One of the most intriguing and managerially relevant findings in the multichannel customer management literature is the positive association between the multichannel customer and profits. The question is whether this is an actionable, causal relationship. Specifically, can marketing campaigns be designed to turn single-channel customers into multichannel customers, and in turn will these multichannel customers become more profitable to the firm?
Elisa Montaguti, Scott Neslin, and Sara Valentini conduct a field experiment to investigate this question. In their study, they manipulate two key aspects of campaign design: message and incentives. They investigate two messages: one which directly communicates the benefits of multichannel shopping, the other which emphasizes the core value proposition of the firm. They also investigate the provision of financial incentives in the form of coupons and compare it to the case where no financial incentives are provided.
The multichannel message coupled with no financial incentives produced more multichannel customers and increased revenues more than other campaign designs. The authors estimate the profit ROI of this strategy to be 40%. These results suggest that the multichannel message motivated customers to explore the benefits of multichannel buying, and as they did so, they became more satisfied customers and hence purchased more over time.
Further, this multichannel message/non-financial incentive campaign worked best on customers who otherwise would be predicted not to become multichannel on their own. Using an a priori estimated model, the authors estimate that targeting just customers with low pre-disposition towards multichannel shopping would generate a 51% ROI.
The multichannel message/financial incentive campaign did not significantly increase either multichannel channel behavior or revenues. It had a one-year ROI of -142%. The results suggest that the poor performance of the multichannel/financial campaign resulted from its inability to motivate customers to explore different channels. The campaign forced customers to shop in channels they might not like in order to take advantage of the financial offer, negatively affecting satisfaction with the shopping experience.
The value proposition campaign - either with or without incentives - did not increase either multichannel behavior or revenues. The ROIs for these campaigns were -104% and -106% respectively.
A multichannel/nonfinancial campaign raising customer awareness of the availability of a firm’s different points of contact is inexpensive and effective at generating multichannel shoppers and increasing profits. This strategy acts to modify customers’ channel shopping behavior at a lower cost than financial multichannel incentives. The multichannel shoppers who respond to this campaign generate more profit and are therefore more valuable to the firm.
Further, financial incentives might be a loss-generating activity for firms because they are not only costly but do not increase multichannel shopping.
This study is contingent on the particular firm that participated, as well as the specific messages and incentives. However, the research clearly builds the knowledge base in this critical area by demonstrating the effectiveness of multichannel campaigns, offering guidance on the design of those campaigns, and demonstrating the potential for targeting based on an a priori estimated model of the customer’s multichannel potential. Importantly, it demonstrates that research on the multichannel/profitability relationship can be translated into practice, and verifies the causal link from marketing actions to multichannel customer behavior to customer profitability.
Elisa Montaguti is Associate Professor of Marketing, Department of Management, University of Bologna, Italy. Scott A. Neslin is Albert Wesley Frey Professor of Marketing, Tuck School of Business, Dartmouth College. Sara Valentini is Assistant Professor of Marketing, Department of Management, and University of Bologna, Italy.
The authors thank an anonymous retailer for cooperating in the implementation of this field experiment. This research is supported by the Marketing Science Institute and the Wharton Interactive Media Initiative as a winner of the “Modeling Multichannel Customer Behavior” research proposal competition.
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