November 13, 2018

Omnichannel Theory

Omnichannel Theory / Customer Experience Theory is predicated on the hypothesis that when a customer does "more" the customer becomes "more" valuable.

The data used to support the theory is highly fraudulent, to say the least. Typically, those promoting the theory average historical spend for all customers buying from one channel (i.e. $100) and compare it to average historical spend for all customers buying from multiple channels (i.e. $900). Those who promote the theory look at the ratio of spend (900 vs. 100) and say that the omnichannel buyer is worth 9x as much ... and then paint a picture where the "brand" is encouraged to convert as many customers as possible to as many channels as possible because the opportunity is a 9x increase in customer spend.

We know the measurement strategy is highly flawed ... just look at Macy's, who have suffered through a 10% sales drop in the past few years while touting their omnichannel strategy. If the strategy worked, sales would have increased dramatically.

Tomorrow I'll explain a few of the metrics in the attached table. I analyzed customers who purchased up-to-five times historically, with at least one purchase in the past year. The story told in the table directly contradicts what those who promote omnichannel theory want you to believe, but directly support the fact that omnichannel brands don't enjoy sales increases.

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