Challenges and Opportunities in Multichannel Customer Management

1. 1 Challenges and Opportunities in Multichannel Customer Management Peter C. Verhoef University of Groningen Presentation based on: Neslin, Scott A., Dhruv Grewal, Robert Leghorn, Venkatesh Shankar, Marije L. Teerling, Jacquelyn S. Thomas, and Peter C. Verhoef (2006), “Challenges and Opportunities in Multichannel Customer Management,” Journal of Service Research, forthcoming

2. 2 Growing Importance of Multiple Channels Firms are adding new channels Internet, Call Centers, E-mail, Weblogs Dutch firms on average use 4 channels in their customer contact strategy Also consumers are utilizing multiple channels: Multichannel Consumer Research Shopper Half of online-shoppers research product on the Internet, and then purchase it in store (Kelly 2002) 30% of consumers in holiday market use one channel for search, while they use a different channel for purchase

3. 3 Prior Research in Multi-channel Arena Multi-channel issues recently gained attention (Rangaswamy and van Bruggen 2005, Special Issue JIM) Addition of channels by firms (Gielens et al. 2001) Customer Migration in Channels and Sales Effects (Mela et al., 2004) Characteristics of Multi-channel Customer (Kumar and Venkatesan 2005) There is a large stream of research on channel choice and store-patronage intentions Focus on single channel Knowledge on consumer behavior in multichannel environments is sketchy. The choice and us of different channels at various stages of shopping is not tackled in sufficient detail (Balusabramanian et al. 2005, p. 13) Recent overview paper: Neslin et al. (2006)

4. 4 Agenda Propose framework. Identify key challenges. Summarize key findings from academic research.

5. 5 Building the Framework: Add Firm Decisions

6. 6 The Proposed Framework

7. 7 Challenge #1: Integrating the Data What data should be collected? From which channels? Is 100% integration (a “single view” of all customers) desirable? Does customer data integration (CDI) pay-off?

8. 8 Integrating the Data: CRM, Customer Information Systems Capability, and Performance Go Together

9. 9 Integrating the Data: Is 100% Integration Desirable? Convex costs plus concave returns yield optimal CDI of less than 100%

10. 10 Framework

11. 11 Challenge #2: Understanding Customer Behavior What determines customer’s choice of which channel to use? What is the impact of the multichannel environment on customer loyalty? Does a multichannel environment grow customer sales?

12. 12 Understanding Customer Behavior: Determinants of Channel Choice Channel attributes Marketing Channel integration Social influence Situational variables Individual customer differences Source: Neslin et al (2006)

13. 13 Customer Perceptions of Attributes (Verhoef et al. 2006)

14. 14 Understanding Customer Behavior: An Emerging Generalization: The Multichannel Customer Buys More

15. 15 Understanding Customer Behavior:The Question is: Why Does the Multichannel Shopper Spend More? Increased loyalty? Self-selection? Marketing?

16. 16 Understanding Customer Behavior:One Study Says the Answer is Marketing

17. 17 Framework

18. 18 Challenge #3: Evaluating Channels What is the contribution of adding a channel? Given the current channel mix, what is the contribution of each channel?

19. 19 Evaluating Channels: It Appears that Adding the Internet Does Not Appreciably Cannibalize Sales Note: Supporting evidence from Biyalogorsky and Naik (2003) Source: Deleersnyder et al. (2002)

20. 20 Evaluating Channels:Channels Differ in Acquisition Performance Source: Verhoef and Donkers (2005)

21. 21 Framework

22. 22 Challenge #4: Allocating Resources Across Channels What is the optimal channel mix? How should marketing resources be allocated across channels?

23. 23 Allocating Resources Across Channels:Is Multichannel A Prisoner’s Dilemma? What happens in the lower right cell? Lower prices and higher costs? Higher loyalty and market growth?

24. 24 Framework

25. 25 Challenge #5: Coordinating Channel Strategies Should channels be independent? What should be the same and what should be different? Prices? Products? How develop synergies? How manage research shopping? How coordinate with channel partners?

26. 26 Coordinating Channel Strategies:The Research Shopper Phenomenon Research shopping is dominated by Internet => B&M Store.

27. 27 Coordinating Channel Strategies:Three Factors Drive Research Shopping Attributes One channel may be good for search; the other for purchase. Lack of lock-in The channel used for search may not be able to lock-in the customer to make the purchase. Cross-channel synergy Searching on Channel A may improve the purchase experience on Channel B. Source: Verhoef et al (2006)

28. 28 Coordinating Channel Strategies:Attribute Perceptions, Low Lock-in, and Cross-channel Synergy all Contribute to Internet=>Store Research Shopping

29. 29 Curtailing the Research Shopper Phenomenon (1)

30. 30 Curtailing the Research Shopper Phenomenon (2)

31. 31 Curtailing the Research Shopper Phenomenon (3)

32. 32 Summary: The Framework

33. 33 Summary: Five Key Challenges and Initial Findings

34. 34 Bibliography Ansari, Asim, Carl Mela, and Scott A. Neslin (2005), “Customer Channel Migration,” Working Paper, Teradata Center, Duke University, Durham, NC, Paper Series No. 13. Deleersnyder, Barbara, Inge Geyskens, Katrijn Gielens, and Marnik G. Dekimpe (2002), “How Cannibalistic is the Internet Channel?” International Journal of Research in Marketing, 19 (4), 337-348. DoubleClick (2004a), “Holiday 2003 Shopping Study,” New York: DoubleClick, Inc. DoubleClick (2004b), “Retail Details: Best Practices in Multi-Channel Integration” (March), New York: DoubleClick, Inc. Kumar, V., and Rajikumar Venkatsesan (2005), “Who Are Multichannel Shoppers and How Do They Perform?: Correlates of Multichannel Shopping Behavior,” Journal of Interactive Marketing, 19 (Spring), 44-61. Kushwaha, Tarun L. and Venkatesh Shankar (2006), “Multichannel Shopping Behavior: Antecedents and Implications for Channel and Customer Equity,” Working Paper, Texas A&M University, College Station, TX 77850. Myers, Joe, Evan Van Metre, and Andrew Pickersgill (2004), “Steering Customers to the Right Channels,” The McKinsey Quarterly: McKinsey on Marketing, (October). Neslin, Scott A., Dhruv Grewal, Robert Leghorn, Venkatesh Shankar, Marije L. Teerling, Jacquelyn S. Thomas, and Peter C. Verhoef (2006), “Challenges and Opportunities in Multichannel Customer Management,” Working Paper, Tuck School of Business, Journal of Service Research, forthcoming Verhoef, Peter C., and Bas Donkers (2005), “The Effect of Acquisition Channels on Customer Loyalty and Cross-Buying,” Journal of Interactive Marketing, 19 (2), 31-43. Verhoef, Peter C., Scott A. Neslin, and Bjorn Vroomen (2005), “Multi-channel Customer Management: Understanding the Research-Shopper Phenomenon,” Working Paper, Unversity of Groningen, Faculty of Economics, Department of Marketing, Groningen, The Netherlands. Villaneueva, Julian, Shijin Yoo, and Dominique M. Hanssens (2006), “The Impact of Marketing-Induced vs. Word-of-Mouth Customer Acquisition on Customer Equity,” Working Paper, IESE Business School, University of Navarra, No. 516. Zahay, Debra and Abbie Griffin (2004), “Customer Learning Processes, Strategy Selection, and Business Performance in Business-to-Business Firms,” Decision Sciences, 35 (2), 169-202.