Almost every multi-channel marketer is struggling with the question, “how much of my web business is incremental”? This is a key question, for marketers who have observed that as the web channel grows, typically the other traditional offline channels fall. So how can a company determine if the web sales are purely a channel shift, or might it be incremental?
My experience is to look at what portion of your web business is coming from customer who are new to your file. Obviously, if your web business is dominated by customers who have been on your file prior to the web activity, then the web channel activity is a pure shifting of business. But that is most likely what you won’t find. There will be a proportion that is new to file and the key is to compare that portion of new with your other traditional offline channels.
The table below illustrates this concept well.
New to File Proportion of Business by Channel | |||||
Existing Buyer Business | New to File Business | Proportion existing Business | Proportion New to File Business | ||
Offline Channels | $300 | $100 | 75% | 25% | |
Web Channels (Ver 1) | $25 | $10 | 71% | 29% | |
Web Channels (Ver 2) | $25 | $20 | 56% | 44% | |
Web Channels (Ver 3) | $25 | $100 | 20% | 80% | |
If your proportions looks like those in Ver. 1, your web business is clearly a channel shift only and should not be viewed as incremental at all.
If your proportions looks like Ver. 2, your web business is partially incremental, but your offline channels are still your primary growth source.
If your proportions look like Ver. 3, you should view your web business as incremental, and just like any marketer, you need to understand what do these new customers cost to acquire, and is that an appropriate investment. This brings up the next topic, how to measure quality of the web buyers.
Two of my previous articles will help with this task. First is to run the “Buyer Matrix” on your web buyers to understand at what level do they return to make subsequent purchases, and how do those compare to other similar aged customers. These behavior metrics will quickly help you determine if the investment made to acquire these customers was appropriate or not. It will also provide you a relative measure of quality between your customers acquired from offline efforts versus online. You should also review my previous article on Acquisition Cost to utilize the appropriate financial perspective on the appropriate investment returns.
Another useful tool is the Generic Scoring model. In a similar fashion, you should compare the scores of your new to file buyers across channels. There are many myths that web buyers are of lower quality of the offline buyer, and thus do not warrant the same level of investment. My experience is that this is not always the case. Be sure you understand how your customers behave using their actual purchase data.
