February 19, 2008

The Role Of A Website Inspired Store Purchase (WISP) And Multichannel Forensics

Industry pundits like to point to Circuit City and their "buy online, pickup in store" strategy as a glowing example of customer-friendly multichannel synergy. Surveys of hundreds of consumers seem to validate these statements.

But how do you know if this strategy is right for your business? In other words, is this really the way a multichannel customer shops your brand?

In reality, multichannel retail store leaders have to answer fundamental questions.
  1. Do customers use my website primarily for research purposes, or for E-Commerce?
  2. If customers prefer to use my website to facilitate store purchases, will they ever use the website for E-Commerce?
A few retailers do a nice job of linking website visitation behavior with store purchases. Those retailers are able to see a new channel ... "website inspired store purchase". Customers who purchase merchandise in a store within seven days of researching a product online are classified as a "website inspired store purchase" buyer.

In this framework, you have three channels:
  • E-Commerce.
  • Website Inspired Store Purchase.
  • Retail/Store Channel.
The intriguing channel, of course, is the "website inspired store purchase" channel. We want to understand what these customers do after buying from this new channel. Do these customers become loyal e-commerce buyers? Do these customers shop exclusively in stores? Or do these customers stay in this "new" channel?

Multichannel Forensics are ideally suited for answering this question.

Let's take a look at a retailer that manages these three channels:

Migration Probability Table

E-Commerce WISP
Repurchase Rate: Total 38.0% 65.0% 53.0%

E-Comm. 32.0% 18.0% 4.0%

11.0% 43.0% 9.0%

Retail 2.0% 24.0% 49.0%

Repurchase Index: E-Comm
27.7% 7.5%

WISP 28.9%

Retail 5.3% 36.9%

Classification: E-Comm
Acquisition / Equilibrium

Retention / Equilibrium

Hybrid / Isolation

Let's review this study, one channel at a time.

The E-Commerce channel is in "Acquisition / Equilibrium" mode. This means that for the E-Commerce channel to grow, new customers have to constantly be recruited. E-Commerce customers are not likely to shop retail on their own. Instead, the E-Commerce customer is willing to use the website to research product, then buy it in the store. The logical path to get this customer to buy in stores is to use the website to educate the customer.

The "website inspired store purchase" channel (WISP) has interesting dynamics. These customers are the most loyal to the brand, and therefore, are most important to management. Pay close attention to the repurchase index information. WISP customers are more likely to migrate to retail purchases than they are to migrate to E-Commerce purchases. Over time (and this will take a long time, given index information in this example), this segment of customers will become self-sufficient retail customers who become less and less likely to use the website.

Now take a look at the retail customer who doesn't use the website. This customer is in "Hybrid / Isolation" mode. This customer does not want to use the website, for research purposes, or for E-Commerce. This segment either represents an opportunity, or a strategic inflection point. Management might view this as an opportunity to encourage more customers to research the website, might view this as an opportunity to improve the website. Or management might believe that a large group of customers are simply unwilling to use the website, allowing the website to facilitate E-Commerce transactions as a first priority.

What we can see is an (at this time) irreversible path that customer follow:
  • E-Commerce -----> WISP -----> Stores
E-Commerce loses customers to WISP status.

WISP customers will shop E-Commerce, and really like shopping Stores.

Store customers do not go back.

So, the natural customer progression results in customers becoming store customers. Leadership can choose to enable this evolutionary behavior. Leadership can try to change the marketing and website strategy to change customer behavior.

The next step is to run five year simulations on different business strategies, understanding which strategies yield positive outcomes.

We spend too little time talking about the role of a website in a retail business. We think customers use a website in a "multichannel" manner, using the website to buy in stores. In reality, life isn't this clean. Each retailer that chooses to run this analysis will obtain different results, results that often buck conventional wisdom. But by and large, Multichannel Forensics teaches retailers that the primary objective of a website in a retail brand is to educate customers. The secondary objective of a website in a retail brand is to facilitate E-Commerce. And increasingly, a third objective of a website is to entertain a customer. Use Multichannel Forensics to allow your customer to help you decide what the primary objective is of your website.