Dear Dr. pROfIt
By Kevin Hillstrom
About Kevin
Kevin Hilstrom is president of MineThatData, a consultancy that helps CEOs understand the complex relationship between advertising, customers, products, brands and channels. His clients include billion dollar retailers, international direct marketers, publishers, catalog brands and online pure-plays.
Prior to founding MineThatData, Kevin spent nearly 20 years in multichannel retailing at some of the most well-known brands in the U.S., including Nordstrom, where he was the vice president of database marketing, Eddie Bauer and Lands’ End. Kevin is also author of numerous books, including his most recent, “Online Marketing Simulations,” available at Amazon.com.
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What Happened to the Sales Curve?
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Thirty-five years ago, you might have received a 600-page catalog from Montgomery Ward. The catalog generated maybe $42 per household and had a “life” of six months.
Fifteen years ago, it was a 148-page catalog from L.L.Bean. The catalog generated roughly $7 per household, with a “life” of two months.
Seven years ago came a 56-page catalog from Nordstrom. It generated approximately $3 per household, with a “life” of one month.
Four years ago, you saw an email from Pottery Barn. The email generated maybe 20 cents per recipient, “living” for three days.
Two years ago, you read a blog post from Lehman’s. The blog generated 7 cents per subscriber, spanning a “life” of two days.
Today, you read a tweet from somebody at Zappos.com. The tweet generates maybe 3 cents per subscriber and has a “life” of 60 minutes.
The sales curve is going through a dramatic evolution.
To achieve a scalable return on investment, you're going to have to change your mind-set. The focus used to be on mailing addresses. Even if you only had access to a mailing address, you could send 600 pages twice a year or 100 pages 12 times a year. Either way, you were figuring out the best way to harvest revenue from a mailing address by pushing messages at that audience.
Every time technology made things smaller, you increased frequency to obtain sales. And as things move into the digital realm, frequency and traffic are required to increase, or sales don't increase.
So often I hear that social media doesn’t work or that email marketing doesn’t work or that a website only has a 3 percent conversion rate. Honestly, these tools will never work if viewed within the context of a traditional mailing address. Email works well when you have a gigantic opt-in email list that's contacted 100 or more times per year. Social media works when you have a giant group of followers that's interacting with you dozens of times per day.
Again, you have to think about a large audience that's interacting with multiple daily contacts — a completely different thought process than a mailing address that you contact a dozen times a year.
The challenge, of course, is to somehow get a million or 2 million followers on Twitter, or a quarter million blog subscribers, or 5 million opt-in email subscribers. By and large, few marketers know how to do this. And the process is opposite of what many of you are used to. It's easy to go to Abacus and pay for one-time access to a million households. It's hard to get a million households to follow you on Twitter for free.
If you want a scalable ROI, one that protects the future of your business, you're going to have to figure out how to pull pennies out of a large audience every two hours. The process of pushing messages that extract dollars out of a large message is slowly fading into the past.
Kevin Hillstrom is president of MineThatData, a database marketing consultancy. He can be reached at kevinh@minethatdata.com.
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