Customer channel migration

The authors develop a model of customer channel migration and apply it to a retailer that markets over the Web and through catalogs. The model identifies the key phenomena required to analyze customer migration, shows how these phenomena can be modeled, and develops an approach for estimating the model. The methodology is unique in its ability to accommodate heterogeneous customer responses to a large number of distinct marketing communications in a dynamic context. The results indicate that (1) Web purchasing is associated with lower subsequent purchase volumes than when buying from other outlets; (2) marketing efforts are associated with channel usage and purchase incidence, offsetting negative Web experience effects; and (3) negative interactions occur between like communications (catalog x catalog or e-mail x e-mail) and between different types of communications (catalog x e-mail). The authors find that over the four-year period of their data, a Web-oriented "migration" segment emerged, and this group had higher sales volume. Their post hoc analysis suggests that marketing efforts and exogenous customer-level trends played key roles in forming these segments. The authors rule out alternative explanations, such as that the Web attracted customers who were already heavy users or that the Web developed these customers into heavier users. They conclude with a discussion of implications for both academics and practitioners.