Study: Incentives are not the way to drive multichannel shopping

Discussion
Sep 28, 2015
Tom Ryan

A university study found that financial incentives, such as coupons, are not always required to drive customers to try something new, including multichannel shopping. In fact, they can be counterproductive.

The study explored how stores can drive sales through more than one channel, for example, driving online shoppers to brick & mortar and vice versa.

Professors at the Department of Management of the University of Bologna (Italy) and Tuck School of Business, Dartmouth College conducted a field experiment with more than 30,000 customers of a major multichannel European book retailer.

The authors randomly assigned the firm’s customers to receive one of four marketing campaigns. Customers received one of two messages: one stated the benefits of multichannel shopping while the other stated the retailer’s value proposition. Each message either included a financial incentive or did not, yielding four campaign variations in all.

When the multichannel message included a financial incentive, the customer received three coupons, one for each channel. When the value proposition message included a financial incentive, the customer received three coupons that had to be used on three separate purchase occasions. Coupons were valid for three months.

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The campaign that proved most effective at inducing customers to use more than just one channel was the campaign that combined the multichannel message with no financial incentive. The campaign generated a return on investment (ROI) of 93 percent, compared to negative ROIs for the other campaigns.

Surveying the respondents, the authors found the multichannel campaign with no incentive communicated the benefits of multichannel shopping without appearing manipulative, or only usable if various restrictions were met.

"The coupon incentives were quite reasonable from the company’s perspective, but were restrictive and manipulative from the consumer’s perspective," said Professor Elisa Montaguti, MBA director at Bologna Business, in a statement. "So the prescription for companies is simple — make clear what you’re encouraging the customer to do, but don’t come across as manipulating them into doing it."

The researchers believe the findings are particularly relevant in today’s shopping environment, where consumers are bombarded with e-mails and website recommendations with purchasing incentives.

"In our case, multichannel shoppers are more profitable than they would be if they were single channel, but you can’t force them into becoming multichannel," said Prof. Montaguti. "You have to convince them in a clear, straightforward manner."

Do you agree that incentives encouraging multichannel shopping often come off as manipulative and work counterproductively? What’s the best way for stores to encourage multichannel shopping?

Please practice The RetailWire Golden Rule when submitting your comments.
Braintrust
"I agree with the study’s findings when dealing with shoppers comfortable with non-traditional retail channels. But like many well-intended, academic-based studies, this one is loaded with nuance. Caveat emptor!"
"Yes! Yes! and ... well ... yes! Customers aren’t stupid. They know when they are being manipulated and nobody likes the feeling that they are getting conned."
"Highlight a compelling reason for shoppers to leverage channels and they will take advantage. It has to make sense to the shopper."

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6 Comments on "Study: Incentives are not the way to drive multichannel shopping"


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Mark Heckman
Guest
4 years 9 months ago

I agree with the study’s findings when dealing with shoppers comfortable with non-traditional retail channels. The more time and frustration any retail channel saves the shopper, the less dependent those purchases will be on discounts and incentives. However, if you are trying to attract folks beyond the early adopters, incentives may be necessary particularly if you are offering products and services that are inherently heavily discounted in other traditional channels.

Like many well-intended, academic-based studies, this one is loaded with nuance. Caveat emptor!

Ryan Mathews
Guest
4 years 9 months ago

Yes! Yes! and … well … yes!

Customers aren’t stupid. They know when they are being manipulated and nobody likes the feeling that they are getting conned.

Of course, there is a level of the market that can always be bought, but the problem with those shoppers is that they are only loyal until another competitor makes them an offer.

The best way to encourage multichannel shopping is to start looking at it from the perspective of the customer who values convenience and/or just uses whatever tool is easiest at the moment.

Retailers have to get over the idea of rigid control and begin positioning themselves to capture sales whenever and however they occur, and that means waking up to the fact that more shopping options tend to put consumers in control.

Ralph Jacobson
Guest
4 years 9 months ago

Highlight a compelling reason for shoppers to leverage channels and they will take advantage. It has to make sense to the shopper.

Camille P. Schuster, PhD.
Guest
4 years 9 months ago

Of course. Consumers have a value equation that combines several benefits. Price is always one of the benefits. Price is not always the most important benefit. Offering price as the reason for purchasing a product is not necessarily a successful strategy for reaching consumers. Matching benefits with those desired by consumers is a better strategy. However, it is more challenging than just offering a lower price.

Martin Mehalchin
Guest
Martin Mehalchin
4 years 9 months ago

Like many, I’ve always felt that designing a compelling multichannel experience and making new channels compelling and worth trying was much more powerful in the long run than using incentives. It’s nice to see some research that confirms my bias.

Seeta Hariharan
Guest
4 years 9 months ago
Consumers value services, information and experiences that make their lives better and easier. They have many choices and will gravitate to retailers who put their needs first and at the core of every shopping experience. Providing information that shows how multi-channel shopping can be more convenient and better serve customers needs is much more effective in my opinion than merely offering coupons and incentives that do not explain the value customers can realize. Today’s digitally enabled world predicates an ever increasing volume of marketing messages—all providing unheard of incentives for the consumer. But for most people, often the gain isn’t worth the time or effort to tune in to figure out what they are getting, especially when it involves multiple communication across multiple channels. For example, I recently went into a large office supply store to pick up a printer ink. I had with me a 20% off coupon that I received via direct mail. However, when I presented the coupon to the cashier I was told I couldn’t use it for my purchase. The… Read more »
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Braintrust
"I agree with the study’s findings when dealing with shoppers comfortable with non-traditional retail channels. But like many well-intended, academic-based studies, this one is loaded with nuance. Caveat emptor!"
"Yes! Yes! and ... well ... yes! Customers aren’t stupid. They know when they are being manipulated and nobody likes the feeling that they are getting conned."
"Highlight a compelling reason for shoppers to leverage channels and they will take advantage. It has to make sense to the shopper."

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