mailing to a few hundred people could potentially move a thousand or more partiers to your establishment when you need them the most.

If you know of anyone applying this idea, please let me know. It’s a concept that still needs to be tested, but I think it could have tremendous potential. In the meantime, here is a social map that charts the frequency that bands play at certain nightclubs. The clubs are colored according to type (blue=cover, red=original). Lines between clubs represent the number of bands that played at both clubs over the 18-month time period. The size of the clubs’ dots indicates sharing of bands. To get the full effect, and to read the whole story, check out this report with a time-lapse animation. Although the report suffers from lack of clarity, it does have some interesting observations.

Review the graphic and you’ll notice that the cover clubs don’t book the same bands as each other (the blue nodes are smaller) while the original clubs do share the same talent (the greater sharing of bands over the period increases the size of the red nodes).

I think you can infer from this that cover bands, which tend to play genres of music (e.g., Disco, Grateful Dead / Jam, Modern Country), tend toward a few clubs that fit this style of music, while a greater “genre” is new, original music. This material needs to be played in more of a circuit of clubs, ala vaudeville. Back to Mike’s and my invention, I think it would only work in the red clubs, because sharing of bands also means sharing of patrons, who follow the bands. Or, of course, the idea would work for nightclubs featuring no live music at all.

Like much in academic studies, I see little immediate business value to this Boston College study, which in some ways states the obvious. But it makes for an interesting view of the nightclub scene. And who knows … it might fuel your own beery inventions.

A message to Mike: We really need to go out and get a beer sometime. I miss the shop talk and rambling inventions of the four of us — you, Kevin, me and Guinness. Call me.

It’s a great idea. I’ve learned a lot from the concept, and want to give back. It’s the Carnival of Marketing. Every week a blogger volunteers to review recent marketing blogs that have valuable, actionable information, and then provide a good summary of the content with links. I can thank Noah Kagan for adapting the concept from other blog “carnivals.”

And I’m pleased to say that I’ll be hosting the Carnival during the weeks of November 19 and 26.

So here are your instructions: Be sure to return those weeks to see the juicy content I’ve accumulated for your benefit. And if you’re a fellow blogger, let me know as the dates approach of an entry that’s particularly worthy of the spotlight.

Here is the email address where you should send those entries: jlarche (at) gmail (dot) com. The Official Rules:

1. Don’t submit an old post. The post needs to be from at least the past couple of weeks, and preference will be given to posts from the most recent week.
2. Submit posts that are actionable. Tips that people can actually apply will almost always win out over abstract stuff. “How” beats “Why.”
3. Submit posts that are complete. As a corollary to the above, posts that refer out to articles or other sites for more information, or that have anything to the effect of “Watch this space for more information” are going to be among the first to be cut.
4. Don’t submit posts that are nothing more than a pitch.

That last point should be self-evident. Marketers, like other poisonous organisms, are immune to their own venom. I look forward to the submissions, and to sharing the winners starting in one month … and counting!

A friend sent me this Marketing Sherpa article about a great web design approach: Build in a button for those Type A folks who just want the facts.

It’s clever idea. The article has links to the site, which is for an ad agency. I suggest you give it a look.

The idea does bring up a greater point: Are you identifying your target audience precisely enough to match their varying browsing styles and needs? Doing so isn’t all that far-fetched.

I’m a big advocate of persuasion architecture, which is a term coined by Brian and Jeffrey Eisenberg of Future Now. It’s a process by which you segment the universe of customers and prospects visiting your site. Segmentation is by persona — which the brothers define as general personality archetypes. These are stereotypes, if you will, for how specific consumers feel about your site’s products or services. 

It all sounds very squishy, and frankly I do find it a little too high-minded sometimes. I’m more of the behavioral type. Generalizing on anything other than past actions can sometimes lead you in circles.

But I am nonetheless deeply indebted to the Eisenberg brothers for taking this idea and extending it to the practice of building pages that contain navigation and content unique for that persona. In other words, if you sell online home security products, and know that a worried single parent is a key persona type, be sure you address this person’s many questions and fears in a systematic way … and also, offer little other navigation or content along that funnel.

The object of persuasion architecture is to move people in an orderly fashion through their decision-making steps, one click at a time. The prize: To unfailingly lead consumers to a sale.

Persuasion architecture is a much-needed breath of fresh air. For the right site, I can see it rewarding Type A people for identifying themselves. And in doing so, rewarding the site owner with a higher sales conversion rate.

Once adopted by a critical mass of internet users, RSS feeds will change interactive marketing permanently and in a big way. I predicted that the phase shift would happen when Microsoft releases the new Vista operating system, in the spring. Published reports suggest that the sea change begins much sooner, as in today. That’s when Microsoft’s new version of Internet Explorer (IE) begins distribution through free downloaded upgrades.

Here’s how Steve Rubel of Micro Persuasion reports this news in his blog yesterday (The Day the Entire World Gets RSS):

As more people around the world start reading RSS feeds, big things will happen. [The orange RSS button on the new IE toolbar] will force everyone to begin integrating feed communication initiatives in their marketing and PR programs. News and blog posts are just the beginning. Couponing and all kinds of other communiques will go into feeds, as well as ads and more. That little orange button might look small, but boy is it big.

If you’re a marketer who (1) hasn’t started using RSS yet, and (2) doesn’t use IE regularly, you can still experience what RSS can offer. And you really must! Try the new, free Google Reader. That’s what I use and it’s terrific. Gina Trapani in the excellent blog LifeHacker.com compares this new feed reader to Bloglines, and she agrees that Google, although sometimes criticized for lackluster product introductions, really got it right with this recent product upgrade.

I have a theory that more people today will be setting up a new Google Reader account than ever before. Why? Because Microsoft has officially entered the RSS arena. As usual, Microsoft’s involvement will change everything. And that means that many who use Firefox or other IE competitors will realize that they can no longer sit on the sidelines and had better see what this RSS stuff is all about.

Jon Krouse is in a perfect position to help me test a hypothesis about long tail behavior. A co-founder of OnMilwaukee.com (a rare success story among regional online communities), Jon recently joined BuyCostumes.com. This is the world’s largest online retailer of costumes. As you can imagine, the month of October is major crunch-time for him.

Nonetheless, when I instant messaged him the other day to see if I could test an assertion from Chris Anderson, Jon was willing to help. Anderson is a Wired editor and most notably the author of The Long Tail. He contends that for companies with virtual inventories, just about any item they post for sale — no matter how obscure — will sell (i.e., be downloaded for a price) at least once every three months or so. Using sales statistics from Rhapsody.com, he made it sound like this was nothing short of an immutable law.

That’s for virtual inventories. Anderson admits it’s a little trickier for companies with real ones. That’s the case with BuyCostumes. I’ve visited their warehouse, which stores over 13,000 very real SKUs. Yow!.

Companies like this must mark down some items teetering at the tip of the tail before they finally sell. Carrying costs are a constraint that virtual inventory merchants simply don’t have. But the fact is, even real inventory items sell with some price manipulation. Or so Chris Anderson contends. I wanted to know for sure, and asked Jon.

He reported that minor adjustments to price do indeed make the most obscure costumes and accessories sell. Sure, there are the rare dogs, but priced properly, nearly all SKUs generate profits. This is huge, because the number of items offered is a precedent for the industry.

Imagine how many items a bricks-and-mortar costume shop can physically stock. Now consider that at one time quite recently, conventional wisdom was that no one wanted more selection than could be held on a really well-stocked costume shop’s shelves. Or, for that matter, in music store’s bins, or along a bookstore’s stacks.

The web, with its power to categorize, search and suggest, has exploded that myth. Which would mean little to a company like Jon’s if the demand for these products wasn’t so large.

How many sales are anticipated in the next couple of weeks for this humble little online costume shop?

“At our busiest, we’ll be doing 20,000 orders a day*,” Jon reports. Tune in November 1 to see a photo featuring the costumes that my wife and I chose and wore at Jon’s Halloween party, the first in his and Peggy’s new home. 

*It never hurts to advertise. BuyCostumes has major private label deals with major retailers, plus an effective search engine optimization and pay-per-click advertising strategy in place.

Real estate on a web site is precious. That’s one reason why many e-commerce sites cram as much merchandise as possible into the home page. You can’t blame them. Shoehorn one more offer onto the page and you see sales of that item go up. But does this practice erode overall sales?

The research of Kevin Hillstrom looked at overall sales from pure selling sites (example) vs branding sites (example) vs hybrids that split the difference (example). The sites evaluated were those taken from the largest businesses represented in the Internet Top 500 retail sites.

I was most interested in how hybrid sites would fare in the study. Although these hybrid sites featured home page offers, they also used much of its real estate to reinforce the brand. White space was more common, and often these hybrid sites didn’t even require you to scroll down to take in the entire home page.

A business that regards its e-commerce site as nothing more than efficient catalog would argue that the hybrid site approach is misguided, since it is not focusing enough on specific offers. But do the numbers bear this out?

The conclusion from this study says no, although it does find weakness in a pure branding approach to the home page:

It appears likely that a hybrid strategy is most likely to maximize the net sales of each visitor to the website. Selling sites may overwhelm visitors, while branding sites may not present enough merchandise to entice consumers.

Many have preached this hybrid approach, but it’s nice to see this validation. It only stands to reason that consumers need to know two things before they buy:

1. What are you selling?
2. Are you to be trusted?

Raising levels of trust, through your site’s branding, is the best way to maximize sales in an environment where competitors are only a mouse click away.

Imagine that you’re on a web site, watching a video of a talking head. The speaker is talking about something that interests you, but it’s hard to get past the frustration of wishing you could ask her to explain a point further before she goes on to the next. Whereas the rest of the web experience is more of a dialog, with us asking questions by clicking on hypertext links, this video is one way only. She talks, we listen.

Now imagine you can click on a section of the video to drill down to another video clip or web page, offering more information. @View Magazine calls it hyper video drilling, and touts it as a way to add deeper meaning and clarity to brief news videos. In another timely application, politicians can support their sound bites on their sites with supporting content. And advertisers and online marketers are, of course, the other big winners in this new web protocol.

If I can boast for a moment: I should say that with the news of this innovation, I experienced for the second time this week a “We’ve been scooped!” moment.

It’s the sensation that my team’s recent brainstorms have already been taken and run with by others. Far from being disappointed, I’m thrilled. It means we’re thinking the right way and finding creative ways to bridge the needs of both our clients and their audiences. The marketplace is validating our work.

Moreover, these widespread introductions of new technologies* are paving the way for acceptance by a mass audience.

Take the example of this hyper video drilling: When we were brainstorming about how wonderful it would be to click off of the talking head videos we were building into a site, and thereby see supporting documentation (in this case demonstrations of the technology described by the speakers), we knew we could build it pretty easily in Flash, but run the risk of it going underused. Or worse, it could confuse unfamiliar users!

Awareness of new user interfaces is notoriously slow to grow.

Think of the hypertext link: It’s a fundamental benefit of the web, but it took a while for the average web user to fully recognize that some text on a page can be clicked on to go somewhere else (those readers under the age of 30 need to talk to your grandparents to fully grasp this sad fact).

Same goes for clicking off of videos. I’m thrilled that this is being tested and talked about widely. It’s clearly the next step in the evolution of online video. And it leaves to groups like mine the thrilling opportunity of how best to leverage this new web convention.

*The other incidence of us being “scooped” was discovering that our ideas exactly — and I mean to the letter — had been accomplished. The idea was how to express visually and with movement and “drillability” the connections in an online community such as Facebook. It’s demonstrated in this video (it loads slowly — be patient), of a visual browser created by UC Berkley Ph.D. students Jeffrey Heer and Danah Boyd. Amazing stuff, and encouraging.

Legend has it that the telephone was invented simultaneously by at least two labs in two countries, and similar innovations have had similar simultaneous origins. If I can be indulged a little more bragging, I’m encouraged that the marketing technology “lab” I’m affiliated with is working at solving the right problems at the right time.