Media planning needs to smarten up as high tech channels for advertising products open up. Sales and marketing executives of companies need to think beyond print, electronic and outdoor media, and find new ways of reaching customers. That’s what a McKinsey study ‘Steering customers to the right channels’ suggests.
Multi-channel marketing is the name of the game now, and ATMs and internet banking are the exciting new possibilities. But this would obviously result in an increase in the overall cost of serving each customer. So, what’s the way out?
Since companies can’t go ‘back to the future’ by reducing the number of marketing or delivery channels, they can only ‘gain control of multi-channel interactions’, the study suggests. And how? Companies must begin to constrain the channel options of customers by guiding them subtly through the sales and service process, it suggests. “This re-routing allows companies to shape when and where they interact with the people who buy their products and services.”
The study cites the example of Charles Schwab. Schwab’s investors open roughly 70% of all new accounts in branches. “The company encourages affluent customers and those who want advice to go on using the branches by making it easy for them to schedule appointments there.” But, for most customers who look after their own investments, the value to the company of subsequent branch interactions is low and the cost of providing the same high, McKinsey points out.
Schwab takes several steps to increase the likelihood of such investors opting for the internet route only. And he has succeeded in offering customers the benefits of a multi-channel model while containing the cost of providing it.
Also, insight into channel economics and customer preference must go together, the study argues. Here’s an example to show why. A major industrial distributor compared the real costs and benefits of serving customers that placed large orders infrequently with those placing smaller orders more often. It emerged that the company’s channel strategy placed too much emphasis on the latter. “Knowing the preferences of different segments, in turn, enabled the distributor to determine which of them could be served by face-to-face sales people or by telesales personnel and other remote channels.” With these insights, the distributor raised its margins by 15%.
Creating a buzz is no less important, it is felt. Take the example of Delta Air Lines, for example. During 2003, the multi-media buzz that Delta created “helped raise the number of self-service check-ins by several million, made the airline more productive, and cut its costs by tens of millions of dollars.”
“By encouraging the use of different channels at distinct stages of the sales process, leading companies balance the preferences of their customers with the economics of their channels,” the study suggests. And, the rewards are good. For instance, the cost of serving customers could be cut by as much as 10 to 15% through such steps.
Among the beneficiaries of migrating customers to new channels are companies in mobile telephony, high-tech manufacturing and transportation equipment. But some are still wary, as channel migration could be risky too, the McKinsey study indicates.