Omnichannel Strategy Process Model STEP 4: ROLE OF THE CHANNEL STRATEGY

Keywords: #omnichannel #retail #brand #strategy #management #fashion #business #success #marketing #sales #entrepreneur

Omnichannel Strategy Process Model - 10 Steps towards an efficient implementation

The first articles started the discussion on how the rapid progression of digitalization changed consumer behavior towards omnichannel retail, introducing the 10-step omnichannel strategy process model. With step 4, this article is outlining why and how companies have to define the role-of-channel strategy, including key questions of: Where do I want to be and how do I get there, and what does that mean for the different distribution channels? What is my channel-specific strategy and how is it summed up into one overall omnichannel strategy approach? Do I have a clear role-of-channel strategy approach?

“Having a clear channel strategy approach is the first thing to do.”

THEORETICAL BACKGROUND – CHANNEL INTEGRATION

With an increasing number of channels, it becomes important for retailers to study how and in what way to operate multiple channels in order to provide competitive service levels to its consumers. As consumers evaluate retailers based on their entire shopping process, using various channels, the topic of channel integration becomes crucial for retailers in today’s omnichannel environment.

Channel integration looks at the coordination of retail channel interaction and cooperation, thus the synergizing combination of channel functions. Its main objective is to leverage individual channel advantages in order to establish a seamless and complete shopping experience for consumers.

Business literature on omnichannel management summarizes the main content of omnichannel integration into six dimensions. The first dimension is outlined as integrated promotions, which means that consumers should find one and the same advertisement in all channels in order to enhance their awareness of association between different channels. The second dimension looks at integrated products and prices, thus a consistent assortment and pricing strategy across various channels. Clear product and price strategy avoids consumer confusion. Integrated transaction information as the third dimension focuses on consumers to use the same account for different channels. Retailers have the advantage to track consumers across channels, whereas consumers receive a higher shopping convenience. Integrated information as the fourth dimension describing once consumers receive the same information in all channels, they are able to switch easily. Integrated order fulfillment and consumer service are analyzed as the last two dimension of omnichannel integration. In that case, consumers can complete their shopping process using one or more channels for different processes, including payment, delivery or return. Standardized consumer service across channels integrates services between different channels.

Several business research discovered a positive correlation between channel integration and consumers’ trust and satisfaction.

For retailers with well-integrated channels, consumers perceive more satisfaction, with a greater shopping intention. It can positively influence sales growth, through improved trust, increased consumer loyalty, higher consumer conversion rate and greater opportunities to cross sell. Trust is provided by creating an appeal of a safe shopping experience for consumers, as more information on product and price is provided and shopping convenience is increased. In addition, due to consistent marketing messages, products and prices across channels eases consumers’ uncertainty. On top, offering various coordinated channels provide consumers self-control to use any channel they want. Increased consumer loyalty is created by adding value by combining channels by new services such as click and collect. In addition, cross channel integration encourages consumers’ relationships with brands. Conversion rate is increased as consumers can use more contact points during their shopping journey with seamless consumer experience while at the same time to use different advantages of each channel in combination. The combination of channels enables companies to maintain the interaction with consumers and thus increases cross-selling opportunities. The integration of consumer data leads to a more complete consumer profile, which in consequence can lead to new cross sell opportunities. As a summary it can be concluded that retailers, which invest in omnichannel integration, receive a payoff in increased consumer shopping intention.

The higher the level of cross-channel integration, the higher the brand's sales growth. Companies focusing on a specific channel only, benefit less from cross-channel integration.

Different channel types differ in their abilities to perform various service outputs. Retail stores provide pre-purchase trial, instant gratification, personalized salesperson attention, and post-purchase service like return and exchange. Internet sites provide expanded accessibility, product information, and novelty. As the store is less often the only shopping channel, retailers need to integrate and employ digital channels within their store setting. Different channels need to be integrated to provide a seamless retailing experience in the omnichannel environment.

Consumers are looking for different features in every channel so that as a consequence each channel has to adapt its individual strategy while at the same time are integrated.

Retailers have to identify what consumers are expecting in what channel and how they are using it in order to set channel strategies accordingly. The effect of channel integration varies across consumers with different levels of internet shopping experience. Due to this fact, consumers may use different channels for different purposes at different stages of their buying process. Omnichannel services can employ different strategies to attract different consumer behaviors during their shopping journey. Because of the growing popularity of mobile and social media, companies need to manage it so that consumer can look for products before, and share their experience after their purchase.

Companies should analyze its consumers in detail in order to set up channel strategies accordingly. It becomes essential for retailers to understand the driving factors of consumer’s choice of channels and set up marketing strategies in accordance with the heterogeneity of consumer preferences and the correlation between channels.

Omnichannel business success is dependent on the comprehensive integration of parallel channels towards one integrated, seamless shopping experience for consumers.

PRACTICAL CONTRIBUTION – CHANNEL STRATEGY

On their way towards omnichannel strategy implementation, as a key focus area, companies need to formulate and decide on a clear statement regarding their specific role-of-channel strategy. Companies should clarify the key questions regarding channel-specific strategies before trying to formulate one holistic omnichannel strategy. They have to analyze all of their distribution channels to classify their individual strengths and weaknesses. They have to answer the question of how to structure and manage different distribution channels to become an omnichannel company. The main objective within an omnichannel strategy implementation and management is to integrate and combine all distribution channels and processes.

An omnichannel strategy should focus on harmonizing all individual distribution channels to create one common brand experience for the consumer, regardless which channel they use.

All channels have to be compatible, complementary and attractive for all consumers. There is no single correct answer; rather, each retailer must determine the best organizational model for its operations based upon its strategic goals and maturity level. This summarized the fourth step within the conceptual omnichannel strategy process model, namely ‘role of the channel strategy’ to define clear strategies by channel and to sum it up to one overall omnichannel strategy.

The findings of this research contribute to the existing knowledge base by confirming approaches of who outlined that different channels can offer different benefits for end consumers and thus retailers benefit to focus on and to define channel-specific strategies.

This research refines strategic multichannel theories, by emphasizing that it is not only key for companies to outline channel-specific strategies, but simultaneously to ensure that all channel strategies fit together into one holistic omnichannel approach.

This finding should alter managers’ views on omnichannel strategy formulation. Rather than rack their brains trying to formulate the one holistic omnichannel strategy, managers should think channel by channel, while evaluating how they can and should interact and fulfill different tasks. The approach of using different strategies by channel is not new; however, combining channels that are allocated an appropriate purpose, all adjusted towards consumer needs, into one overarching strategy, can be stated as being a relatively new perspective within omnichannel strategy formulation. The findings of this research highlighted that an omnichannel strategy is composed of many individual channel strategies; this should alter managers’ view of how to set up organizational strategies today. Instead of seeking and trying to formulate one omnichannel strategy, it is preferable to define a strategy by channel, aligned to consumer needs, which in consequence forms one overall omnichannel strategy.

Are your channel strategies aligned and form one overall omnichannel strategy?

Step #4: Role of the Channel Strategy - Omnichannel Strategy Process Model