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Retail: Multichannel Customers Are More Profitable, Analysts Say
CRM Magazine
September 08, 2004
Multichannel customers in the retail sector are significantly more profitable than single-channel ones, according to a new Aberdeen Group survey.
The report, "Multichannel Retailers Must Integrate Their Enterprises," claims that the conventional wisdom regarding multichannel customers has been off target: Competitive pricing, the old theory went, meant that online consumers were less profitable, and should be avoided. But rather than shunning online consumers, retailers have flourished by including them in a clicks-and-mortar-and-mailing mesh of channels. In fact, 60 percent of retailers see more profit from multichannel customers than from their single-channel counterparts. And the difference is significant: on average, those multichannel customers are 20 to 25 percent more profitable, according to Paula Rosenblum, director of retail research at Aberdeen Group and coauthor of the report.
According to Rosenblum, multichannel retailing has simply become a fact of life over the past decade. "Only 9 percent of the companies we surveyed sell through a single channel," she says, adding that Internet sales are going up at a compound rate of 35 percent a year.
Rosenblum says the survey revealed a troubling lack of self-awareness in the retail sector, with 28 percent of respondents claiming they didn't even know which kind of customer was more profitable. But the ignorance is no surprise, Rosenblum says. "With retail in particular, things that you think they've overcome, they haven't overcome."
"All the data we have says that the multichannel customer is more profitable," Rosenblum says. And although it doesn't matter which the dominant channel is, "the phenomenon of 'order online and pick up in the store' appears to be the most profitable," she says.
The multichannel customer is simply less focused on the price tag, Rosenblum says. "Retailers have gotten themselves in an awfully bad situation driving everything around price, but the multichannel shopper isn't as price-sensitive.... This whole price-sensitivity thing is a trained behavior--and the multichannel customer is getting untrained, because it's tiring. This is solely about convenience." Competing solely on price, she says, is "tired": Consumers just want to get a good deal, and aren't bothered by minuscule differences.
That makes customer service the main differentiator in multichannel operations, Rosenblum says. "The multichannel customer wants convenience. They want to get it where they want to get it, and they want to return it where they want to return it--and they don't care about your separated systems. Everything is fungible at this point. What [retailers] have to do is start being brand managers and not channel managers. The challenge is organizational."
Maintaining that convenience for the customer requires efficiency in the enterprise, and companies serving multichannel customers have hurdles to overcome, according to Aberdeen. Their top challenge, the report finds, is the need to better integrate order and inventory management processes. Once retailers can nail that part of the equation the rest will fall into place, Rosenblum says: Multichannel customers "aren't tolerant of mistakes, [and] they're discriminating--they're not particularly loyal, but if you provide it to them, they'll take the path of least resistance."
Chris Selland, Aberdeen's vice president of sell-side research and the report's other coauthor, adds that "best-in-class retailers are moving beyond [multichannel marketing] to multichannel fulfillment. This is a key competitive differentiator: The companies that do not just market to customers, but fulfill demand and provide postsales service--when, where, and how the customer demands it--will be those that excel."
Search Engines Grow in Popularity, Importance
New surveys and traffic data confirm that search engines have become an essential and popular way for people to find information online. A US phone survey of 1,399 Internet users between May 14 and June 17 by the Pew Internet & American Life Project shows that 84% of online Americans have used search engines - that translates into more than 107 million people. On any given day online, more than half those using the Internet use search engines. And more than two-thirds of Internet users say they use search engines at least a couple of times per week.
Furthermore, there is a substantial payoff as search engines improve and people become more adept at using them. Some 87% of search engine users say they find the information they want most of the time when they use search engines.
Search Engine Use Data (PDF)
NSGA Survey Ranks The ‘Most Active’ US States; Michigan Is No. 1
Among the 11 largest states, making up more than 56% of the U.S. population, residents of Michigan are the most active, according to an analysis of data contained in “Sports Participation in 2003 – State-by-State,” a report published annually by the National Sporting Goods Association (NSGA).
NSGA’s Sports Participation index indicates how likely it would be for a person in a given state to participate in a specific sport or activity. In the NSGA Index, the national average for each sport or activity equals 100. The index is created by dividing a state’s percentage of participants in a particular activity by its percentage of the U.S. population and then multiplying by 100.
Michigan, for example, has 7.9% of the total participants in golf and 3.6% of the U.S. population. This yields an index of 209, indicating residents of Michigan are more than twice as likely to play golf than the national average.
Among the most populous states, Michigan has NSGA Participation Indices of 100 or more in 24 of the 34 activities surveyed for 2003. Those sports/activities are backpacking (115), bicycle riding (132), billiards/pool (130), boating (power/motor) (137), bowling (148), camping (140), exercise walking (100), fresh water fishing (139), football (tackle) (126), football (touch) (100), golf (209), hunting w/firearms (146), inline skating (124), paintball (114), running/jogging (127), skiing (downhill) (113), snowboarding (122), soccer (111), softball (147), swimming (115), target shooting (121), tennis (103), volleyball (105), and work out at club (116).
California (11.0% of the U.S. population) and North Carolina (3.0%) ranked second with 22 participation indices of 100 or more, followed by Illinois (4.4%) with 20, New York (6.7%) with 19 and New Jersey (3.0%) with 18.
In compiling this study, NSGA analyzed state-by-state participation for the following 34 activities: Aerobics, backpacking, baseball, basketball, bicycling, billiards/pool, boating (power), bowling, camping, exercise walking, exercising w/equipment, fishing (fresh water), fishing (salt water), football (tackle), football (touch), golf, hiking, hunting with firearms, mountain biking (off road), paintball games, roller skating (inline), running/jogging, scooter riding, skateboarding, skiing (downhill), snowboarding, soccer, softball, swimming, target shooting, tennis, volleyball, weightlifting and work out at club.
A chart showing the NSGA Participation Indices for the 11 most populous states, as well as a chart showing the five most popular sports/activities for each of the 48 contiguous states, will be posted on the NSGA website, www.nsga.org.
The survey is available to NSGA members for $235.00. Non-members pay $325.00. For more information, contact the NSGA Research Department, 847-296-6742; e-mail: info@nsga.org.
Water Sports "Target Markets" Defined By NSGA
Sporting goods association offers robust data on 9 boat-based activities
by Greg Proteau, Senior Counsel
greg@homeportcommunications.com
One of the greatest challenges facing marine firms is how to cost-effectively market niche-specific products and services to the right customers and prospects. The generic boating enthusiast is just about everybody in the U.S. so you can assume any exposure will attract at least a few eyeballs.
But an annual, quantitative Sports Participation study undertaken by the National Sporting Goods Association's (NSGA) can help drill down into ten water-based sports (nine that use boats in the process) to help identify pockets of greatest opportunity. Water sports covered are power boating, canoeing, kayaking/rafting, sailing, scuba, snorkeling, surfing, water skiing and fishing.
Information summarizes gender, age, presence of children, income and market size, region, ethnicity, crossover correlation, individual tables by sport and individual sport activity by state. The 109-page report costs $150, though some highlights are available on the NSGA web site.
Additional details are available from Tom Doyle, the VP of Information Research at NSGA, (847) 296-6742, Ext. 107, or e-mail: tdoyle@nsga.org.
Some interesting facts and figures:
- Highest participation by men: Windsurfing (83%)
- Highest participation by women: Sailing (49%)
- Most educated: Windsurfers (55% are college grads)
- Richest: Snorkelers (48% have household incomes of $75K-plus)
- Top region for water sports participation: South Atlantic (18%)
- Number of one-day-only water sports participants: 17.4 million
One of the most interesting aspects of the study is identification of "crossover" activities where participants of one sport engage to varying degrees in others. As might be expected, 66% of power boaters also water ski and 44% of snorkelers also scuba dive.
But some unexpected alliances occur, such as 55% of canoeists are anglers and 7% of scuba divers also sail. This information can be used to target current participants or those leaning toward involvement in crossover sports. It can also provide extra leverage with promotional or advertising dollars targeted to mutually enjoyed activities.
