Asim Ansari, Carl F. Mela, and Scott A. Neslin
Executive Summary
As multichannel distribution becomes increasingly prevalent,
customers face an expanding array of purchase and communication options. For example, online sales are expected to increase 20% in 2006 to $211.4 billion, doubling the total revenue in 2003. As such, multichannel customer management is becoming a pivotal component in firms’ marketing strategy. Despite this trend, the authors are aware of no empirical research that details (1) how customers migrate between channels in a multichannel environment and (2) the role of marketers in shaping migration through their communications strategy. Although researchers are beginning to recognize the considerable economic and behavioral ramifications of customer channel migration, many important questions remain:
- What determines whether customers migrate to the Internet, and what is the overall effect of this channel on demand in the long run?
- What are the short- and long-term effects of channel usage on channel selection and demand? For example, do customers develop “channel loyalty” according to their channel usage experience?
- What is the role of marketing communications in channel migration? Does marketing affect channel selection, demand, or both?
- Do customer differences affect the channel migration process, and if so, how?
- The authors develop a model of customer channel migration and use it to (1) investigate the general nature of channel migration and (2) diagnose the migration process that occurred for a major, multichannel retailer between the years 1998 and 2001. They integrate several factors into their model, including the following:
- A model of purchase volume and channel selection;
- The effect of marketing and channel experience on purchase volume and channel selection;
- Customer heterogeneity in marketing, experience effects, base purchase volumes, and channel preference; and
- Controls for observed customer characteristics, seasonality, and market trends.
The authors find both a negative long-term association between Internet usage and sales and limited loyalty effects for purchases made on the Internet. They conjecture that migration to the Internet lowers switching costs, making it easier for consumers to compare products across firms. In addition, Internet interactions decrease the likelihood that users interact with people on the telephone or in the store. The attendant reduction in personal service could lead to lower loyalty. Thus, the notion that migration is unqualifiedly positive because it lowers costs and increases demand should be tempered by the admonition that it can be negatively associated with long-term purchase patterns.
Another novel result is the finding of decreasing returns for communications in the purchase volume model. Because e-mails are virtually costless, it is tempting to think that the optimal e-mail strategy is to e-mail customers daily. However, total response can be higher by sending e-mails intermittently and getting their full impact than by continually e-mailing and diminishing their effectiveness. Thus, firms should assess which types of customers will be unreceptive to the Internet and to the company if they are channeled to the Internet.
Biography
Asim Ansari is Professor of Marketing at Columbia University. Hereceived his PhD in Marketing from New York University. His research focuses on customer relationship management and the use of the Internet for targeted product recommendation and customization of communications. His methodological expertise is in the Bayesian modeling of customer preferences. His research on these topics has appeared in many marketing and psychometric journals. He is an associate editor of Quantitative Marketing and Economics and is on the editorial review board of Journal of Marketing and Marketing Science. He has received the Paul E. Green award from the American Marketing Association for his research on e-customization.
Carl F. Mela is Professor of Marketing at Duke University. He received his PhD from Columbia University. Before Duke, he held management positions at Hewlett-Packard, Hughes, and Proxima. His research focuses on the long-term effects of marketing activity, customer management, and the Internet. Articles along these lines have appeared in Journal of Marketing Research, Marketing Science, Journal of Marketing, Harvard Business Review, Journal of Consumer Research, and other journals. Mela has received nine best-paper awards from the Marketing Science Institute, INFORMS, the American Marketing Association, and other professional organizations. He is an associate editor for Marketing Science and serves on the editorial boards of Journal of Marketing, Journal of Marketing Research, Marketing Letters, Quantitative Marketing and Economics, and Journal of Public Policy & Marketing. His home page is located at http://faculty.fuqua.duke.edu/~mela/bio.
Scott A. Neslin is Albert Wesley Frey Professor of Marketing at the Tuck School of Business, Dartmouth College. He received his Ph.D. in Management from the Sloan School at Massachusetts Institute of Technology. His research interests include database marketing, sales promotion, and market response models. He has published articles on these topics in journals such as Marketing Science, Journal of Marketing Research, Management Science, and Journal of Marketing. He is coauthor with Robert C. Blattberg on the book Sales Promotion: Concepts, Methods, and Strategies, published by Prentice Hall, and, more recently, author of the monograph Sales Promotion, published by the Marketing Science Institute. He is an area editor for Marketing Science and is on the editorial boards of Journal of Marketing Research, Journal of Marketing, and Marketing Letters.
Journal of Marketing Research, Vol. XLV, No. 1, February 2008
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