Multi-Channel

Marketing
Making “Bricks and Clicks” Stick

McKinsey
Marketing
Practice
Overview

The complexities of multi-channel marketing can be daunting and

can seem to exponentially increase the variables a marketer must
manage. The stakes are high, but for many companies, innovatively
delivering benefits through integrated multi-channel solutions is the
key to significant profit growth. McKinsey research shows that four
key steps will help you win in this arena.

Choose between a multiple channel strategy and a multi-

channel strategy that provides cross-channel benefits
■ There are substantial differences between these strategies – the core
reason to choose multi-channel is the increasing importance of
high-value multi-channel buyer segments.

Define a customer-based, multi-channel network architecture

■ Explicitly defining the core role each channel plays in the customer’s
experience is key to profitability, and will help avoid the “3E Trap” –
overinvesting to provide “Everything to Everyone Everywhere.”

Manage customer experience and brand promise delivery on

a cross-channel basis
■ The most important levers to successful implementation of a
seamless experience are a realigned resource allocation and
budgeting process, coordination of certain focused marketing activi-
ties, balanced customer and channel performance metrics, and
customer-focused P&Ls.

Build capabilities needed to market a multi-channel enterprise

■ Tightly align your brand promise and multi-channel proposition.

■ Make sure your CRM capabilities enable multi-channel management.

■ Aggressively “test and learn” with cross-channel offerings, manage-
ment processes, and technologies.
 The ability to master multi-channel marketing is becoming
increasingly vital for companies determined to be leading
players in the New Economy. In both B2C and B2B sectors,
McKinsey research indicates that within 2 to 3 years, over
50 percent of customers – and typically the highest value cus-
tomers – will be using multiple channels for shopping and
purchasing. These channels include store, telephone,
ATM/kiosk, catalog, and online. Aware of this trend, incum-
bents and attackers in countless industries are moving to
“bricks and clicks” distribution strategies to attract, grow, and
retain these emerging multi-channel customers.

While still early in their evolution, multi-channel “value propositions”

– innovatively delivering new benefits through integrated multi-chan-
nel solutions – show signs of being significant growth and profit drivers
for companies that are able to effectively develop them. While a hand-
ful of players have been quite successful at this task, many others are
finding it a complex and expensive road with a still uncertain payoff.
Indeed, the stakes can be extremely high for companies developing
multi-channel solutions. Companies as diverse as Allstate, Gateway,
and E*Trade are investing hundreds of millions of dollars to build and
integrate field, phone, and Internet sales and service.
Clearly, the key to successful multi-channel investments will be pro-
viding distinctive value propositions to high-value customer segments
while avoiding the “3E Trap” – unprofitably investing while trying to
provide “Everything to Everyone Everywhere.”

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 Table 1 Developing a Multi-Channel Action Plan

Decide on multi-channel Develop a Retool your Build the

vs. multiple channel strategy multi-channel ability to deliver requisite organiza-
and design multi-channel network target customer tion, marketing,
value proposition architecture experience and IT skills

Value creation High-value Core channel roles Clear accountabili- Accountability

opportunities of segment conve- and linkages ties/metrics, for cross-channel
multi-channel nience and requisite skills customer experience
strategy vs. Customer revenue/
information – senior management
multiple channel cost across Customer
benefits committed
portfolio channels recognition, brand
Technology- promise delivery, Modify marketing
Key criteria: Set role, siting,
enabled “realm of consistent treatment resource/budget and
scale of physical
the feasible” foundational performance man-
– Segments assets –“wrap the agement processes –
Brand promise old around the Experiment
– Customer mix single/shadow P&L
linkage new” and with “tactical vs. transfer pricing?
– Competition recondition/exit accelerators”
Track metrics
– Brand balancing customer
– Capabilities segment measures
with channel-specific
– Economics measures

There is little doubt that the need among companies for an effective
multi-channel strategy will only intensify. What lessons, then, can be
learned from the early winners? McKinsey research underscores four
imperatives (see Table 1) addressed by the emerging class of successful
multi-channel marketers:
■ Choose between a multiple channel strategy (i.e., simply making
multiple channels available) and a multi-channel strategy that
provides unique cross-channel benefits, such as the ability to check
item availability via the Internet prior to visiting the store.
■ Define a unified multi-channel network architecture that clarifies
channel roles and investment priorities from a customer-value-
based perspective.
■ Manage the customer experience seamlessly on a cross-channel
basis and faithfully deliver on the brand promise.
■ Build capabilities needed to market a multi-channel enterprise.

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 Choose between a multiple channel and a multi-channel strategy
There are substantial differences between strategies that simply pro-
vide multiple channels for shoppers and those that provide
cross-channel benefits based on tight linkages among multiple chan-
nels. The critical decision facing marketers is the degree to which they
will adopt a dynamic value proposition embracing important new
benefits sought by high-value multi-channel customers. This decision
should be driven by two factors.
First is the size and profit potential of emerging multi-channel seg-
ments in your customer base. Proprietary McKinsey research in
retailing and financial services indicates that multi-channel shoppers
represent increasingly substantial proportions of the attractive buying
population (e.g., more than 50 percent in apparel retailing and retail
banking). On an individual basis, retail customers using multiple
channels for purchasing have more than two to four times the spend
than those using one channel. Similarly, in retail banks, multi-chan-
nel customers are 25 to 50 percent more profitable than single
channel users.
If your high-value customers are interested only in access to new
channels – essentially new delivery of today’s benefits – then a multi-
ple channel strategy will probably suffice. But if they are receptive to
competitors who offer creative new cross-channel benefits, then the
development of a multi-channel value proposition is essential.
Our research indicates that two core benefits will drive most successful
multi-channel value propositions. They are:
Greater convenience: For some people, greater convenience means
faster access to information, for others it means the ability to purchase
from home without having to deal with salespeople. For still others, it
means a richer and more personalized in-store service experience.
More targeted and actionable information: Access to information
seamlessly combined with advisory tools and “personalized” sugges-
tions will increasingly drive consumer choice. This hybrid of
information and advice (both online and “on call”) will become even
more important as the multi-channel shopper pool includes more

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 advice-oriented individuals who want to feel they’ve made the right
decisions.
Charles Schwab, for instance, provides customers with not just the
convenience of trading online, by phone or in person, but actionable
information and advice through online Learning Center investment
courses and Portfolio Consultation using offline and online tools and
interactions. Similar benefits are offered by Office Depot, which
enables small businesses to shop online and choose between same-day
in-store pick up or next-day delivery.
The second factor affecting the pursuit of these benefits is the degree to
which an industry requires multi-channel integration. As shown in
Table 2, financial services firms, by virtue of their information-rich
offerings, face a very high degree of channel substitutability (there is lit-
tle a customer can do in one channel that cannot be done in others).
At the same time, there is an unmistakable trend – at once desirable
and costly for marketers – toward more frequent and direct customer
interactions leveraging new channels. In these situations, multi-chan-
nel value propositions are rapidly becoming strategic necessities. While
retailing channels are not yet this interchangeable, high-value cus-
tomers increasingly expect key multi-channel benefits to be in place –
and wise competitors should be building capabilities now.

Define a customer-based, multi-channel network architecture

Many of today’s multi-channel distribution networks are the result of
organic growth and incremental channel expansion. This has often
led to a layering of roles, capabilities, and costs resulting in higher dis-
tribution expense and fragmented customer experience. Explicitly
defining a multi-channel architecture – namely, the core role(s) of
each channel along with their functionality, formats, physical density,
and how they will interact – is critical to profitability.
A deliberate multi-channel architecture is critical to avoid the 3E
Trap. The key to this process is carefully mapping high-value customer
channel usage and preferences against the existing network and cost
base. This usually requires a sharp change from managing these chan-

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 Table 2 The Need for a Multi-Channel Strategy Will Intensify

Increasing
need for
multi-channel
strategy
Strategic
necessity
High

Strategic
choice
Retail
banking
Channel substitutability

Retailing
Strategic
opportunity

PCs

P&C insurance

Autos

Airlines

Low High
Frequency of customer interactions

nels as silos to managing them as a linked, interdependent system.

This, in turn, means transitioning from a bottom-up, capacity- and
cost-driven process to a customer-focused, cross-channel process (see
Table 3). Findings related to gaps and overinvestments can be used
to develop key migration steps toward a customer-driven, true multi-
channel architecture.
Gateway has proven adept at defining distinct channel roles and tailor-
ing them to the needs of targeted customer segments. It discovered that
30 percent of its market was uncomfortable buying a computer online,
so the company created the Gateway Country Store in which novice

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 Table 3 Manage Your Channels as a Network*

Channels
Segments Stores Phone Mail Online

To:
20 30 10 40
Customer-driven
High
To cross-channel
value A
decision making
Resource allocation
based on high-value
segments usage
High and preferences
value B 40 30 10 20
From

Implied Action:
Investment in phone/
Moderate Web channels for
70 10 10 10
value C appropriate stages
of shop/buy process

Low
80 10 10 0
value D

Average 53 20 10 18
From:
Channel silo
decision making
Bottom-up resource *Channel usage map,
allocation based on percent
channel usage
and cost

Implied Action:
Continued investment
in dominant store
channel

customers can test, configure, and order equipment for subsequent

home delivery, and obtain training. The stores carry no inventory, and
over time customers begin to use the Web site for subsequent interac-
tions. The majority of Gateway’s new sales are now through these
stores, and a large proportion of buyers sign up for computer training, a
business with gross margins far in excess of hardware.
Finally, reconditioning the branch/store network creates a major eco-
nomic opportunity for redeploying physical assets. First, in our
experience, savings of at least 15 to 20 percent of the expense base

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 are possible. Second, divesting or closing stores is often part of the
multi-channel solution; research on department store customers
reveals that a 6 percent shift to online sales among high-value shop-
pers decreases the profitability of the bottom third of stores in the
chain by 40 percent. Disciplined management of this process can
mitigate the attrition of high-value customers.

Manage customer experience and brand promise

delivery on a cross-channel basis
To this end, multi-channel marketers must tightly align brand prom-
ise, value proposition, and customer management to provide a
seamless experience. While these strategic marketing issues are chal-
lenging, the critical ingredient of multi-channel experience
management is execution. The following levers are key:
Organizational commitment: In many companies, organizational
accountability for the “customer,” and therefore the customer
experience, often resides only with the CEO/COO. A key element
of success is assigning accountability for managing customers across
channels. A mix of dedicated (at the center) and matrix (in the
channels) roles is the most common solution.
Resource allocation/budgeting: Cross-channel commitments must be
communicated across the organization through the resource alloca-
tion/budget and performance management processes. A “horizontal”
process driven by high-value customer usage is therefore essential.
Marketing practices: Virtually any multi-channel value proposition
will require alignment of basic customer identification strategies, seg-
mented treatment plans, and brand promise delivery across the
organization. While a centralized marketing unit is not necessarily
required, a well defined set of “rules of the road” and coordinated
activities are critical.

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 Metrics: Marketers need to bridge the gap between channel-indiffer-
ent customer-value-based performance metrics and traditional
channel-specific measures. Through a set of enterprise-wide customer
metrics, winners create a common cross-channel vocabulary where
segment-level customer value, share of wallet, retention/migration,
channel usage, cost-to-serve, and service quality are basic. These must
be linked to measures that channel managers control so that trade-offs
in delivering the target experience are clear. Handle times and CSR
compensation, for instance, may need to differ dramatically for high-
value customers.
P&Ls: Most importantly, the move to unified or shadow customer
P&Ls will accelerate progress toward sole reliance on channel P&Ls,
or complex transfer pricing mechanisms. As one senior manager
observed, “My life became much easier when we moved to a single
customer P&L from channel P&Ls.”
Build capabilities needed to market a multi-channel enterprise
Multi-channel marketing can add exponentially to the variables a
marketer must manage. Therefore, we recommend that marketers
focus on three “touchstones”:
■ Tightly align your brand promise and multi-channel value proposi-
tion. Winners in multi-channel marketing will be those who can
design and deliver value propositions that offer unique convenience
and information benefits. Contrast how Schwab has naturally
evolved its core brand promise (providing self-directed individual
investors the tools they need to build wealth) with the transition
that traditional full-service brokers are currently attempting as they
reposition themselves as multi-channel providers with a less broker-
centric emphasis.
■ Make sure your CRM/customer information capabilities enable
multi-channel management. It is essential that multi-channel mar-
keters focus on identifying high-value customers as quickly as
possible, even using incentives to encourage customers to identify
themselves. Providing Web-enabled tools to accelerate the ability

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 of all channels to collect and provide high-impact data to frontline
employees and customers can pay off handsomely and build the
required platform for multi-channel experience management.
Employ a phased approach, however, that avoids the trap of “big
bang” solutions.
■ Use a “test and learn” approach. Most of today’s multi-channel win-
ners have been aggressively experimenting with cross-channel
offerings, management processes, and technologies for several years.
Clearly, multi-channel marketers should be creating a portfolio of
cross-channel programs based on their insights into the emerging
convenience and information benefits sought by high-value cus-
tomers. For instance, explore the use of “tactical accelerators” to
encourage trial of new cross-channel offerings. These should
include such “carrots” as information, education, promotional pric-
ing, product design and rewards, as well as such “sticks” as penalty
pricing and store closures. Continuing to define ways to provide
greater convenience and information will yield powerful clues for
future action.
– Corey Yulinsky is a Principal in McKinsey’s Marketing Practice

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