May 1, 2006 /
Jack Schmid, Founder

Jack Schmid, Founder

Multichannel success is all about breaking down barriers between channels and building cooperation. Every company that strives for multichannel success is trying to change from being company-centric or channel-centric to being customer-centric.

In a channel-centric company, one channel typically dominates the others. In this business model, the company is more important than the customer; everything revolves around improving sales and making more money for the company. Retailers think first and foremost of their stores; other channels are an afterthought. Pure-play catalog or Internet companies concentrate only on their method of selling.

A customer-centric business is totally oriented toward the customer. Customers decide when, where, and how they wish to shop with the company. From the customer’s perspective:

  • The customers control the relationship.
  • Customer service is seamless across all channels.
  • Customers see a single face/identity/voice/brand from the company, regardless of channel.
  • Customers have the feeling that the company cares about them and works for their loyalty.
  • Most if not all merchandise is available from all selling channels.

COOPERATION ACROSS CHANNELS

How do multichannel merchants achieve cooperation among selling channels? What techniques can help break down the traditional silos in which we all tend to operate? Answering these questions is vital to tranforming retailers with a “store only” mentality and even direct marketers with two competing channels (catalog and Internet) into successful, customer-centric, multichannel merchants.

Online retailing association Shop.org’s research study of a year or two ago provided the best motivation for cooperative efforts. A brief summary of the findings:

  • Multichannel shoppers are more valuable than customers who shop via a single sales channel. They have a 12% greater buying frequency and a 32% higher annual spending history than customers who shop at stores only.
  • Trichannel (retail, catalog, Internet) shoppers are more loyal than otherwise similar customers who purchase from only one or two channels. The study found that customers who purchased from all three channels had a 73% likelihood to make similar purchases from that retailer.

In fact, Plano, TX-based general merchant J.C. Penney, in figures presented publicly by the company in 2004, revealed average annual dollars spent by channel, by customer. Customers who shopped in two channels spent an average of more than 125% more than those shopped only one channel, regardless of which channel it was. Those customers who shopped in all three channels spent well over 300% more than single-channel buyers.

On the downside, findings by San Francisco-based firm Modalis Research Technologies indicate that multichannel buyers expect the company to know everything about their transaction history across all channels. They don’t want to be asked the “same questions” when shopping different channels, and — here’s the kicker — they promise to stop doing business with those multichannel companies that exhibit poor database and customer service tendencies.

The motivation is quite clear: Break down the silos and build cooperation between selling channels, and enjoy greater success. Like most business concepts, that’s easier said than done, but there are a few things to keep in mind as you develop and execute a plan. Here are seven strategies to help you break down the silo barriers.

  1. Provide (or demand) support from the topThe company’s top management must support and drive the organization’s multichannel strategy. Left to their own devices, every silo-oriented selling channel will try to protect its turf, its sales, its bonuses…its empire. A successful multichannel strategy is much like successful strategic planning in general: Unless members of top management become supporters and are personally involved and committed, the strategy will be doomed for failure or, at best, mediocrity.
  2. Reorg your org chartThe company organization must be changed to force traditional silo managers to cooperate. It makes little sense to have multiple functions in a company being involved in customer communication, merchandising, creative, or brand execution. The company’s structure can be streamlined so that every part of the organization is working toward the same goal: multichannel success. Retailers are probably the most skeptical culprits. They constantly will drag their feet, claiming, “Those catalog and Internet people are stealing my customers.” Organization planning — especially for an existing retail-based company — is anything but easy. Marketing, fulfillment and overhead costs have to be allocated among channels. One group, not two or three, has to develop a master customer contact plan that works for all channels.
  3. Make it worth their whileWhat better way to motivate people to cooperate in making multichannel selling a success than to offer them financial incentives should the multichannel strategy work. The “what’s in it for me?” syndrome is alive and well. If you can make a situation a win-win, you’ll find that employees are more willing to pitch in to make it happen.
  4. Communicate with your customersCustomers love to be asked for suggestions as to how to serve them better. The better the customers, the more likely they are to cooperate with research efforts involving ways to improve the multichannel selling experience. You can conduct research using formal phone surveys, the mail, Internet, or even informal questions to customers when placing orders. People are flattered to be asked, “How are we doing?” You will be surprised at the useful suggestions you will receive.
  5. Take care of your databaseThe greater the number of selling channels, the more important it is to communicate with customers from a common, unified perspective. A recent study from New York-based digital advertising firm DoubleClick on multichannel best practices has loads to say about the importance of an integrated database. Specifically it concludes:
    • Retailers with integrated database systems find they are able to move into multichannel selling quite easily.
    • The customer database segmentation must drive contact strategy. DoubleClick concluded that RFMP (recency, frequency, monetary value, and product category) is still most effective segmentation technique.
    • Capturing customer transaction data from every selling channel is critical to success.
    • Tracking source codes and developing matchback analytical skills will heighten channel measurement.
  6. Promote cross-channel selling at every opportunityThe best way to promote the multichannel experience is to let customers know that they can come to your stores, visit the Internet, or shop from your catalog. Every customer contact, be it a catalog mailing, an e-mail, a letter, a service call, store signage, your Website, or a package shipment, should promote the alternative ways for customers to shop. This is a great way to show the customer how well rounded and comprehensive your company is and how easy you make the shopping experience for them.
  7. Portray a consistent brand identityIt is amazing to me how different the communications image is for many companies from store to catalog to Internet. The lack of brand consistency is troubling and confusing to customers. All the design elements — layouts, use of color, typefaces, quality of photography, copy voice or “persona” — must look as if they are coming from the same company, not two to three companies. You will lose customers fast with inattention to branding detail.

It’s not easy to get out of the silo mentality, as most companies have a tendency to remain hunkered down as they continue to do the same things year after year. But there is a significant advantage to effective multichannel cooperation. And as you can imagine, the shift toward multichannel marketing isn’t going away; it’s going to continue to be one of the most important trends of the decade.

As seen on Multichannel Merchant

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