Why Multichannel Consumers Are More Loyal, Part 2

  |  February 8, 2008   |  Comments

Putting decision-making behaviors into a business context. Last of a series.

Last time, I explained the basics behind precognitive decision making. Today, we'll apply that knowledge to multichannel marketing in an effort to validate the following theories:

  • Multichannel consumers are more loyal than single-channel consumers.

  • Multichannel companies can win over single-channel companies if they focus on creating a good customer experience across all their channels. In this case "good" doesn't necessarily mean "best," a very important point.

  • A unified brand across channels is imperative to nurturing a multichannel consumer.

We learned last time that decisions are broken down recursively into smaller yes/no questions that are answered independently of each other. The question "which is better, A or B?" breaks down to two independent trials: "is A good?" and "is B good?" If one results in "yes" and the other in "no," we have a winner, and we're done. If the answer to both questions is "yes," the brain goes to the next step; it looks at all the evidence and sees how good one is compared to the other, based on how many times it has observed good or bad.

Let's put this in a business context. Let's say I need to decide whether to purchase from Amazon.com or barnesandnoble.com, as that was the catalyst of my research into this subject in 2001. (Amazon is much more than a bookstore now, but it will suffice for the sake of the example.) Here's the question we need answered:

    Question 1: Should I buy books from Amazon.com or barnesandnoble.com?
    Answer 1: The answer is solved by answering two other questions:
    Question 1.A: Does Amazon have a good site?
    Answer 1.A: Yes: 60 percent; no: 40 percent

    Question 1.B: Does bn.com have a good site?
    Answer 1.B: Yes: 60 percent; no: 40 percent
    Answer 1: Both are equally good, so look at the weight of the evidence to decide.

If one of the above questions had resulted in a "no," there would have been a clear winner. But both Amazon and bn.com have the same good:bad ratio, having equally good Web sites.

Let's say the consumer had used Amazon for two years before ever using bn.com and has only used bn.com a few times. While she has had an equal percentage of good experiences with both companies, she has had more good experiences with Amazon. The "Amazon is good" percentage, then, means more than the "bn.com is good" percentage, and Amazon wins.

If this were a single-channel environment, our examples would be done. But here is where things get interesting. The brand choice in a truly multichannel company is really the sum of the brand's various channels, and we have to add several recursive layers to the primary question.

I've only put the winning "yes" answers here to increase readability:

    Question 1: Should I buy books from Amazon.com or barnesandnoble.com?
    Question 1.A: Which brand do I prefer?
    Question 1.A.i Is Amazon good?
    Question 1.A.i.a: Is Amazon's Web site good?
    Answer 1.A.i.a: Yes (60 percent)
    Answer 1.A.i: Yes

    Question 1.A.ii: Is bn.com good?
    Question 1.A.ii.a: Is bn.com's Web site good?
    Answer 1.A.ii.a: Yes (60 percent)

    Question 1.A.ii.b: Are bn.com's stores good?
    Answer 1.A.ii.b: Yes (70 percent)
    Answer 1.A.ii: Yes
    Answer 1.A: Both Amazon and bn.com are good, so we need to look at which "yes" means more, based on the amount of evidence. Amazon's evidence is in question 1.A.i.a (60 percent), and let's say that was 100 trials. Bn.com's evidence is the sum of evidence across all channels: question 1.A.ii.a and question 1.A.ii.b. Let say the user went online to bn.com 100 times and went into stores 400 times. The total evidence is then 500. If there were more channels, this equation would get longer.*
    Answer 1: The company with the most evidence of good wins, because neither company had any bad scores. In this case, bn.com wins.

What It All Means

All else being equal, the company with the most evidence of good wins. The more channels your company has and the more you encourage people to use each channel, the more evidence will pile up for your company. As long as each channel has more good than bad evidence, the company with the most channels wins, because theoretically the user has more touch points with that company than with a single-channel company.

For example, your company is trailing its competitors. Yours is a multichannel company. Theirs is a single-channel company. You've both spent a lot of money creating state-of-the-art Web sites, but you still trail them in sales. Customer ratings have come back, and everyone loves your site, so that's not the problem.

How, then, will you spend your marketing budget to keep more customers? Will you improve your site even more and hope it makes a difference? If people already like your site, this might not be the optimal answer. Increasing the multichannel usage of your company is a smarter idea, because you will begin accruing good evidence across your other channels, which will be taken into account when the user decides which company to use. Your competitor might have an amazing site, but without the ability to accrue good evidence through other channels, it won't win in the long run.

The more channels you have, the more the idea of good is aggregated and the more leeway you have in one particular channel. That means if one channel is lagging behind another, that could be hidden a little if the other channels make up for it. On the other hand, there's the weakest link theory: your best channels are brought down by your worst channels. Even so, if you are a single-channel company, you've only got one shot, which is worse.

Why Don't All Multichannel Companies Win?

If the math is so clear-cut and the decision process so easy, why don't all multichannel companies win? First, the yes/no questions above aren't arrived at solely based on user experience. We're affected by external forces such as brand marketing, a changing climate (e.g., price sensitivity might become more important), friends' recommendations, habituation, and so on. Even so, the above equations still stand. A multichannel company simply has more evidence to play with, and the company with the most good evidence wins.

But being a multichannel company doesn't mean you think like one or that you have multichannel consumers. Bn.com didn't win this equation back in 2001 because it wasn't operating like a multichannel company. It operated (literally and legally) as two separate single-channel companies that happened to have the same name. Because of this, it didn't have multichannel consumers. The equations above were still in play, but bn.com didn't have the advantage of positive in-store evidence to outweigh the volume of online evidence Amazon had (or, for that matter, any negative online evidence it had). If it had been able to harness true multichannel consumers, it would've won this equation. The question "which brand do I prefer?" is predicated on the notion that consumers combine all your channels into one brand idea. If they don't (and you don't), you've lost the game.

Conclusion

Multichannel consumers can be more loyal if you let them and if you ensure you have a unified brand across all your channels. Loyalty is decided in two dimensions: the value of a particular channel and the number of channels there are.

But to achieve this kind of brand loyalty, you need to:

Once you're truly operating like a multichannel company and each channel has more good evidence than bad, you'll benefit from the inherent ways humans make decisions. This will lead to your ability to acquire and keep more profitable customers longer.

Questions, thoughts, comments? Let me know!

Until next time...

Jack

*This column has been updated to clarify how evidence accrues more rapidly across multiple channels. (Return.)

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ABOUT THE AUTHOR

Jack Aaronson

Jack Aaronson, CEO of The Aaronson Group and corporate lecturer, is a sought-after expert on enhanced user experiences, customer conversion, retention, and loyalty. If only a small percentage of people who arrive at your home page transact with your company (and even fewer return to transact again), Jack and his company can help. He also publishes a newsletter about multichannel marketing, personalization, user experience, and other related issues. He has keynoted most major marketing conferences around the world and regularly speaks at Shop.org and other major industry shows. You can learn more about Jack through his LinkedIn profile.

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