How to Move from a Single Channel Past the Multichannel Present

Nov 18, 2008 7:35 AM  By

It’s not universally understood that there is a significant benefit to having customers cross channels when purchasing from your company. Studies from many different merchants have shown that once a customer responds to, and orders from, more than one channel, that their subsequent lifetime value increases significantly.

A common value of the multichannel lift is between 50% and 100% gain in lifetime value from customers who exhibit purchase history from two channels versus customers with the same RFM profile who have only purchased from one. Three-channel buyers are even stronger.

Often a company’s structures are set up for operational convenience into departments by channel or order. Thus you will have a store management team, a phone order-taking facility, and an Internet operating department. In itself, this silo approach is not a problem and may be a good way to run operations.

But the problem comes when this type of thinking is extended to the marketing function. Because the marketing of the company involves so many activities that cross channels, the isolation of order-generating functions into marketing silos will often prevent the cross-channel behavior that is vital to brand success.

The current marketing environment richly rewards companies that allow the customer to freely choose the channel they wish whenever they are contemplating a purchase. For example, while researching a purchase on the internet, they may want to pick up the phone and talk to a product specialist, or after receiving a catalog they may want to go to the local store or the website to place their order.

Unsiloing yourself means that you are doing everything to enable this highly desirable behavior that not only gets more orders now, but binds customers more tightly to your brand because you are giving them what they want, when they want it.

When the various departments are integrated in a siloed structure, they will find ways to have the marketing in one channel enhance the results in the others.

Often the store and direct marketing efforts are not coordinated. An especially insidious form of this thinking is when the store division refuses to pay for catalogs or keyword internet marketing because we think our customers come here on their own.

Matchbacks consistently prove that direct marketing efforts within a store trade area of 10 to 30 miles drive about half the sales they are generating to the store. Wise multichannel sellers know this and allocate their marketing expenditures accordingly.

Bill Nicolai is senior partner at catalog consultancy Lenser.