The number and type of channels that customers are using has rapidly grown to include the Internet, smartphones and a host of social media options. The result is an increase in possible customer touch points, which presents new opportunities for organizations to interact with their customers. With the increasing sophistication and empowerment of customers, this trend is driving the need for organizations to use new channels in new ways. However, many organizations have not been successful, experiencing disappointing results due to mismanagement of a new channel or misjudgement of overall channel requirements. This mismanagement can detrimentally affect company results. Capgemini Consulting advises that a channel strategy designed for customer needs is imperative to ensure channel success.

1. the way we see it
Channel Strategy: Framework for Success
How to Maximize Internal and Customer Benefits Through Effective
Channel Management

2. Table of Contents
Abstract 3
Introduction 4
Channel Failures 6
Understanding the Needs of the Customer 7
Channel Management Strategic Framework 10
Recommendations 13

3. Abstract
The number and type of channels that customers are using
has rapidly grown to include the Internet, smartphones
and a host of social media options.
The result is an increase in possible Capgemini Consulting advises
customer touchpoints presenting that a channel strategy designed
more and different opportunities for the customer needs of that
for organizations to interact with organization is imperative to ensure
their customers. This, along with channel success. Understanding the
the increasing sophistication and customer’s channel requirements for
empowerment of customers, is their different possible interactions
driving a need for organizations with the organization is a crucial
to use new channels and use them strategy input. The customer may
differently. And though great use multiple channel touchpoints
opportunities can be delivered to complete a single transaction,
by entering new channels, many and organizations need to be
organizations have not had cognizant of this in their channel
successful experiences. Examples strategy. Customer centricity has
exist from disappointing results become a strategic imperative,
due to mismanagement of a new and organizations need to create a
channel to complete misjudgment channel mix capable of delivering a
of the overall channel requirements, valued and differentiated experience
detrimentally affecting the at each key consumer interaction.
top-line company results.
Capgemini recommends that an
organization uses a framework
to develop its channel strategy
such as Capgemini Consulting’s
Channel Management Strategic
Framework. It firstly develops an
understanding of the customer
needs to build up channel business
requirements. It then takes the
organization through five steps,
which introduce, optimize, migrate,
rationalize and integrate channels.
Using such a framework means that
a company can capitalize on the
channel opportunities available,
delivering the required customer
experience and ultimately increased
sales or reduced cost to serve.
Channel Strategy: Framework for Success 3

4. Introduction
The number, type and reach of possible channels through which a customer can interact
with an organization has increased rapidly over the last decade.
Between 2000 and 2010 global and information channels are
Global Electronics
Internet usage grew 444%1 shaping changing the landscape of how
Manufacturer: Launching a
many aspects of a consumer’s the consumer buys, browses and Successful Online Channel
lifestyle including the way goods socially connects. Social networking
and services are selected. particularly means that an
organization has less direct control.
Mobile telephony too has This global consumer products
significantly penetrated the global The social channels are changing manufacturer wanted to develop
population. Access to mobile the dimension of marketing from an innovative online channel,
which would provide information,
networks is now available to 90% a “push” to a “pull” environment
products and customization
of the world2 and penetration of the as customers reach out through
and community opportunities
mobile market by the smartphone multiple social channels to get the for its customers. Capgemini
is particularly increasing. U.S. information they need. This is in Consulting was chosen as
smartphone penetration of the contrast to the “push” marketing its strategy, design and
mobile phone market is predicted messages delivered by traditional implementation partner for the
by Nielsen to reach 49% by the channels. Customers increasingly venture, which included:
end of 2011,3 and the uptake of expect to be able to engage with
ƒƒDevelopment of an online sales
the biggest selling smartphone, companies through community- business plan
the iPhone, was far more dramatic based interactions, and best
than other previous technological practices to do this have emerged.5 ƒƒDesign of the online sales
launches (see Figure 1). Crowdsourcing is one such example, organization and processes
where customers can collectively ƒƒDefinition of website features
The continuing growth of social influence new product and service and functions
media is also having a significant ideas. Unilever moved from its
ƒƒLaunch of the new e-shop
channel impact, splitting the online costly traditional marketing agency
channel into a series of additional to an online ideas forum open to Three months after launch
potential customer touchpoints. all to submit advertising ideas for the online shop had already
New channels that have gained its consumer products, awarding a generated €300 million of
qualified referrals to the
traction in the last decade include prize to the winning idea.6 Giffgaff
traditional channels.
blogs, online communities and is a community-driven mobile
social networking. Facebook, the network. Members get rewarded
most visited social networking with mobile services for helping
site, became the most popular site to run the company through their
on the entire World Wide Web in ideas and generating new customers,
2010.4 These new transactional thereby reducing fixed overhead.7
1
“Internet Usage Statistics,” Internet World Stats, December 2010
2
“The World in 2010,” ITU, October 2010
3
“Industry dynamics, Telco Services,” Royal Bank of Scotland Broker Report, April 2010
4
“Facebook Tops Google; Social Networking Passes Search As Web Users’ Top Activity At End Of
Year,” Mercury News, January 2011
5
“Forrester’s Top 10 Trends for Customer Service in 2011,” Kate Leggett, Forrester Research Inc.,
January 3, 2011
6
“Unilever Goes Crowdsourcing to Spice Up Peperami’s TV ads,” The Guardian, August 2009
7
www.giffgaff.com
4

5. In light of the growing and the right channel strategy and
changing channel options and how understanding the customer
the sales opportunity they can channel expectations is a crucial
provide, there is a compelling need input to this. We conclude by
for organizations to capitalize on stressing the importance of a
channel mix to drive increased strategy and introduce Capgemini
business for their products and Consulting’s proprietary Channel
services. In this paper, we explore Management Strategic Framework
how the lack of a strategic approach and how it can be used to maximize
to channels can jeopardize overall results from an optimized, high-
organization performance. We performing channel mix.
highlight the importance of having
Figure 1: Number of iPhone Users in the Quarters Since Launch Compared to Other Technologies
120
~120MM+
100
Mobile Internet
iPhone + iTouch + iPad
Launched 6/07
80
SUBSCRIBERS (MM)
Desktop Internet
60 Netscape*
Launched 12/94
~32MM
40 Mobile Internet
NTT docomo i-mode
Launched 6/99
20 ~27MM Desktop Internet
AOL
~9MM v 2.0 Launched 9/94
Q1 Q3 Q5 Q7 Q9 Q11 Q13 Q15 Q17 Q19
QUARTERS SINCE LAUNCH
iPhone + iTouch NTT docomo i-mode AOL Netscape
Source: “Ten Questions Internet Execs Should Ask and Answer,” Morgan Stanley, November 2010
*Note: Netscape users limited to U.S. only.
Channel Strategy: Framework for Success 5

6. Channel Failures
Great opportunities can be delivered through expanding Understanding the company’s own
or switching channels to reach the customer, but many key strategic strengths in developing
organizations have made costly channel mistakes that channels is also crucial. When
betting firm William Hill decided
negatively affect the overall business. to move into the online market it
failed to recognize its strengths
and core business and tried to
develop its own custom-built online
IT solution. The initiative wasted
Not adjusting the channel mix to control user comments and an estimated £26 million.11
to meet the changing needs of use of its logo on the site. This
the customer can mean company produced an online community An inappropriate application of a
disaster. Blockbuster video failed to dialogue criticizing the Nestlé new channel can cause significant
react quickly as its customers and brand and its online behavior.9 customer discontent. Pepsi tried
pure-play rivals moved online. Its to reach out to the target male
prime real estate policy for its bricks- Failure to understand a new audience for its AMP energy drink
and-mortar stores worked well in channel and applying a traditional with a “guide to women” iPhone
the ’80s and ’90s but needed to be strategy was the mistake made by app. The application received such
switched to more direct shopping Walmart in its Facebook marketing negative social media publicity
channels post-2000. Blockbuster’s campaign. Walmart did not adjust about its derogatory nature it
movie stores, DVD vending kiosks its marketing techniques to the had to be withdrawn and Pepsi
and digital downloads were brought social network environment. It issued an online apology.12
in too late to offset the physical stores’ limited feedback and interaction
losses, and the company declared from its community members and In summary, understanding how
bankruptcy in November 2010.8 tried to push a repeated marketing customers are changing and how
message in the way of a traditional they want to use the channels
Organizations need to understand offline marketing campaign. Its rival of their choice to communicate
that they are not necessarily in Target, on the other hand, created with an organization is crucial.
direct control of how the consumer a “pull” marketing situation, taking Companies also need to time their
interacts with their brands in some time to understand how customers entry into a channel appropriately.
channels. Consequently, they wanted to act on Facebook and These factors should be built into
need to engage the consumer in a setting up a more interactive site an organization’s channel strategy.
different way. Nestlé has received with customer dialogue. Target
negative PR as a result of its actions attracted over three times the
on Facebook, due to its attempt number of users that Walmart did.10
8
“Online rivals bring brutal end to Blockbuster story,” The Independent, August 2010
9
“Nestlé’s Facebook Page: How a Company Can Really Screw Up Social Media,” BNET, March 19, 2010
10
“Walmart Failed Facebook Social Internet Marketing Campaign,” Articlesbase, October 2009
11
“Gaming machines help William Hill hurdle online woes,” Reuters News, February 2008
12
“Pepsi goes down with AMP on failed iPhone app,” Econsultancy, October 2009
6

7. Understanding the Needs of the Customer
First and foremost to manage their channels effectively,
organizations need a channel strategy. Good channel
management is not necessarily operating in all channels.
ASOS, the online fashion retailer, To select the optimum channel
started the first half of financial strategy these companies
year 2010-2011 with a continuation understood their customer
of many years of double-digit needs for their products, which
sales growth with profits rising is a crucial strategy input.
59% over the previous year, all
from operating purely online.13
Amazon has also focused only on 13
“ASOS uses international sales to drive
Understanding the the online channel and its revenue 59% profit boost,” Computer Weekly,
remained strong in 2010 with 39% November 2010
needs of the customer growth from its base of 121 million
14
“Ten Questions Internet Execs Should Ask &
Answer,” Morgan Stanley at Web 2.0 Summit,
is the single most active customers worldwide.14 November 2010
important input to
channel strategy.
UK Retailer: Creating a More Integrated Customer Experience
This UK-based clothing, food and homeware retailer had a series of channels
that had been added to its core offering over time rather than being designed
together. This resulted in different experiences across different channels.
Capgemini Consulting used its Channel Management Strategic Framework
to analyze how well the channels were delivering the experience required by
the company’s customers. Benchmarking against leading practitioners and
mapping customer journeys were key input into designing the required channel
strategy. We worked with the retailer to create a roadmap with action plans
across all channels to provide a more integrated customer experience.
Channel Strategy: Framework for Success 7

8. The Customer Journey In the multi-channel world customer Some typical multi-channel journeys
journeys have become much more for a telecoms provider are shown
The starting point of understanding
complex with a customer using in Figure 2. This channel-hopping
the customer is to think of his or her
several channels throughout the behavior presents the need for
possible interactions with the organi-
journey’s course; customers are not organizations to understand the
zation as a set of journeys that are
loyal to a particular channel. This can multi-channel requirements of their
triggered by a need or want. Selecting
negatively impact customer experience customer and the complexity of how
a product or service is more than a
if the transition between channels one channel can influence another.
simple transaction; the customer
is not seamless. In 2010, more than For example, many retailers have
journey encompasses everything a
75% of shoppers in the U.S. were found that a small percentage of
customer thinks, feels and perceives
using at least two channels to browse, sales are directly attributable to their
while interacting with a business.
research and conclude purchases.15 catalog. Customers are, however,
Figure 2: Example Cross-Channel Journeys for a Telecoms Provider
Ongoing Use and
Become Aware Join First Use Upgrade, Renew, Exit
Payment
Select Provider
Buy and First Usage
Manage Account
Key: Possible
Channels to Use
= Store
Upgrade Phone
= Online and Service
= Mobile
= Call Center
Source: Capgemini Consulting
15
“Cross-Channel Commerce: The Consumer View,” A consumer research study commissioned by ATG, March 2010
8

9. browsing the catalog to decide on the higher the likelihood that a The DVLA, the UK government
their purchase and then going online more tailored or personal service is organization responsible for vehicle
to complete the transaction. Retailer needed. Banks, for example, may licensing, added an online and
JC Penney eliminated its traditional service low-complexity customers automated telephone service to
catalog and switched to “look with simple requirements online, its traditional postal channel to
books,” more frequent, customer supplemented with the offer of increase efficiency and reduce
targeted catalogs that line up with online chat for more complex queries costs. Customer feedback was very
the company’s online offering.16 before customers need to pick up the positive as many customers found
phone for highly complex issues. that the new channels were more
The Joined-up Customer convenient and quicker to use
Experience If managed well channel migration than the previous channels.17
can mean that the customer actually
As customers channel hop they
gains an improvement from the switch Once an organization has a detailed
expect consistency in their
to a cheaper channel. In the U.S. understanding of the channel ex-
experience. This harmonization
banking example shown in Figure 3 pectations of its particular customer
of the brand across channels is a
customers saw a variety of benefits then it is ready to use a framework
channel management basic that
from switching to online banking. to build its channel strategy.
customers expect no matter which
channel they are using. They expect
the organization to remember
their interactions and channel
preferences and adjust the service Figure 3: Typical Relative Transactional Costs for Checking Bank Balances and
accordingly. Centralized customer Recent Transactions
information that is accessible
by the entire organization is an
essential enabler to deliver the Channel Transaction Costs
joined-up channel experience. Online $0.17
Mail Statements $0.75
Maintaining the Experience ATM (Automated Teller Machine) $0.85
Through Channel Migration
Interactive Voice Response System $1.25
It is well known that some channels Contact Center $3.75
are cheaper to operate than others
Bank Teller in Branch $4.00
and by encouraging customers
through these lower-cost-to-
serve channels organizations can
reap operational cost savings. Benefit Customers Perceive From Using the Online Channel
For example, online transaction
costs can be a fraction of those of Speed of Receiving/
46%
Sending Information
telephoning a contact centre. Relative
costs for checking bank balances Receive Messages
46%
Anytime Anywhere
and account transactions in different
channels are shown in Figure 3. Faster Analysis of My
31%
Financial Information
However, customers will have Better Time
30%
different journey and shopping needs Sensitivity
and should not be channeled into the
0% 10% 20% 30% 40% 50% 60%
cheapest option to the detriment of
their expected experience. The more % of All Respondents
complex the customer’s requirements
Source: “Mobile Banking Survey,” Syniverse, 2009
“JC Penney to shut down catalog outlets,” DMNews, January 2011
16
“Electronic service delivery in the Deliver, Vehicle and Operator Agencies in Great Britain,” National Audit Office (NAO), January 16, 2008
17
Channel Strategy: Framework for Success 9

10. Channel Management Strategic Framework
Capgemini Consulting has developed a Channel Management understood. A channel that is used
Strategic Framework from which a channel strategy appro- to build awareness of a service to
priate to driving results for a particular organization’s cus- a customer but not to sell it, for
example, still forms an important
tomer and products or services can be developed. part of the channel strategy. In the
U.S. in 2011 it is estimated that
39% of sales will be influenced by
Defining the Channel Business with up-to-the-minute knowledge the online channel in addition to
Requirements of how to engage customers with the 9% actually transacted online.18
different channels. The customer This strategic definition of customer
The framework (see Figure 4) begins
insights need to extend to knowing and channel requirements for the
with describing what an organization
which channels an organization’s business should ensure that each
should achieve from its channels
targeted customers want to use channel will form part of a cohesive,
in business terms. Core to this is
and how they will use them. combined company strategy. It
an understanding of the customer’s
also forms the basis for the five-
channel requirements. The classic
The complexity of the customer step key channel decisions to be
or standard marketing approach of
channel interactions throughout made that lead to an appropriate,
gaining a deep understanding of the
the sales journey needs to be optimized, integrated channel mix.
customer’s needs must be coupled
Figure 4: Channel Management Strategic Framework
CHANNEL MANAGEMENT
CHANNEL STRATEGY
CUSTOMER CHANNEL CONTACT CHANNEL CONTACT CHANNEL MANAGE CHANNEL
SEGMENTATION MODEL MODEL POSITIONING FUNCTIONALITIES CONFLICT
Channel Introduction Channel Optimization Channel Migration Channel Rationalization Channel Integration
CHANNEL CHANNEL CHANNEL CHANNEL CHANNEL
CUSTOMER CUSTOMER CUSTOMER CUSTOMER CUSTOMER
Source: Capgemini Consulting
“US Online Retail Forecast, 2009 to 2014,” Forrester Research Inc., November 2010
18
10

11. Channel Introduction Channel Optimization sales channel. We helped advise
on a promotional awareness
Each channel should represent a Channel optimization ensures
campaign and the enhanced online
key interaction point between an that each channel is performing
and mobile features such as seat
organization and its customers. against its strategic business
selection, which made customers
There are many channel options, objectives. There should be
prefer and stick to the channel.
from stores, phones and contact both specific sales and customer
centers to the Internet, mobile interaction targets, as a particular
Disney’s online wedding Wish Book
devices and social media tools. channel’s strategic intent may be
enables users to configure a wedding
A company needs to determine to drive sales to other channels.
package and then click a button to
which new channels will meet its Performance against the targets
share and discuss it with a customer
strategic objectives and help increase should be monitored continually
service representative.22 Without
the customer base, grow revenues and used to drive the processes
this application, customers would
and reduce costs. Domino’s Pizza and system changes needed to meet
likely be on the phone much longer
introduced an iPhone ordering app the channel objectives. Online
running through possible options.
in September 2010 and within three retailer Petco.com, for example,
months the app had driven £1million found that products with reviews
Channel Rationalization
of sales in the UK and accounted have return rates that are 20%
for one-third of its online orders.19 lower than for those without. By In a world of increasing channels,
Banks are developing creative adding this feature to its website eliminating a channel may
channel solutions for servicing it saved on shipping, restocking feel counterintuitive to some
emerging market economies. and customer service costs.21 organizations but strategically this
M-Pesa is a Kenyan company that may be the right course of action.
offers a mobile money transfer Channel Migration In using the framework a company
service. Since the introduction of will have identified its strategic
Once the right channels are in
the service in 2007, 38% of Kenyan channel goals and understand
place and working effectively, an
households have at least one M-Pesa the costs to serve for its channels.
organization can begin to match the
user while only 22% of the adult Terminating under-performing
profitability of different customers
population have bank accounts.20 channels reduces complexity and
with their cost to serve. This requires
cost, freeing up resources to allow
an organization to understand each
the organization to focus on the
channel’s operational efficiencies
Using the Channel Management core, profit-driving channels and
and costs. Customers can then be
Strategic Framework (see Figure improving the overall experience.
“steered” to the appropriate channel
4) a strategy can be developed
by answering five key questions:
through incentives, promotions,
Capgemini Consulting worked with
additional services and awareness
a major UK retailer to rationalize
generation. This migration
its channels. The retailer had two
should not come with a perceived
1. Channel Introduction: store brands in the marketplace each
degradation of service by the
Which channels should serviced by individual online and
customer, rather as an enhancement,
be present? call center operations. We helped
for example being quicker or more
combine the individual channels
2. Channel Optimization: convenient for the customer.
into one that could still meet the
How are these channels
performing?
brand needs of both store chains.
Capgemini Consulting worked
The more efficient, rationalized
3. Channel Migration: Which with an Asian airline to migrate
channel delivered significant cost
customers should be using its customers to its lower-cost and
savings for the retailer without
which channel for what? more efficient online and mobile
compromising customer experience.
4. Channel Rationalization:
Which channels do we
not need to meet our
business goals?
19
“Domino’s Defies Snowfall as iPhones Boost Festive Sales,” The Daily Telegraph, January 2011
5. Channel Integration: 20
“Benefits of Mobile Money Transfer Trickle Down to Rural Folk,” All Africa, October 2010
How should the channels
21
“Leading Pet Retailer Finds That Returns Plummet When a Product Has Reviews,” BazaarVoice,
June 2007
be integrated? 22
http://disneyweddings.disney.go.com/
Channel Strategy: Framework for Success 11

12. Channel Integration
European Bank: Finding the
With the optimized channel mix in Right Channel Strategy
place companies can then maximize
their gains by ensuring channel
integration. This is from both a
This major European bank was
customer journey and brand experi- questioning the effectiveness of
ence and operational perspective. its new branch opening strategy
Channel integration can eliminate as it was merely replicating its
the silos of individually run channels current channel mix and cost
and manage the customer experience model. Capgemini Consulting
with optimum efficiency through: worked with the bank to assess
which of the new available
••Continuity – Providing seamless technology channels would be
channel transitions to reduce the the right strategy in serving
its customer and helping
risk of losing contact with the
it operationally drive down
customer during channel hopping.
costs. A joint program office
was established to manage
••Controlled choice – Aligning the change to the new branch
activity within each channel and concept, which included more
promoting the use of the most self-service options such as
efficient channels. kiosks. The transformation
program carried out resulted in:
••Consistency – Managing the ƒƒIncreased gross operating
customer experience across all incomes through maximizing
marketing, sales, service, finance, customer potential
IT and supply chain interactions.
ƒƒStreamlined customer relations
across all channels
An organization that effectively
follows the Channel Management ƒƒReduced distribution costs
Strategic Framework will have
the right channels that are
performing and aligned to drive
customer interactions and profits.
12

13. Recommendations
The interaction with the Capgemini Consulting
customer is changing recommends the following
rapidly, as both the channel strategy approach:
channels to the customer 1. The strategic channel plan should
as well as the possible begin with an understanding of
customer touchpoints which channels an organization’s
are proliferating. customers are using and how they
are using them.
Organizations need to keep pace
with change and adjust to meet their 2. The operational differences
changing customer requirements. required of the new channel need
However, acting without a plan and to be understood and built into
an understanding of new channels the channel introduction strategy.
can result in sub-optimal results
adversely affecting overall company 3. Customers expect a harmonized
performance. Multi-channel experience across channels and
across all channels is not the right the strategy needs to ensure
approach for every organization. enough cohesion among the
Strategic choices are required. channels to deliver this.
4. By understanding its internal
efficiencies an organization can
use its channel strategy to
encourage customers through a
reduced cost-to-serve channel.
5. An organization’s channel strategy
should be created and managed in
a framework such as the Channel
Management Strategic Framework.
Effective use of such a tool will
ensure that enhanced results are
delivered through the channels that
fit an organization’s customers and
products or services.
Channel Strategy: Framework for Success 13

14. About Capgemini Consulting
Capgemini Consulting is the Global Strategy and Transformation
Consulting brand of the Capgemini Group, specializing in advising
and supporting organizations in transforming their business, from
the development of innovative strategy through to execution, with
a consistent focus on sustainable results. Capgemini Consulting
proposes to leading companies and governments a fresh approach
which uses innovative methods, technology and the talents of over
3,600 consultants worldwide.
For more information: http://www.capgemini.com/services-and-
solutions/consulting/marketing-sales-services/overview/
About Capgemini
Capgemini, one of the world’s foremost providers of consulting,
technology and outsourcing services, enables its clients to
transform and perform through technologies. Capgemini provides
its clients with insights and capabilities that boost their freedom
to achieve superior results through a unique way of working, the
Collaborative Business Experience™. The Group relies on its global
delivery model called Rightshore®, which aims to get the right
balance of the best talent from multiple locations, working as
one team to create and deliver the optimum solution for clients.
Present in 40 countries, Capgemini reported 2010 global revenues
of EUR 8.7 billion and employs around 110,000 people worldwide.
www.capgemini.com
14

15. For more information:
www.capgemini.com/services/consulting/
For more information please contact:
Global/UK Central Europe
Patrick James Steffen Elsaesser
Tel: +44 870 366 0262 Tel: +41 44 560 2578
patrick.james@capgemini.com steffen.elsaesser@capgemini.com
France Sweden
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frederic.burtz@capgemini.com hakan.erander@capgemini.com
North America Italy
Scott Clarke Lorenzo Sterzi
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scott.clarke@capgemini.com lorenzo.sterzi@capgemini.com
Netherlands
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Tel: +31 30 689 0199
frank.eijssen@capgemini.com
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16. www.capgemini.com/consulting
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