The Multi-Buyer Effect Defies Conventional Wisdom

Oct 13, 2008 10:00 PM  By

In an article last month, I argued that it is a waste of time and money to encourage single-channel customers to purchase from additional channels, in order to convert them to multichannel status.

This, of course, is contrary to conventional wisdom. But the conventional wisdom is flawed because of “the multi-buyer effect.” Multichannel customers are, by definition, multi-buyers.

The same is not true of single-channel customers. It is this multi-buyer status that is responsible for the superior performance of multichannel customers, not the diverse channel preferences they have displayed when making their purchases.

We did an after-the-fact analysis for a client that operates through both the direct and retail channels. The goal was to “tease out of the data” the effects of multichannel behavior above and beyond the standard multi-buyer effect.

Customers with two purchases over the previous 24 months were broken into two groups: Those who had bought both times through the direct channel, and those with one direct and one retail purchase. Then, the performance of both groups over the subsequent twelve months was compared.

Although not a definitive “looking forward” test, we found no compelling evidence of multichannel superiority. The two groups displayed different patterns of channel usage over the subsequent twelve months. The multichannel customers ordered a bit less through direct, and a bit more through retail. But aggregate performance across both channels was pretty much the same.

In short, it did not appear that customers who had self-selected to purchase from multiple channels were superior to those who had self-selected to purchase from a single channel. Therefore, why would we think that, by coercing single-channel customers to order from a second channel, we would somehow turn them into better customers?

Based on these analytical results, the decision was made to not spend time and money attempting to convert single-channel customers to multichannel. Instead, efforts were redirected to giving customers ample reason to make additional purchases, regardless of channel, making it as easy as possible to do so by improving the accessibility and efficiency of each channel, and publicizing whenever possible the existence of multiple channels.

Jim Wheaton is a co-founder of Daystar Wheaton Group.