Challenges of Multichannel Retailers

What you'll learn to do: Recognize the challenges faced by multichannel retailers and how retailers must adapt

Multi-channel retailers work to engage shoppers at the point of purchase in a variety of channels, in order to be present where and when these potential customers are ready to buy. The complexity of doing this effectively continues to increase as outlets, especially those online, multiply: branded websites, e-commerce sites, apps, social media and marketplaces. Thus, a multi-channel marketing strategy requires organizational discipline and infrastructure to ensure that the customer experience is consistent across channels.

Multichannel Factors to Consider

As you’ve read, organizational discipline and infrastructure is critical to managing a multi-channel marketing strategy. Specifically, firms need to ensure that consumers, regardless of channels, receive consistency and service during their shopping experience and beyond. Common areas where this can go awry are pricing, promotion, analytics, and technology.

It begins with the customer journey. That is, the specific path to purchase taken by a shopper as they consider, research and ultimately make a purchase. This path is rarely a straight-line. More likely is that it includes multiple iterations, activities, technology and channels. It might be useful to think about a shopping experience to add context to the customer journey.

Let’s plan a trip to Disneyworld in Orlando, FL. We need to consider flights. Where should we look for the best options? Should we go directly to the airline? Delta.com? What about an aggregator like orbitz.com or expedia.com? Would it make sense to search for travel packages? Maybe we should look at Disney’s Facebook page to see if there are special offers or programs being promoted. How would the search be different for hotels? Would we search marriott.com or hilton.com? What about Disney properties? Or, is our best option an aggregator? The same ones or should we include hotels.com? Should we check Google to find out how far it is from the parks? Maybe we should consider on-line reviews also. There are a lot of blogs to read, if we want. Do we know anyone who has visited recently? Let’s e-mail them to get their recommendations. Think about the questions that arise and the searches that they’ve inspired. Imagine the screen of your phone, tablet or computer. How many browsers, search tabs, or apps are open? Do you see where this customer journey has carried you, before we even consider thinking about the park tickets, rides and characters?

The Customer Journey helps us understand the multiple touch-points consumers have, before they transact. And, equally important, the instances when they could leave the path to purchase, preferring a different channel instead. With this as the backdrop, let’s think through again the factors to consider in multi-channel marketing.

Pricing

For our imagined trip to Orlando, we considered shopping for flights on delta.com, orbitz.com and expedia.com. What were we shopping for? The most convenient schedule or the lowest fare? Let’s assume it’s the latter, and we wanted to find the cheapest possible flights for our trip. What’s the message you get if you’re able to find cheaper flights on orbitz.com than on the carrier’s own website? What would this mean for Delta if flights purchased outside their system were less expensive?

While our planned trip is a simple example of how prices can change across channels and outlets, it underscores the challenges in managing pricing. Firms can manage around this, if they invest and engage in product information management (PIM). These systems help firms by managing product information, which is released to other media, like web sites, print catalogs, and data feeds to trading partners. Without them, however, firms will have difficulty maintaining price consistency across channels.

Promotion

Like our consideration of pricing, firms need to be conscious of how promotions are delivered across channels. Consider our hotel room search. How would we react if we found an offer on hotels.com that wasn’t consistent or available from hilton.com?

Firms have finite marketing budgets and a growing number of channels in which to spend them. However, without a clear understanding of the path to purchase, channel roles in each step, and attribution of what each channel contributes, marketers are left making uninformed promotional investments. With better data, firms can target promotional activity in the correct channel at the correct point in the customer journey to support the overall path to purchase.

Analytics

Let’s move forward in our planning for Disneyworld. We’ve purchased a vacation package through a travel agency we found on-line. The firm continually invests in search engine optimization to ensure that their site is easily found, when shoppers search for vacation packages. They engage in search engine marketing to ensure that they are a top listing on specific consumer searches like Orlando + Disney + Packages. They maintain a Facebook site, where they share the comments of happy customers who have booked through them. They have an Instagram feed where they do the same, posting others’ vacation pictures.

With all these channels and all this activity, which requires investment, how does the travel agency know what interaction with a shopper tipped the shopper to visit or to call or to buy? Did a shopper visit each channel or only some? Did they spend time equally at each or not? Are they all equally important, or does one matter most?

The challenge of analysis and attribution is important because it helps you understand shopper behavior throughout the customer journey and illustrates where and how to make investments by channel. Further, attribution can help you understand how each channel performs, which can help you optimize for the best possible customer experience to support conversion, repeat purchases, and loyalty.

Technology

Technology underpins so much in supporting a multichannel marketing strategy. As you’ve read, a PIM system manages product information to be shared with other media. In the same way, inventory management systems add transparency in product availability—inventory control, shipping and distribution. And, attribution models help firms understand how consumers engage across different channels, media and assets. In using these tools, and others, firms can ensure consistency and service even across multiple channels.

Firms pursuing a multi-channel marketing strategy need to ensure that consumers, regardless of channels, receive consistency and service during their shopping experience and beyond. This requires a full understanding of the customer journey, so that the firm understands all possible points of interaction with the customer and their needs at each point. To have consistency and good service, firms must maintain focus on pricing, promotion, analytics, and technology.

Customer Impressions and the Seamless Experience

As you’ve seen throughout this chapter and in examining your own shopper behavior, consumers engage with companies through any number of channels—brick & mortar, social, .com, chat and more. Moreover, consumers want consistent, seamless, and collaborative interactions, optimized for whatever channel they’ve chosen. That is, consumers select the channel that is best for them at the time, making changes when there is interruption or when there is a better channel fit. As such, managing multi-channel or omni-channel marketing strategies means designing efficient channel transitions so that consumers do not feel they’re engaged in episodic interactions but part of an on-going engagement.

Think again about the example we considered with the Starbucks app. The purchase of a cup of coffee is a low engagement activity. However, think about the effort that Starbucks has made to make that single transaction as seamless as possible. Yes, the majority of activities take place within a single channel, the app, but potential roadblocks like finding a store location or placing an order, have been removed. Further, stored payment information reduces the friction in processing the transaction.

The most effective firms are taking a similar approach, when considering how consumers navigate across and between channels. For example, airlines provide access to reservations from desktop, tablet, or phone. During the interface, consumers can update their frequent flyer information, change seats, or inquire about alternative flights. Changes made in one channel are reflected across the others. Further, after check-in, which can also be done across multiple media devices, consumers can elect to have boarding passes sent a number of ways—print at home, e-mail, text. E-mail and texted boarding passes can be saved on mobile devices for use at check-in, security, and boarding. For the consumer, there is seamlessness to the user experiences (UX), adding consistency and assuring service.

What makes this possible and pleasant for the consumer is that the firm’s marketers have worked to understand the customer journey, identifying potential roadblocks, triggers and next steps in the decision flow. That is, these firms understand how customers move on the path to purchase. In doing so, they can identify and address potential “pain points” that inhibit customer service or transactions.

This process begins by understanding key activities or decision points in the path to purchase. Then, researching how consumers complete them, ask “Do they stay within a single channel, or do they need to transition to another, such as from app to website? From .com to store location?” More specifically,

• Are there specific activities that require transition from one channel to another? For example, if buying on-line and picking up in-store, does the retailer provide a confirmation number via text or e-mail that can be scanned from a mobile device? Or, does one need to print a hardcopy receipt?
• Is the experience optimized for the specific channel interface? That is, are content pieces and activities appropriate for changing usage contexts, like on the go vs. in-home, or technology, such as screen sizes or processing speed?
• Are there systemic roadblocks, which prevent shoppers from completing transactions or discourage them from using the tools in the future?

Many issues with the UX result from a lack of coordination, as existing infrastructure has been “patched” to accommodate new channels and technology. Often, investment is required to integrate fully new channels with system capabilities. But, the issues may not just be related to technology. Too often, teams are siloed, meaning that different organizations have responsibility for marketing, sales, and operations in a specific channel, not across all outlets. When this occurs, the largest channel, usually brick & mortar, receives the highest level of investment. The result is that emergent channels that are growing more quickly are routinely under-funded, potentially compromising the user experience across the whole ecosystem.

It’s critical to remember that consumers want accessibility. However, they are not willing to trade consistency and service for additional access. They require a seamless experience across channels.

Data to Support the Multichannel Shopping Experience

Measurement of retail performance is important, but especially for multi-channel retailers as it provides a basis for comparing performance across channels. Among a number of other details, brick & mortar stores track:

• Traffic: the number of shoppers in-store within a given period
• Average Inventory: (beginning inventory for a period + ending inventory for the same period) / 2
• Return on Inventory: Revenue / Average Inventory
• Inventory Turn-over: cost of goods sold in a period / average cost of goods in inventory
• Gross Margin Return on Inventory Investment: (sales – product costs) / average inventory
• Cost Per Sale: marketing costs / sales revenue

Many of these same metrics are the same for e-tailing. However, fragmented channels, especially those that are not necessarily transaction-oriented, require different measures. Think about social networks or websites that provide engagement or information, but are not necessarily intended for transaction. How can we assess their impact? What about apps? How can their impact be measured, when they do not generally have comparable functionality to the firm’s full website?

First, a firm will need to establish whether it is interested in having ongoing monitoring of performance or monitoring a specific campaign with a defined beginning and end.

Marketers consider a number of metrics that assess interaction and engagement online, using these as indicators of impact. Traffic is measured through website visits, separated by unique and returning, as well as hits, which are requests for a file from a web server, and impressions, which is the number of times an ad loads on a viewer's screen. They measure engagement through page views, duration of time spent on the site, and events, which includes clicks, page views, downloads, video plays, etc. Engagement is also measured by the click-through rate (CTR), which is the number of visitors who click on a link divided by the number of visitors who were served the link, and conversion rate, which is the number of visitors who complete any desired action divided by the total number of visitors.

For social networks, marketers track followers or friends to measure reach. They measure engagement in the context of likes, shares, mentions or retweets. For apps, meaningful measures might be downloads and the number of users in a given period. They also often measure daily active users (DAU) and monthly active users (MAU), which are the number of users that opened the app in a given day and month, respectively. Another helpful way marketers assess active users is to calculate the level of “stickiness” and app has for potential users. That is DAU/ MAU. This reflects how indispensible the app is implying that the higher the percentage the more users are returning to the app and engaging with it at a high frequency.

A final set of metrics for marketers to use to assess apps relates to profitability. The measures are cost per user (acquisition costs divided by total users), average revenue per user (revenue in a period divided by users during that same period) and gross margin per user, which is the average revenue per user (ARPU) minus the cost per user (CPU).

Overall, metrics for assessing retail performance are similar online and offline, focused upon measuring traffic and engagement. In tracking these metrics, retailers can be most effective in prioritizing channels and investing appropriately to support customer interaction.

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