Solving Channibalism: Embrace It, Then Trace It

  |  January 12, 2007   |  Comments

Coping with customers who refuse to be confined to one channel to research, browse, and buy.

Happy New Year, everyone! I have hopes for 2007. Maybe this year we'll finally solve the channibalism problem.

Channibalism is the fear one channel will steal the customers of another. In some areas of the industry this problem has been solved, but in others it's still a persistent fear. Moreover, some parts of the supply chain (such as manufacturers) want to find ways to have an online presence but can't sell directly to consumers without endangering their current distributors. Today, we'll look at various scenarios in which channibalism rears its ugly head and how the problem is being, or should be, solved.

The main way to solve channibalism (or any other customer behavior we fear) is to "embrace it, then trace it" (one of my mantras). Instead of fearing this customer behavior, find ways to enable it. Once you enable it, you're able to trace it and give credit where credit's due, thereby eliminating the fears of losing customers or missing sales credit.

Brick and Mortar vs. Online

This was the biggest challenge for most retailers, and it's fair to say the problem has been solved by larger retailers. Smaller ones are still dealing with the issue, but there's a well-worn path for them to follow.

Sites such as Best Buy, Staples, and Home Depot allow you shop online, then pick up in the store. This not only encourages customers to defray shipping costs by picking items up but also to browse the store in addition browsing online, hopefully increasing the size of their purchase once they get into a physical store.

There's another way to connect the in-store and online experience. Although the transition from online to offline seems straightforward, the reverse doesn't. What's the way to embrace users who browse in a store, then buy online? The example I used was a furniture store. Quite often, customers spend a lot of time looking at furniture -- sitting on it, laying it, feeling the fabric. They talk with a salesperson (who's on commission) and make a list of what they want and the options they need. Then they go home to discuss it with their families. Quite possibly, they then go online and find the cheapest prices or even go online to the store's Web site and buy the products. In either scenario, the store and the salesperson are left in the dust.

But by embracing this behavior and tracking it, the problem's solved. If the salesperson had the ability to create an online wish list for the customer, complete with all the products he looked at (and with all the options he chose), the salesperson makes the transition to online shopping easy. Once the customer goes home, he can see all the products online and buy them if he wants. Because the salesperson created the list, it's relatively simple to track the sale and where it originated and give each party the credit and commission deserved.

Manufacturers Enter the Ring

Though this works for multichannel retailers, the issues are completely different elsewhere in the distribution chain. Manufacturers, for instance, can't start selling online, though they'd love to. Traditionally, these companies don't deal with consumers directly. They aren't set up for it and most likely can't sell directly for legal or political reasons, as they'd be competing with the distributors and retail channels that sell their products to the public.

However, increasingly more people search online for manufacturers' Web sites to research products. When I wanted to buy a new digital SLR camera, I knew I wanted to buy a Nikon because all of my lenses are Nikon. I could have gone directly to a retailer's Web site, but I went instead to Nikon's site to see its new cameras.

But Nikon doesn't sell to consumers. It has a "where to buy" site section. Once you enter your Zip Code, you're directed to a physical store. That's the end of the shopping experience on its Web site. Companies like Nikon (I imagine) would love to be able sell directly to consumers. But it most likely can't compete with its distribution channels. Yet someone has to pay for the Nikon consumer Web site, and it's impossible to know how the site affects sales.

As a consumer, I'd love to have been able to buy the camera right then and there, either via an online sales partner or at a local store. By embracing this behavior, manufacturer could do better then simply give me a list of nearby stores. For this to happen, a few important pieces must come together. On the front end, the manufacturer's site must have a shopping cart, mirroring a traditional retail site. But instead of directly concluding a sale, the checkout path must integrate sales through a local retail partner.

One company that's doing this currently is Sligh Furniture. Sligh is a manufacturer that doesn't sell directly to consumers, but its site has a shopping cart. At the point of purchase, the customer is prompted for a Zip Code, then asked to select a local retailer from which to make the purchase. The transaction is handled online, but the actual purchase is made through the retailer.

This is a great way for manufacturers to make their sites more transactional. It's also a great way for them to understand their Web sites' value. Yet the problem exists not only on the front end. Back-end accounting systems must specifically understand this purchase behavior and be able to give credit to all parties involved. For instance, Sligh might have a different contract with store X than it does with store Y, so the accounting behind this sale is potentially complicated.

Luckily, this problem is also being solved. Companies like Reshare exist solely to solve it. Its back-end system allows manufacturers to set up all these types of business rules, track multichannel purchases, and keep accurate accounting of where sales were made, what percentage of sales go to various levels of the distribution chain, and so forth. Using a service like Reshare on the back end and creating a more retail-like experience on the front end solve the channibalism problem from the manufacturer's perspective.

Embrace It, Then Trace It

We have to stop fearing our customers and the way they behave. The more we accept their behavior, the better we'll be. They'll go online to research and buy in a store. They'll go in a store for research and buy online. They'll go to a manufacturer's Web site, then buy either online or at a store. They'll look at a catalog, then buy online. All these behaviors have traditionally been nightmares for companies. Who gets credit for the sale? Whose P and L sheet is affected?

Although some forward-thinking retailers have decided to forego separate P and L sheets for these channels, others can't (or won't) restructure themselves internally to be less channel-centric (and siloed). For these companies, it's essential to create pathways that easily allow all this cross-channel behavior to occur.

Once companies do that, they can trace it, understand it, and figure out what percentage of the sales credit goes to what channels. More important, they can better understand their customers and create new services based on user needs, a win-win for all parties involved.

Questions, thoughts, comments? Let me know.

Until next time...

Jack

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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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