How Valuable are Multichannel Customers? The Moderating Effects of Product Category on the Relationship between Channel Preference and Monetary Value

Abstract

How does the monetary value of customer purchases vary by customer preference for purchase channels (e.g., catalog, store, Web, multichannel) and product category? We develop a conceptual model and hypotheses about the moderating effects of two key product category characteristics -- hedonic versus utilitarian nature of the product category and perceived risk -- on the channel preference-monetary value relationship. We test these hypotheses using two different studies, comprising a unique large scale empirically generalizable dataset and a timeseries cross-sectional dataset. Contrary to conventional wisdom that all multichannel customers are more valuable than single channel customers, our results show that multichannel customers are the most valuable segment only for hedonic product categories. They reveal that for utilitarian product categories perceived as high (low) risk, ‘Web (catalog or store) only’ shoppers constitute the most valuable segment. Our findings offer managers guidelines for targeting and migrating different types of customers for different product categories through different channels.

Keywords: Customer relationship management, channels, multichannel marketing, retailing