Last week I had the privilege of participating in a retail executive dinner focused on the following topic: “Measuring & Increasing Omni-channel Customer Profitability”. Over the course of several hours we discussed a number of perspectives and more importantly, challenged each others perceptions and experiences.
The first question posed was “Do you believe that omni-channel customers are more profitable than single channel shoppers, and if so, how much?”. Responses from around the table ranged from “2 to 3 times more” to “15-30% more” and other generic, wide ranges. Essentially, everyone agreed with the RSR Research chart below, which shows that 76% of retailers agree that omni-channel customers are more profitable.
But for most retailers, there is a different and more appropriate answer: “More Profitable / Don’t Know How Much”.
To understand this response, we need to first define an omni-channel customer. A recent client (and many others) used this definition: “a customer is omni-channel if they have transacted across two or more channels within the last two years“. Sounds reasonable at first. A customer that buys online today and bought in-store last month certainly is an omni-channel customer, as is the catalog shopper who bought several items and returned some in-store (remember, a return is still a transaction).
But the reason for this definition is rooted in the wrong place: the data. Retailers have data about customers (specifically, those that identify through loyalty programs) and transactions. So they can actually make this yes/no determination based on specific factors (at least one transaction in two or more channels within 2 years) within their data warehouse. The definition of the “omni-channel customer” should more appropriately be defined by Marketing.
And with this definition, many are missing a significant number of omni-channel customers. Consider these three customers:
- Receives catalog, sees something they like, drives to store, browses in-store and purchases;
- Visits store, tries on several styles/sizes, returns home and purchases on-line a few days later;
- Uses third party mobile app (such as RetailMeNot or Shopular) and makes purchase on m.com site.
Now let’s assume that these are the only purchase behaviors of these three customers. Are they omni-channel? By most data warehouse definitions, the answer is “no”. But clearly, the correct answer is “YES”.
So if retailers lack the data to clearly identify a customer as “omni-channel”, will they ever be able to answer this question?
It doesn’t matter…because the question itself is flawed.
We know that omni-channel customers are more profitable. They are more profitable not because they are omni-channel…they are more profitable because they are ENGAGED with your brand, and because of that engagement, they leverage more touchpoints points to interact with your brand.
So I’ll offer this updated definition of the ‘omni-channel customer”. In today’s connected world, all customers are omni-channel customers! Don’t spend time segmenting and analyzing omni vs. non-omni customers – focus on the customer attributes that matter to your brand. Figure out which customer segments might be more valuable and distort your customer experience strategies appropriately. Improve the customer experience accordingly (one of the two keys to a successful omni-channel strategy) and ensure that is is directly aligned and supportive of your brand strategy. Do so and you will increase engagement and value/profits.