You can’t achieve the right business outcomes without the right measurement
At Nordstrom, our marketing and analytics teams were organized by search, display, social, and email. Plus, we looked at each merchant within our brand portfolios separately: Nordstrom Rack versus Nordstrom.com versus brick-and-mortar stores. We had siloes of channels and siloes of merchant activity. As a result, we were miscalculating our value back to the business.
What did we do? We restructured our internal teams so that we were organized around our customer profiles. At the highest level, our business goals are to attract new customers and nurture existing customers, regardless of channel or merchant. Rather than individual channel teams, now we have two marketing teams — a customer acquisition team and a customer retention team.
Acquisition is about profitably investing for the future. For us, that means having a curated point of view on what’s next and how we can reach a new generation of customers. Retention is all about growing the lifetime value of current customers by increasing trips and spend. For example, we wanted to ensure our Nordstrom Rack customers had visibility to the sales promotions of our full-price channels. So during our anniversary sale, we encouraged our off-price Rack shoppers to consider our full-price product offerings.
Let measurement signals lead the way
The state of marketing today is too complex to rely on one, single measurement solution. That’s why the path to a better measurement strategy involves multiple solutions and customer signals. This gives you a holistic view of the customer and helps you better understand the effect of incremental marketing.
We fell into a trap many brands do by measuring marketing effectiveness solely through last-click return on ad spend. That skews investment to existing high-spend customers and sometimes even our own employees.
I’ll give you one example: In the past, when a customer made an order via last-click measurement, we would give all the credit to one particular affiliate publisher. But when we built our own multi-touch attribution (MTA) solution, we learned that some of that credit went to other affiliates, some of it went to other marketing channels, and some of that credit was attributed to our estimated baseline propensity of the customer to shop with us anyway, independent of marketing. Essentially, there was only a tiny slice of credit that was actually deemed incremental.
This was a huge a-ha moment for us. These days, we use four key signals to measure marketing effectiveness: a media mix model, MTA, last-click, and experimentation.
But these signals don’t provide the prescriptive answer of how exactly to move forward. This is where the expertise of your team comes in. They can use their judgement to determine what actions to take to drive growth based on the business outcomes you’ve all agreed to pursue. Judgment becomes even more important when we consider the shifting landscape around things such as cookies and their impact on our ability to collect a complete picture of marketing activity.
With potentially tens of millions of customers and prospective customers, it’s important to know what really drives customer lifetime value beyond the obvious trips and spend. Perhaps it’s introducing the customer to a new category or new brand or encouraging the customer to try a Buy Online-Pickup in Store feature, engage with a stylist, enroll in a loyalty club (like our Nordy Club), or even download your app. Being able to assess the value of each of these potential actions will help drive not just your marketing campaigns but also how much you’re willing to pay for any one of those actions.
By reorganizing around the customer, we have moved from a mindset of last-click return on ad spend to one of incremental marketing. As a result, we’ve bent the curve on our marketing model. Expenses are now in line with sales, efficiency has increased, and our rate of acquisition has gone up.