Direct mail to prospects and email to current customers? Modeling and field-testing multichannel marketing

Multichannel retailers need to understand how to allocate marketing budgets to customer segments and online and offline sales channels. We propose an integrated methodological approach to assess how email and direct mail effectiveness vary by channel and customer value segment. We apply this approach to an international beauty retailer in six countries and to an apparel retailer in the United States. We estimate multi-equation hierarchical linear models and find that sales responsiveness to email and direct mail varies by customer value segment. Specifically, direct mail drives customer acquisition in the offline channel, while email drives sales for both online and offline channels for current customer segments. A randomized field experiment with the beauty retailer provides causal support for the findings. The proposed reallocation of marketing resources would yield a revenue lift of 13.5% for the beauty retailer and 9.3% for the apparel retailer, compared with the 6.5% actual increase in the field experiment.