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Solving the 3 Key Frictions of Omnichannel Marketing

Solving the 3 Key Frictions of Omnichannel Marketing

Tony Haitao Cui, Anindya Ghose, Hanna Halaburda, Raghuram Iyengar, Koen Pauwels, S. Sriram, Catherine Tucker and Sriraman Venkataraman

Is omnichannel marketing worth the cost? In a new study in the Journal of Marketing, researchers define omnichannel marketing as the “synergistic management of all customer touch points and channels both internal and external to the firm that ensures that the customer experience across channels and firm-side marketing activity, including marketing-mix and marketing communication (owned, paid and earned), is optimized.” 

Often viewed as the panacea for one-to-one marketing, omnichannel experiences data, marketing attribution, and consumer privacy frictions. Our research team demonstrates that advances in machine learning (ML) and blockchain can help address these frictions. However, these technologies may in turn also present new challenges for firms and opportunities for academic research.

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First, to fully realize the potential of omnichannel marketing, firms need information on all their interactions with each customer as they traverse the different stages of the customer journey. We consider the whole gamut of interactions, such as communications between the firm and its customers, activities where the customers interact with the firm (or its partners) across information gathering, purchases, product fulfillment, returns, and post-purchase service. Such data might not be readily available or usable. 

Questions for future research include: how to decide which machine-learning methods are best and can impute missing pieces of information using data already available to the firm? What is the optimal design of matchmakers/platforms that will collect information from different parties spanning different customer touch points? What is the impact of data sharing within and across firms on consumers (prices they pay), firms (supply-chain efficiency, profit margins), and policy makers (market structure, efficiency, and overall surplus)? How to incentivize internal and external partners to participate in the blockchains? And might blockchain-enabled omnichannel marketing efforts result in increasing or softening competition?

Second, advances in attribution modeling have significantly improved firms’ ability to assign credit to a specific marketing touchpoint. However, extant attribution models are limited by an inability to attribute the transition to a single intervention or presume that the impact of the previous intervention stops with the next step within the purchase funnel and does not carry over to subsequent steps within the funnel. Moreover, future research should develop attribution models that combine micro and macro data leveraging tried-and-tested methods in economics and marketing. We need more research that compares aggregate-level approaches using traditional attribution modeling with individual-level approaches and multi-touch attribution. It is useful to compare how extant attribution methods may be adapted to study forward-looking metrics such as customer lifetime value (CLV), which quantifies revenue streams a firm expects to earn after acquiring a customer. Finally, as omnichannel marketers adopt technologies like blockchain, these firms will realize greater transparency and more reliable integration of consumer data across touchpoints within and outside of the firm. This naturally warrants both academia and practitioners a better understanding of how attribution effects change with and without blockchain-enabled marketing platforms.

Third, consumer privacy is advanced by regulation, customer empowerment, and blockchain guarantees. Still, we highlight several questions to improve consumer privacy. Is it possible to use predictive analytics in a manner that is conscious of consumers’ likely privacy preferences? Moreover, is there a way of emulating existing blockchain-based ecosystems in an omnichannel context? For example, can a firm use blockchain to create a token that establishes a currency that allows the consumer to be rewarded for sharing their data as a part of an omnichannel marketing effort? And more ambitiously, is there a way that multiple firms can coordinate around a single-token-based scheme to help kickstart a larger ecosystem? How successful are ad-tech initiatives that have helped omnichannel marketers become privacy-regulation compliant? Are they inherently just a cost that interrupts the accurate processing of information, or are there benefits in terms of enhanced consumer trust in that firm? It strikes us that academic-firm partnerships can assess the usefulness of such tools for firms, consumers, and regulatory compliance – as well as make recommendations for improvements. Recent developments in federated learning aim to provide privacy controls; however, there remains room for indirect leakage of consumer information. These leakages can stem from loopholes in collaborative machine-learning systems, whereby an adversarial participant can infer membership as well as properties associated with a subset of the training data. In a blockchained federated-learning architecture, the local-learning model updates are exchanged and verified by leveraging a blockchain. Might such developments temper privacy concerns and lead to more efficient omnichannel marketing programs? 

Finally, public policy has thus far focused on the deleterious effects of machine-learning-induced algorithmic biases, be they in the form of racial or gender discrimination. Scant research or policy looks at the use of personal information in algorithms. For example, does greater transparency into the customers’ path-to-purchase journey, even with explicit customer consent, result in the unintended consequence of giving omnichannel firms room to price-discriminate efficiently, and in doing so, erode consumer welfare?

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From: Tony Haitao Cui, Anindya Ghose, Hanna Halaburda, Raghuram Iyengar, Koen Pauwels, S. Sriram, Catherine Tucker, and Sriraman Venkataraman, “Informational Challenges in Omnichannel Marketing Remedies and Future Research,” Journal of Marketing.

Go to the Journal of Marketing

Tony Haitao Cui is Ecolab-Pierson M. Grieve Chair in International Marketing and Professor of Marketing, Carlson School of Management, University of Minnesota, USA.

Anindya Ghose is Heinz Riehl Chair Professor of Business and Professor of Technology, Operations, and Statistics and Professor of Marketing, Stern School of Business, New York University, USA.

Hanna Halaburda is Associate Professor of Technology, Operations, and Statistics, Stern School of Business, New York University, USA.

Raghuram Iyengar is Miers-Busch, W’1885 Professor and Professor of Marketing, Wharton School of Business, University of Pennsylvania, USA.

Koen Pauwels is Professor of Marketing, Ozyegin University (Istanbul), and Associate Professor of Business Administration, Tuck School of Business, Dartmouth College.

S. Sriram is Associate Professor of Marketing, Ross School of Business, University of Michigan.

Catherine Tucker is the Sloan Distinguished Professor of Management Science and Professor of Marketing, MIT Sloan and Research Associate at the NBER, USA.

Sriraman Venkataraman is Professor of Marketing and Edward M O’Herron Scholar, Kenan-Flagler Business School, University of North Carolina at Chapel Hill, USA.