News
5 Crucial
Multichannel Metrics
By Jack Schmid, founder of J.
Schmid & Associates
Any seasoned direct marketer knows the importance of
understanding the numbers side of the business. You
have to know both the left-brain (analytic) and
right-brain (creative) rules for maximum success. My
philosophy is “know the rules before you break
them.”
People often ask me for the most important direct
marketing metrics. As we have evolved to a wider use
of selling channels (Websites, e-mail campaigns,
search engines, in-store selling), do the
tried-and-true tenets of catalog marketing still
hold up?
Here are my top five metrics that every multichannel
marketer must know and use in the measurement and
tracking of their business.
1. Business financial model
Every consumer, business-to-business, or even
not-for-profit multichannel seller has a unique
financial model that describes its business--there
is no single business model. Each company has a set
of costs (including its cost of merchandise,
fulfillment, marketing or selling and administrative
or overhead) that is totally specific to its
operations. This business model should reflect a
mature company position (at least three to five
years in business) and must represent the goal or
ideal that the company is striving for.
2. Cost to acquire new customers (or “front end”
marketing)
There are dozens of ways to recruit new customers.
The challenge for successful multichannel merchants
is identify those acquisition methods that produce
the best short term (from a cost standpoint) and
long term (as in lifetime value) customers for your
company. The Internet and retail stores have added
to the versatility of the ways to bring in new
buyers. But the bottom line is in measuring what it
costs to get new customers and then tracking them
for longer-term value.
3. Lifetime value of customers
The “backend” analysis of acquiring new customers is
measuring their longer-term value or their
propensity to continue doing business with your
company. Multichannel selling is not about a
one-time sale. It is totally driven by repeat sales
from existing customers. Knowing what customers will
spend over time is crucial to putting a value on
your list and in determining how much you can spend
to acquire new customers.
4. Square-inch analysis
The primary method of measuring the results of your
merchandise efforts is the square inch analysis.
Ideally, every direct seller needs to know the
productivity of every product (SKU), page or spread
in the catalog, price point, and product category.
Measuring the contribution to the profitability of
every aspect of merchandising is critical to
long-term financial success.
5. Breakeven Analysis
This is an analytical tool that too many
multichannel merchants ignore. Breakeven analysis
works backward from the financial model to solve for
percent response and average order value (AOV)
needed to generate the revenue per mailing, email
campaign or any customer promotion to pay for itself
(or break even.) This analytical tool can be used in
conjunction with the business model to help in the
pre-promotion expectation and the post-promotion
look at results.
We’ll look more at the specifics of each of these
techniques--and other multichannel metrics--in
coming weeks. Stay tuned.
---Source: Reprinted from
Multichannel Merchant Magazine Nov. 7, 2007 issue
www.multichannelmerchant.com. Jack Schmid is founder
of J. Schmid & Associates.
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