Multichannel%20Forensics:%20%20%20%20%20%20%20An%20Introduction

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Multichannel Forensics An
Introduction

• Kevin Hillstrom
• President, MineThatData

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Multichannel Forensics

• An Introduction
• Kevin Hillstrom
• President, MineThatData

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Predicting The Future
Who is going to win American Idol? Do you
anticipate heavy traffic on your way home from
work? How will Microsofts Zune MP3 player fare
against Apples iPod player?
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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, SP 500
• Weather Temperature, Cloud Cover, Humidity,
  Rain.
• Sports Playoff Seeding.

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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

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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?
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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.
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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.
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Multichannel Forensics

• There are two components in any Multichannel
  Forensics analysis.
• Customer Loyalty. How loyal are customers within
  any product, brand or channel?
• Customer Migration. Do customers stay within one
  product, brand or channel, or do they migrate to
  others?

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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.
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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.
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Repurchase Modes
There are three Repurchase Modes Retention
Mode 60 - 100 Repurchase. Hybrid Mode 40 -
60 Repurchase. Acquisition Mode 0 -
40 Repurchase. The repurchase mode determines
the primary focus of your marketing activities.
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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?
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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
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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.
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Calculate Migration Mode
Heres 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.
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Migration Probability Table
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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.
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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.
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Website Example Peanut Business
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Website Example Peanut Business
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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.
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Online Channel Example
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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.
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Analyze Sales Over Time
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Analyze Your Competitors
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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.
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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 dont play well with
others are ideally suited for Isolation Mode
business units.
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Marketing Strategies

• E-Mail Marketing
• Versions that meet the needs of customers likely
  to migrate to another product, brand or channel.
• Try to move products, brands or channels from
  Acquisition to Hybrid, or Hybrid to Retention
  Mode.

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Marketing Strategies

• Catalog Marketing
• What role does catalog marketing play, given the
  results of a Multichannel Forensics analysis?
• If catalog customers transfer to another channel,
  consider merchandising strategies that facilitate
  this transfer.

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Marketing Strategies

• Online Marketing
• Do online customers transfer to another channel
  (telephone, retail)?
• If so, online marketing is brand focused, not
  channel focused.
• If not, online marketing capitalizes on
  completing an online sale today.

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Marketing Strategies

• Data Mining
• Identify merchandise trends that facilitate
  customer migration from one product/brand/channel
  to another.
• Build models that predict the migration.
• Use Isolation Mode information to limit
  cross-shopping marketing strategies.

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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.
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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.
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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. Lets do this within our
own businesses, too!!
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Questions?
Contact Kevin Hillstrom President,
MineThatData E-Mail kevinh_at_minethatdata.com Ph
one 206-853-8278 Website http//minethatdata.
com Blog http//minethatdata.blogspot.com Whit
e Paper http//minethatdata.com/MineThatData_Mul
tichannel_Forensics.pdf