February 19, 2008

Multichannel Forensics: Calculating Migration Mode

Before we go into various studies, we need to know how to calculate the migration mode of each product, brand, or channel.

Here's an example for the online channel of a multichannel retailer.

Step 1: Calculate the annual repurchase rate for online customers, across all channels. Answer = 55%.

Step 2: Calculate the annual purchase rate for online customers within each channel.
  • Total Company = 55%.
  • Catalog Channel = 5%.
  • Online Channel = 35%.
  • Retail Channel = 30%.
Step 3: Calculate the purchase index for each channel, measured as the channel purchase rate divided by the total company purchase rate. Though we will calculate the metric for the online channel, we're only interested in the metric as it relates to the catalog and retail channels.
  • Catalog Channel = 5% / 55% = 0.091.
  • Online Channel = 35% / 55% = 0.636.
  • Retail Channel = 30% / 55% = 0.545.
Step 4: Classify each metric into isolation mode, equilibrium mode, or transfer mode (oscillation mode occurs when two channels transfer to each other).
  • Isolation Mode = Index between 0.00 and 0.20.
  • Equilibrium Mode = Index between 0.20 and 0.50.
  • Transfer Mode = Index greater than 0.50.
  • Catalog is in Isolation with the Online Channel.
  • The Online Channel Transfers customers to the Retail Channel.
Given the dynamics of this business, customers ultimately migrate from the website to retail stores.