What drives direct commerce?

This post is an exercise in reminding myself of the fundamentals.  And just like football, you've got to get the fundamentals right, before you move on to the more sophisticated permutations of the business.

The fundamentals of Direct Commerce are convenience, customer service and, sometimes, price.

Convenience
The reasons the direct marketing channels exist, at all, is because they are more convenient than the brick-and-mortar retail channel.  What is it about convenience?  Could be any of several things -- which varies by the individual customer:

• saves the time to drive to and from the store
• avoids having to "rummage" thru a store to find what you're looking for
• avoids having to deal with untrained, poorly trained or rude retail clerks
• avoids having to find a parking space
• avoids having to "lug" stuff to and from the car
• avoids the crowds at the mall -- especially at heavy shopping seasons, like Christmas or Back-to-School
• allows me to shop from anywhere -- work, hotel, and now, with a mobile device, even from my car

How can you provide additional convenience to your customers and, just as importantly, to your prospective customers?

Customer Service

Customer Services has several components.  

Pre-sale contact, when a customer is trying to learn more about a product so they can make a decision whether or not to buy, whether or not the product meets their needs or satisfies their desires.  

Post-sale contact, when a customer is trying to resolve some issue which has arisen after the purchase decision.  This might be an exchange, a return, a simple "where is my order?" inquiry or anyone of about 20 or so typical customer service inquiries.  

Finally, reliability and trustworthiness, which at the end of the day, determines if a customer wants to do business with you again.  Your customers need to trust that you'll treat them right and that you're not afraid to actually talk to them on the phone.

Have you noticed how difficult it can be to actually get a customer service rep on the phone?  Or, even get a reasonably prompt answer to an email?

A lot of companies spent a lot of time and effort trying to avoid dealing directly with their customers.  Ever tried to call Amazon?  It's almost impossible to find Amazons' customer service phone number.

Price 

And I should emphasize that price is only sometimes a fundamental.   It seems to get more important as the product price points increase, but there is also a point at which price becomes irrelevant -- either because the price is so high or the price is so low.

And the exact location of this price range varies by product category.

This is also why shipping cost is a factor.  My rule of thumb is that if shipping cost is more than 10 percent of merchandise cost, then the customer will at least "pause" to consider if it's worth it.

So, be sure you spend a little time on the fundamentals each week -- then move on the more esoteric stuff.

Systemax exits hosted e-commerce software business

There is probably a lot behind this story in DM News.  But ultimately, it's a failure in execution.  Compounded in my view, by a mismatch between the vision of the company and the vision of it's prospective clients.

Fortunately, there are still a lot of good solutions in the marketplace -- perhaps not integrated to the breadth that PCS promised, but still good solutions.

Survey Says ...

Customer service is tops at retaining customers ... 


Here's a headline in Internet Retailer, I love to see, because I've been "preaching" this forever.  Most of the people who buy via direct commerce channels (web, phone, mail) are more concerned about convenience and customer service than about price.


Price and breadth of merchandise selection are now table stacks or irrelevant.


After all, it's so easy to find a specific product at a price I'm willing to pay, that breadth of selection is not inherently a strategic advantage -- especially when attracting new customers.


And as far as price goes -- follow me on this:


Have you ever used one of the comparison price engines?  You can find 20 web sites, all selling the exact product you want to buy.  And you can site at your computer and see all their prices simultaneously.  Do you always pick the lowest price?


I know I don't.  I first look for a familiar name.  And if I don't see one, I look for customer ratings (not completely reliable, but at least a good indicator).


I steadfast avoid companies who don't accept returns (unless I know it's something I'll keep).


You see, my concern is about my convenience.  I don't want to get stuck with something that disappoints.  I want a company I can trust to treat me reasonably, if not unreasonably well.


Even in good times, Customer Service is the best way to keep the best and the most customers.

The last step in direct marketing channel integration

I had lunch earlier this week with a old and tenured friend, who runs a personalized mail business.  As with many, if not most or all, direct mail production companies, his business is suffering some.

He asked me to peer into the future and tell me what I thought was going to happen to the industry.  I won't claim that my insights are better or more predictably accurate than anyone elses, but here they are:

First, I think the efficacy of direct marketing is being publicly proven -- again.  For example, as I posted earlier.  The DRTV business is growing in this economic downturn, because of the reduced price of network TV advertising.  General advertising agencies don't have budgets from their clients to "over pay" for television time, so DRTV is proving how much stuff you can really sell over TV, rather than just advertise it.

Second, while retail sales are flat or down, ecommerce and mail-order sales are flat or increasing (this according to US Dept of Labor statistics).  Retailers continue to commit increasing resources to their ecommerce initiatives.  Chicos FAS even "replaced" their CEO because he had not devoted sufficient resources to their "direct" business, which was growing faster than any other segment.

Third, internet based retail stores are great "buying" channels, but poor "shopping" channels.  Even with ubiquitous broadband access, you cannot flip thru a web site the way you can flip thru a catalog.  Interestingly, the big catalog companies, such as LLBean and Lands End and others, continue to drive business to their web site by mailing catalogs.  And their web sites are continuing to grow as the point of origin for more and more of their total order volume.

Fourth, electronic-mail does not replace paper-mail (at least, not yet).  By all reports I've heard, response to email marketing is 10-20% of response to paper-mail marketing.  That means if you get 2% response to a catalog, you'll get 0.2% response to an email effort -- at best.

And even if the email marketing effort is statistically more profitable, the gross sales and net income remains dramatically lower than traditional direct marketing efforts.  So, all of these merchants who are trying to save money by shifting declining resources to electronic marketing will likely find they will have to return to a more balanced budgetary strategy.

The more difficult question is when will this rebalancing occur -- almost impossible to predict.

So, here's the question I think we need to be contemplating more:

How can we integrate the web as a response channel to paper-based direct marketing efforts, in order to document their efficacy?

And in my opinion, this integration should be more than back-matching orders to mailing files, or forcing customers to enter "source codes" from their catalog.

Let's have a little creativity in response tracking

Growth in DRTV Advertising

Direct Magazine published an article entitled "Direct Response Rare Bright Spot in Nielsen Report."

The gist of the report is that DRTV advertising spending has increased recently, while other categories have declined.  That is great news for the industry -- and includes many of my friends.

But let's also keep it in context.  Spending in most advertising media is declining.  Newspapers are thinner.  Magazines are thinner.  Radio is less interrupted.

In this economy, any expense that a business cannot clearly measure it's ROI is under review, if it hasn't already been cut.

The reduced demand for most forms of advertising is leading to lower rates.  DRTV companies can buy network spots like never before.  Good for them.

But ultimately, the real test is whether, when the economy comes back, will general advertisers adopt the direct response type model to clarify and perfect the measurability of their TV / Radio / Newspaper / Magazine advertising?

Obviously, it's too soon to tell.  So, in the mean time, enjoy the ride ... all the way to the bank.

Direct Mail Fades As Mass-Marketing Channel: Winterberry

This is a headline in Direct, here's a link to the entire article.

I pretty seriously disagree with the implications of the headline.  The jist of the article highlights how the total direct mail volume is declining -- which has nothing to do with the headline.  There are fewer advertisers on TV these days -- fewer on radio -- fewer in newspapers.

The decline in advertising activity relates to the general decline in the economy, and has little to do with the impact of the medium itself.

While general TV advertising is down, direct response television is increasing pretty dramatically.

What is changing is the economics of the marketplace.  Companies who have not been managing themselves well are fading or disappearing.

On top of that, if anyone sees direct mail as a "mass marketing" channel, they probably should not have been using the medium in the first place.  Every competent direct mail person I've every known would have loved to eliminate every non-responsive name they could.

Jacking up mail volume, just to get big numbers is always a losing proposition.

Millard Fuller, co-founder of Habitat for Humanity, dies

Some of you may wonder why I'm linking to this story in a blog about direct marketing.  Fair question, to which  there are two answers.

First, because I've been a volunteer with Habitat for Humanity of Northern Virginia, since 1991.  Even this past Saturday, I was out on a work site in Fairfax County, Virginia, where I live.  You should check out Habitat for Humanity International as well as Habitat for Humanity of Northern Virginia.

Secondly, Millard was a direct marketer.  He and Morris Dees (a very liberal guy who helped George McGovern's Presidential campaign back in 1972; as well as led the Southern Poverty Law Center), started Morris & Dees, as a direct marketing agency while they were still in college.

One story was that they began selling birthday cakes to the parents of their fellow students -- by mail, of course.  Good story, whether it's true or not.  They'd sell the cakes to the parents and then deliver the cakes to the dorm rooms.

Millard was a good guy -- had his flaws, like all of us do -- but you only have to talk to one or two owners of Habitat for Humanity homes to understand how this idea has changed so many lives.

Pretty remarkable.