The Multichannel Matter

When direct marketers began to use the Web, a question emerged: Who’s responsible for it?

Was it a technology project? Some companies came to that mistaken conclusion and put the leadership in IT. They set up Web sites that didn’t sell very much.

Today, most firms see the Web as a marketing channel, and so they assign this responsibility to their marketing groups. Yet there are some DMers that still haven’t figured out whether online should be all or nothing. The answer is that it should be one part of a multichannel strategy.

But what does multichannel mean? Strictly speaking, there are two multichannel functions: promotion and product ordering. Promotion often is done through direct response ads that include a phone number, a URL or an invitation to visit a retailer and redeem a coupon. Other options are Web sites, e-mail, direct mail, catalogs and outbound telemarketing. Multichannel product ordering is done through phone and Web interactions and retail visits. Each medium plays its role.

The Web is different, though. Except for travel, books, pornography and music, it’s not really a separate selling channel. Web sites without a catalog, TV, radio or print promotion to drive people to visit them seldom sell much. The Web tends to be more of an ordering outlet for customers who are stimulated to buy through another medium.

The good news is that those who respond to multichannel marketing are different from single-channel customers: They tend to be more affluent, and they buy more. Indeed, customers who purchase via at least two channels spend more per year than single-channel shoppers.

Sears Canada found that Canadians who bought both at retail and through the catalog spent almost twice as much as those who made purchases on only one of those two channels. Multichannel customers buy higher priced options, are less price sensitive, and are cheaper to serve. This can be learned by any company with a customer marketing database that consolidates purchases from all channels.

Given the obvious cost benefits, businesses have been trying to persuade customers to shop on the Web. But online ordering has its disadvantages. On the plus side, orders can be processed faster and at less expense. On the minus side, a good phone operator can generate more cross-sales than a Web site. To do this, the rep must have access to the customer’s purchase history on his or her computer screen, plus a suggested “next best product” that’s created dynamically by collaborative filtering software while the customer is on the phone. The same thing can be done online, but not as effectively as a live operator in most cases.

Define Goals

All that being said, how do you proceed? First, you have to define your goals. Most marketing strategies have five similar overall objectives:

1. Acquire new customers both directly and through referrals.

2. Boost the retention rate — the number of customers that return next week, next month or next year.

3. Increase the number of visits, orders or sales per week, month or year.

4. Up the average order size. Get people to buy more or pricier items, or through cross-selling to buy additional new products.

5. Reduce the administrative costs of handling customer purchases. The Web usually is much cheaper than either the phone or mail.

To achieve these objectives and measure their effectiveness, DMers have been experimenting with a number of new techniques, such as:

• Sending e-mails in tandem with catalogs.

• Inviting customers and prospects to visit a Web site to print out a coupon they can take to a retail outlet.

• Paying retail customers for permission to use their e-mail address. LensCrafters offers $10 each.

• Viral marketing, in which customers are given an easy way to recommend a product to a friend. (And be rewarded for it.)

• Capturing customers’ phone numbers on a point-of-sale system, reverse-appending names and addresses, and sending them postcards with an offer to return. The Sports Authority got an 11% response rate with this technique.

• Putting a Web site’s URL on a product, inviting purchasers to come to the site to register, get more information and buy more.

• Providing lower prices for online purchases than for transactions done through other channels. Airlines do this routinely.

How can a marketer measure the effectiveness of all this?

Where possible, DMers should set aside control groups of identical customers who don’t get the multichannel offers to gauge the lift from the promotion. Another option is to create a spreadsheet that relates the promo to each of the five basic marketing objectives noted earlier. Some examples can be found in the chart on this page.

Going Forward

So what should you do? Find out what percentage of your customers are multichannel. Quantify their annual purchases compared with your single-channel buyers. They will be significantly higher.

Then, develop strategies to shift more of your single-channel customers to multichannel using the analysis you have on hand to support the programs. The result? Increased retention, sales and profits at little expense.

Arthur Middleton Hughes is a vice president and solutions architect at KnowledgeBase Marketing. He is the author of “The Customer Loyalty Solution” (McGraw-Hill).