Customer Strategist Journal
Innovative strategies for building more profitable customer relationships. Published quarterly online and in print.
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The Customer Intelligence Advantage

Multichannel 101

Here is the challenge: an ever-increasing number of channels, myriad evolving customer segments, too many different products to count. We want to sell to and service our different customers through the various channels in a tailored fashion; in doing so, we want to minimize costs and maximize customer experience. We need to determine which activities, campaigns, and interactions should take place where—and for which set of customers. We also must decide where we need to invest in new infrastructure or practices.

Framed in this way, developing and practicing a differentiated multichannel strategy presents itself as a straightforward, albeit daunting, optimization problem. We can determine which channel is best suited for which segment, and which channel is best suited for which aspect of selling and servicing. We know what we need to achieve for each segment with regard to sales, as well as service. Three variables, three equations—solved with a quick drawing on a napkin over lunch. If we wanted to increase the intellectual challenge, we can overlay the product dimension and play the problem through for each product category. No major issue. Four variables, six equations—solved with a sketch on a larger napkin.

So why doesn't it happen this way? Why don't we see straightforward coordination, allocation, and positioning of channels against customers and business objectives? Why does it remain difficult for large companies to formulate a sound multichannel strategy, especially one tailored by customer type?

Here is the 50,000-foot answer: Because no one is getting paid for it. Check your org chart: Where is the corporate channel responsibility? You will easily find heads of sales, call centers, and perhaps even mobile and social—but little, if any, explicit coordination on the group level. If you're lucky, you'll find the equivalent of heads of individual customer segments, but only little coordination or integration with other functions. Now the problem once sketched on a napkin becomes one of talking through three equations with at least 40 or 50 individuals. That's about 150 conversations, not counting the feedback loops required between these conversations. That's a lot of discussion time with people whose job it is to optimize their respective silo and not the common corporate bottom line. And we haven't yet added the product dimension. That's a lot of people, even for the biggest napkin.

Technically speaking, here we see classical negative scale effects at play: The larger your organization (i.e. the more different types of customers you have and different channels at your disposal), the more complex it becomes to devise and implement a sound multichannel strategy. Of course, the less you have it, the more you need it.

Just think of your single-segment-few-channels competitors: Multichannel is easy when you have a segmentation of one and channel options of, let's say, two. In that model you won't waste resources on customers who don't require additional attention, and you won't disappoint customers who expected it. It's unlikely that you'll overinvest or underequip the channels you use to interact with customers. In such a universe, you can optimize for the bottom line by managing a silo, because the silo happens to be the bottom line.

But then again, this is how we all started. In the beginning there was the simple business; we were doing one thing for one set of people. However, as we grew, we started responding to the different needs and behaviors of different customers and we assigned different values to them. Complexity grew and, over time, we responded to technological advances and developed numerous channels to reach tentacle-like ever further into our customers' worlds. Now we load them with all our services and products, each channel aiming to serve customers better and provide additional touchpoints; each better suited for customers' changing needs and behaviors.

As useful as these channels might be individually, they're still part of a whole system. Don't pretend that each is a separate business. Remember, the octopus swims head first. Imagine if, as it evolved, it had tried to swim tentacles first. It wouldn't have gotten very far.

Swimming head first
It's time to think of your touchpoints holistically and from the center of the organization. This starts with recognizing who pays your bills: customers. Understand them, differentiate them. Make customer information available centrally and make it transparent across your organization. Do so in a standardized and easy-to-process format. Have an "immersion room" where channel representatives (or product staff) can quickly learn about the latest trends per customer segment; provide stories, display pictures, have movie clips. Make sure your colleagues in the channels understand who they are selling to and serving and how the respective experience expectations might be shifting.

Then, do exactly the same from a channel perspective. Explain the capabilities and capacities of each channel to your colleagues whose task it is to manage customers. Equipped with such mutual knowledge, orchestrate a conversation and answer the following three questions:

• Which channel is best suited for each segment, and will that be the case tomorrow? Don't answer this in a binary form; use a simple ranking.

• Which channels are best suited for certain objectives across the sales and service cycle. In other words, which channels are optimal for creating awareness about your products and offerings, and which are best for conducting such activities as sales, ordering, fulfillment, maintenance, queries, and retention.

• By segment, which steps across the sales and service cycle require the most attention?

By answering these questions one by one, you have disaggregated all the complexity in developing your multichannel strategy. Now you need to combine your answers. You only need to use the simple ranking captured for each of the questions above as the agreement between channel and segment representatives. Multiply those various rankings with each other and produce maps by segment. The maps will decipher where across the sales and service cycles and channel matrix that your attention is required most. Next focus on the priority areas identified and develop campaigns and initiatives to support them. Do the same for each channel. Produce maps that illustrate which steps in the sales and service cycle, for each segment, are key areas to focus on. Iterate this exercise once every quarter and adjust your business practices slowly over time. Insert the product dimension and repeat. Once you have gained confidence, link your investment decisions to this ongoing discussion.

Now that the channels are coordinated, let them loose, empower them, and demand action. Together, they will jointly propel your organization in the right direction. Of course, the difficulty is in the details. You need to rank answers to the questions based on hard data rather than guesswork. And you must convince your colleagues that this is a fruitful way to spend their time. Although the science aspects of the multichannel equation are straightforward, managing the process is a complex art that only few will ever master. It will depend on your willingness to engage in this complexity and your ability to lead such a process.

Your success in those two endeavors will determine whether you are destined to operate a group of disconnected single-segment-few-channel businesses, or manage a true multisegment, multichannel corporation.