Research by Lejla Karamehmedovic & Krister Bredmar at the School of Business, Economics and Law, University of Gothenburg, Sweden found that that multi-channel customers spend 20-30 percent more money, on average, than single-channel customers. Multi-channel marketing is no easy undertaking.  All too often it actually raises costs or reduces revenue. For example, according to some studies from the retail banking industry, while the average transaction cost per customer has decreased by 15% by providing less expensive channel such as ATMs and online banking, transactions volumes have increased resulting in an increase in the overall cost-to-serve each customer. 

Cost-to-Serve is a Key Multi-Channel Metric

Most companies have some understanding of the volumes and margins of their channels.  Few truly know the cost of serving customers in each of them or a channel’s associated customer “quality”-that is, the value to the company of the products or services purchased through a particular channel. Even fewer grasp the economics of specific sales and service activities, such as the cost incurred to generate a new opportunity, or which channels customers prefer.

Cost-to-serve, however, is an essential operational metric. You can gain valuable insights into key accounts, customer segments, personas profitability and overall business value when you understanding your true “cost to serve” at the customer level.  To create a cost-to-serve metric you will need to quantify your business activities and overhead consumption on a customer and/or product level. 

Purchase Your Assessment

The key isn’t to eliminate channels. The key is to control your multi-channel interactions so you can proactively manage your cost-to-serve.  Different customers should be subtly guided them through the sales and service process – from awareness of the product through purchase and post sales support-based on their customer value.

The intent behind “rerouting” customers is to encourage the use of different channels at distinct stages of the sales process, in order to balance the preferences of your customers with the economics of your channels. This approach will allow you to reduce the cost-to-serve while increasing the revenue per customer.

Your carefully tailored “routes to market” can also become powerful sources of sustainable differentiation because they are difficult to imitate.  You also create the potential to  link the channel in the customer’s mind with actual product or service offerings.

Address These Four Initial Multi-Channel Questions 

Developing a multi-channel strategy requires that you:

1. have a thorough understanding of your channel economics,
2. use incentives to guide customers to the right channels at the right times,
3. provide a safety net to control any backlash by customers and channel partners, and
4. develop a communication program that inspires its internal and external constituencies.

When considering a multi-channel strategy you should address the following four questions:

1. What is the optimal mix of channels?
2. When should salespeople be dispatched to close deals face-to-face or use outbound telesales channels to generate opportunities?
3.  In what circumstances does it make sense to reach out to customers exclusively online (via chat/email/ etc.)?
4. Which service inquiries from high-value customers merit the attention of sales representatives rather than a lower-cost interactive voice-response system?

It’s important to remember that customers often prefer some channels to others for certain transactions, and specific channel combinations often engender loyalty or create cross-selling opportunities. Conduct customer research and using statistical analysis to identify preferred channel combinations by segment and persona.

Manage the Channel Transitions

Incentives that customers value highly and receive ONLY when they use the preferred channel and fees or reduced services (think about the fee airline charge for reservations by phone vs. those you book online) will help migrate customers to the channels that help you achieve your cost-to-serve targets. It’s critical that incentives be used properly and that there be a well defined transition plan.

Managing the transition requires getting the timing right, providing safety nets and good communication. Once the migration starts, its participants need different forms of support, such as specialized training, pilots to introduce the new approach, and realigned commission structures. Initially, customers may require access to touch points of both the old and the new channels and hands-on training in the new one (remember all the staff training us on self-check-in at the airport?). Channel partners will also need support. The migration will occur more quickly if everyone, employees, customers, and channel partners, understands the value.

FAQ:

• What is the optimal channel mix?
• When should salespeople engage face-to-face or via telesales?
• When is exclusive online engagement appropriate?
• Which high-value customer inquiries warrant personal attention versus automated systems?

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