Multichannel MarketingExploiting a business goldmine

Published December 2008 8 lectures
Prof. Hugh Wilson
Professor of Strategic Marketing, Cranfield School of Management, UK
Summary

This series has four very practical aims:
- To explain what multichannel marketing is and why it has become a key competitive battleground.
- To explain when an organization should review its multichannel strategy, and what the drivers of that review should be
- To show how... read moreto develop a multichannel strategy in order to optimize channel costs, customer experience and market coverage
- To describe how to implement multichannel strategy.

A senior marketing practitioner recently asked me: “Why is this series needed? What is new? I think we all agreed a long time ago that multichannel is the only way forward.” So what is new? The integrated channel chain concept, that channels are not alternatives to each other, but rather, complements that perform different roles in the customer journey, and all its implications for how we form multichannel strategy, how we implement it, how we structure our organizations, how we measure success and how we motivate and reward people.

Multichannel has been around a while, in the limited sense of having several communication and distribution channels to market, but with an outdated philosophy representing a hangover from the first dot-com boom yet still widely believed. The philosophy, persuasive because it is packed with half-truths, is: multichannel is about saving money by diverting customers to low-cost channels. We will run these channels as independent profit centres, their success being judged by revenue and by profit, unless they are service channels, in which case we will judge them on cost. So, our job is to steer our customers to use low-cost channels, and pocket the extra profit.

Informed managers may not themselves no longer believe that this works, but this outdated philosophy is deeply embedded in organizational structure, channel directors being judged by their profit, as well as in metrics, culture (the channels operate in silos) and strategy. So it’s still the way companies act.

But that is simply not the way customers think and behave. They do not choose between a range of channels for their purchase: they channel-hop between them, not just in the same relationship, but in the same purchase cycle, and even at the same moment. And it is customers that deliver revenue, not channels. To put it another way, customers choose not between channels but between channel chains, sets of channels working together to satisfy the customer. But today’s customer is at odds with the way we run our organizations. So if a customer researches on the company website but buys offline, who gets the credit if we organize around channel silos? And what motivates the Internet director to hand over the lead to an offline channel if that is the best one to progress it? And if the customer falls down the gap between the silos never to be seen again, who notices, and who cares?

The multichannel challenge is for the organization to reflect the new customer reality. To organize around customers rather than around channels. To plan around channel chains and not around channels as mutually exclusive alternatives. To measure around customers and around the success of channel chains. To motivate around customer experience.

Most organizations – private and public sector – have not yet grasped this, although some have. Consider UK bank First Direct, long an exemplar in its superb ratings for customer satisfaction, but now highly profitable due to its mastery of channel integration and the customer-focused values that lie behind the way in which it has gone multi-channel. Or in the business-to-business space, think of BT, which switched its handling of major accounts from a pure field sales force operation to a hybrid channel mix involving a new breed of desk-based account managers working alongside their field sales force counterparts – with dramatic results. And in the public sector too there are successes such as the UK’s DVLA, which has diverted much traffic from call centres to interactive voice response and the web, not by force but by adding value for the customer. In short, multichannel marketing is a business goldmine. With the help of these and other examples, this series will explain when and how to review channel strategy, and how to make the strategy happen.