In this post, we will discuss how the internet and e-commerce have prompted some firms to try to adapt their marketing strategies; the implications of these changes on purchase drivers and consumer information sources; and the impact of these trends on litigation.
Many firms have attempted to adopt an omnichannel experience in response to significant technological changes. Firms that strive to offer an omnichannel experience look to provide their current and prospective customers with a seamlessly integrated user experience across various channels and points of contact. Their goal is to cater more uniquely to each customer’s preferences and situation. Examples of omnichannel implementations include the following:
- Allowing customers to purchase a product online (through a computer or mobile device) and to pick it up at the retailer’s brick-and-mortar store,
- Sending customers notifications through a retailer’s app when a customer is near the retailer’s store,
- Using near field communication (NFC) technology to send detailed product information to a customer’s mobile device when they are interacting with that product in a store.
Successfully delivering an effective omnichannel experience, however, has proven to be a difficult task for many firms due to various barriers.1 Academic studies indicate that advertising messages across channels can often be inconsistent, especially when marketing departments are siloed between offline and online channels. The commonplace occurrence of the latter has led to a lack of coordination within firms and a failure to provide customers with a consistent marketing experience.2 Omnichannel trends increase the complexity of how firms market to customers, and in doing so have important relevance for litigation.
Increase in Customer Touchpoints
Adoption of the omnichannel experience has led to an increased likelihood that consumers will interact with a retailer multiple times before making their purchase decision, further complicating the consumer purchase journey. For example, in a study of 46,000 shoppers at a major U.S. retailer, 73 percent of the shoppers used multiple channels (e.g., the retailer’s website and the brick-and-mortar location) during their shopping journey.3 In contrast, only 7 percent of the shoppers were exclusively online shoppers and a larger minority of 20 percent were store-only shoppers.
Because many consumers may consider multiple channels prior to making their purchase decisions, an important question for firms that follow an omnichannel strategy is how to allocate sales credit across the different customer touchpoints in the purchase journey. One method is to allocate the entire sales credit to a single touchpoint (e.g., the final advertisement clicked by the customer before purchase, even if the customer had other interactions with the company). This simplistic approach, however, fails to address an important motivation for the allocation exercise to begin with—evaluating the effectiveness of the different customer touchpoints.
To overcome the inability of simplistic allocation methods to accurately capture consumers’ potentially complicated purchase journeys, many retailers have turned to a Multi-Source Attribution Model, which distributes sales credits across multiple touchpoints and channels. Academic research further corroborates this shift with findings that marketing in offline and online channels has a significant, positive effect on the sales made in the opposite channel (referred to as the channel’s “cross effect”).4
This increase in the number of touchpoints between firms and consumers means that while on their purchase journeys, consumers will on average follow a more differentiated, complex path often across multiple channels.
Differences between Customer Types
Single-channel customers differ in important ways from omnichannel customers. The shopper study cited above found that many consumers conducted research online before making purchases in store, and that consumers who used multiple channels before purchasing tended to spend more money at the retailer than those who used a single channel. Additionally, omnichannel consumers exhibited higher levels of loyalty to the retailer than single-channel consumers.
Implications for Litigation
Firms’ shift to offering omnichannel experiences has significant implications for litigation.
First, the location or channel where a purchase is ultimately made may not be sufficient to conclude that the advertising consumed in that channel is a key driver of the consumer’s purchase. This is evidenced by the host of touchpoints firms have with customers and the shift to Multi-Source Attribution Models. An assessment of reliance on specific advertising in select channels therefore may require accounting for heterogeneous consumer journeys.
Second, omnichannel and single-channel customers may differ in important ways, such as the amount spent at a retailer and the level of loyalty to the retailer. Therefore, in order to understand the effect of advertising (or any other marketing activity) on a consumer’s purchase, it is imperative to understand each consumer’s purchase journey, including the use of online channels, offline channels, or both, because differences in this journey can have a significant impact on not only the advertising they were exposed to, but how important that advertising was in their ultimate purchase decision.
1 “The end of shopping’s boundaries: Omnichannel personalization,” https://www.mckinsey.com/business-functions/marketing-and-sales/our-insights/the-end-of-shoppings-boundaries-omnichannel-personalization
2 “Demonstrating the Value of Marketing,” https://www.anderson.ucla.edu/documents/areas/fac/marketing/Dominique/2016%20JM%20Hanssens%20Pauwels.pdf; “Marketing’s Profit Impact: Quantifying Online and Off-line Funnel Progression,” https://www.jstor.org/stable/23012014
3 “A Study of 46,000 Shoppers Shows That Omnichannel Retailing Works,” https://hbr.org/2017/01/a-study-of-46000-shoppers-shows-that-omnichannel-retailing-works
4 “Driving Online and Offline Sales: The Cross-Channel Effects of Traditional, Online Display, and Paid Search Advertising,” https://www.jstor.org/stable/43832315