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Demand channel vs. Transaction Channel

Al Bessin over at Lenser presents a case study this week looking at customer value by channel. His data are from one specific anonymous catalog client. (An old fashioned client at that: the firm Al describes still receives 18% of their orders by postal mail.)

Al doesn’t represent the specific findings of this study as universally applicable, as they aren’t.

But two of Al’s points do apply to all multichannel retailers:

  1. “How you first met a customer” is different from “how the customer first purchased from you.” Al uses the phrases “Channel of Demand Generation” (eg catalog, email, paid search, natural search, etc) vs. “Channel of Transaction” (web, phone, mail, fax). My former colleague Dave Dierolf used to use more succinct tag for this key concept: “Web as Media” vs. “Web as Medium”. As Al states,

    All too frequently, we multichannel merchants refer to channels as Catalog, Web, and Storefront to describe marketing efforts. In fact, this is really a mix of marketing and transaction terms, and any generalization made with respect to this mix of channels can be somewhat misleading.

    Too true.

  2. All multichannel merchants should be calculating customer value (12 month, 24 month), repurchase rates, average order values, and channel preferences by both demand channel and transaction channel. Calculate these metrics each month. Look for changes. Look for differences. When you find differences, ask “why?”. Ask “what’s the marketing implication?” And look beyond simple averages to distributions (that is, plot histograms).

When I was marketing VP for a large consumer catalog, we noticed higher average order values on the phone that on the web. (That was a few years back and may no longer be the case there.) Why might this be, we asked. Looking more closely at the order size distributions by transaction channel, we noticed that above a certain threshold order size, a buyer was almost certain to order by phone versus the web. (Al describes this same phenomenon with his client.) Chopping off the right tail of the web order size distribution necessarily drives up the phone AOV.

There’s also a selection bias: customers with simple orders — often lower ticket items, often single item orders — can self-serve by buying online, and many choose to do so. Customers with complicated orders — multiple items, more pricey complex items — want the assistance of a human, and so opt to call in. Again, a higher phone AOV results.

Such analysis generates ideas, which in turn lead to marketing tests. Compare the number of items per order between the web and call center. Who’s better at adding accessories or additional items to an order — the machines or the humans? If the web lags, consider better upsell and recommendations on the site. If the call center lags, consider more training or better this-goes-well-with-that call center apps.

If you’re not tracking key customer metrics by both demand channel and transaction channel, make that analysis a priority for this month. It will certainly spark ideas and likely reveal possible opportunities.

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  • Alan Rimm-Kaufman
    Alan Rimm-Kaufman founded the Rimm-Kaufman Group...
  • Comments
    2 Responses to “Demand channel vs. Transaction Channel”
    1. Allan D. says:

      I also agree – as an online seller of niche-market items of various costs and complexities we see this in action every day.