Redefining Multi-Channel Retailing to Get Results

Health care is top of mind for lots of folks, these days as health care reform seems hopelessly bogged down in Congress. Meanwhile, costs continue to escalate. It's well-documented that providing home care is far less costly, more comfortable and potentially more effective than caring for patients in the hospital. And effective home care for chronic conditions can even help to avoid hospitalization entirely. Home care has been a fragmented industry about which information on effectiveness, patient satisfaction and comparison pricing has been hard to get.

Enter Walgreens. I've written before about the drugstore chain's move to provide in-store clinics for walk-in patients as well as clinics that operate at company workplaces, like Disney World in Orlando and Harrah’s in Las Vegas. In a throw-back to the days when doctors made housecalls, Walgreens is now offering home health services.

Through its acquisition of OptionCare, Walgreens delivers home infusion, respiratory/oxygen and medical equipment services through more than 100 accredited home care facilities in 36 states. The extension into home care means Walgreens can meet its customers' OTC and prescription needs, as well as their needs for infusion services, respiratory therapies and durable medical equipment.

In some ways, the move parallels Best Buy's acquisition of the Geek Squad, which extended the retailer into helping customers make their consumer electronics work. This is a new type of multi-channel retailing. It's not just about store, mail, web and phone orders.

Best Buy's in-home services represent a move out of consumer electronics retailing and into home integration or simply into making stuff work. Similarly, Walgreens in-home services represent a move out of the drugstore category and into longevity or independent living.

Which retailer will be next to see the opportunity to redefine multi-channel and transcend their category?

What Healthcare Can Learn from Multichannel Retail

In the ‘80s I was part of a team of consultants that explored retail healthcare concepts for a client. The idea was to evaluate the market for healthcare services and identify situations where consumers would be willing to visit a self-contained clinic to have their medical needs addressed. We showed back then that health care delivery was broken, and that market innovators could provide breakthroughs in the health care delivery experience profitably.

Launched in the early ‘80s, Urgent Care Centers came of age in the ‘90s. These centers are a response to the long times patients typically have to wait to get an appointment at traditional medical practices, and their emphasis on convenient,"good-enough" care makes them an alternative to hospital emergency departments. They fill a need and spawned other health care service delivery innovations.

In-store retail clinics appeared in 2000. Typically staffed by nurse practitioners, these clinics provide diagnoses and prescriptions on a walk-in basis. They repackage medical services available in traditional physicians' office. The core of the concept is a limited range of "get well" medical services, such as allergy or flu relief, which account for the bulk of these clinics' revenue, demand and profitability though they also treat patients who have uncomplicated minor conditions, such as bronchitis and ear, urinary tract, or sinus infections. According to a July '06 report prepared for the California HealthCare Foundation, retail clinics proliferated rapidly, and were forecast to total more than 1,500 by the end of 2008. The market has been largely driven by small start-up chains, such as MinuteClinic, RediClinic and Take Care Health Systems, which run the outlets under agreements with retailers and have had few formal ties to the medical establishment.

As reported in June ’08 on Nurse.com, “Even if we are not in-network with a particular insurance company, the choice is there for a $59 out-of-pocket expense compared to a co-pay of $75 to $100 for an Emergency Doctor visit, where you may have to wait for hours to be seen for an ear infection,” says Anne Pohnert, RN, MSN, FNP, manager of operations for MinuteClinic in Northern Virginia and Washington, D.C. The affordability and convenience of these clinics encourage patients to receive care early, which promotes early treatment and better outcomes.

According to the Convenience Care Association’s 2007 research, in-store and other types of convenience clinics have a 98% patient satisfaction rate. In contrast, patients do not rate hospital care as highly. Business Week reported late last month on research by the Harvard School of Public Health that found only 67% of patients said they would recommend the hospital where they were treated. According to the researchers, “part of the onus is on patients to improve care: Patients need to be proactive -- ask questions. The more engaged patients are, the better the care they will receive and the better the care all of us will receive, because they will drive the change for better systems of health care."

Patients are indeed becoming more assertive about their own care as health costs shift to consumers. It’s clear that different needs are best addressed in different settings – in our family alone, we’ve been to the ER when our daughter broke her leg skiing and when she hyperextended her elbow playing softball. We’ve gone to an urgicenter when my son got a spider bite on his eyelid while we were on vacation. We’ve gotten flu shots at our local Long’s pharmacy.

As healthcare consumers, we all want options that work in respectful, convenient and qualified settings. Specialty retailers like Williams-Sonoma, Patagonia and Lands' End learned long ago that their best customers were multichannel buyers – that is, they shop the brand in their own stores, online, through catalogs, and through their channel partners.

Multichannel healthcare is part of the answer to today's high-cost, broken health care delivery system. Look for savvy providers and insurers to follow retailers’ lead and find ways to offer their patients a variety of experience alternatives and care in a variety of settings.

In politics as in retail, the more channels of interaction, the better

Marketers and e-commerce managers have long known that shoppers who buy from stores, online and from catalogs are a retailer’s best customers. Opinion Research confirmed in a recent study that multi-channel consumers spend nearly twice as much as their single channel counterparts on average.

Taking this insight a step further, I suggested to friend in magazine publishing that the number of channels a consumer uses to interact with a brand could be a leading indicator of consumer brand engagement. Turns out, his data supported the idea that the more channels a subscriber uses to interact with the brand, the greater the brand engagement and more likely the subscriber loyalty, measured in renewals.

What does all this mean for the customer experience? It means retailers are going all out creating multifaceted brand touchpoints online and off, in their own stores (catalogs and PCs on the selling floor) and through partnerships (e.g., the Banana Republic-Details promotion announced recently). It helps explain why spam has increased, and why more people are on the Do Not Call list. It also helps explain why widgets and contests have emerged as arguably less offensive and more fun means of engagement.

This election season, we’re seeing the same pattern play out in the Presidential campaign. Potential voters who engage through multiple channels appear more likely to actually vote in November – whether it’s donating money, writing letters to the editor of the local paper, to the candidates, or to anyone else, blogging/commenting on blogposts – the more touches, the more committed.

Web-based tools are intended to convert online energy into in-person support. From January to April, for instance, the Obama campaign spent $3 million on online advertising to steer voters to their precincts through polling place locators - online look-up tools that tell people where to go to vote. According to Chris Hughes, a Facebook co-founder who has become an Obama campaign aid, the locators "are hard to build, but once you build them, they have a very high return on investment."

This summer, it was reported that Obama trumped McCain in social networking popularity and online fundraising efforts. The findings were seconded by Pew, which found Obama supporters evangelized heavily across social media.

And as the race grows more intense, it is becoming clear that social media outreach and paid search advertising are going to be key. "Online targeting and optimization will translate to more votes offline," predicts Jonathan Mendez of search engine marketing blog Optimize and Prophetize. If he’s right, we should have one heck of a turnout in November.

The Changing Role of Stores

Contrary to conventional wisdom, the rise of e-commerce and our heightened sensitivity to junk mail have not meant catalogs’ demise. In fact, in a new study issued yesterday, The Direct Marketing Association reports that for multichannel marketers, “the paper catalog is still the largest revenue generator among all channels with an average of nearly 50 percent of sales in both 2007 and 2008, although web sales continue to grow.”

Here’s the big news the press release forgot to mention – stores now generate less than half of all multichannel retailer sales – and if catalogs’ share of sales is holding steady and the web’s share is increasing, then store sales represent a decreasing share of total sales. Wow!

When I was running the catalog and web channels for Illuminations, I wanted the company to change its view of its channels. I recommended we use the stores to bring the brand to life, and that we rely on the direct channels to drive profitable volume. Unfortunately, my CEO was a die-hard store guy. Wally viewed the catalog as a marketing expense for driving store sales. Today, the data suggest that stores are increasingly a marketing expense as same-store sales decline while year-over-year online sales grow.

Take Gap, for instance. The San Diego Union Tribune reported last month that Gap had an 11 percent decline in same-store sales in the first quarter of this year, but a 21 percent increase in online sales. Victoria's Secret has seen the same trend. Its catalog and Internet sales were up 11 percent in the first quarter while same-store sales declined 8 percent. JC Penney, too. The retailer had an 8.7 percent increase in Internet sales in the first quarter of this year, in contrast to a 7.4 percent decrease in sales at stores open at least a year.

So, what does that mean about the retail experience? Expect more retailers to offer the option to buy online and pick up in the store to get you to go to the store in the first place. And expect more dramatic and engaging in-store experiences - like REI's climbing wall - as retailers work harder to make the trip worth your while and maybe get you to pick up an extra item, like a carabiner, while you’re there.