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Are Your Results by Design or Default?

Are Your Results by Design or Default? The Omni-Channel Customer Reality

It seems like everybody's talking about this term “omni-channel” these days: the omni-channel customer experience, omni-channel selling, and on and on. It’s clear that different organizations have different definitions of what exactly "omni" means. For some, it means having both indirect and direct routes to market. For others, it implies they are everywhere, kind of like an omnipresent force hovering over their marketplace compelling their customers to buy from them. (Or so they wish! 

Is Omni-Channel a Good Thing?

Omni comes from a Latin word meaning "all." Therefore, omni-channel in its purest sense means taking "all routes to market."

But is taking all routes to market a good idea? Clearly, there are some examples where it doesn't make sense. For example, the Sears Catalogue was first published in the late 1880s. For years, it served as Sears' primary route to its key market: rural America. Sears didn't open its first store until 1925, and even then, catalogue sales remained strong for many more decades.

As we all know, times change. American consumers became more mobile, and it was no longer a challenge to make into town to shop at a Sears retail outlet - or one of its competitors. Fast forward a few decades and a version of catalogue shopping is  back, but it's all on the web, and consumers in Ohio are buying products directly from retailers in Osaka. Sears finally stopped publishing their famous catalogue in 1993.

Why, Why, Why

If I were to ask a hotel conference room full of salespeople why Sears stopped publishing the catalogue, they'd probably tell me it was because it wasn't making

enough money for the company. While that's true, we need to dig a little bit deeper to learn a lesson from this example. Why wasn't it making enough money?

OK, you say, it wasn't making enough money because customers didn't buy from catalogues anymore. Good answer, but why didn't Sears customers buy from catalogues anymore?

The ultimate answer is that other ways to buy emerged that were more convenient, less expensive, more enjoyable...pick the driver that motivates consumers to choose one channel over another.

The point of this example is that Sears executives could have taken a look at their dwindling catalogue sales and decided they needed to do something about it. But no matter what promotions they ran; no matter how they tried to hype the glamour of catalogue buying, the writing was on the wall: consumers didn't want to buy from the catalogue. In today's mobile, highly connected world, true omni-channel selling really means selling through every channel through which your customers want to buy. Or, at least every profitable segment of your customers.

Assessing Your Omni-Channel Strategy

When we work with a sales organization, one of the first things we do is help executives assess their go-to-market strategy and determine if the results they're seeing are by design or by default. Are your results coming due to superb execution of a well-thought-out strategy, or merely because your customers are voting with their hands and feet and choosing which route they take to bring you their money?

Take a look at a typical analytical framework we use with a new client:

•           First, we make a list on the whiteboard of all the ways they go to market — but we do so from the customer's point of view. By inquiring about the ways customers can access their products and services, it opens up the thinking. Responses might include inside sales, outside sales, cross- or up-selling by support organizations, marketplace alliances, web sales and a wide variety of channel partner relationships.

•           Then we ask the team what percentage of their profitable revenue comes from each of these routes “from customer.” It's important to look at profitability because when it comes time to set strategy, we'll want to know if a particular channel is a net benefit or a drain on profitability.

•           Next, we ask what the trend is in their organization for each of these routes.  Is the profitable revenue growing, shrinking or staying the same? Again, while a source of funds may be growing, if another more modest source is  more profitable, that could impact your strategy decisions.

•           Finally, we investigate whether the results are by design or by default. The Sears catalogue is a good example of a reduction in revenue by default. Customers just weren't buying through mail-order catalogues anymore. Many organizations will see a rise in revenues by default through online channels if their product or service lends itself to being bought that way. Other companies will see a rise in revenue through integrators when there are significant pieces of the “whole solution” that the customer buys that cannot be bought any other way.

A by-design change would be the result of a conscious decision by the organization to promote that channel. For example, when Sears stopped publishing its catalogue, the collapse in sales would have been by design. Conversely, an organization that just opened up a new channel would hopefully see a by-design rise in sales through that channel.

We're not (yet) casting any judgments based on the percentage of revenue by route, or by the type of rise or decline in sales. A by-design change can be just as beneficial to the organization as a by-default rise and vice versa. If customers want to buy through a certain channel, we want to see a rise in those channel sales. If a channel is no longer profitable, or just doesn't fit our business model, it makes sense to deemphasize or discontinue that channel.

Making the Call

In order to round out the picture and be ready to make judgments and recommendations, we have to take a look at one key outstanding factor: the competition. We have to dig into what the competitors are doing and what's happening in the marketplace.

First the marketplace. How are customers accessing similar goods and services? What are the trends? The analysis can get quite detailed here. For example, many big box retailers spend a lot of time studying trends in cross-channel interactions and consumer habits, e.g., What percent of customers shop online but then buy in- store and why? Conversely, what percent shop in-store, but then look for a better price online?

It’s basically doing the same competitive analysis as we’ve done for our client company. If you did this same analysis for your top three competitors, what would the results be? Would their categories be the same? Would the trends in each category be similar to yours? If not, you need to spend some time asking yourself why. Maybe your organization in the one that has adapted to market trends. Or maybe not.

The Omni-Channel Customer Reality

At the end of the day, the mantra is simple: customers are going to buy as they choose to buy, not necessarily based on how you choose to sell. The question is more difficult than the answer:

Can you out-design and out-execute your competitors, creating an omni- channel customer experience that is consistently excellent enough for customers to choose you first – regardless of which route they choose?

 

Rich Blakeman is the Managing Director of Channel Enablers, MHI Global’s Channel Sales Center of Excellence.

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