Transcript Multichannel Forensics

Multichannel Forensics:
An Introduction
Kevin Hillstrom
President, MineThatData
Kevin Hillstrom, President: MineThatData
[email protected] 206.853.8278
http://minethatdata.blogspot.com
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Multichannel Forensics
An Introduction
Kevin Hillstrom
President, MineThatData
Predicting The Future
Who is going to win “American Idol”?
Do you anticipate heavy traffic on your way home from work?
How will Microsoft’s Zune MP3 player fare against Apple’s
iPod player?
Kevin Hillstrom, President: MineThatData
[email protected] 206.853.8278
http://minethatdata.blogspot.com
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Metrics And Intuition
Systems have been built to help us understand the past, and
predict the future:
• Comp Store Sales.
• Stock Market: Dow Jones Index, S&P 500
• Weather: Temperature, Cloud Cover, Humidity, Rain.
• Sports: Playoff Seeding.
Kevin Hillstrom, President: MineThatData
[email protected] 206.853.8278
http://minethatdata.blogspot.com
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We Use Metrics And Intuition
Examples:
• Interstate Highways, Suburbs, Urban Decay.
• IBM, Microsoft, Google
• Dial-Up Internet, Broadband Internet
• 8mm Film, VHS, DVDs, Digital Movies
• LPs, Cassettes, CDs, MP3s
• Network TV, Cable TV, Satellite, YouTube
Kevin Hillstrom, President: MineThatData
[email protected] 206.853.8278
http://minethatdata.blogspot.com
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Could You Answer This Question?
“Five years from now, if current market conditions remain
reasonably constant, what will your sales and profit be, by
product, brand or channel?”
Kevin Hillstrom, President: MineThatData
[email protected] 206.853.8278
http://minethatdata.blogspot.com
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Predicting The Future
Think about the metrics available to you, where you work.
Most of the metrics explain “what happened in the past”.
You are paid to drive “future sales”.
Kevin Hillstrom, President: MineThatData
[email protected] 206.853.8278
http://minethatdata.blogspot.com
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Multichannel Forensics
Multichannel Forensics is the study of how Customers interact
with Advertising, Products, Brands and Channels.
Multichannel Forensics provide a roadmap for the CEO or
Executive. The leader will understand which levers drive
growth.
Kevin Hillstrom, President: MineThatData
[email protected] 206.853.8278
http://minethatdata.blogspot.com
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Multichannel Forensics
There are two components in any Multichannel Forensics
analysis.
1. Customer Loyalty. How loyal are customers within
any product, brand or channel?
2. Customer Migration. Do customers stay within one
product, brand or channel, or do they migrate to
others?
Kevin Hillstrom, President: MineThatData
[email protected] 206.853.8278
http://minethatdata.blogspot.com
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Repurchase Modes
Our products, brands or channels are classified into three
Repurchase Modes, usually based on annual activity.
For the average business, we look at customers who
purchased during 2005. Next, we count how many of those
customers purchased during 2006.
Kevin Hillstrom, President: MineThatData
[email protected] 206.853.8278
http://minethatdata.blogspot.com
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Repurchase Modes
Retention Mode means you have a reasonably loyal customer
base.
Hybrid Mode means you need a balance of loyalty and
acquisition strategies.
Acquisition Mode means your main job function is to
constantly acquire new customers.
Kevin Hillstrom, President: MineThatData
[email protected] 206.853.8278
http://minethatdata.blogspot.com
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Repurchase Modes
There are three Repurchase Modes:
Retention Mode:
Hybrid Mode:
Acquisition Mode:
60% - 100% Repurchase.
40% - 60% Repurchase.
0% - 40% Repurchase.
The repurchase mode determines the primary focus of your
marketing activities.
Kevin Hillstrom, President: MineThatData
[email protected] 206.853.8278
http://minethatdata.blogspot.com
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Migration Modes
Three Retention Modes are complimented with four
Migration Modes.
Migration Modes explain how customers use products,
brands or channels. Do customers only buy from one area, do
they sample other areas, do they switch to other areas?
Kevin Hillstrom, President: MineThatData
[email protected] 206.853.8278
http://minethatdata.blogspot.com
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Migration Modes
Here are the Migration Modes:
Isolation Mode is when customers do not cross-shop other
areas.
Equilibrium Mode is when customers try other areas of the
business
Kevin Hillstrom, President: MineThatData
[email protected] 206.853.8278
http://minethatdata.blogspot.com
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Migration Modes
Two additional modes:
Transfer Mode is when customers switch to other areas of
the business.
Oscillation Mode happens when customers alternate loyalty
between products, brands or channels.
Kevin Hillstrom, President: MineThatData
[email protected] 206.853.8278
http://minethatdata.blogspot.com
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Calculate Migration Mode
Here’s an example: Online customers have a corporate
repurchase rate of 55%.
Online customers had a 16% purchase rate into the retail
channel.
The repurchase index is 16 / 55 = 29% = Equilibrium Mode.
Kevin Hillstrom, President: MineThatData
[email protected] 206.853.8278
http://minethatdata.blogspot.com
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Migration Probability Table
Kevin Hillstrom, President: MineThatData
[email protected] 206.853.8278
http://minethatdata.blogspot.com
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Migration Probability Table Example
Catalog is in Acquisition / Equilibrium Mode.
Online is in Acquisition / Equilibrium Mode.
Retail is in Hybrid / Isolation Mode.
Catalog customers shop the website and retail store. Online
customers shop retail. Retail customers are unlikely to shop
elsewhere.
Kevin Hillstrom, President: MineThatData
[email protected] 206.853.8278
http://minethatdata.blogspot.com
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Migration Probability Table Example
In this example, catalog growth is hard. Catalog can be used
to drive traffic to other channels.
The website might be used for E-Commerce, or for research
that drives customers to the store.
Store customers seem to only want to shop the store.
Kevin Hillstrom, President: MineThatData
[email protected] 206.853.8278
http://minethatdata.blogspot.com
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Website Example: Peanut Business
Kevin Hillstrom, President: MineThatData
[email protected] 206.853.8278
http://minethatdata.blogspot.com
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Website Example: Peanut Business
Kevin Hillstrom, President: MineThatData
[email protected] 206.853.8278
http://minethatdata.blogspot.com
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Website Example: Peanut Business
Gifts are in Hybrid / Isolation Mode.
Shelled are in Acquisition / Transfer Mode.
Roasted are in Acquisition / Equilibrium Mode.
In this example, Gift customers are the most loyal, but fail to
cross-shop. Shelled Peanut customers become Roasted
Peanut customers. Roasted Peanut customers shop the
whole site.
Kevin Hillstrom, President: MineThatData
[email protected] 206.853.8278
http://minethatdata.blogspot.com
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Online Channel Example
Kevin Hillstrom, President: MineThatData
[email protected] 206.853.8278
http://minethatdata.blogspot.com
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Five Year Product Forecasts
The business analyst can build a forecast of future
performance.
The analyst measures the probability of a customer migrating
to every product, brand or channel combination. By
appending spend levels to each combination, a future
forecast can be derived.
Kevin Hillstrom, President: MineThatData
[email protected] 206.853.8278
http://minethatdata.blogspot.com
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Analyze Sales Over Time
Kevin Hillstrom, President: MineThatData
[email protected] 206.853.8278
http://minethatdata.blogspot.com
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Analyze Your Competitors
Kevin Hillstrom, President: MineThatData
[email protected] 206.853.8278
http://minethatdata.blogspot.com
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Leadership Strategies
Business units that operate in Equilibrium or Transfer Mode
require leaders that have outstanding collaborative skills.
Because customers migrate back and forth in Equilibrium /
Transfer Mode, business leaders also need to collaborate.
Kevin Hillstrom, President: MineThatData
[email protected] 206.853.8278
http://minethatdata.blogspot.com
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Leadership Strategies
Equilibrium and Transfer Mode leaders have the least control
over their business.
Isolation Mode leaders have a lot of control. Small business
units in Isolation Mode are ideal for new leaders. Leaders
who don’t “play well with others” are ideally suited for
Isolation Mode business units.
Kevin Hillstrom, President: MineThatData
[email protected] 206.853.8278
http://minethatdata.blogspot.com
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Marketing Strategies
E-Mail Marketing:
1. Versions that meet the needs of customers likely to
migrate to another product, brand or channel.
2. Try to move products, brands or channels from
Acquisition to Hybrid, or Hybrid to Retention Mode.
Kevin Hillstrom, President: MineThatData
[email protected] 206.853.8278
http://minethatdata.blogspot.com
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Marketing Strategies
Catalog Marketing:
1. What role does catalog marketing play, given the
results of a Multichannel Forensics analysis?
2. If catalog customers transfer to another channel,
consider merchandising strategies that facilitate this
transfer.
Kevin Hillstrom, President: MineThatData
[email protected] 206.853.8278
http://minethatdata.blogspot.com
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Marketing Strategies
Online Marketing:
1. Do online customers transfer to another channel
(telephone, retail)?
2. If so, online marketing is “brand focused”, not
“channel focused”.
3. If not, online marketing capitalizes on completing an
online sale today.
Kevin Hillstrom, President: MineThatData
[email protected] 206.853.8278
http://minethatdata.blogspot.com
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Marketing Strategies
Data Mining:
1. Identify merchandise trends that facilitate customer
migration from one product/brand/channel to
another.
2. Build models that predict the migration.
3. Use Isolation Mode information to limit crossshopping marketing strategies.
Kevin Hillstrom, President: MineThatData
[email protected] 206.853.8278
http://minethatdata.blogspot.com
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Multichannel Forensics Overview
Three Repurchase Modes and Four Migration Modes dictate
the role each product, brand or channel (and combinations)
play in the bigger picture of our complex business models.
Each product, brand or channel plays a role in the larger
ecosystem of your individual business.
Kevin Hillstrom, President: MineThatData
[email protected] 206.853.8278
http://minethatdata.blogspot.com
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Multichannel Forensics Overview
By calculating unique repurchase probabilities, it is possible to
develop five-year business forecasts that highlight the future
trajectory of your business.
Your trajectory and acquisition/retention strategy dictate
marketing strategies and data mining opportunities that drive
growth.
Kevin Hillstrom, President: MineThatData
[email protected] 206.853.8278
http://minethatdata.blogspot.com
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Multichannel Forensics Overview
Humans are great at looking at various trends, understanding
where the future is heading, and then developing action plans
based on what they are observing.
We do this well with macro-business trends.
Let’s do this within our own businesses, too!!
Kevin Hillstrom, President: MineThatData
[email protected] 206.853.8278
http://minethatdata.blogspot.com
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Questions?
Contact:
Kevin Hillstrom
President, MineThatData
E-Mail: [email protected]
Phone: 206-853-8278
Website: http://minethatdata.com
Blog: http://minethatdata.blogspot.com
White Paper: http://minethatdata.com/MineThatData_Multichannel_Forensics.pdf
Kevin Hillstrom, President: MineThatData
[email protected] 206.853.8278
http://minethatdata.blogspot.com
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