Best Practices for Measuring the Website Contribution to Multi-channel Purchase Behavior

Best Practices For Measuring the Website Contribution to
Multi-Channel Purchase Behavior:
Introducing the
Multi-Channel
Value Index
A ForeSee Results White PaperWinter 2006The Need for True Multi-Channel MetricsThe influence of the web on multi-channel retail has grown enormously over the past several years. Today, the web plays a key role in multi-channel retail as both a purchase and a retail channel. However, to date it has been virtually impossible to find reliable and meaningful standard metrics for multi-channel customers that measure the influence of the online shopping experience on total revenues. Few (if any) of the commonly used behavior-based metrics can track the full cross-channel contribution to a company's bottom line.
Online sales figures vastly understate the contribution of the website experience to total multi-channel purchases. A survey of multi-channel shoppers surveyed by ForeSee Results during the 2005 holiday shopping season found that 51% preferred visiting the retailer's website to research purchases while one in three stated they preferred to purchase and pick up products in the store. Just more than half of the online shoppers surveyed (53%) said they preferred to purchase online and have the product delivered. Clearly, online sales leave out a significant portion of the website contribution to a retailer's bottom line.
Existing metrics have three fundamental shortcomings in terms of assessing the value of the web shopping experience on overall retail sales:
. First, existing metrics represent disjointed facets of the increasingly complex multi-channel purchase life cycle. Most multi-channel retailers measure channel purchases independently, which blurs contribution of the individual shopping channels and gives bottom-line credit to the channel where the sale is made. Without a unifying framework to align the website to overall sales, the financial influence of the website is severely underestimated. This may cause retailers to misallocate resources because improvements upstream can improve downstream results in all channels. . Second, behavioral metrics are historical and have no predictive value. The contribution of the website can't be assessed until the multi-channel customer completes the purchase. At this point, their shopping and purchase history is tracked across the various channels.Technologically, this has proven to be a tremendously difficult undertaking, one that is typically executed only for select audience segments (e.g., returning customers in loyalty programs). As a result, even though the influence of the web channel is growing, retail metrics dramatically underestimate the role of the web in driving multi-channel sales.
. Third, behavioral metrics lack an attitudinal component that allows the retailer to understand what multi-channel customers are thinking and how the online experience shapes their future purchase behavior. Understanding why multi-channel customers come For More Information to the website and what they plan to do after their visit can help explain high shopping 1.800.621.2850 cart abandonment rates and low online conversion rates-possible signals that online www.ForeSeeResults.com shoppers are completing their sales in another channel, or that marketing channels are attracting poor prospects.
A Fresh Approach to Measuring Multi-Channel ShoppersA more comprehensive and predictive view of multi-channel shoppers emerges when online satisfaction is measured using the proven, scientific American Customer Satisfaction Index (ACSI) methodology. The ACSI, established through a decade of empirical evidence across 39 industries, scientifically quantifies the mathematical relationship between the drivers of customer satisfaction, overall customer satisfaction and financial behavior, using a sophisticated econometric model based upon a Partial Least Squares (PLS) approach.
Introducing The Multi-Channel Value IndexThe Multi-Channel Value Index (MCVI) is a strategic metric developed by ForeSee Results that projects the contribution of the website to a multi-channel retailer's overall sales through a calculation based on the ACSI methodology. The MCVI was developed using online customer satisfaction data obtained in the Top 40 Online Retail Satisfaction Index, published by ForeSee Results in June 2005 ... [download for more]