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Multichannel Customer Management: The Benefits and Challenges

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Abstract

This paper defines multichannel customer management and investigates the opportunities and problems created by multichannel customer management. It explains why multichannel customer management has become an issue for serious discussion. Its aim is to help companies determine their strategies and tactics in this area. It does not provide a complete recipe for multichannel management, but rather explores the main decisions companies need to take as they add customer management channels. It identifies the importance of understanding customer needs and defining the experience customes wants from each channel and overall. It probes issues related to technology, organisation, measurement and economics. A checklist of questions to help companies examining this area is provided at the end of the paper.Journal of Database Marketing (2002) 10, 39-52; doi:10.1057/palgrave.jdm.3240093
per channel. Things have, however,
changed. Many companies are in a
transition in channel management,
typically covering the following:
— they are moving away from channels
dedicated to restricted tasks and not
communicating with each other, but
INTRODUCTION CHANGING
TIMES, CHANGING CHANNELS
Itallusedtobesosimple—separate
channel managers, separate segments
targeted by separate channels, products
aligned by channel, customers asked to
deal with specific channels, measures of
effectiveness purely on business transacted
Henry Stewart Publications 1350-2328 (2002) Vol. 10, 1, 39–52 Journal of Database Marketing 39
Multichannel customer
management: The benefits
and challenges
Received: 27th June, 2002
Merlin Stone
is IBM Professor of Relationship Marketing at Bristol Business School, Business Research Leader with IBMs business
Innovation Services, and a director of QCi Ltd, Swallow Information Systems Ltd, The Database Group Ltd and ViewsCast
Ltd. His consulting experience covers many sectors. He is the author of many articles and over 20 books on marketing and
customer service, ‘Up close & personal CRM @ work’, Customer relationship marketing’, ‘Sucessful customer relationship
marketing’, ‘CRM in financial services’ and ‘The management scorecard’. He is a founder member of the Institute of Direct
Marketing, a Fellow of the Chartered Institute of Marketing and on the editorial advisory boards of many journals. He has a
first class honours degree and doctorate in economics.
Matt Hobbs
is a principal consultant of the IBM Multi Channel Services Practice. With over a decade of experience in designing and
implementing multichannel programmes for a variety of blue-chip clients he has contributed to many articles, books, seminars
and conferences on the topic of multichannel customer management. Before joining IBM he was marketing director of the
marketing strategy boutique Magenta Partnership, marketing manager of Demon Internet and managing director of his own
consultancy. Matt is an active member of The Marketing Society, The Chartered Institute of Marketing and sits on the
Marketing Council’s e-commerce advisory board.
Mahnaz Khaleeli
is a managing consultant in the IBM Global Services’ Insurance team. She has worked on engagements in strategy,
knowledge management, e-business and business processes. Before joining IBM, she completed an MBA at Imperial College,
University of London. Before this, she worked for five years at Lloyd’s of London, where she led a variety of projects
reviewing the operational and regulatory effectiveness of Lloyd’s entities. While working for Lloyd’s Mahnaz undertook the
Chartered Institute of Marketing and Chartered Insurance Institute professional exams.
Abstract This paper defines multichannel customer management and investigates the
opportunities and problems created by multichannel customer management. It explains
why multichannel customer management has become an issue for serious discussion.
Its aim is to help companies determine their strategies and tactics in this area. It does
not provide a complete recipe for multichannel management, but rather explores the
main decisions companies need to take as they add customer management channels. It
identifies the importance of understanding customer needs and defining the experience
customes wants from each channel and overall. It probes issues related to technology,
organisation, measurement and economics. A checklist of questions to help companies
examining this area is provided at the end of the paper.
Professor Merlin Stone
Executive Consultant,
Finance Sector, Business
Innovation Services, IBM
United Kingdom Ltd, 76
Upper Ground, South Bank,
Mailpoint GSE 1, London
SE1 9PZ, UK.
Tel: 44 (0)20 7202 3000;
Fax: 44 (0)20 7202 5887;
e-mail:
merlin stone@uk.ibm.com
this area is provided at the end of this
paper.
DEFINITION OF MULTICHANNEL
CUSTOMER MANAGEMENT
In this paper, a broad denition of the
term multichannel customer
management is used, as follows:
multichannel customer management is
the use of more than one channel or
medium to manage customers in a
way that is consistent and coordinated
across all the channels or media used.
Note that the denition does not say
thesameway, as different channels may
be best used for different tasks. For
example, in a complex, technical,
business-to-business environment, a sales
person may be best for explaining the
product, meeting objections and dealing
with queries, and setting up initial
contacts, while the Web or call centre
might be used for reordering or checking
progress with delivery. Also, it may be
that channels are used in a differentiated
manner, eg if a person wants to buy
tickets for last-minute cancellations by
other customers (anything from ights to
equipment orders), they are referred to
an auction website as other channels
cannot support this kind of interaction
cost-effectively.
Note too that for the purposes of
this paper both distribution channels
(through which products or services
reach customers from suppliers,
including transfer of title) and
communication channels (through
which customers and suppliers
communicate with each other before,
during and after distribution channels
do their work), are included.
A multichannel strategy is one that
provides numerous customer
touch-points the points at which
are not certain how far to move
towards channels which all work with
the same data and to the same
objectives
they have seen some of the
disadvantages of having different and
possibly incompatible technology
platforms for each channel, but are
not certain of the benets of moving
to a single platform
they have been through the process
of setting up dot.coms as separate
web channels
separate web channels often had their
own objectives, management, staff and
systems, usually experienced escalating
costs, provided a customer experience
which was very different from that of
other channels, and in some cases
created brand damage and increased
customer churn.
Companies are moving towards the
world of multichannel integration. It is
the purpose of this paper to investigate
the meaning of multichannel customer
management, and its benets and
challenges. For example, Forrester reports
that 63 per cent of retailers and travel
suppliers expect to use three or more
channels by 2003.
1
Furthermore, 37 per
cent of European consumers are
currently using the Internet channel to
research products, with 85 per cent of
this group buying ofine the product
they identied online.
2
The purpose of this paper is to
dene multichannel customer
management and to investigate the
opportunities and problems created by
multichannel customer management,
and to help companies determine their
strategies and tactics in this area. It
does not provide a complete recipe for
multichannel management, as the
authors do not believe this can be
done in just one paper. A checklist of
questions to help companies examining
40 Journal of Database Marketing Vol. 10, 1, 3952 Henry Stewart Publications 1350-2328 (2002)
Stone, Hobbs and Khaleeli
suggested that multichannel customer
management will yield the most
benets are those for whom achieving
it is most problematic. They have the
largest customer bases, the most
complex lines and the longest history
of systems development, with many
business-critical systems that support the
process of customer management being
quite old. This applies, for example, to
many companies in nancial services,
logistics and manufacturing companies.
THE BENEFITS
The benets of multichannel customer
management, however, are numerous.
These include benets that work through
customers, ones that work for customers
and ones that work through efciency, as
follows.
The benets that work through
customers are:
the identication and capture of
opportunities for increasing value per
customer
increased convenience and an
improved experience, reducing
customer churn rates and increasing
their motivation to buy more from
the supplier
the ability to leverage an established
brand creating positive impacts on
brand perception and mitigating the
risk of brand damage, increasing the
incentive for customers to stay and
buy more.
The efciency benets are:
increased efciency through the
sharing of processes, technology and
information
increased organisational exibility
increased efciency in dealing with
business partners, so they can reduce
their costs
products and services are purchased or
serviced across several distribution
channels, such as:
direct channels, eg telephone,
Internet, mobile telephone (voice,
SMS and eventually WAP) and
interactive television (iTV)
counter and kiosk service in branch
networks or retail outlets
partnerships and alliances
sales force
service force.
In some cases, these may be supported
by broadcast media, in which the
customer is not necessarily identied eg
television, radio, press and some Web
applications.
WHY IS MULTICHANNEL
CUSTOMER MANAGEMENT
IMPORTANT NOW?
There are two main reasons for the
importance of multichannel customer
management:
developments in new channel
technology: increasing reliability and
speed of storage and
telecommunications technology,
convergence of voice, video and data
customer requirements and
expectations: some (not all) customers
expect technology and processes to be
used to manage them more
consistently across channels.
Although it is now easier to ensure
that every channel dealing directly with
a given customer has the latest data on
the state of interaction between
supplier and customer, and follows
related, connected processes, this is not
costless or without technical problems.
In particular, it should be noted that
the companies for whom it is
Henry Stewart Publications 1350-2328 (2002) Vol. 10, 1, 3952 Journal of Database Marketing 41
Multichannel customer management: The benefits and challenges
known customers across all touch-points.
3
Research to identify how far nancial
institutions have moved towards
integrating customer touch-points was
conducted by Forrester.
4
They
interviewed 50 information technology
(IT) executives at banks, brokerages and
insurance rms and found that for 52 per
cent of the interviewees, channel
integration projects were only just
commencing, and for 54 per cent less
than half of their products are integrated
across channels.
Examples of organisations which have
already gone some way towards
integrating their channels include Allstate,
Gateway and E*Trade. All these
organisations have invested hundreds of
millions of dollars in building and
integrating eld, phone and Internet sales
and service.
SEVEN FACTORS DRIVING CHANGE
Seven factors are causing companies to
focus on multichannel management, as
follows:
customer demand
channel costs
strategic competitive advantage and
differentiation
allowing customers to manage
relationships
convergence of channel roles
increased variety in customers
channel use patterns
regulatory pressure.
Customer demand
Customers desire for convenience has
partly fuelled the increasing requirement
for multichannel integration. Increased
customer expectations translate to a
demand for 24/7 high-speed access and
choice in how they interact with a
company. Customers often have strong
increased efciency in exploiting
customer data to identify customer
needs, possibly indicating new paths
for growth.
The benets for customers are:
increased choice in the way they can
interact
the ability to switch easily between
the various channels, when it suits
them and wherever they want to,
depending on their preference and the
type of interaction, whether it be the
exploration or purchase of a product
or service.
For the supplier, channel integration
helps the sharing of customer data
across channels to create a more
complete customer prole which will
help to maximise cross-selling
opportunities.
THE CHALLENGES
Multichannel integration does not come
without its challenges. Problems
experienced by companies include:
heavy investments in unconvincing
multichannel strategies and
technologies that result in a poor
return on investment (ROI)
problems in bringing together and
standardising data about customers or
resulting from interactions with them
problems unifying different systems
which may have very different data
models
difculties in reducing or abolishing
organisational boundaries.
For example, a survey of 50 retailers in
the USA revealed that 48 per cent had
learned nothing about their cross-channel
customers and the biggest problem they
faced was their inability to recognise
42 Journal of Database Marketing Vol. 10, 1, 3952 Henry Stewart Publications 1350-2328 (2002)
Stone, Hobbs and Khaleeli
multichannel management is one of the
few customer-facing differentiators that
can deliver true sustainable competitive
advantage.
Allowing customers to manage
relationships
Badly executed customer relationship
management (CRM) (as, sadly, many
CRM implementations are) can result in
the organisation trying to control
customers almost against their will
through specic channels at specictimes
in the buying cycle. Customers can end
up being made to feel like cattle being
herded. Customer satisfaction and sales
plummet. The term customer-managed
relationships (CMR) recognises the
possibility of the customer being in
control and the idea that it is the
suppliers job to nurture and service the
relationship.
Convergence of channel roles
Traditionally, channels were usually silos
with most, if not all, of the functions
required in the customer-buying cycle
being fullled through one channel.
Now in many companies, several
channels are used during each
customer-buying cycle and need to be
designed, maintained and measured
appropriately.
Increased variety in customers
channel use patterns
Those who synchronise their
distribution channels will preserve or
gain market share. Research has shown
that multichannel shoppers in the
nancial services and retail sectors
represent an increasingly large
proportion of the attractive buying
population. Furthermore, in the retail
banking sector, multichannel customers
preferences for using a specic channel for
particular kinds of interaction, for
example, they may use the in-store
channel to commit to a buying decision,
while using the more convenient online
channel for exploring options Forrester
research identied that 46 per cent of
online buyers research online to purchase
ofine, while 27 per cent research ofine
to buy online and 17 per cent do both.
5
The focus should not be on providing all
things in all channels but on providing the
expected level of service for the target
user group of that channel.
Channel costs
Maintaining channels (including
marketing, advertising and managing the
channels themselves) can typically
account for around 40 per cent of a
companys costs. Channels tend to be
managed and maintained in silos with
multiple infrastructures, management
teams, technology and, possibly, different
marketing strategies. The potential
sharing and reuse of people, process and
technology that can be achieved through
an integrated channel strategy can,
however, help improve an organisations
channel cost structure. Furthermore, the
mapping of high-value customer usage
and preferences can help identify channel
areas of over-investment and channels
which are not providing their optimum
ROI and consequently identify channels
that require some form of disinvestment
and asset reallocation.
Strategic competitive advantage and
differentiation
Products can be copied within days
(H&M, the fashion retailer, can copy a
design from the catwalk and get it on
the High Street within 72 hours).
Pricing can be undercut within
minutes. Apart from branding,
Henry Stewart Publications 1350-2328 (2002) Vol. 10, 1, 3952 Journal of Database Marketing 43
Multichannel customer management: The benets and challenges
while others are used to purchase or
service.
If a company decides to adopt a
multichannel strategy, it must consider
whether all its channels should offer the
same range of products and services, and
whether all channels should support all
functionality areas. If necessary, one
channel can perform all three functions,
online retailers or bricks and mortar retail
outlets for example.
It is essential to dene the role of the
various channels and how they interact.
This helps identify and clarify the target
customer usage and preferences. Gateway
Computers is a good example of a
company that dened distinct channel
roles and tailored each to the needs of
their targeted segments to meet customer
preferences and optimise their
multichannel revenues.
8
CUSTOMER EXPERIENCE MUST BE
THE START POINT
Customer experience should be the
starting point for dening required
channel functionality. Here are some
suggestions as to how to build on it.
Experiment with scenario planning
It is vital to understand customers
channel preferences and usage. Customers
not only want to buy, but may also need
information and advisory tools. So,
scenario planning can be used to
understand which channels customers
want to use for each part of the
interaction process. Customer scenario
planning is a powerful tool. It helps at all
stages, from articulating the vision,
determining processes and selecting
technology. Thus, for expensive products
customers may prefer to pre-shop online
and then visit the store to look at the
product and buy. For example, Charles
Schwab, the nancial services company,
are25to50percentmoreprotable
than those using one channel while
retail shoppers who use multichannel
purchasing spend two to four times
more than those who purchase through
a single channel.
6
These ndings are
reinforced by the Boston Consulting
Group whose research revealed that
European retailers who have an off-line
presence and manage an integrated
Internet channel enjoy a
disproportionate market-share and
on-line satised customers spend 71 per
cent more and transact 2
1
2
times more
than dissatised ones.
7
Providing the target high-value
multichannel customer segment with
increased convenience through integrated
channel management therefore not only
encourages customer lock-on and brand
loyalty, but results in improved customer
lifetime value.
Regulatory pressure
In some sectors (eg nancial services,
public sector) government has a strong
interest in the cost-effectiveness and
quality of channel use, particularly where
high channel costs lead to customers
apparently getting poor value or even to
customers being excluded or
disenfranchised.
DETERMINING CHANNEL
FUNCTIONALITY
Careful thought needs to be paid to
the use of each channel in
multichannel programmes —‘one
channel ts all is not the case
anymore. Car buyers no longer just
visit their local dealer, and television
buyers no longer just go down to their
local electrical store. Research shows
that many customers use multiple
channels throughout the buying cycle;
some channels are used to research
44 Journal of Database Marketing Vol. 10, 1, 3952 Henry Stewart Publications 1350-2328 (2002)
Stone, Hobbs and Khaleeli
can use various strategies to achieve this:
merging mailing lists to target e-mail and
catalogue promotions better; launching
cross-channel loyalty programmes to
increase customer retention; rewarding
customers for whichever channel they
complete their transaction within; and
using bricks and mortar stores to provide
local services to improve customer
convenience for online shoppers.
Examples of the latter include accepting
returns in-store from online shoppers and
offering in-store pick-up to get online
shoppers to favour them.
11
Where
companies fail to integrate services and
promotions across channels this will shift
the balance of business elsewhere as
customers expectations are not met.
Pricing
In making the transition from single
channel to multichannel, companies face
the challenge of pricing issues, ie can
they charge different prices to their
customers for the same product online
and ofine? Many believe that different
prices for the same product from the
same company are not feasible; customers
expect to be charged the same price
whether purchasing online or ofine,
whether or not it is more cost effective
for a supplier to sell online. The
argument of suppliers is that a universal
pricing strategy is not realistic, as ofine
customers must inevitably pay a premium
for the added satisfaction of the in-store
shopping experience.
12
Research has been conducted into
pricing efciency between online
branches of multichannel retailers and
their Internet pure-play counterparts, to
establish whether online pricing
efciency will weaken due to the
presence of multichannel retailers.
Research ndings in the DVD market
revealed that online branches of
multichannel DVD retailers sold at
not only provides online, phone and
in-person trading but also actionable
information and advice through their
online Learning Centre investment
courses, online Portfolio Consultation
and ofine interactions.
9
Consistency
Suppliers should plan for consistency of
their brand, customer information and
the customer experience across different
channels. Scenario planning is also useful
here. Channel synchronisation may be
used to deliver a consistent customer
experience. Consumers can become
frustrated when suppliers online channels
only sell a selection of their ofine
products or services or altogether
different products or services. Many
suppliers, however, offer either the same
or fewer product categories online as in
other channels, and 58 per cent say that
their sites offer a narrower assortment
within those categories.
10
There may,
however, be very sound commercial
reasons for this, eg delivery costs and the
risk of customers making poor choices
leading to high returns ratios. To
improve consistency in the
product/services offering, suppliers should
stage online product roll-outs, rst
focusing on depth in their core
product/services categories, then add
breadth through new complementary
products and nally, once the depth and
breadth of products online reach critical
mass, suppliers should introduce
not-so-obvious categories and services
both on and ofine. Alternatively, the on
and ofine channels should be clearly
positioned as different.
Consistency in customer service
and promotions
Services and promotions can be
integrated across channels. Companies
Henry Stewart Publications 1350-2328 (2002) Vol. 10, 1, 3952 Journal of Database Marketing 45
Multichannel customer management: The benets and challenges
application and integration servers, as
well as embedding process tools to codify
and manage business processes.
17
Technology is key to implementing an
integrated channel strategy, but channel
innovators may nd packages are not
sufciently mature to meet their needs.
18
The one application ts all approach
may not be the best strategy. An
organisation may have to use a mix of
available tools to address particular needs,
using best of breed by channel and using
efcient systems integration to work with
channels that have established systems.
Technology can hinder a channel
integration programme. No technologies
are capable of everything. It is essential
to involve the technical team early on,
and pay careful attention to the
parameters of selected technology, to
avoid costly redesign of processes. The
technology must not, however, be
allowed to totally dictate the customer
experience.
ORGANISATIONAL ISSUES
Multichannel integration requires a new
organisational model one that adapts
people, processes and technology to meet
this coordinated approach to channel
management. Redening the
organisation, and processes and
technology that support it, to meet the
multichannel challenge, requires strong
support from the chief executive and the
senior management team. They need a
clear vision of how channel integration
will generate business value for the
organisation and where the main changes
need to be in the organisation. Decisions
will need to be taken on the size of
team and skills to ensure the necessary
resources and exibility. Employees must
have the right skills to understand
increasingly sophisticated customers,
analyse customer preferences and create
value from these customer relationships,
considerably higher prices, over 14 per
cent higher, than their online only
rivals.
13
These ndings have been
corroborated by Morton, Zettelmeyer
and Risso whose study comparing prices
of cars sold in online and conventional
channels identied that, on average,
online consumers paid 2 per cent less
than ofine consumers.
14
Therefore, in
developing their channel strategy,
companies must give consideration to the
very real consumer pricing expectations
consumers expect prices to be
competitive, whichever website they
purchase from, regardless of whether the
site is a pure Internet operation or an
online channel as part of a wider
multichannel operation.
OVERCOMING TECHNOLOGY
COMPLEXITY
Technology is not the be all and end all,
butitiskey.ImplementationofIT
packages for multichannel integration
projects can not only mitigate risk but
can also enforce best practice. Forrester
asked 50 nancial services organisations
what technologies they used for channel
integration. Most said that they relied on
off-the-shelf tools from 36 different
vendors and consultants, with IBMs
technology leading with 32 per cent of
this vote.
15
An example of this is cahoot:
At cahoot, we want to put our
customers in control. Thats something
IBM does for us... When a customer
pays a bill via the website ... it happens
automatically. We donthavearmiesof
clerks behind the scenes re-keying data
in the main banking engines.
16
The aim is to implement an
integration solution that will reduce the
need to build custom interfaces and
speed up application integration and
deployment. Organisations need to
employ technologies that connect
customer-facing systems by uniting
46 Journal of Database Marketing Vol. 10, 1, 3952 Henry Stewart Publications 1350-2328 (2002)
Stone, Hobbs and Khaleeli
and the retailer benetastheygiveeach
other the opportunity to increase online
and ofine sales by providing each other
with customer referrals. Manufacturers
will close $50 billion in online sales ...
but inuence $235 billion in other sales.
The power of manufacturers online lies
in their ability to affect retailers sales,
both online and ofine. Consumers will
take what theyve learned while visiting
manufacturer sites and spend almost $90
billion online and $147 billion in
brick-and-mortar stores and catalogs.
21
MEASUREMENT
An organisation is unlikely to get it right
rst time, so it is vital to measure,
monitor and review channel integration
programmes. Financial measures are
important but they are a blunt
instrument in a multichannel world
where not all channels are used to full
or close the deal. Instead a balanced
scorecard approach is needed, in which a
mixture of relevant strategic and
operational measures are applied. This
includes customer-focused measures,
innovation and learning measures and
process measures, all of which drive the
nancial and value measures. Protrather
than sales targeting, should be used (sales
targeting focuses on promoting volume
at the expense of prots and the quality
of the customer base, while prot
targeting focuses on contribution rather
than volume and provides a basis for
prioritising multichannel offers).
Consideration should be given to how
to measure employees. For example, are
Web and call-centre staff going to
cooperate or compete if they are given
independent targets? Employees should
be measured on customer protability
(present or ideally estimated future), as
opposed to rewards being tied to a
particular channel, as this can lead to
focus on maximising returns from that
while organisations must train their
employees to develop the right skills.
Organisational processes must be
redened to overcome organisational
barriers, reduce operational costs, increase
efciency and improve the cross-channel
customersexperience.
Hugh Wilson suggests that
organisational structures can be a barrier
to multichannel integration when a
company is product or function-focused
rather than customer-focused. He also
acknowledges the need for an
organisation to consider whether to spin
out a business by establishing a separate
company to exploit a new channel.
Wilson concludes that although spin-outs
may be suitable where a single channel
strategy is appropriate to one or more
customer segments, a hybrid
organisational strategy would be more
appropriate, based on a multichannel
integration strategy to meet the different
channel needs of the companystarget
customer groups.
19
While developing a new organisational
model for multichannel integration,
organisations should consider
cross-channel opportunities generated
through channel cooperation:
Retailermanufacturer relationships based
on shared data, technology, and
investments ... to create coordinated
efforts that leverage discrete assets to
better focus on the customer.
20
Thus,
research showed that online cooperation
of retailers with their manufacturers can
enhance sales through referrals. Fifty per
cent of retailers and manufacturers
surveyed by Forrester said that their
online sales increased by collaborating,
for some by as much as 25 per cent.
While online cooperation between
retailers and manufacturers allows
channel-hopping Internet customers a
fuller product selection, it also minimises
channel conict between retailers and
manufacturers. Both the manufacturer
Henry Stewart Publications 1350-2328 (2002) Vol. 10, 1, 3952 Journal of Database Marketing 47
Multichannel customer management: The benets and challenges
be given to the costs of integrating new
e-channels with legacy processes and
systems, new fullment processes,
origination and management of the
online catalogue and supporting text and
pictures and customer-service staff.
26
So, companies need to ensure suitable
ROI from their multichannel
investments. Scenario analysis should be
combined with testing and piloting
where possible to develop a business case
to ensure an adequate return on
investment. Ultimately, channels must be
used selectively, according to their
strengths and customer preferences. A
balance must be struck between growth,
effectiveness, cost control, centralisation
and channel autonomy.
27
RECOMMENDATIONS
The main recommendations are that
companies:
look at what they have, they might
be pleasantly surprised (rarely, if ever,
can rms start with a blank sheet of
paper so they must build, adapt and
add to what they have)
build a roadmap for change, not an
unachievable vision: search for quick
wins and prepare to be pragmatic
multichannel integration projects, by
their very nature, are enterprise-wide
andveryhardtogetright
start with rapid ROI and build:
process redesign and a channel
function review are good places to
start to deliver signicant ROI within
a short time.
Hugh Wilson suggests a ve-stage
roadmap for formulating a multichannel
strategy:
1 analyse the industry structure; use
market mapping and intermediation
analysis
channel. A bricks and mortar employee
is unlikely to divert customers to a
low-cost Web channel if this reduces his
or her bonus.
22
Consequently, single
channel metrics should be replaced with
cross-channel metrics. This may include
crediting one channel for purchases
through another channel or rewarding
different customer service representatives
for their shared involvement in resolving
a customer inquiry.
23
THE ECONOMICS OF
MULTICHANNEL INTEGRATION
Managing channels separately may not
only damage customer relationships but
also increase costs unnecessarily. The cost
of running separate order-tracking and
customer service operations, operating
multiple warehouses and fullment
systems, employing buyers and
merchandisers with overlapping skills and
building multiple brands is high.
24
Given
the potential of signicant operational
cost savings, the economic argument for
consolidating infrastructures, management
functions and technology through
multichannel integration is strong.
Efciency savings will directly affect the
bottom line. Integration can improve
service levels but also lower cost to
serve. Such cost savings may, however,
require high initial investment: Forrester
research into 50 nancial services
organisations, to determine the cost of
channel synchronisation, revealed that 58
per cent of these rms believed that
implementation of such an integration
strategywouldcostatleastUS$1mper
year with 16 per cent spending more
than US$20m per year.
25
So, failure to
plan properly may result in no cost
benetormay,atworst,actually
signicantly increase costs. For example,
a move to self-service over the Internet
may increase call-centre load and reduce
prots temporarily. Consideration must
48 Journal of Database Marketing Vol. 10, 1, 3952 Henry Stewart Publications 1350-2328 (2002)
Stone, Hobbs and Khaleeli
location. Another advantage is the ability
to build and maintain a data-rich,
360-degree prole of each customer such
that even if a customer leaves and then
returns the company is able to view and
maintain a complete record of the
relationship.
30
Although many channel integration
projects are in their infancy, with an
expectation that such strategies are a
long-term play, failure to act swiftly may
mean that companies are left behind by
the competition and exposed to the risks
of inconsistent customer expectations and
channel disconnect, which in turn may
affect revenue and efciency. Consumers
are becoming ever more multichannel in
behaviour using specic channels at
various stages of the interaction process.
Consequently, companies must
understand their customers expectations,
in particular their customers interaction
preferences and patterns of behaviour
across different channels, particularly for
those segments which are critical for the
companys future. They must improve
channel performance for these segments
rather than trying to be all things to all
customers.
Companies will nd it hard to
implement a fully synchronised
multichannel strategy. They therefore
need to undertake staged roll-outs of
their multichannel strategy, while
ensuring that any multichannel
investments are prioritised and backed by
a sound business case. Ultimately, the
organisation needs to balance the goals of
growth and reduced costs, and
centralisation and channel autonomy.
CHECKLIST
Strategy
what is meant by integrated channels?
what would they look like from the
2dene channel chains to describe how
channels combine to serve customers
through their lifetime; consider both
current and potential combinations and
t with customer lifecycle
3 compare value proposition; use the
channel curve to test whether a
channel innovation will win market
acceptance
4 set channel strategies; by considering
strategic options and the channel mix
using the classic channel choice
portfolio matrices for prioritising
5 determine channel tactics; consider
organisational structure, HR and
reward systems, and project
management and IT.
28
Alternatively, Flint and Spieler detail a
four-stage process which should be
followed to create a successful
multichannel enterprise:
1 create a customised multichannel
strategy
2 determine the relative positioning and
priority for the channels
3 organise for multichannel operation
reconcile the need for central control
over branding and service standards
with the need for local autonomy in
managing individual channels
4 adopt best practices for integrating the
new with the old.
29
A starting point could be to transform
yesterdays cost-intensive call centre into
todays multichannel Customer
Interaction Centre (CIC). The CIC is
the rst line of communication with
customers and its hublike quality means
that all customer touch-points and
departments connect to it. The solution
can include call recording on a sampling
basis, searchable tagging to route
intelligence about customers to where it
is needed most, and the ability to
monitor any call at any time from any
Henry Stewart Publications 1350-2328 (2002) Vol. 10, 1, 3952 Journal of Database Marketing 49
Multichannel customer management: The benets and challenges
do the companys existing products
work across multiple channels? Could
they?
Understanding customer behaviour
and needs
who are the rms best customers?
Firms should use strong data mining
tools to identify the 20 per cent of
customers who use those
multitouch-points and generate high
value for the company and whose
preferences will satisfy 80 per cent of
the customer base
what channels do each of the rms
customer segments use? Is there a
clear pattern? Why do they do it?
does the rm fully understand its
customers needs and preferences?
how condent is the rm of its
segmentation?
does the rmssegmentationreect
failure to achieve multichannel
integration?
does the company precisely
understand its target multichannel
customers preferences?
Channel costs
does the rm know how much each
of its channels costs overall and for
different kinds of transaction, for
different type of customer?
how cost effective are the rms
channels? Do they meet regulatory
requirements in terms of cost
effectiveness and quality?
is the rm using its channels
economically?
Implementation
how can customer information be
point of view of supplier, partner and
customer?
how should how the company
manages its channels vary between
transactional products (where
customers are in regular contact)
and life-cycle products (where
customers might make a decision
infrequently)? What about the
middle ground?
what could be the benets and costs
of integration for supplier, partner
and customer? What are the risks of
not doing it well?
where is the business on the
evolutionary path? Who is doing it
well in the industry and what results
are they getting? Are they focusing
their attention on particular
combinations of channels, particular
products, particular market segments?
what channels does the business use?
Are some more important than
others, and if so, why? Are any
strategically more important than
others?
how many of the rms channels are
integrated, partially or completely, and
across different episodes in the
customer buying cycle?
does the rm have a multichannel
strategy? Has it tried to implement
one before? How far did it get? If it
failed, why was it?
if a competitor introduced a brilliant
new product, would they need to use
an integrated channel approach, or
would they use a variety of business
partners to achieve communication
and distribution?
has the rm experimented with
x-channel scenarios?
is the rm using channel functions
fully?
do the rmsexistingproductswork
across multiple channels?
has the rm experimented with
x-channel scenarios?
50 Journal of Database Marketing Vol. 10, 1, 3952 Henry Stewart Publications 1350-2328 (2002)
Stone, Hobbs and Khaleeli
Business case and roadmap
what is the case for change?
does the rm have a business case for
its multichannel programme?
what evidence does the rm possess
to prove its business case, and what
evidence does it need?
what is the rms multichannel vision?
what is the rms roadmap?
what are the risks?
how long will it take?
can it be phased?
how is the rm going to achieve
quick wins?
if multichannel turns out to be
infeasible or too expensive for all or
part of the business, what are the
options back to product or
production-centricity, nding
distribution partners?
References
1 Forrester Report (2001) Implementing customer
heuristics, April.
2 Boston Consulting Group (2001) The
multichannel consumer,July.
3 Forrester Report (2001) Tu rn i n g We b t r a fcinto
store sales, August.
4 Yates, S., Shevlin, R., Watson, T. and Sweeney, J.
(2001) Integrating nancial channels, Forrester
Report, August.
5 Forrester Data Overview (2001) Retail & media
data overview.
6 Yulinsky, C. (2002) Multichannel marketing
Making ‘‘bricks and clicks’’ stick,McKinsey
Marketing Practice, August.
7 Boston Consulting Group (2001) op. cit.
8 Yulinsky (2002) op. cit.
9 Ibid.
10Williams,S.,Delhagen,K.,Levin,K.andArdito,
C. L. (1999) Synchronize channels or bust,
Forrester Report, April.
11 Ibid.
12 Ibid.
13 Tang, F.-F. and Xing, X. (2001) Will the growth
of multichannel retailing diminish the pricing
efciency of the web?, Journal of Retailing,May.
14Morton,F.S.,Zettelmeyer,F.andRisso,J.S.
(2000) Internet car retailing,mimeo,Yale
University, New Haven, CT.
15 Yates et al. (2001) op. cit.
16 Tim Sawyer, Director of Business Development
and Marketing, cahoot in IBM multichannel
better used to improve the
cross-channel customer experience?
what is the relative importance in
achieving channel integration of
technology versus people and
processes?
how important is data integration, and
is it possible?
is the rm optimally organised for
multichannel operation?
People and organisation
are the rms staff paid on
performance only in the channel they
work in (multichannel unfriendly
targets)?
does the rm have cross-organisational
support for cross-channel scorecards
and compensation?
how can the rm allow for exibility
that might be needed immediately
(for expected situations) or in the
future (eg mergers and acquisitions)?
is the rms organisational structure
optimising the benets of channel
cooperation?
Measurement
what would a balanced multichannel
scorecard look like in the rms
organisation? How would it work?
how should customer-facing staff
work with it? What about managers
with accountability for different
products or channels? How do the
rms processes support use of such a
scorecard?
how is the rm measuring
multichannel effectiveness?
how accurate is the rms
multichannel performance data
analysis?
do the rms channel measures
support the corporate strategy?
Henry Stewart Publications 1350-2328 (2002) Vol. 10, 1, 3952 Journal of Database Marketing 51
Multichannel customer management: The benets and challenges
(2001) Cross-channel scenario design, Forrester
Report, September.
24 Flint, D. and Spieler, G. (2001) Multichannel
retailing: Bringing the new into the old,Gartner,
5th July.
25 Yates et al (2001) op. cit.
26 Flint, D. (2001) Questioning your multichannel
strategy,Gartner,28thJune.
27 Flint and Spieler (2001) op. cit.
28 Wilson (2002) op. cit.
29 Flint and Spieler (2001) op. cit.
30 Dougherty, L. and Peck, V. (2002) The customer
interaction center: Strategies for driving prots,
Genesys, Peppers & Rogers Group.
challenge The drive towards channel
integration.
17 Yates et al. (2001) op. cit.
18 Wilson, H. (2002) Multichannel integration in a
digital world: A strategic approach,Craneld
School of Management.
19 Ibid.
20 Forrester Brief (2000) Retail ebusiness networks
emerge, 7th September.
21Zrike,S.K.,Allen,L.,Hamel,K.,Sommer,J.
and Flemming, G. (2001) Channel cooperation
pays off, Forrester Report, May.
22 Wilson (2002) op. cit.
23 Sonderegger, P., Delhagen, K. and Dorsey, M.
52 Journal of Database Marketing Vol. 10, 1, 3952 Henry Stewart Publications 1350-2328 (2002)
Stone, Hobbs and Khaleeli
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We investigate the effect of Internet car referral services on dealer pricing of automobiles in California. Customers of an online service pay on average 2% less for their car ($450 for the average car). 25% of the savings come from purchasing at low-price dealerships affiliated with the online service. The remaining 75% stem from information provision by the online service, bargaining by the service on behalf of consumers, and cost efficiencies. A consumer receiving the mean online price does better than 65% of offline consumers, conditional on the car being purchased. Copyright 2001 by Blackwell Publishing Ltd
Integrating financial channels', Forrester Report
  • S Yates
  • R Shevlin
  • T Watson
  • J Sweeney
Yates, S., Shevlin, R., Watson, T. and Sweeney, J. (2001) 'Integrating financial channels', Forrester Report, August.
Retail & media data overview
  • Forrester Data Overview
Forrester Data Overview (2001) 'Retail & media data overview'.
Multichannel marketing -Making ''bricks and clicks'' stick', McKinsey Marketing Practice
  • C Yulinsky
Yulinsky, C. (2002) 'Multichannel marketing -Making ''bricks and clicks'' stick', McKinsey Marketing Practice, August.
Synchronize channels or bust
  • S Williams
  • K Delhagen
  • K Levin
  • C L Ardito
Williams, S., Delhagen, K., Levin, K. and Ardito, C. L. (1999) 'Synchronize channels or bust', Forrester Report, April.
Director of Business Development and Marketing, cahoot in 'IBM multichannelCross-channel scenario design', Forrester Report
  • Tim Sawyer
Tim Sawyer, Director of Business Development and Marketing, cahoot in 'IBM multichannel (2001) 'Cross-channel scenario design', Forrester Report, September.
Multichannel retailing: Bringing the new into the old', Gartner
  • D Flint
  • G Spieler
Flint, D. and Spieler, G. (2001) 'Multichannel retailing: Bringing the new into the old', Gartner, 5th July.
Questioning your multichannel strategy
  • D Flint
Flint, D. (2001) 'Questioning your multichannel strategy', Gartner, 28th June.
The customer interaction center: Strategies for driving profits', Genesys, Peppers & Rogers Group. challenge -The drive towards channel integration
  • L Dougherty
  • V Peck
Dougherty, L. and Peck, V. (2002) 'The customer interaction center: Strategies for driving profits', Genesys, Peppers & Rogers Group. challenge -The drive towards channel integration'.