Multiple channel retailers employ a package of channels consisting of bricks-and-mortar stores, mail order catalogs, and web sites to provide their product and service offerings to end customers. In some industries, such strategies have become the rule rather than the exception. While multiple channel strategies increase a retailer’s potential contact points with its customers, it may have the effect of increasing competition within its own channels and among other retailers. A critical question for managers arises in light of these potential advantages and disadvantages: what impact do multiple channel retailing strategies have on customer retailer loyalty?

It is plausible that multiple channel strategies in a competitive environment may have the effect of reducing customer retailer loyalty. As channels multiply, customer search costs decrease and price transparency and competition increases. The resulting decreased customer switching costs and increased customer motivation to switch might be expected to erode customer retailer loyalty.

We suggest, however, that multiple channel retailing can enhance customer retailer loyalty through the synergistic combinations of services that they make possible. Retail stores provide excellent opportunities for prepurchase trial, instant gratification, and personalized attention; Internet sites provide expanded accessibility, product information, and novelty; finally, catalogs offer superior image reproduction and portability of information. Because of these differential strengths, customers may use different channels for different purposes or at different times. For example, a customer may want to try on multiple styles of shoes but may not be able to arrive at a decision until later in the evening; rather than heading back to the mall, the customer can order the exact product desired online. Other cross-channel synergies are possible as well; e.g. in-store Web kiosks, or the combination of online ordering with express pick up. Because multiple complementary channels provide more services, and a more diverse range of services, than single channel strategies, when a merchant adds complexity to its customer interface by increasing customer contact points, it thereby expands both the quantity and possible combinations of services. Thus, we would expect that these multiple customer contact points would have important positive implications for customer shopping behavior, and these will lead to increased customer retailer loyalty.

Our study surveyed the customers of an industry partner, a specialty retailer with bricks and mortar, mail order, and Internet channels. Our primary results indicate that when shoppers take advantage of the increased number of contact points through multiple channel shopping, they do find that they have access to an expanded portfolio of services. Customers respond to the availability of these services by expressing increased satisfaction, and critically, increased customer retailer loyalty. Thus our major contribution is to show that for merchants, multiple channel retailing strategies do have a payoff in terms of strategically crucial consequences.

It is not enough, however, for retailers to simply establish multiple channels. In addition, such strategies must be implemented successfully. A poorly implemented multiple-channel retailing strategy could lead to a variety of cross-channel service failures. For example, a clothing item purchased online may not be returnable to a local store, or a product displayed in the store might not be available in the catalog. In such cases, we might expect customers to be less, rather than more, satisfied; and the multiple channel strategy could turn into a liability rather than a loyalty-enhancing asset. If cross-channel synergies can produce loyal customers, it may be that cross-channel failures can erode customer loyalty.

To answer this question, we collected information from a set of the retailer’s “lost” customers: past customers who had not purchased from the retailer in 36 months, but who were still active purchasers with other firms in the same industry. Have these customers stopped patronizing the retailer due to cross-channel failures or for other reasons? As expected, results suggest that the lost customers did express a lower level of overall satisfaction with the retailer. We found, however, that cross-channel failures did not significantly explain this decrease. On the other hand, it appears that customers had inflated expectations about the retailer’s ability to deliver services, and that these expectations were specifically linked to the retailer’s multiple channel strategy. Lost customer reduced satisfaction was the result in part of the retailer’s failure to meet these inflated expectations. Other significant influences included strength of competition (particularly in relation to price) and lack of recent need to purchase anything from the retailer’s merchandise mix. In addition, respondents indicated that they had simply fallen out of the habit of patronizing this particular retailer.

Especially with the advent of Internet retailing, increased price competition and decreased customer-switching costs, retailers urgently need some way of providing differential value to their customers. The two studies described by this research suggest one important means to this end. By making synergistic packages of services available to the customer, multiple channel strategies make possible enhanced customer satisfaction and ultimately enhanced customer retailer loyalty. However, it is important that retailers provide and deliver sufficient levels of services to meet the high expectations of their multiple channel customers, or else the multiple channel strategy can backfire.