The rapid evolution of technology has transformed how people communicate. Today, there are virtually no limitations for consumers concerning the channels they choose for interacting and communicating with brands. The global eCommerce boom has taken retailers by storm. Many retailers have already implemented digitalization and are utilizing the various channels that come with it to earn more and make their brands more successful.
The opportunity to sell online offers retailers a host of opportunities besides numerous advantages that can help establish a brand's position as the undisputed market leader. Incorrect and unsubstantiated notions related to eCommerce or online marketplaces are getting dispelled. Big-ticket online retailers and eCommerce brands, as well as small, home-grown online sellers — everybody enjoys few competitive advantages over their traditional counterparts comprising physical stores or brick-and-mortar establishments.
eCommerce charms sellers and buyers alike
Inventory management, showcasing a wide range of products for customers to choose from, or offering flash sales do not evoke stress responses from online sellers. Digitalization and technology adoption have ensured that buyers and sellers in online marketplaces remain largely stress-free. Online marketplaces appeal to buyers from almost all age groups and cater to most buyer profiles, thus serving a wider customer demography. Brands can showcase what they have to offer consumers online or on any digital platform with a sizeable reach. Add to this a significant reduction of overhead expenditure and a more straightforward analysis of consumer persona, and brands can be certain of dominating the market
At the same time, eCommerce allows buyers to make faster purchases anywhere, anytime, with easy payment and checkout options, as well as many other advantages. But, the most important advantage of using multiple channels for providing service and communication has to be the ability to manage client profiles, analyze consumer needs, fulfill agent and customer expectations as well as provide personalized experiences to customers throughout their journey with brands.
Conversely, multiple channels may create confusion among product and service delivery teams and create channel conflict. If not checked, channel conflict may lead to channel cannibalization.
What is channel conflict or channel cannibalization?
Channel cannibalization occurs when a business sells the same or similar products through different online platforms, such as its website, third-party marketplaces, or social media. This can result in lower margins, price wars, and customer confusion.
Multi-channel service crucial for excellent customer service
It is well-known that customer experience (CX) is rapidly transforming as the primary differentiator among brands. Consequently, many organizations identify customer engagement as their top strategic initiative for the foreseeable future. In order to improve engagement and offer clients a premium experience to foster brand loyalty, companies are leaving no stone unturned to delight customers at every touchpoint, as it goes a long way in shaping CX and brand loyalty.
PwC’s latest study of North American consumer behavior tells us that digitalization and offering eCommerce can help your brand stand tall among the competition. Furthermore, another research into consumer behavior reveals that 82 percent of consumers are willing to overlook a brand’s shortcomings in product or service delivery and won’t hesitate to do business again, provided the company’s customer service quality remains top-notch.
Customers love variety
Besides improving product and service quality, brands need to introduce variety and give customers viable options to choose from in everything they have to offer — across multiple channels. Variety-seeking is a popular choice strategy in consumers' daily lives, and many factors influence it. Customers love the novelty of choosing something from multiple options. That is why, irrespective of the industry — creating a bouquet of services for clients to choose from is becoming a business imperative.
Additionally, digital communication across multiple channels means customers can choose their preferred channel to contact your business rather than be restricted to a single channel. Businesses gain customer trust and loyalty if they follow a simple rule of thumb — offering clients choices/multiple options of the product/service they wish to avail on any channel.
Let us understand brand cannibalization with an example.
A European apparel retailer that is a favorite with customers from across various age groups has a solid presence in multiple cities owing to a large network of physical stores. Furthermore, due to the brand being customer-centric, it enjoys the unwavering loyalty of clients and records outstanding sales performance year after year.
Riding high on the success of its retail stores, the brand’s leadership decided to expand its presence — this time online. At the outset, the idea seems perfect. After all, the past few years have rewarded retailers who have been agile enough to embrace digital retail transformation. But unfortunately, due to a poorly planned channel expansion strategy, the results were less than satisfactory.
What was supposed to be a profitable move hurt the economic interests of the apparel retailer. The reason for this debacle is as follows — when one sales/support channel provides equal value as other channels, one channel will likely overpower or destroy the revenue stream or value of the other. Therefore, to prevent revenue loss due to brand cannibalization, companies must offer products or services on channels that differ from one another or are complementary.
Here are a few more examples of brand cannibalization:
Brand cannibalization in retail
A clothing retailer that sells multiple private-label and branded lines but uses similar designs and materials. The customers might not see any difference between the different lines, thus reducing the sales of specific lines.
Brand cannibalization in eCommerce
Online shopping is a hit among consumers as it allows them to shop anywhere, anytime — at their convenience. As eCommerce gains popularity, it automatically accounts for more sales than brick-and-mortar establishments. eCommerce creates profitable opportunities for merchants, and the opportunities lie in the potential for additional revenue from new customers, new products, and new sales channels.
On the flip side, an eCommerce website offers multiple similar products at different prices, making it difficult for customers to choose between them. This might lead to lower sales overall, as customers need clarification and help to differentiate between products.
Brand cannibalization in customer service
A company might offer multiple customer service channels such as phone, email, or chat, but the responses provided by representatives need to be more consistent across channels or resolve issues differently. This may lead to customer confusion, frustration, and a decline in customer satisfaction and loyalty.
Channel conflict is most likely when the following channels are pitted against each other.
- eCommerce platforms versus brick-and-mortar stores
- Direct-to-consumer (D2C) versus wholesale brands
- Shopping apps versus eCommerce platforms
Cannibalization in business occurs when a company's products or brands compete with one another, thus affecting its sales and market share. Therefore, companies need to avoid cannibalization to maintain brand equity and maximize profits.
Factors that cause channel conflict or brand cannibalization
Channel conflict or brand cannibalization isn’t the only challenge sellers/service providers face when managing multiple channels. Inconsistencies in how various business functions are conducted can also drastically increase the risk of cannibalization.
Some of these factors are:
- Which brand is showcased or made available to consumers on a particular channel?
- The type of product showcased and made available on a specific channel.
- Consumer sentiment or behavior towards brands, product varieties, or channels themselves.
- Category of products available to consumers.
- Differences in customer outreach and communication across different channels.
- Timing when a particular product or service is made available on specific channels.
The outcome of a channel conflict or brand cannibalization
Why brands resort to cannibalization strategies
Despite negative perceptions, companies may sometimes wilfully resort to channel conflicts or brand cannibalization. There are various reasons why an organization may choose to indulge in brand cannibalization. A few reasons are:
- To stay on top of the competition.
- Cannibalization may help brands in making minor improvements to already existing products.
- Sales numbers may drop for certain goods or services. Releasing new and improved versions of the product/service may help boost revenue.
- Channel conflict/cannibalization can be helpful to companies looking to increase their market share. Sometimes an organization may choose to take a calculated risk of introducing a new product/service in the hopes that it will harm competitors more than the brand’s existing portfolio.
- Sometimes companies resort to cannibalization as it hopes that the new product/service will sell better than what is currently offered. A brand may also believe that a new lineup of products/services will appeal to a different set of buyers; hence it chooses to go ahead with a cannibalization strategy.
- Brands looking to make their products/services available to consumers from different classes can also indulge in a cannibalization strategy to shake up the market and create demand within new consumer demographics.
How can brands prevent channel conflict/cannibalization
Now that we know the various causes of brand cannibalization and its impact on brands and consumers let us understand how to prevent brand cannibalization.
Define and differentiate product offerings: Clearly defining product offerings will help customers understand the value and unique features of each product in your portfolio, thus preventing confusion and cannibalization. For example, if a company sells both luxury and affordable clothing lines, the company must differentiate them so that they appeal to different demographics and price points.
Develop a pricing strategy: A well-thought-out pricing strategy can prevent cannibalization by differentiating the price points of products. For instance, premium products should have higher prices, while basic or entry-level products should be priced lower.
Create effective marketing campaigns: Marketing campaigns should highlight each product's unique features and benefits, stressing why customers should buy a specific product. The messaging should make clear distinctions between products and avoid confusing customers.
Define clear rules of engagement: Establishing clear guidelines for how channel partners will work together can help prevent misunderstandings and conflicts.
Segment your markets: Segmenting your markets can help fend off channel conflict by giving each partner a clearly defined market to target.
Communicate frequently: Keeping an open line of communication with your channel partners can help ensure that everyone is on the same page.
Implement a deal registration process
A deal registration can help ensure that each partner receives fair compensation for their efforts.
Identify and address conflicts quickly: Addressing conflicts as soon as they arise can help avert them from escalating and causing more damage to the business.
Be transparent: Being transparent with your channel partners can help build trust and prevent any suspicions of unfair treatment.
Foster collaboration: Encouraging collaboration between your channel partners can help stop conflict by fostering a sense of teamwork and shared goals.
Multi-channel helpdesk can prevent channel conflict
Channel conflicts in customer service can negatively impact brand image and can not only mar the customer’s journey but also drive them away from your brand resulting in churn. Using a multi-channel helpdesk and communication system can help prevent channel conflicts.
ThinkOwl — the future-proof solution for all your customer service needs
ThinkOwl is an appropriate choice for all businesses and their customer support teams. It has intelligent automation and supports communication across multiple channels like direct messages, email, Facebook, Twitter, Instagram, and WhatsApp.
If your business functions on legacy systems, and you are worried about how to modernize it to delight clients — ThinkOwl has the solution to your problems. The integration feature in ThinkOwl is designed so that it can become your legacy systems' AI brain. As per requirement, the API displays information from all connected systems so that agents have the most accurate resolution to customer issues.
With ThinkOwl, you can be sure of giving equal importance to all networking and communication channels that customers use. Avoid channel conflict when doing business on multiple channels. Try ThinkOwl and sign up for a 30-day free trial.