Everything you need to know about mul­tichan­nel marketing

You buy a used car from a dealer in the city center, bread from the bakery, kitchen gadgets from a shopping channel when you phone in to place an order – companies used to con­cen­trate on a single dis­tri­bu­tion channel when selling their goods or offering their services, an approach that today is called “single channel.” The supplier, not the customer, decides where, when, and how products and services can be purchased. Then came the digital re­volu­tion: existing channels changed and new ones were invented – first e-commerce, then mobile shopping.

Consumer behavior also continued to change and develop along with new in­form­a­tion and com­mu­nic­a­tion tech­no­lo­gies. In addition to a wide range of products and 24-hour service, buyers demanded a wide selection of sales channels so they could choose their personal favorites. To stay com­pet­it­ive, companies and dealers could soon no longer afford to market their goods with just one channel. This led to the birth of mul­tichan­nel marketing, but what exactly does this term mean?

The mul­tichan­nel approach means that the company is flexible, improves customer sat­is­fac­tion, and con­sequently strengthens customer loyalty. Ad­di­tion­al sales channels make it possible to reach target groups that couldn’t pre­vi­ously be reached by a single-channel strategy. At the same time, this allows the de­vel­op­ment of com­pletely new business fields, with which a company can offer new products and services and re­pos­i­tion itself on the market. In the long term, a mul­tichan­nel strategy should increase a company’s sales.

Multi-track sales ap­proaches of this kind have become standard in the economy. Even small and medium-sized busi­nesses usually have at least one webstore in addition to their brick and mortar business. After all, being present on as many channels as possible can prevent potential customers from migrating to the com­pet­i­tion if you aren’t present on their preferred channel.

Com­mu­nic­a­tion, ad­vert­ising, dis­tri­bu­tion, and sales over several channels instead of just one requires more complex logistics and a greater control effort. If the different channels are not presented in a ho­mo­gen­eous corporate image, this could confuse potential customers and they may not realize that the product and/or service belongs to the same company.

Another dis­ad­vant­age of a mul­tichan­nel strategy is that the in­di­vidu­al sales channels merely exist side by side, but are not connected in terms of or­gan­iz­a­tion and tech­no­logy. The lack of ability to switch back and forth between favorite channels within the same trans­ac­tion at will (e.g. with practical click and collect) isn’t so inviting for some consumers and it may cause them to switch to a com­pet­it­or that offers a more holistic buying ex­per­i­ence (see crosschan­nel and om­ni­chan­nel marketing below).

Then there is the issue of “can­ni­bal­iz­a­tion.” For example, a customer signs a Verizon contract either by telephone, online, or in one of the provider’s branches. In a mul­tichan­nel strategy, each of these channels operates on its own. In other words, the advisor won’t directly benefit if a potential customer is advised in a store and then signs the contract via the company’s website. This is what’s known as the can­ni­bal­iz­a­tion effect: the partial or complete sales shift from one channel to another. Many store owners, for example, worry that customers will move from offline to online shopping. However, this can only be cal­cu­lated to a limited extent.

A study by GE Capital Retail Bank revealed that 81% of shoppers research online before making a purchase which is known as “ROPO” (research online, purchase offline).

Mul­tichan­nel strategies are mostly, but not ex­clus­ively, found in retail or in the B2C area. In this context, the focus is usually on the link between online and offline measures. Many retailers set up a webstore in addition to their physical points of sale, which usually offer a larger, even more complete product selection, which would not be lo­gist­ic­ally possible in sta­tion­ary retail. This means that even goods that are rarely in demand can be offered for sale anywhere and at any time.

Both channels have their own cost structure and prices due to their inherent char­ac­ter­ist­ics. This could be in­con­veni­ent for the customer, since they want the shopping ex­per­i­ence to be as ho­mo­gen­ous as possible. One solution is to offer the same prices on all channels, but to advertise online with special pro­mo­tions. Syn­er­gist­ic effects should also be used: e-mail news­let­ters can, for example, be used to inform customers of any sales in sta­tion­ary retail, and store operators can display flyers con­tain­ing in­form­a­tion about the online store.

The de­part­ment store, JCPenney, is a good example of a business that uses a mul­tichan­nel strategy. It was the first de­part­ment store to sell mer­chand­ise online by making its entire product inventory available to buy on Facebook. Customers can make their purchase without having to leave Facebook. With over 5 million likes, the store uses the social media platform as a necessary tool to interact with its customers.

There are different terms for sales that take place over several dis­tri­bu­tion channels. “Mul­tichan­nel” is certainly the tra­di­tion­al channel since it is the most widely used and has been around the longest. In addition to the terms: “no-line commerce” and “every­where commerce,” “crosschan­nel” and “om­ni­chan­nel” were also es­tab­lished, which differ from mul­tichan­nel. Basically, the mul­tichan­nel strategy is the evol­u­tion­ary pre­de­cessor of the crosschan­nel and om­ni­chan­nel concepts – and is therefore gradually seen as outdated.

While mul­tichan­nel refers to several channels operating sep­ar­ately, the crosschan­nel approach refers to channels that are closely linked (in­teg­rated), enabling a crosschan­nel shopping ex­per­i­ence. For example, the customer might find out about a product in the brick and mortar store, order it in the webstore, and then pick it up from the actual store via click and collect or in-store pickup. The same range of goods or at least part of them can be found in all available dis­tri­bu­tion channels. A re­quire­ment for this in­teg­rat­ive aspect of crosschan­nel marketing is a con­sist­ent, centrally managed, and always ac­cess­ible database con­sist­ing of in­form­a­tion about the customer and the inventory.

A mul­tichan­nel strategy should cover as many dis­tri­bu­tions channels as possible in order to reach all relevant target groups. The om­ni­chan­nel approach, in turn, claims to be present on all existing channels with marketing measures at least according to its name (“omni” means “everything” or “every­where”). At the same time, the channels should be closely in­ter­linked so that the customer can use them in parallel and at will. Om­ni­chan­nel combines the ad­vant­ages of mul­tichan­nel and crosschan­nel marketing in a single concept.