A presentation about how micro-channels fit together.

1. Understanding The Relationship Between Micro-Channels And Catalog Productivity Kevin Hillstrom President, MineThatData

2. Micro-Channels What the heck is a micro-channel? Simply put, a micro-channel is defined as “ any combination of physical channel and advertising channel that a customer uses to place an order ”. Micro-channels matter. Micro-channel patterns dictate how customer behavior evolves.

3. Old-School Micro-Channels Back in the day, a micro-channel represented the catalog we mailed, coupled with the key code the customer used to place an order. Based on this combination, we determined short-term ROI and long-term value. My, how times have changed!!!

4. Check-Mark Marketing Catalog Marketing Online Marketing Social Media Live Human Interactions These days, marketing is fundamentally different. Customers slide along a checkmark, with profitability featured along the “y-axis”. Our job is to evaluate where on the check-mark the customer resides. The more “human” the relationship, the more profitable the customer becomes.

13. Micro-Channels: Why Bother? Our industry is moving in three different directions. One path requires us to attribute orders to the primary advertising vehicle that caused the order. Another path looks to fractionally allocate orders. A third path uses micro-channels to predict future behavior. It is here that we save $$$$$$$$ .

18. Segmentation And Migration Once we have “proven” sources and “influenced” sources, we can predict future customer behavior on the basis of each source. We track the migration of customers from one source (proven or influenced) to another (proven or influenced), to understand how customers are evolving and changing.

19. Migration Probability Table

20. Migration Probability Table: Map

21. Why Do This? Remember the earlier graph, talking about “ check mark marketing? ” It turns out that the more customers “do their own thing”, the fewer catalogs we have to mail to these customers. This data is frequently validated via “ mail and holdout ” tests.

22. Catalog Proven Test Panel “ Catalog Proven” customers tend to require catalog marketing in order to buy something. These customers require a steady diet of direct marketing!

23. Catalog Influenced Test Panel “ Catalog Influenced” customers will spend some money without the need to mail catalogs to the customer. This is a place where catalogs can be reduced, increasing profit without much impact on sales.

24. E-Mail And Search Channel As customers move away from catalogs, the influence of the catalog can become reduced. These are customers who might warrant a diet of half to a third of the normal contact strategy.

25. Back To The Check-Mark Catalog Proven Buyer Website Only Buyer Marketing Influenced Buyer Social Media , Human Interaction Sales Rep Customer, Loves Human Interaction Catalog Proven buyers require analog marketing. Most “influenced” buyers require a mix of analog and digital marketing. Website-Only buyers require the least amount of analog marketing. Human interactions tend to yield the most valuable customers.

26. The New Methodology Step 1 = Assign “micro-channels” based on proven and influenced advertising channels. Step 2 = Use Multichannel Forensics to measure how micro-channels interact with each other. Step 3 = Take advantage of test/holdout groups for catalogs and e-mail marketing, to measure the “organic percentage”.

27. The New Methodology Step 4 = Create housefile models to grade customers (A/B/C/D/F) based on their responsiveness to catalog marketing --- reduce contact strategy to customers on the “right side of the check mark.” Step 5 = Re-invest money in customer acquisition or pocket the additional profit!

28. Improve Profitability

29. Going Forward Micro-Channels tell us where the customer is in their relationship with our brand. As customers evolve, we can change our catalog advertising strategy --- maintaining much of the demand we receive while saving expense. Use the expense savings to acquire more customers!!!

30. Questions? Kevin Hillstrom President, MineThatData 206-853-8278 [email_address] Website: http://minethatdata.com Blog: http:// minethatdata.com/blog Twitter: http://twitter.com/minethatdata