Cross-Channel Cannibalism (Dallas, TX)

November 9, 2007 · Filed Under Marketing Tools, Tracking Results 

Phillip CrumSounds like the Brits gone mad but the French have nothing to worry about. It’s really quite simple. Cross-channel cannibalism is when a marketing campaign intended for attracting new business ends up costing the company existing sales.

The simplest example is an unnecessary coupon offering to an existing customer. Suzy spends $100 a month with you on shoes whether she needs them or not. It’s steady, predictable, reliable income. If you include Suzy in a coupon campaign intended to attract new business and send her a $50 off coupon she’ll only spend $50 with you next month ($100-coupon=$50). You’ve cannibalized your sales. (Suzy shouldn’t have been on the targeted list for this campaign anyway; she’s already a premium customer. We have other programs for Suzy!)

Another way this can happen is to cannibalize cross-channel. Assume that you have a segment of your customer base that always buys from your brick-and-mortar “channel”. If you send them an email promotion with a discount she may be very willing to buy online to get the savings. In this case all you’ve done is change which channel she purchased through and had to pay her the discount to do it!

If the expenses involved in selling through the online channel are far less than the discount you gave her then their may be some merit to the outcome. But if that wasn’t the intention then all you’ve done is cost yourself some profit. And what if she brings the coupon into the store and insists that the coupon be honored? Now she’s mad because she thinks you view her as a second class customer, and you’re out the coupon!

The fix for this problem is called “database marketing”. A solid database of your customers, their demographics, their purchase behaviors and personal preferences is required to keep the cannibalization problem from occurring.

This problem of taking profit out of your own pockets and unintentionaly giving it to your customers is only going to get larger. As more channels are created at the rapid pace we’ve seen in recent years the problem will only worsen. Compound that with the fact that most companies lack a mandated focus on really good customer data and you can see how even larger, well capitalized firms can quickly end up chasing their tail.

Cross-channel cannibalism is a costly, corporate problem but it’s really the chronic symptom of a systemic lack of understanding about what really good, targeted database marketing is. The good news is that you don’t have to be a Fortune 500 company to practice it. Remember, it’s not a good idea to go full-speed ahead in multiple channels unless you begin the effort with a robust database and someone who knows how to read it.

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Phillip Crum is the Chief Idea Officer of MarketingMeasure and is committed to the idea of helping small business owners do a better job of finding their next customer or client. He and his two sons also own a Sir Speedy Printing franchise and employ those additional capabilities in the overall marketing services menu of offerings. Phillip can be reached at 214-213-7445, or pcrum@MarketingMeasure.com

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