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Multichannel marketers get the message

ORIGINALLY CONSIDERED a threat to traditional retailers, online companies took an early advantage with their ability to quickly adopt technologies that offer consumers immediacy and interactivity. But multichannel retailers--those that derive significant revenue from multiple shopping channels--appear poised to win the customer loyalty war.

Take Eddie Bauer. This classic "brick, click and flip" company, which lets customer shop from physical stores, Web sites and catalogs, says its multichannel shoppers spend more and have greater loyalty than its single-channel shoppers.

A recent study by Jupiter Communications confirms this finding: Multichannel shoppers, it says, spend 30% more than their single-channel counterparts.

Good news, right? Well, it's a start. Gaining greater customer loyalty demands more than adding another channel to push product. It requires an understanding of customer behavior and the ability to recognize and reward the best customers for their loyalty regardless of when, where or how they shop.

This is where most multichannel retailers have still more potential. The same Jupiter study, in fact, reveals that 76% of all retailers are unable to track customer behavior across all channels.

Poised for Success

Already established and skilled in the ways of consumer retail, multichannel marketers are armed to succeed where the majority of Internet pure-plays struggle:

* Brand awareness and image. For years, big brand marketers like Eddie Bauer and Sears have instilled an image of who they are and what they stand for in the eyes of key consumer audiences. It's an obvious advantage over dot-coms that must build consumer awareness and confidence from scratch.

* Customer databases. Most multichannel merchants have been building their customer databases for years. Although holes still exist, they're less likely to be mentally consumed by acquisition and mote likely to be cognizant of customer retention and loyalty. On the other hand, most dot-coms are still in hot pursuit of first-time visitors.

* Merchandising skills. Multichannel retailers know how to present and merchandise goods in an exciting way. They have efficient fulfillment systems and delivery processes in place. They understand inventory management, markdowns and cross-merchandising. And they long ago invested in systems and processes to improve their back-office logistical and accounting functions. E-tailers--the ones that survived the nagging neglects in customer care, fulfillment and delivery systems--must prove their reliability now or they'll go under.

* Customer service savvy. In general, multichannelers are skilled in customer service. Some of them, like Nordstrom and Lands' End, are even legendary for it. Plus, multiple channels mean many ways to handle customer service, deliveries, returns, data gathering...and cross-selling.

In addition to these qualifications, multichannel marketers are gaining human capital at the expense of the Web stores. Each time a dot-com hits the skids, talent hits the streets. The highly sought-after technophiles are less likely to be in short supply.

Finally, although many shot themselves in the foot early on by separating their Web sites as business units from their stores and catalogs, multichannel merchants are slowly integrating all their channels. Progressive firms like REI, a Seattle-based merchant of outdoor gear and apparel, and Boots, a U.K. drug store chain, even have Web-enabled kiosks in their stores, letting buyers shop both ways simultaneously.

A Tall Order

For all their advantages, multichannelers still have their work cut out for them, including consolidating customer transaction data across all channels.

Where the e-store almost always knows its buyers and has the potential for a direct link to preferences, profiles and clickstreams, the real-world store does not. Some e-tailers have customer databases built on their private credit card base, while others have implemented loyalty programs that allow the best customers to identify themselves. Catalogs may have the greatest advantage over physical stores because they have a direct channel. But it's often too difficult even for them to ascertain if their buyers are shopping through other channels.

Blame it on legacy systems or technology issues if you will, but the bottom line is that the invisible customer still exists.

The Missing Piece

Loyalty programs benefit traditional retailers (identifying, maintaining and increasing yields from the best customers) the same way they benefit multichannel merchants--and then some.

A loyalty program by its very nature will allow integration of customer databases across all channels--to reward and recognize the best customers regardless of where, what or when they buy.

Retailers operating in several channels will increasingly use their Web sites as an outlet to communicate frequent-shopper-program data. They'll create loyalty programs that offer members rewards or promotional currencies every time they shop--whether they're using cash, bank cards, store cards, checks and whether the transaction is made in the store, via catalog or online. At threshold levels--carefully calculated based on lifetime value and loyalty program investment returns--those points will turn into tangible rewards for members to use when shopping any of the three channels.

A host of other loyalty program opportunities can drive cross-channel sales and customer interactions:

* Tiering, a common loyalty program feature that segments members based on annual value, can be used to encourage customer spending.

* Bonuses, based on shopping in certain channels, departments or during specified times of the week or year, could change buyer behavior.

Cross-channel marketers have additional means and opportunities to get in touch with customers and prospects more often. These can include loyalty program communications as part of their catalog distribution, and certainly as part of their online channel in both e-mail and Web pages. Opt-in, permission-based marketing is at the core of a loyalty program where customers want their behavior tracked because of the inherent value derived through reward and recognition.

Saks Fifth Avenue uses its SaksFirst member site this way. While non-members have online access to program details and an application to join, a password-protected area of the site allows each member complete access to his account information including point balance and order status and history.

No Difference

Successful multichannel retailers know that it doesn't make any difference if their customers buy from physical stores, Web sites or catalogs.

Ultimately what creates success is the fundamental understanding that there's only one customer. And that means all of a company's thinking, all its systems and certainly, all of its play in customer loyalty must be based on this.

Michael T. Capizzi is vice president of marketing at Frequency Marketing Inc., Cincinnati.