A Quadrant Chart for Sophistication with Analytics vs. Multichannel Marketing

A recent post highlighted the central idea behind the book Competing on Analytics: Namely, many companies employ analytics (business intelligence) merely in a tactical role, i.e. for improving ROI, while a few others use analytics so cleverly that they become the basis of their differentiation.

Then, another post had a similar observation about the way that companies use multichannel marketing. Namely, for most companies the existence of multiple marketing/business channels is just the way things are done in their industry. Yet a few other companies are able to use channels so cleverly that they become the basis of their differentiation.

Well, given those two dimensions, analytics vs. multichannel marketing, let’s see what happens when we juxtapose both in a quadrant chart. Is there anything to be learned from companies employing both of these in either a tactical fashion or as a strategy that forms the basis of their competition?

Here we go.

In the chart below, the use of analytics, as a tactic vs. a strategy, forms the Y axis. The X axis stands for the use of multiple business channels as a mere tactic vs. as a strategic differentiator.

Quadrant chart for use of Analytics vs. Multichannel Marketing

Let’s place some companies that we all know on this chart.

The old Blockbuster was arguably in Quadrant I, i.e. there was no differentiating use of business intelligence nor multiple channels that an outsider could spot.

In came Netflix as a competitor in Quadrant II. Netflix used the online channel as a differentiator, namely a video store that offered infinitely more choice than any Blockbuster branch ever could. Plus better terms on top.

Blockbuster countered by matching Netflix’s terms and capability for rent online / deliver by mail. But in addition Blockbuster also added the weight of their 5000+ stores into the battle. Now customers could rent online as with Netflix but also return and rent in stores on the spot. That moved Blockbuster also into Quadrant II, competing on channels.

NetFlix has an Ace up their sleeve though. Namely, as discussed in the book Competing on Analytics, Netflix is honing their analytics behind movie recommendations. The analytics for providing more relevant movie recommendations are expected to become the basis on which NetFlix will now compete with BlockBuster going forward. At the same time its online channel advantage is being matched and therefore eliminated. That moves NetFlix from Quadrant II to III.

Can either company move into Quadrant IV where they differentiate on both the basis of analytics AND the basis of channels? How?

Note that if Netflix merged with, say, Safeway, to match Blockbuster’s store channel strategy, it would not move Netflix into Quadrant IV. Rather, the store channel would become a non-differentiator for either company. Blockbuster would move back into Quadrant I while Netflix would stay in III, at least until Blockbuster can match its movie recommendations. The take away from this observation is that the Quadrant is not just determined by a company’s own actions but also those of its competitors.

So, can you think of a way that one of these companies could cross into Quadrant IV before the other one does?

For Netflix it would require a way to make use of channel advantage in a way that Blockbuster can’t immediately match. For instance, this could be to pass on to its customers the cost savings from having no brick & mortar stores to maintain.

For Blockbuster it would require a way to use analytics in a way that Netflix can’t immediately match. Maybe some kind of analytics on what is going on in their stores? For example, market basket analysis to recommend the best candy that goes with each movie? (Just kidding).

7 Responses to “A Quadrant Chart for Sophistication with Analytics vs. Multichannel Marketing”

  1. Hi Akin,

    Great post which highlights well the constant competitive advantage that can be gained with the exploitation or discovery of a new channel. And also how web analytics, used innovatively, can really help an organisation excel in their industry sector and stay ahead of the competition. Something we are seeing every day with our NetInsight customers.

    Also congratulations on the new book! I am working my way through it now. It is an enjoyable read!

    Thanks,
    Chris (SCL Analytics)

  2. Akin,

    I just found your blog; I think it has great content and thought leadership. I also just purchased your book and I am looking forward to a good read.

    I think this post has good analysis on how some organizations have been successful leveraging analytics to differentiate their brand. To achieve a true cross channel experience retailers need to tie analytics back to actionable events across all customer touch points. This requires a single view of the customer, orders, pricing, promotions, inventory… IMHO the demands that consumers are putting on the retailers to have a consistent brand experience are very challenging for merchants; the management of duplicated data and integration for each of their channels are becoming costly and inconsistent. The bigger problem facing retailers is breaking down the barriers of operational silos that exist in their organizations. This internal strife is causing channel conflict and brand erosion from a consumer’s perspective. The technology part of this problems is being addressed and it is the easier problem to solve.

    Mark Fodor
    CrossView, Inc.

  3. Hello Chris, Mark,

    Thanks much for your comments! Sorry I was on vacation and missed them until now. Is being offline still acceptable in a multichannel world when blackberries and WiFi are available even at the beach these days? Well, hardly. But they haven’t invented a blackberry yet that keeps toddlers busy for an hour or two 😎

    Your time in reading the book is much appreciated! Please share your feedback, positive or negative, liberally so we can all educate ourselves further.

    I am of course a big fan of Mark’s point of view and dedicated the book to it. But my eyes were opened that there are also other aspects to analytics / multichannel which led to this post and the couple before it.

    Hey Mark, I would be curious to learn a few more words about CrossView and what you guys offer your customers? Just make it a comment here if you can get to it.

    Akin

  4. Thanks Akin!

    CrossView empowers merchants to deliver an integrated consumer experience and optimize transactions for all customer touch-points.

    A suite of cross-channel software products were created by CrossView to provide a solution that focuses on cross channel optimization for all customer touch-points (including the Web site, call center, store (point of sale [POS] and kiosks) to leverage the same order, product, promotion, marketing, inventory and customer data in real time.

  5. Hi Akin, Great post – extremely insightful, especially if one uses “channel” as a synonym for “delivery mechanism”.

    I believe Netflix appears to be doing exactly what you suggest:

    “For Netflix it would require a way to make use of channel advantage in a way that Blockbuster can’t immediately match. ”

    …with their on-demand movies and the recently announced movie delivery via set-top boxes.

    Unfortunately (or fortunately for those of us with experience working with data) few companies have the resources to use analytics (business intelligence) as a key differentiator.

    Thanks for the book and keep evangelizing!

  6. Thank you Mark for the intro to CrossView. Looks like we have similar things in our hearts and minds!
    Akin

  7. Thank you Shwe too!

    Interesting point about those online movies! I saw a presentation by a Blockbuster exec once (back in 2001 or so) saying that they didn’t consider that a strategic move. Huh! Little did they know. OK, back then it was too early to focus on them. But now, will it be too late?

    Sometimes it seems anything that is done can be done better and you can take business away from others. So no rush to be the first big success. For example, Google was far from being first at Search or PPC. But then if you look at Google today, it seems hard to be significantly better at what they are doing. So it seems impossible to replace them until one day maybe they make some strategic mistake to miss a boat on some change in the market.

    The book by the way is very concrete and not so much about strategy. As Peppers & Rogers kindly put it in the foreword, it is a how-to book, not a what/why book.

    Thanks for reading!