Eugene Sivadas, Professor of Marketing, University of Washington, Tacoma Sivadas@uw.edu
Cindy is a 22 year old recent college graduate who is shopping for a dress watch to wear at work. She walks into her favorite department store and tries on various watches and settles on one she likes. She wears the watch and takes a picture with her smart phone and posts it on Instagram and shortly begins to receive feedback and comments from those in her large social network. She also uses her smart phone to look up consumer and product reviews on the watch and learns that the watch is available in additional colors that are more to her taste than the one on display at the department store and it is available for $50 less on another online e-commerce site. The comments she receives from friends are complimentary and consumer reviews are favorable. However, she decides to purchase the watch from an online site since it costs less and the department store she was in was not willing to price match.
Much of marketer effort focuses on understanding why people buy, creating products and services consumers want, and persuading them to buy, using the state of the art communication tools. In contrast, the focus of marketing channels or place (one of the 4 P’s in the classic marketing framework comprising product, price, promotion and place) is on how people buy. The goal is to design efficient and cost-effective systems that firms can use to deliver products and services to consumers or end-users so that the consumer can buy when, where, and using their preferred mode be it in a retail store or online. The more limited a product’s distribution or the more hasslesome it is to buy a product, the less accessible it is to consumers. Consequently, sales suffer.
In recent years, those tasked with designing marketing channels, be they manufacturers or retailers have had to grapple with the pronounced shift from multi-channel to an omni-channel world. While some have tended to use multi-channel and omni-channel interchangeably, they represent distinct approaches. A multi-channel approach implies that a product or service is available through multiple diverse channels. However, these channels operate independently and act to maximize their own individual incentives. Each of the operations is siloed and there is minimal coordination and communication between and across channels. This type of channel configuration creates customer frustration and confusion as each channel (for e.g., a store and store’s online e-commerce website) may utilize differing policies, pricing, and even stock different merchandize. In contrast, an omni-channel strategy necessitates a high level of coordination across channels such that they speak in unison to create a seamless customer experience.
An omni-channel system implies that a product or service is available through multiple channels but also the channels are well-integrated in that the consumer will have a seamless experience as they go back and forth between channels. This would mean that store and online e-commerce operations of a retail firm have to be well integrated and silos between them would have to come down. For example, one could purchase an item online and pick it up or return it in the store. The online website would clearly indicate if an item was in stock at a nearby store for instant pickup if a consumer did not want to wait. Similarly, a retail store clerk could provide information on online options and provide product information.
The online site could provide much more detailed product information including the ability to compare features across various models and incorporate consumer and expert product reviews as well. A customer could use the physical store as a showroom and inspect the product but have it delivered to their home. Personalized coupons could be sent to consumers incentivizing them to visit a store or shop online. The online site could incentivize consumers to visit a physical store if there was nearby with the hope that once inside a store there would be more impulse purchases as well.
The omni-channel design would have to provide incentives to the physical store operations and online operations to cooperate and would have to devise mechanisms to give credit to both operations for a sale. The omni-channel system recognizes that customers engage in cross-channel shopping. For example, a consumer may first research a product online and then buy it in a physical store (webrooming) or alternately inspect a product in a store but then buy it online (showrooming). These consumer actions are a source of conflict with the goals of individual channels.
For example, the brick-and-mortar store where the consumer goes to physically inspect a product does not benefit from the actual purchase by the consumer online and ends up subsidizing the operation of the online store by enabling the consumer to inspect the product and even seek input from salespeople on the floor. While inside a retail store, consumers may go online using their smart phones to do price comparison shopping and read up consumer reviews for a product they are considering buying. They could even seek input and suggestions from those in their social network. Technically speaking, they could also hold a chat session with the online store if it offers a live representative to gather additional information about the product.
The move towards omni-channel has been facilitated by explosive growth in smart phones and e-commerce. The widespread utilization of smart phones and the Internet has changed how consumers research for and purchase products and the manner in which they share information with others in their social networks or through various review sites. No doubt the power of word-of-mouth is vastly greater than in years past. In the pre-Internet age, consumers were more constrained in their ability to share word-of-mouth information. They could, practically speaking, share word-of-mouth be it favorable or negative with a limited number of people be it co-workers at a water cooler or during lunch break or with their neighbors or with a larger group at a social gathering if the occasion was suitable. In the age of social media, consumers can share their experiences with a large number of people by simply posting on their social network. They could even go to review sites such as yelp and share their experiences with complete strangers.
The shopping process has also completely changed in the omni-channel age. Take for example, the automobile buying process of the past and of today. In the past consumers would have to physically visit a nearby dealership and deal with aggressive salespeople to obtain information on a car and rely on a few magazines to get expert reviews and pricing information. Consumers of today walk into a dealership armed with detailed information on a vehicle and sometimes may have already negotiated a price with a salesperson online. Consumers can use online tools to compare features across cars (such as legroom in the back seat and boot space). They can watch videos online that give them a 360 degree view of the automobile and even obtain information on the average price paid by other consumers in their zip code for the same make and model. They can even have multiple dealerships within a larger geographic area bid for their business by filling out a simple form and obtain the best price. While the consumers may be more empowered in the omni-channel age, marketers also have reams of information on most consumers—the consumers who are digitally connected and are actively participating in these marketing channels.
Thanks to the greater amount of data on each customer acquired by tracking consumer visits, browsing behavior, and purchases, and the ease of deploying sophisticated consumer analytics, marketers not only can develop personalized and highly relevant messages to consumers but also learn about their purchasing decision-making processes during the sales negotiations. The types of messages a consumer sees and even the amount of promotional incentive sent to a consumer is customized based on their browsing and purchase habits. This of course raises concerns about privacy and adds new ethical issues about marketing practices. The emerging information landscape makes it imperative for marketers to be responsible in safeguarding consumer privacy and data that they have gathered on each consumer. The readily available just-in-time analytical data on consumers obviously requires the marketing profession to consider what best practices are relevant for ethical conduct of business with consumers in this wide open information ecosystem.
Another challenge for marketers is that pricing has become more transparent and the ease with which marketers could charge different prices through different channels or to customers in different countries is becoming more difficult. So transparency has become a central theme of the omni-channel age if the manufacturer or retailer wants to remain credible in the consumer market.
Physical store retailing has two major constraints. One is the total size of the store which are often times located in high rent areas and second is the shelf space available for displaying products within the store. Physical store retailers will lose money if products sit on the shelf and do not turn over and hence by necessity have to try to stock items that are more likely to sell quickly. Marketers operating in the online space are freed from the constraints of store size and shelf space. This potentially enables them to stock a wider array of products online than in a traditional store. They could even target a different type of audience (more upscale or downscale) in their online ventures. However, targeting several target audiences at a time may create consumer confusion and affect brand image. To handle this complex situation, communication strategies would have to be fine-tuned to tackle with the intricacies of each consumer groups’ purchasing behaviors.
It is to be further noted that e-commerce has taken greater roots in certain sectors such as travel and hospitality, books, music, and insurance. In contrast, while growing, online buying of groceries remains a small proportion of overall grocery sales. One challenge is that e-commerce purchases are not as well suited for items that are generally low in cost but bulky and costly to ship due to their weight such as cement or rice. Despite innovations in shipping infrastructure, fresh goods requiring refrigeration still struggle to capture volume sales to distant locations.
As marketers are trying to develop and fine-tune their omni-channel strategies, these fields offer a vast array of research opportunities for business and marketing communication researchers. At the heart of a successful omni-channel strategy is providing the consumer with a seamless experience while they move back and forth between various channels even during a single purchase transaction. As such marketers have to break down silos and firewalls among the various channels and enable smooth communication to prevent communication breakdowns between and among channels. It requires a deep understanding of customer journeys and the path they take as they traverse from pre-purchase to purchase and returns. An inevitable by-product of omni-channels is that marketers have to manage relationships between the various channel actors (be it between store and online operations or a manufacturer’s relationship with multiple retailers online and offline that carry their brands and overcome the challenges of turf battles between these entities—for example physical retailers being affected by showrooming and put incentive structures in place that motivate channel participants to communicate and cooperate.
References
Palmatier, R,W., Sivadas, E., Stern, L.W., & El-Ansary, A.I. (2019). Marketing Channel Strategy: An Omni-Channel Approach. (9th ed.). Philadelphia, PA: Routledge, Taylor & Francis Group.
Beck, N. & Rygl, D. (2015). Categorization of multiple channel retailing in multi-, cross-, and omni-channel retailing for retailers and retailing. Journal of Retailing and Consumer Services. 27 (November), 170-178.
Verhoef, P.C., Kannan, P.K., & Inman, J.J. (2015). From multi-channel retailing to omni-channel retailing introduction to the special issue on multi-channel retailing. Journal of Retailing, 91 (2), 174-181.
Sushil Oswal catches Eugene Sivadas for a brief Q&A on omni channel strategy’s’ relevance for Business and Marketing Communication professionals and instructors
Sushil: Would you please introduce yourself, Eugene? What’s your academic and professional background?
Eugene: I hold an undergraduate Honors degree in Economics from the University of Delhi in India, a Master’s degree in Advertising from the Indian Institute of Mass Communication, a Master’s degree in Communications from Emerson College and a Ph.D. in Marketing from the University of Cincinnati. After my first master’s degree I worked in advertising media planning with a MNC ad agency in India and subsequent to my Ph.D. I was a consultant with another multinational consulting firm in the USA. I have taught at Emerson College and Rutgers Business School prior to joining the faculty of the University of Washington, Tacoma’s Milgard School of Business. My research interests are in marketing channels and services marketing area and I chaired the Special Interest Group for Interorganizational Relationships (Channels and Business-to-Business Marketing) at the American Marketing Association for 3 years.
Sushil: What research projects do you have going at this time and what classes do you teach?
Eugene: In addition to the introductory marketing class, I also teach classes in International Marketing and Marketing Channels. I have also been an academic administrator for the past 11 years including 2 years as associate dean which took up a bulk of time. In terms of research projects, I have projects on franchise dissolution (within the channels domain) and customer engagement (within the services domain).
Sushil: What is the history of the development of omni-channel strategy? Did it start from the industry side, or was there some academic research that initiated this trend? Who were the early actors in this area?
Eugene: It is interesting that you bring this up. For our book, we did a key word analysis from search engines to see how often omni-channel retailing was mentioned. The phrase was a mere blip in 2004-2010 and started gaining some steam in 2014 and there was a pronounced jump 2016 onwards and the use of the term exploded in 2017. I would say that it began as an industry phenomenon as manufacturers and retailers decided to make sense of how consumer shopping behavior changed as a result of developments in technology and how marketers could optimize diverse channels into a unified whole. Initially when e-commerce took off in the 1990s several researchers working on direct and interactive marketing focused on making sense of consumer behavior in this area and designing effective channels. The debate then focused on pure play Internet retailers such as Amazon versus stores with a strong physical presence as to whether these retailers with their superior brand awareness and supply chain should be present online.
Then the focus began to shift to Multi-Channel retailing where the research agenda was set up by some leading scholars like Scott Neslin and Peter Verhoef and academic researchers including me and my co-author Rob Palmatier have since been among those taking the lead in the academic discourse on omni-channels. I would like to note that when I was a doctoral student in the 1990’s, some marketing channels researchers such as my advisor Bob Dwyer did work on Direct Marketing as well and to some degree omni-channel marketing is a marriage of these two research streams.
Sushil: How can marketing and professional communication researchers interested in engaging with omni-channel work make their way into this new area? Do you have some suggestions, or leads for launching research in this direction?
Eugene: The omni-channel field is fertile ground for research both behavioral and highly mathematical. The mountain of data collected by omni-channel marketers lends itself to building sophisticated models. It is a good context to study decision-making, customer journeys, influence of online reviews on purchase decisions, influence of social media on purchase decisions to name a few. The field holds promise for privacy researchers and pricing researchers who may want to study the effects of privacy or price transparency on firm profitability and consumer decision-making. Retail store design is another area ripe for research, what will the future of the retail store be like. As we know many malls are closing or are faced with high levels of vacancy. So instead of renting large retail space will the store of the future be a showroom where consumers can go to touch and feel products but then have it shipped to their homes.
We also see a trend of online only players like Amazon opening up retail stores in malls, so are online only players feeling the need to have physical presence as well in the omni-channel age. Within the field of organizational communication, there are plenty of opportunities that center around how firms can encourage better coordination, cooperation, and communication across the various channels. Also, there could be research on omni-channels in specific verticals like health care and how to integrate e-health care with actual patient visits and incorporating the Internet of Things (apple watch, fitbit) into the overall health monitoring. One of the chapters in our book focuses in part on omni-channels and the world’s poorest consumers living mostly in remote far flung villages. I recall reading that there are more mobile phones in India than there are toilets. A good portion of the world’s population has their first access to the Internet through their mobile phones and as such it may be a fertile area of communications research. Also, given your interest in disability studies, I do believe that the omni-channel marketing’s effect on the quality of life of the disabled population does merit research.
Sushil: What possibilities are there for the practitioners in the business and professional communication fields to do design or consulting work in omni-channel strategy area?
Eugene: As I mentioned earlier, design professionals can focus on designing the store or website of the future. Some retailers are even struggling with the basics, online sites have to be optimized for the web and for the mobile platforms. Other consulting opportunities would be in understanding customer journeys and making the customer experience seamless as consumers make a purchase. Also, the adoption of omni-channel varies across industry sectors and some industry sectors would have a greater struggle with incorporating omni-channel experiences including I might add higher education.
Sushil: Moving to the academic side, how would you incorporate omni-channel theory in business college communication courses and how would you engage students in some hands on projects?
Eugene: I would say that the initial emphasis would be on classes on retailing and advertising. Since the omni-channel system demands a seamless communication experience, projects could center on evaluating the user experience. Other projects could be more narrowly focused on areas like what steps could small businesses take to provide an omni-channel experience or improving the omni-channel experience in various specific industries.
Sushil: Does your textbook have some exercises, or assignments that could be adapted for introducing omni-channel concepts to business and professional communication students who might not have a background in marketing?
Eugene: The book (please see publisher link) is very readable and students without a background in marketing should be easily able to digest the material. For example, when we discuss the role of omni-channels in franchising, we go through the basics of franchising and discuss the motivations of both franchisors and franchisees in great detail. Similarly, the chapter on wholesaling outlines the fundamentals of wholesaling before getting into the omni-channel aspects of wholesaling. https://www.routledge.com/Marketing-Channel-Strategy-An-Omni-Channel-Approach-9th-Edition/Palmatier-Sivadas-Stern-El-Ansary/p/book/9780367262099
Sushil, Eugene, thanks for showing our readers the ways they can engage omni-channel strategy research in their research, practice, and teaching.
Author Biography
Eugene Sivadas is Professor of Marketing in the Milgard School of Business at the University of Washington, Tacoma. He is the co-author of the recently published textbook, Marketing Channel Strategy: An Omni-Channel Approach, which expounds on these themes while offering practical approaches to operationalize omni channel marketing environment.
Recommended Citation: Eugene Sivadas. (2019). Business and marketing communication in an omni-channel world. the Western ABC Bulletin, 1.2.