Int. J. Internet Marketing and Advertising, Vol. 1, No. 3, 2004 229

Copyright © 2004 Inderscience Enterprises Ltd.

Designing a channel mix

Luuk P.A. Simons and Harry Bouwman* Technical University of Delft, PO Box 5015, 2600 GA Delft, The Netherlands E-mail: L.P.A.Simons@tbm.tudelft.nl E-mail: w.a.g.a.bouwman@tbm.tudelft.nl *Corresponding author

Abstract: In their quest to develop an optimal channel mix, organisations face significant challenges. Despite ubiquitous discussions concerning click and mortar strategies, there is little empirical work that compares the strengths and weaknesses of emerging and existing technologies, or addressed channel mix design in relation to the opportunities provides by information and communication technologies (ICT). In this paper, we introduce a multi-channel design support method, based on a discussion of existing literature and a number of case studies.

Based on existing theory and current literature and research approaches to internet servicing we develop a multi-channel design support method. We start from and extend the Quality Function Deployment (QFD) method by explicitly distinguishing requirements and solutions. The main extension to traditional QFD is that in addition to customer requirements we also take supplier requirements as our starting point. We focus on a combined use of the web, call centres, retail stores and personal sales. Our main case finding is that there are a number of significant differences with regard to the sales cycle support that these channels can provide.

Keywords: multi-channel service; marketing channel management; click and mortar; internet; call centre; retail; personal sales.

Reference to this paper should be made as follows: Simons, L.P.A and Bouwman, H. (2004) ‘Designing a channel mix’, Int. J. Internet Marketing and Advertising, Vol. 1, No. 3, pp.229–250.

Biographical notes: Luuk Simons received his MSc (Applied Physics) degree and MA (Philosophy of Science and Technology Development) from the University of Twente, the Netherlands, in 1996. His ‘technology philosophy’ masters thesis won the ‘Technology and Society’ award of the KIvI (Dutch Royal Institute for Engineers). He is currently researcher at Delft University of Technology, Faculty of Technology, Policy and Management, ICT-department and at TNO-Telecom. His research interests are in the areas of e-service design, services marketing, multi-channel distribution management, e-commerce and customer contact management. He has extensive consulting experience and has published papers in several scientific journals.

Harry Bouwman is an Associate Professor at Delft University of Technology, Faculty of Technology, Policy and Management, Section Information and Communication Technology. He received his master degree in political science from the Free University of Amsterdam and his PhD from the Catholic University of Nijmegen. He is author and editor of several books in the field of

230 L.P.A. Simons and H. Bouwman

Multimedia, ICT and Telecommunications. He has contributed to national and international scientific and business journals. His research interest include Business Architectures, Business IT alignment, Strategy and Business models, Service design and 4th generation mobile telecommunications.

1 Introduction

In their quest to optimise their channel mix, organisations face serious challenges. Strictly speaking, a channel is a means to transmit a message [1–3]. Organisations have to cope with a number of new technologies, i.e. e-mail, chat, instant messaging, mobile internet, web and call centres. These technologies support existing pre-sales, sales and after sales activities and have to be combined with the more personal forms of communication used in retail stores and personal sales. A broader definition of channels includes marketing channels, as sets of (independent) organisations involved in preparing a product or service for consumption or use [4]. In this paper, we look at the channel mix problem from the broader marketing perspective. Marketing channels offer two types of services: marketing and distribution support for suppliers, and buying support or sales cycle support for customers. This paper deals with the following research questions: what are the main services (or service elements) that these channels provide, how can new technologies be used in marketing channels to contribute to an overall quality of service, and how can service design methods help in choosing between the channels that are available?

We focus on four channels: web, call centres, retail stores and personal sales. In addition, we pay attention to the ways they complement each other in the overall service proposition. These four channels are widely used and they are likely to coexist, and often they are supported by separate departments (which means they qualify as separate channels). Since they are relatively different from each other, they provide a wide range of service facilities. The internet and call centres use information and communication technology and can therefore be considered ‘distance channels’, whereas retail stores and personal sales require physical proximity. For that reason, we refer to ICT-enabled vs. physical channels. Although the internet and call centres are no longer the new kids on the block, having been succeeded by mobile internet, instant messaging and other technologies, research into the integration of the internet may help us understand the synergies and opportunities that these new emerging technologies may offer in a channel mix. In any channel mix, a balance has to be found between service quality and costs [4–7], and it is here that the opportunities for new technologies lie.

To answer our research questions, we review existing literature regarding the channel mix, analyse the strengths and weaknesses of the various channels based on extensive cases-study research, and discuss the results in relation to the design of a multi-channel design support method. In our perception, finding the optimal channel mix is basically a design problem. Our ultimate aim is to help develop a method to support teams responsible for the adoption, design and implementation of new channel services. The proposed multi-channel design support method should make it easier to compare channel performance in terms of customer requirements, rather than trying to compare incompatible channel-specific functionality’s and solutions (comparing, for instance, web auction availability [8] with speed of answering the phone [9]).

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2 Theoretical background

Our literature review is based on service and marketing channel management research. Service management literature pays a great deal of attention to service design and management. As far as designing the optimal marketing channel mix is concerned, however, it has little to offer [10,11].

Key concepts borrowed from services literature are the ‘total service offer’ or ‘package’, which consists of a ‘core product or service’, supplemented by ‘peripheral’, ‘auxiliary’ or ‘hidden’ services (e.g. the way questions are answered or information is provided, service recovery procedures, directions for consumption of the core offer, etc.) [10,12]. ‘Auxiliary services’ are often non-billable, and although they are not primarily what the customer pays for, they have a large impact on customer satisfaction and the effectiveness of the sales cycle [13]. Different communication channels (virtual as well as physical) that market and sell the same core product or service have different sets of auxiliary services. In literature a distinction is drawn between channels that provide ‘high support’ or ‘low support’ to customers, while selling the same product [6,14]. In this paper, we take the auxiliary services perspective: what type of additional support and services do companies offer to their customers? Service management literature offers little insight into which service elements could be supported by which (combinations of) ICT-enabled and personal channels.

A dominant paradigm in service literature is formed by the SERVQUAL model, which describes service dimensions. SERVQUAL has been used in studies on ICT-systems [15–18], but rarely in relation to ICT-based services [19,20]. It is doubtful that the five dimensions of SERVQUAL – tangibles, responsiveness, reliability, assurance and empathy- are sufficiently capable of capturing the perceptions of ICT-based service quality and take the differences between the various channels into account. In one of his more recent overview papers, Johnston [21] argues that further steps in the research on service design and on the ICT-enabling of services need to be taken. In his words, the most important question in practice is not knowing what the SERVQUAL dimensions [19] are, but knowing how to ensure high quality service delivery on a day to day, week to week and year to year basis, using good service design and management.

Existing literature pays much attention to marketing channel strategy and structure (e.g. balance of power, channel conflicts, market reach, etc.). Despite the occasional comments concerning channel service elements, no overall or generally accepted set of elements is provided. Here, too, there are very few specifics on the use of ICT in channels. One of the exceptions is a recent paper investigating competitive strategies in click-and-mortar retailing [22]. Other recent contributions focus on internet-based service quality [8,23–25]. However, there are very few cases where the various channels are compared with regard to service elements, and little attention is paid to the matter of design support for a multi-channel mix.

In traditional literature concerning marketing channels, little is offered by way of theory on ICT or the strengths and weaknesses of different channels in a multi-channel mix [4,26]. The advantages of ICT-enabled channels that are mentioned are usually linked to a transaction cost theory perspective, quoting several operational, scale and cost advantages [27,28]. This perspective is also most frequently adopted in literature focusing on ICT-enabled channels per se [29–32].

232 L.P.A. Simons and H. Bouwman

By contrast, traditional literature devotes much attention to market forces, and the idea that each channel should aim at supporting specific customer needs. Channels operate in a market, and they are in the business of connecting producers to buyers. Their aim is to provide maximum quality (supporting needs of customers in their buying cycle [6]) at minimal costs. According to channel theory, channel arrangements in the long run evolve towards the ‘normative structure’ [7]. In this structure, expensive, high support channels can co-exist with low cost/low support channels, provided different customers choose different cost-service combinations. In its simplest form, this normative structure could be modelled as a linear price quality line, with different channels, or firms deploying multiple channels, occupying different points on the line.

Figure 1 contains firm X, and its two competitors A and B. If X decides to move to a higher price-quality line, indicated by arrow 1, it will compete with A. It will approach the price levels that A’s customers are willing to pay, while at the same time offering superior quality. If, on the other hand, X decides to increase the quality it offers, indicated by arrow 2, it will compete with B, offering the quality B’s customers are used to, but at a much lower price.

With the use of the internet or other forms of ICT, either cost per service can be reduced, or service levels can be increased. In some industries, for example financial services, the effect of this on existing channel systems and propositions has proved to be quite disruptive. This can be illustrated with the cases of E*TRADE and (e)Schwab [33]. Due to the emergence of low-cost online information and transaction services, the market structure for US private investments changed significantly. While at the start of 1996, 85% of the market consisted of high-end services, that figure is expected to have dropped to 45% by the end of 2003. In 1996, 15% of the companies involved were discounters, using cheap telephone ordering services. This segment is expected fall to 7% by 2003. These developments were caused by the emergence of a new mid-market segment, which is expected to represent 48% of US private transaction volume by 2003. It offers a wide range of online services plus complementary telephone and off-line support, at a price slightly above the deep discounters. The new proposition attracted many customers from both other market segments. This can be seen as a combination of arrows 1 and 2 in Figure 1.

Figure 1 Market equilibrium changes when a channel set X moves to a higher Q/P line

In this paper, we focus on the practical level of service elements [10,11] of ICT-enabled marketing channels, and the performance of each channel with regard to these service elements (e.g. a customer will compare the ease and quality of ‘information provisioning’ or ‘decision support’ offered by the various channels).

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We have created the following useful set of service elements (Table 1) from several sources: problem recognition/clarification or need identification [34]; information provisioning [35]; decision support [6,35,36]; generating trust [36–39]; negotiation [4]; ordering; payment; order processing; pick, pack, ship and delivery [4,6,26]; transferring the possession of goods [4]; inventory management; communication to coordinate activities [4,6,26]; notifications (which decrease the cost of lost opportunities) [40]; calamity support and distress relief [41,42]; after sales usage support; and relationship building [6,39].

Table 1 Service elements of marketing channels

1 Need identification 2 Information provisioning 3 Decision support 4 Generating trust 5 Negotiation 6 Ordering 7 Payment 8 Order processing 9 Pick, pack, ship and delivery

10 Transferring possession of goods 11 Inventory management 12 Coordinating tasks, tracking and tracing, order status 13 Notification (to support needs) 14 Calamity support and distress relief 15 After sales usage advise and support 16 Relationship building/maintenance

The various service elements can be placed in a logical context and structure. One of the most frequently used perspectives is that of the sales cycle [43]. There are several ways of dividing the cycle. We opt for the simple form of pre-sales, sales and after-sales [24], see also Table 2. As is to be expected, there are limitations to this model. Not all service elements are limited to one phase: elements like providing information (3), generating trust (4), communication for coordination of tasks (12) and relationship maintenance (16) can typically be placed across the entire cycle. Our model can be used to describe auxiliary services offered by channels. At this point, it is difficult to say which elements are more important than others, and to what degree. In contrast, according to design literature, one of the key challenges in any service design problem is to determine which elements are most important to the targeted offer and customer group.

Moreover, to offer a competitive customer experience, it is important to align the multi-channel service system in a coherent way. This includes a fast and adequate adoption of new technologies. According to services literature, partial design and local sub-optimisation are among the highest risks in designing and implementing a total service offer and service system [10,13,21,44]. For this reason, a rigorous design support methodology can be expected to aid the design process and quality [44,45].

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Table 2 Extended service element model, including customer and supplier requirements

Service element Customer requirements Supplier requirements Pre-sales 1 Need identification Get non-intrusive

suggestions to help me understand and fulfil potential needs

Generate sales opportunities / leads

2 Information provisioning Find out whether a product or service is good for me

Educate customers about my products/services

3 Decision support Obtain help in making choices that are right for me

Reduce uncertainty to stimulate purchase

4 Generating trust Check if supplier, offer and processes are trustworthy

In still trust/confidence, reduce uncertainty

5 Negotiation Fit offer to my wishes Close deal at limited process and price costs

Sales 6 Ordering Purchase and initiate transfer

of possession Receive order

7 Payment Pay conveniently and safely Receive payment 8 Order processing Process order ‘invisibly’ Efficient order handling 9 Pick, pack, ship and

delivery Obtain goods timely and easily

Minimised logistics costs and adequate delivery

10 Transferring possession of goods

Obtain possession Transfer possession

11 Inventory or service capacity management

Availability of products/service within easy reach

Minimise inventory / capacity costs for acceptable coverage

After-sales 12 Coordination of tasks,

tracking and tracing, order status

Coordinate tasks and ensure effectiveness

Ensure efficient and effective coordination of tasks

13 Notification (support needs)

Support my tasks or help seize opportunities

Stimulate usage, service or repeat sales at minimal costs

14 Calamity support and distress relief

Have urgent/important problems resolved and damage redeemed

Recover image and relationship

15 After sales usage advise and support

Resolve questions and problems, increase usage benefits

Support usage and satisfaction to increase future revenues

16 Relationship building/maintenance

Increase ordering efficiency and effectiveness by better knowing suppliers

Increase repeat sales by binding and knowing customers

Design support methods are used to translate customer and supplier requirements. There are several methods available for requirements engineering. Their aim is to transform user requirements that are formulated in everyday language into formal specifications to serve as a basis for design and implementation. However, most techniques are predominantly geared towards building data and process models and focus on the technical aspects of the information systems [46]. Moreover, what they usually do

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is elicit user requirements, while it is more a process of service creation that has to be supported [46,47]. Two of the most successful methods of avoiding partial design (and realising an integrated ‘total’ service design) are concurrent engineering and Quality Function Deployment (QFD) [45]. While concurrent engineering has mostly to do with (team)working, and therefore falls outside the scope of this paper, QFD is a rigorous, highly visual and integrating method, using fixed tools and formats. QFD strictly distinguishes between requirements and solutions and is very customer-oriented [40].

QFD typically involves the following steps [45,46]:

• defining the service concept and determining customer needs

• separating requirements from service attributes

• scoring the contribution of attributes on requirements

• obtaining customer priorities regarding the requirements

• choosing an attribute set

• determining service levels per attribute

• generating and evaluating service concepts and designing detailed service processes.

This design approach is illustrated in Figure 2. Because this paper focuses on the generic parts of the design process, we do not discuss the specific tasks of determining customer priorities and matching. Instead, we focus on the more generic service elements, requirements, service attributes and solutions. To illustrate these concepts: there are a number of attributes that can be used for service element ‘ordering’, for instance ‘fast ordering’ (e.g. defined as the number of minutes needed after the need arises) or ‘easy ordering’ (e.g. the number of activities needed for ordering). An internet-based ‘service solution’ for easy ordering could involve ‘two-click ordering’, using previously entered customer information.

Figure 2 Quality function deployments steps that are subject of our research

At this point, we want to introduce an extension to QFD. The reason is that, because channels are used to match supply and demand, some of their service elements will be aimed more at serving customer needs while others focus more on ‘supplier needs’. To arrive at an optimal channel mix, the requirements of both parties have to be taken into consideration. Since the QFD method focuses solely on customer requirements, we have decided to add supplier requirements. This step is illustrated in Table 2, which

236 L.P.A. Simons and H. Bouwman

lists customer and supplier requirements per service element. Note that we have adopted standard QFD practice of using everyday language in describing the requirements.

The division between customer and supplier requirements reveals that there is a possible conflict of interest with regard to certain service elements. These elements need identification (1), generating trust (4), negotiation (5), pick, pack, ship and delivery (9), inventory management (11), and all after-sales services. The interests of supply and demand are not always the same. As a result, some solutions are expected to focus more on serving suppliers than customers, and vice versa. This makes it important to take both sets of requirements into account when designing a multi-channel service mix. The need to focus on customer requirements is generally recognised in QFD literature. However, they have to be balanced by supplier requirements [2,4,6], because an exclusive focus on customer requirements is sure to erode profitability [48].

3 Case study methodology

To get an overview of the various types of multi-channel strategies and underlying management decisions, we adopted a broad, explorative case study approach. In the first half of 2000, a team of ten researchers conducted 19 case studies among Dutch firms that had developed an internet-channel with the aim of exploiting synergies with existing channels. We visited several of these firms again early 2002. The cases were selected to ensure variability across industry/product type and firm size. The specific criteria for case selection included:

• Retail or other physical presence: the firms we selected had a physical presence in the Netherlands, either in the form of retail outlets, sales personnel, or field representatives. We specifically excluded firms that did not use physical channels.

• E-commerce: the firms we selected had initiated e-commerce activities that appeared to use both physical and ICT-enabled channels.

• Product/Industry: our selection included firms selling physical goods (perishable and non-perishable, durables and small items), information goods, and information services. In addition, we targeted goods and services currently experiencing an increase in web-based sales, such as financial and travel services, books, music and electronics equipment.

• Size: whenever possible, we selected firms of various sizes in each product/industry area. In those categories where we only managed to select large firms, there is a clear difference in terms of their competitive position.

We selected the firms on the basis of news and trade journal reports that highlighted the fact that they combined physical and ICT-enabled channels in their e-commerce activities. The cases included a large network equipment manufacturer, consumer and business retail chain of two large telecom operators, a large mobile telecom operator business centre chain, a large company that offers office products, a large grocery chain, a health food web portal (SME) and a health food store (SME), a large automobile import and dealer organisation, a single location automobile dealer (SME), a bicycle wholesaler (SME), a single location bicycle retailer (SME), a large music retailer chain, and a single music store (SME), a large nation-wide financial services/banking provider, a large

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nation-wide book retailer chain, a smaller upscale book retail chain, and a small multiple location book retailer (SME), an international travel operator and a small travel agency (SME).

To make sure that the firms we selected would indeed contribute to our research, we collected data from publicly available sources and reviewed their internet site. Between March and June 2000, we conducted multiple face-to-face interviews with the managers that were most responsible for e-commerce and channel cooperation, using a structured interview protocol (see place.telin.nl, for a more extensive description of our case study approach, see also [22]). Given the exploratory nature of the subject, the interviews were semi-structured. We used open-ended questions to guide the discussion about each firm’s channel development. We asked the interviewees how the channels were positioned in relation to each other, why and how positioning choices were made, what the results of those choices were, what they thought of those choices in hindsight, and what they saw as key future issues. In addition, we asked questions concerning the type of outcomes they experienced, internal organisational issues the company faced in introducing web-based and other ICT-channels, and the specific applications the firm used that involved the integration of physical and ICT-enabled channels. Finally, we made case descriptions of 8–10 pages, which we used for cross-case analyses to find similarities and differences, and to identify a number of best practices [49]. To ensure internal validity, all researchers used the same interview and case description templates. In addition, they conducted the interviews in different combinations and reviewed and discussed each other’s case descriptions. The case descriptions were reviewed by the informants, and some of the questions that arose in the cross-case comparison were answered in a second round of (telephone) interviews.

4 Case study results

We discuss the results of our case studies in three steps. First, we list the multi-channel service attributes per case (Table 3). Second, we summarise the attributes across the various cases and relate them to the service elements in Table 4. Finally, we discuss the service solutions provided by the various channels in relation to customer and supplier requirements (Table 5).

Table 3 presents the results of our multi-channel case study, analysed according to the service attributes per channel. Only those service attribute-channel combinations were included in the table where a specific channel showed particular strengths (+) or limitations (–). We only highlighted five out of the 19 cases. Because we only chose the most interesting and diverse cases of multi-channel combinations, at least three of the four channels we targeted (web, call centre, retail stores, personal sales) were used extensively. Two of the other 19 case were very similar to our second case and therefore offered little added value. Most of the other 12 firms used one virtual and one physical channel, i.e. the internet in combination with either retail stores or personal sales. In those cases where customers had the option of calling, for instance, to order books or CDs, this was not seen as a separate channel or part of a deliberate multi-channel service design.

We have excluded average performance from our results. In our approach, the subjectivity of our interviewees is an important given; their experiences, perceptions and judgements regarding channel (dis)advantages form the basis for our analysis. Consequently, our ratings have been based on the number of positive and negative

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remarks by the interviewees, as well as the degree of positivity/negativity. Note that the numbers of strengths that are mentioned far outweigh the number of limitations. This is a direct consequence of the opportunity-driven focus of channel marketers.

Table 3 Examples of strengths and weaknesses of channels as mentioned in cases

ICT enabled and personal communication channels Type of company Web Call centre Retail stores Personal sales Network equipment manufacturer (B2B, tangibles, speciality goods)

(+) easier ordering and product configuration (+) self service trouble shooting (+) downloading invoices (+) view order status, incl. track and trace (+) support product and price comparisons with competitors (+) support dealers with order history management information

(+) instant handling of complex questions (+) supporting ‘novice’ buyers (+) lead qualification (–) less control over support process (–) limited problem overview for customer

[planned as a future channel for SME’s, but not developed yet]

(+) advise and educate the customer (+) negotiation

Telecom Operator and Retailer (B2C and B2B, tangibles, commodity and speciality goods)

(+) instant mutations (e.g. subscription type, address) (+) overview product information (+) continuous insight in bill (esp. for cell phone users) (–) delayed product possession

(+) instant handling of complex questions (+) convenience ordering (for less internet savvy customers) (+) resolve complaints (+) lead generation (–) less control and overview for customer (–) delayed product possession

(+) allow in store pickup and paying (trust) (+) immediate possession of products (+) experience look and feel of products (+) product returns, repair and replacement (–) limited stock size and portfolio breadth for less popular goods

(+) (complex) deal making and negotiation (+) relationship building (+) product education and advise on use (+) problem clarification (–) too ‘strong’ instrument for minor issues

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Table 3 Examples of strengths and weaknesses of channels as mentioned in cases (continued) ICT enabled and personal communication channels

Type of company Web Call centre Retail stores Personal sales Large travel company (B2C, intangibles, commodity and speciality goods)

(+) pre-sales info and education (+) comparison of alternatives (esp. for experienced travellers) (+) efficient order processing (+) messaging regarding order status

(+) convenience ordering (for less internet savvy customers) (+) instant product or status information and decision support

(+) allow in store pickup and paying (trust) (+) more in-depth information and decision support

[not present]

Office Supplies Wholesaler (B2B, tangibles, commodities)

(+) efficient order processing (connection to order management system) (+) easy product comparison (+) instant product availability check

(+) allow for impulse buying (professionals on site, using cell phone) and impulse inquiries (+) resolve complaints

(+) allow product pickup (decreasing use due to lower total cost and high reliability of the alternative: ‘home’ delivery) (+) experience look and feel of products

(+) relationship building (+) negotiation of window contracts incl. terms of delivery (+) advise on and promotion of online ordering (+) practical help on setting up online account

Large Bank (B2C and SME-B2B, intangibles, commodity and speciality goods)

(+) support routine transactions (+) pre-sales info and education on complex products (+) generate leads (–) handling of complex leads requires other channels

(+) fast response on leads from internet (+) appointment scheduling for customers and local offices (coordinating tasks) (–) handling of complex leads requires face to face contact

[The distinction between retail and personal sales was blurred for this case: retail personnel would make very personal appointments and perform ‘home’ visits, thus functioning as field sales] (+) face to face contact (generate trust) (+) decision support for high value (financial) products (+) advice on and promotion of use of internet self help

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In Table 4 we display the summarised service attributes across cases, linked to the service elements. Although this provides a general overview of what channels can contribute, the weight and relative advantage of service attributes varies per case and customer (group). For example, the convenience of web ordering is relatively high in cases where customers are online all day. Also, in our B2B cases the advantages of in-store product pickup were relatively low, due to the costs associated with the time needed for transportation. Online pre-sales information scores best in those cases where the buying decision is information intensive (e.g. financial services, complex technology products). The B2C travel cases revealed some interesting social behaviour: customers would surf and print information during the day (often at work), presumably discuss this information over dinner, and then order at night: online ordering showed a peak around midnight.

Also the service attributes are valued differently within cases: Network Equipment customers that are online all day, for instance, find it very convenient to order online, whereas service technicians that are offline most of the day have a web threshold. If, to give another example, a consumer needs a new mobile telephone instantly, he or she might prefer to go to the physical store. On the other hand, if it is not urgent, or the customer has little time available or no convenient access to a nearby store, he or she may feel that the convenience offer by online ordering is well worth the wait. One of the biggest challenges facing the firms in our case studies was deciding which channel attributes to use, based on an assessment of the relative value for their customers, and on overall service coherence.

Table 4 Channel service attribute strengths and weaknesses per service element

ICT enabled and physical channels Service elements Web Call Retail stores Personal sales Pre-sales phase 1 Need

identification (+) generate leads (–) handling of complex leads requires other channels

(+) lead generation (+) fast response on leads from internet (+) lead qualification (–) handling of complex leads requires face to face contact

(+) in-depth advise

(+) problem clarification (–) too ‘strong’ instrument for minor issues

2 Information Provisioning

(+) educate customer on product, alternatives etc (+) instant product availability check

(+) instant product or status information

(+) experience look and feel of products (+) in-depth information

(+) educate customer and advise on product use (+) practical help and advise online service

3 Decision support

(+) support product and price comparisons

(+) supporting ‘novice’ buyers (–) limited control and overview for customer

(+) in-depth advise

(+) support complex or high value purchase

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Table 4 Channel service attribute strengths and weaknesses per service element (continued)

ICT enabled and physical channels Service elements Web Call Retail stores Personal sales Pre-sales phase 4 Trust (+) in store product

pickup and paying (+) face to face contact

(+) face to face contact

5 Negotiation (+) negotiation (e.g. window contracts)

Sales phase 6 Ordering (+) easy

ordering and product configuration

(+) instant ordering (e.g. when on the move)

7 Payment (+) in store paying 8 Order

processing (+) efficient order processing

9 Pick, pack, ship and delivery

(–) delayed product possession

(–) delayed product possession

(+) fast possession of products

10 Transferring possession of goods

(+) fast possession of products

11 Inventory management

(–) limited stock for less popular goods

After-sales phase 12 Coordinate

tasks, track and trace, order status

(+) view order or payment status, incl. track and trace (+) instant mutations (subscription, address) (+) support dealers with order history mgt information

(+) instant inquiries

13 Notification (to support needs)

(+) messaging regarding order status

14 Calamity support and distress relief

(+) resolve complaints

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Table 4 Channel service attribute strengths and weaknesses per service element (continued)

ICT enabled and physical channels Service elements Web Call Retail stores Personal sales After-sales phase

15 After sales usage advise and support

(+) self service trouble shooting (+) downloading invoices

(+) instant handling of complex questions (–) less control and overview for customer

(+) product returns, repair and replacement

16 Relationship building/ maintenance

(+) relationship building (–) too ‘strong’ instrument for minor issues

One of the first things one notices when looking at Table 4 are the open spaces. This indicates that the various channels to a certain extent are complementary, and that there are clear differences between the channels. Starting with the internet, customer benefits are mostly related to pre- and after-sales information and decision support, in combination with 24/7 service access and a sense of control over the (self)-service process. This is especially true for information-intensive services like mortgages or technical self-help. A number of cases revealed that customers prefer the ‘non-pushy’ and ‘non-intermediated’ nature of self-service. In one case there was a clear preference for the slower but self-managed searches over interpersonal searches [50]. The most important disadvantage is delayed product possession. As far as suppliers are concerned, low-cost self-service opportunities and process efficiencies are the most prominent advantages. There are some low cost options for lead generation and customer education as well, but the handling of complex leads requires other channels. Interestingly, the main issue regarding complexity is customer perception: we have seen cases where highly complex products were bought routinely over the internet, because of previous experience and familiarity customers had with purchases of those types of products.

With regard to the call channel the main customer benefits are: instant service access (even faster than logging on to the internet and conducting a search) and advice and support in pre- and after-sales. The human aspect is particularly important in case of calamity support and distress relief: especially when service restoration and empathy are needed, calling is fast, cheap and effective. Customer disadvantages are limited control over the service process and (again) delayed product possession. Supplier benefits include lead generation and support, and the ability to reach and support customers across long distances.

The retail store channel remains important for the physical aspects of buying: experiencing the look and feel of products, immediate product possession, and also the possibility to return products and have them repaired. Interpersonal aspects such as in-depth decision support and assurance and trust are important. Supplier benefits are stimulation of (additional) purchasing through uncertainty reduction, and proximity to customers, which creates a certain lock-in. For fast-moving consumer goods

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(e.g. groceries) supplier advantages are related to the fact that the store contains the inventory, and that self-service logistics (product pickup by customers) is the most efficient and cheapest way for servicing. A drawback of the physical store from the point of view of suppliers is the limited product or service range it can contain compared to, for instance, an internet-based store.

Interestingly, our case summary indicates that the personal sales channel is not ideal for the sales and after sales service tasks (with the exception of relationship management); the other channels are more effective and/or efficient, and personal sales only cause delays and/or overkill (except when the relationship is at stake). As far as presales are concerned, however, the personal sales channel shows the best performance. Customer advantages are: presales support, need identification and personalised advice. Supplier benefits are: lead generation, relationship management and penetration (by being able to reach below the surface), and the possibility of stimulating/facilitating the use of other channels to perform tasks for which they are better suited. An important disadvantage from the supplier’s point of view is the high cost of personal sales.

Table 5 Multi-channel service solutions on pre-sales requirements

ICT enabled and physical channels Customer and Supplier Requirements (CR and SR) Web Call Retail stores Personal sales

1 Need identification CR: Get non-intrusive suggestions to help me understand and fulfil potential needs

++ (collaborating Filtering) + (browsing) – (pop-ups)

+ (inbound [51]) – (outbound calling)

+ (customer controlled search)

+ (highly personalised) – – (door to door selling)

SR: Generate sales opportunities/ leads

+ (for info intensive offer)

+ (inbound and outbound)

+ (impulse buy)

++ (respond to customer concerns)

2 Information provisioning CR: Find out whether a product or service is good for me

+ (for info intensive offer) – (for ‘high touch’ [52] offer)

+/– (mostly for personal touch; limited info capabilities)

+ (for ‘high touch’ offer) – (for info intensive offer)

++ (for high risk, complex, personal offer) – (for extensive info comparison)

SR: Educate customers about my products/ services

+ (for information intensive offer)

+/– (mostly for personal touch; limited info capabilities)

+ (for ‘high touch’ offer) – (for info intensive offer)

++ (high ability to draw attention to new offers)

244 L.P.A. Simons and H. Bouwman

Table 5 Multi-channel service solutions on pre-sales requirements (continued)

ICT enabled and physical channels Customer and Supplier Requirements (CR and SR) Web Call Retail stores Personal sales

3 Decision support CR: Obtain help in making choices that are right for me

++ (self-help tools) + (for personal advise) – (for thinking and comparing)

+ (for personal advise) – (for thinking and comparing)

++ (for personal advise) – (can be too ‘pushy’)

SR: Reduce uncertainty and stimulate buying decision

+/– (good for self-help, but limited lock-in to buy)

+/– (speed up decision, but limited lock-in bc. distance)

+ (speed up decision)

++ (speed up decision)

4 Generating trust CR: Check if supplier, offer and processes are trustworthy

– (site can be deceptive)

+/– (service nr gives personal touch, but can be deceptive)

+ (enables ‘feel’ and accountability)

+/– (enables some ‘feel’ and accountability)

SR: Instils trust/confidence, reduce uncertainty

+/– (for process trust, via track and trace) – (for brand trust)

+ (for personal touch) – (for brand trust)

+ (physical store instils trust)

+/– (sales rep can instil trust, but also distrust)

5 Negotiation [53] CR: Fit offer to my wishes

+ (dynamic pricing sites) – (‘static’ sites [54])

+/– (flexibility limited)

+/– (flexibility limited)

++ (flexibility)

SR: Close deal at limited process and price costs

+ (for standard trade-offs and capacity dependent flexibility [55]) – (cannot deal with exception)

+/– (some, but limited deal-closing flexibility)

+/– (some, but limited deal-closing flexibility)

+ (balance deal-closing with cost)

To move one step closer to multi-channel service design, Table 5 rates the service support that channels can provide per requirement, as found in the case studies. For illustrative purposes, we limit ourselves to the pre-sales service elements in Table 5. Our ratings are based on the interpretation of our case material. When no explicit solutions are mentioned, the service solution is based on the channel in its basic form. The quality of support/solutions provided by a channel, to a large extent, depends on the quality of implementation and on the solution details (there are substantial differences, for example, in the degree to which the internet is considered a suitable channel for supporting customers in the area of need identification). Nevertheless, our overall results reveal specific strengths and weaknesses.

We can see from Table 5 that the personal sales channel has strong capabilities in the pre-sales phase. This is especially true when a new product or service is introduced. On the other hand it is also the most expensive channel. It is up to the development team

Designing a channel mix 245

to estimate which approach (and hence which position in Figure 1) is best for their market strategy. Second, there are few channels that are very strong at generating trust (service element No. 4) when they are used in isolation. It appears that brand trust, which is often generated through mass marketing communication, is an important addition to the trust that the various channels can provide. Third, most service solutions in Table 5 reveal differences in how well channels serve customer requirements vs. supplier requirements. This justifies our decision to draw a distinction between customer and supplier requirements.

5 Discussion

Our research has a number of limitations. To begin with, Tables 4 and 5 are the result of theory generation, rather than theory testing. Consequently, their external validity is yet to be demonstrated empirically. Moreover, we found that many of the strengths and weaknesses of services depend on customer needs and context. Although these are not explicitly addressed in this paper, our findings are confirmed by another research paper from the Place project [56]). In this paper, we have focused on the general service attributes of multi-channel servicing, and on a generalised overview of what solutions channels can contribute to service requirements.

Another limitation is that we took a rather functional focus on service, excluding marketing notions like the emotional value of experiences or image effects. Although our multi-channel overviews are in line with our bi-channel case results, there is a difference: cases that use fewer channels have a narrower range of solutions at their disposal to fulfil requirements. As a result, the relative advantages of the various channels will shift to some extent (when the personal sales channel is excluded, for example, retail may be the best remaining channel for negotiation or personalised advice.)

Contrary to recent expectations that space and time would become less important in the information age, our research indicates that these aspects play an important role in finding the right channel mix. The internet, for instance, is handicapped in terms of the very physical service aspects that are considered the main advantages of retail stores. Retail stores in turn are less flexible than their virtual counterparts when it comes to product range and inventory management. Also, customers who do not have easy access to retail outlets may for that reason find the service access of other channels more convenient.

Services literature teaches us that customers generally appreciate control over and involvement in the service process [10,13,21]. A comparison of the service attributes of web and call has made some of these differences explicit (Table 4). It appears that customers feel less psychological pressure and more control when they use the internet channel, and as a result they develop a preference for that channel in certain cases where they need information and have to make a decision.

There are several ways to assess the quality of websites. Some approaches focus on ease of use, completeness of functionality [8], visual appeal, or a combination of several aspects [23,25]. However, some of the more successful click-and-mortar approaches we have seen would not score particularly high in these areas (our Network Equipment case, for example, would not score above average on functionality and the same goes for the Office Supplies case with regard to ease of use). In our opinion, the value of channel functionality depends less on how close it is to an objective ‘golden standard’ and more

246 L.P.A. Simons and H. Bouwman

on how well customer and supplier benefits are created (see also [12,44]). Our extended QFD method appears to be useful to support this in a systematic manner. Moreover, while our case results show that it is hard to generalise with regard to the importance of service attributes, we search generalisation in the application of design methods.

In our theory section we separate customer and supplier requirements. There are two things that suggest we are right in making this choice. First, our findings show that supplier and customer interests can differ per service element and that specific solutions affect customers and suppliers in different ways (see Table 5). Second, as far as the service development process is concerned several of the firms we investigated found it difficult to deal with trade-offs and to choose between the solutions that were available. Although these choices are never easy, formal design approaches provide support by making the (dis)advantages explicit [44,45]. By separating customer and supplier requirements we provide an extension to QFD. It is our opinion that this will help suppliers to make better more explicit decisions, which in QFD and other approaches are left for the design team to figure out somehow.

Based on our findings we have tried to transcend the solutions-oriented terminology of channel marketers and to offer building blocks for a multi-channel design support method. We have seen that a design approach to multi-channel marketing remedies some of the current omissions in web-performance and Marketing Channel literature, whose terminology and focus are relatively solutions-oriented. Consider, for example, service element 9, ‘pick, pack, ship and delivery’, which has as the following requirements: ‘Obtain goods timely and easily’ (for customers) and ‘Minimised logistics costs and adequate delivery’ (for suppliers). Clearly, the requirements more explicitly expose underlying needs than the solution-phrased service element. The ‘traditional’ focus on solutions makes it more difficult to evaluate alternative channels, due to the absence of a frame of reference (like an explicit set of customer requirements), and runs the risk of missing market opportunities [46].

We do not expect all firms to be supported by extended QFD in the same way. As far as the design choices concerning multi-channel service concepts are concerned, there are large differences between the various cases. Generally speaking, SMEs put very little time and resources into analysis and design. Their motto seems to be ‘just do it’. In several cases, it was not the idea of making money through their websites, but the fact that customers were asking for them that prompted the companies to establish an online presence. As a result, the websites in question operated at a loss. Within the group of large corporations, several instances of partial design and sub-optimised or conflicting solutions were found. One of the telecommunications forms, for instance, opted in favour of a consumer-oriented web solution, thus hampering business to business processes around order handling. When a large bank did generate web leads, its local offices were not ready or equipped to follow up on them. It turned out that medium-sized companies were generally best at maintaining an adequate multi-channel coherence, and finding a balance between analysis and quality of implementation. In our opinion the reason for that state of affairs is that in those cases the overall size of the service offer across the various channels was such that it could be managed by one person or team relatively easily.

Designing a channel mix 247

The web has given customers more control, knowledge and power. As a result, some of the larger firms we investigated need to become more customer-oriented than that had to be thus far, they now face the challenge of translating customer requirements into service design. Paradoxically, it also means that, because customers are less easily locked into a sales cycle, supplier benefits have to be addressed more explicitly. When companies offer services on the web at lower prices, or sometimes for free, there is a risk that these low-margin services will not be compensated by consumption of high-margin goods.

This paper mainly aims at moving from service elements towards customer and supplier requirements and towards service attributes and solutions across channels. The design team of an individual firm will want to determine which requirements their customers and suppliers find most important, but this falls beyond the scope of this paper. Future research has to address the application of our method by individual firms, and look for methods for easy (preferably visual) service solution comparison across different channels and sales cycle elements.

6 Conclusion

In this paper, we have developed a sales cycle-related set of channel service elements, and provided empirical indications concerning the specific strengths and weaknesses of channels with regard service attributes. Subsequently, we have compared service solutions provided across channels, in relation to the (pre-sales) requirements of customers and suppliers. Based on these comparisons it is safe to assume that the internet is here to stay, but so are call centres, retail stores and personal sales. Each channel has its own advantages and disadvantages (see Tables 3–5).

Our recommendations focus on the need for management to ensure that the channel mix they select reflects the interests of both customers and suppliers, by making a well-balanced comparison of the available service solutions. To do so, managers and developers can use the extended QFD method along the lines of Figure 2. Consequently, when facing new ICT possibilities, step 1 is to check which service attributes (in Table 4) are strengthened, and whether new service attributes may have to be added? In the case of mobile internet access via handhelds, for example, the accessibility of ordering (6), checking order status (12) and messaging (13) will most likely be favourably compared to the internet by many types of customers, and the level of self-service control is higher than it is with the call channel. Step 2 involves checking how customer and supplier requirements are affected, and how important those requirements are within the total service offer. For example, it makes sense to check overall ordering process convenience when introducing mobile access. Step 3 has to do with concept generation and combination. For example, customers may only value the convenience of mobile online ordering when the orders are linked to the customers’ back office administration (to avoid duplication or inaccuracy in the order process). Step 4 involves actively looking for and stimulating multi-channel synergy effects (although this falls outside the scope of this paper, is it supported by the multi-channel service attribute overview of Table 4). This will stimulate service coherence and increase the likelihood of innovations being adopted by the entire channel service system.

248 L.P.A. Simons and H. Bouwman

Acknowledgements

This paper is a result of the PLACE project. The acronym PLACE stands for: ‘Physical presence and Location Aspects in electronic Commerce Environments’, involved in this project were Charles Steinfield from Michigan State University, Thomas Adelaar, Arnout Bruins, Erwin Fielt, Alko Smit from Telematica Instituut, Harry Bouwman, Els van de Kar from University Delft, Ellen de Lange and Mark Staal from KPN Research, and Luuk Simons from University Delft and KPN Research.

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