Chapter 16

Mobile Internet

Qiongwei Ye and Baojun Ma

1. Introduction

With the development of information technology and the speedy popularization

of the SoLoMo mode, mobile internet has gradually become an important part
of people’s life. WeChat, for example, is an outcome of the rapid development
of the mobile internet. Owing to the development of the network technique of
the mobile internet and the improvement of the convenience of people’s life, the
mobile internet becomes a new aspect of the e-commerce innovation, and influ-
ences people’s perception of the mobile internet terminal and the telecom opera-
tors in many aspects. This chapter is about the mobile internet, emphasizing the
vital influence given by the network technique, marketing channel, and enterprise
transition to the popularization of the mobile internet, and then emphasizing the
great influence which the SoLoMo mode has on consumer behavior and business
operation strategy under the circumstance of the experience economy. Thus, on
the basis of correlation theory of Social Networking Services, this chapter deep-
ens the impact of the mobile-telecom marketing to the business channel market-
ing decision, and the important role of the e-commerce innovation strategy.

2. A General Introduction to the Theory

2.1. Telecom Marketing

2.1.1. Telecom Marketing Channel

Marketing channel is an important part of the marketing theory; market-
ing channel research also originated in marketing research, and different
507
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experts and scholars have put forward many different points of view.
Among them, the most classic definition for marketing channel is the
concept put forward by Philip Kotler (2012), a famous American scholar
and pundit on marketing. He considered the marketing channel as all
enterprises and individuals that obtain the ownership of certain goods
or services, or help to divert the ownership, when the goods or services
are transferring from producers (manufacturers) to consumers (users).
This concept emphasizes all the enterprises and individuals participat-
ing in the supply–produce–sell process of the product or service, such as
resource suppliers, producers, middlemen, retailers, and other transpor-
tation organizations, advertisers, market research institution, and other
auxiliary institutions, and the final consumer or user also belong to a part
of the marketing channel. American Marketing Association has also given
a definition to marketing channel, “organizations of enterprise internal
and external agents and dealers (wholesale and retail), through which,
products (goods and services) can appear on the market and be on sale”
(Yuexin Miao, 2007), that is, a set of interdependent organizations that
make it possible for products and services being used or consumed. To
sum up, we can understand the marketing channel as: the specific path
and organizations involved in the whole process of products and services
transferring from producers to consumers, the premise is the transfer of
ownership of the product, the starting point is the producer, and the end
point is the consumer and user, including all kinds of intermediaries in
the middle. In addition, Wang (2003) summarized the channel marketing
research in fields of channel relationship, channel behavior, and channel
structure. He also undertook a contrast analysis from several aspects as
the channel length and width, the types of channel and channel members’
cooperation method.

2.1.2. The Structure of the Telecom Marketing Channel

As for the structure of the telecom marketing channel, if according to the
nature of the channel, it can be divided into corporate entity channels, social
entity channels, electronic channels, customer manager direct channel, etc.
If according to the regional characteristics, it can be divided into rural chan-
nels, urban channels, campus channels, etc. According to the form of carri-
ers, it can be divided into physical channels, non-physical channels, etc. In
the concrete practice, the structure of the telecom marketing channel can be
analyzed from the following aspects:
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(1) The Corporate Entity Channel

The corporate entity channel refers to the channel set up and run by tel-
ecom operators, with its physical media, mainly including: first, corporate
business hall and brand shop/experience shop, namely the product and service
marketing institutions set up by the operator, such as the Communication 100
Business Hall of China Mobile, the M-zone Experience Shop, etc. The cor-
porate entity channel is the marketing channel in which operators face their
consumers directly and it is also the only marketing channel that can carry all
the business. Apart from the responsibility of promoting and marketing the
product and service, it also has the function of promoting the brand image
of the enterprise. Second, mobile marketing vehicles, it’s a channel for mobile
marketing with all kinds of equipment and staff in a vehicle, without a fixed
marketing site. The corporate entity channel covers major cities with its char-
acteristics of stability and comprehensiveness, but its coverage in villages and
towns and countryside is insufficient, and its operating costs are high.
(2) The Social Entity Channel
The social entity channel refers to the substantive marketing channel
established by operators and social subjects cooperatively, mainly includ-
ing: first, the designated store, it is the exclusive agency that sells part of
the business of a certain operator. It is invested and set up by the social
subject and the operator who signed a franchised cooperation agreement,
and it is the main form of social channels for operators. The operator’s logo
can be used in storefront decoration and business image promotion with
authorization. Business can be conducted in the name of the operator, but
the scope of business is limited according to the terms of the franchised
cooperation agreement signed, generally including the card number, termi-
nal sales, fee payment, package setting, promotional activities, customizing
different kinds of services, etc. In the process of the development of the tel-
ecommunications industry, the designated stores has become an important
part of the marketing channel, mainly in counties, townships or commu-
nity where the population is relatively concentrated. Second, the appointed
agent point, it refers to the basic service agency set up by the agent under
authorization and guidance in the way of franchising. It is an important
supplement of the core channel for operators. Operators grant special
agents to use franchise, using the operator’s brand and technology, but
only the products or services concluded and signed in the franchise agree-
ment can be sold. The agent point is limited to some basic business, such
as selling cards, paying fees, simple value-added services, setting packages,
etc. It is the main channel for the telecom industry at the primary-level,
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especially in the marketing channel of the township and village level, and
some remote township or rural communities with relatively small popula-
tion. Third, the commercial network agency, it refers to the institution with
telecom operators business in some commercial network. It is an important
channel for operators to develop in the commercial area. In the form of
product sales agent, it provides customers services such as simple card sales,
terminal activities, fee payment, and so on. It is the distal channel for opera-
tors to occupy customers in associated industry. The specific forms include
the agent point in professional mobile phone stores (such as D-phone and
mobile phone brand stores), the agent point in appliances stores (such as
GOME and Suning), the payment network in banks, and the agent point
in small places in rural communities (such as the service station of village
level). All these forms have the characteristics of high dispersion and high
permeability. It is the most widely distributed channels in relatively large
quantity for operators.
(3) The Direct Channel
The direct channel mainly refers to the service channel set up by operators
and serving customers directly, mainly including customer managers (group
customer manager, certain industry customer manager, and so on). It is a
direct marketing medium that operators build according to the characteris-
tics of customer base and business. It is a representative of the operator and
customer relationship, a representative of operators’ outward service, and
an important part of their own channels. In actual construction, there are
group customer managers, middle to high-end customer managers, commu-
nity managers, social channel managers, etc. The main work includes recom-
mending, consulting and conducting products, services for consumers, etc.,
generally providing door-to-door and face-to-face service. At present, it is the
main channel for telecom operators to develop group clients and to serve the
middle to high-end individual customers. These customers have the charac-
teristics of high income and high stability, and they commonly require more
professional and more efficient services.
(4) The Electronic Channel
The electronic channel mainly refers to the electronic and autonomous
business channel set up by operators relying on certain technology and
equipment. It mainly includes: first, the electronic business hall, which is the
electronic marketing channel established directly by telecom operators for
business querying, experiencing and conducting, such as the online business
hall of China Mobile, 10,086 call centers, text business hall, and so on. It is
an electronic path for operators to face their customers directly. It empha-
sizes the use of network information technology, through which a direct link
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between operators and consumers is established. Due to the characteristics

of convenience and efficiency, it is suitable for basic business querying and
conducting. Second, the self-service terminal, it is the self-service equipment
provided to customers to handle and query self-service business, such as the
24-hour self-service business acceptance system and equipment, new business
experiencing equipment, cueing machines for business hall queuing, window
service evaluation apparatus, electronic signature board, large multimedia
screens, and so on. It is an electronic self-service channel for operators to
face their consumers directly. It is usually attached to the physical channels,
mainly in business halls or comparatively good appointed stores, suitable for
paying fees, business querying, basic business, etc.

2.1.3. The Function of the Telecom Marketing Channel

The aim of marketing is for enterprises to promote their own products and
services, so marketing is of special significance to the development of enter-
prises. In the process of marketing, the marketing channel, as the outpost
of the enterprise, has an irreplaceable role in enterprise promotion and
market feedback information collection, and it is a link between enterprises
and market. In the development of practice, the marketing channel’s main
function is embodied in the following aspects: first, the information func-
tion, namely collecting necessary information for planning and exchanging.
Second, the promotion function, it refers to the supply of products and the
promotion of product sales with persuasive communication. Third, the link
function, it means looking for potential buyers and communicating with
them. Four, the coordinate function, it means supplying products to meet
the needs of the buyers, and it includes classification, grading, assembling,
packing, and other activities. Five, the negotiation function, agreement on
the price of the product and related conditions, thus to transfer of owner-
ship of the product. Six, the distribution function, it is the transportation
and storage of the product.
The marketing channel of telecom operators, as the carrier channel deliv-
ers the products and services to consumers, determines directly the consum-
ers’ recognition degree for its products and service, thus affects the consumer’s
buying behavior, and ultimately affects the market share. Because even though
the products and services provided by operators could be good enough, if
there isn’t a smooth and effective marketing channel to reach consumers, con-
sumers could not get the products and services effectively, let alone purchas-
ing, operators also could not achieve its market objectives. The function of
the telecom marketing channel can be summarized in the ­following aspects:
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(1) Information Transfer

The marketing channel of telecom operators, as a medium between opera-
tors and consumers, undertakes the function of delivering the information of
the operator’s products and services to consumers, and feeding back the con-
sumer’s related information to the operator, namely the information transfer
function. In the process of product sales and service in the telecommunications
industry, first of all, marketing channel undertakes the function of delivering
the information of the operator’s products and services to consumers, such as
corporate image logo, business rules, tariff description, etc. It is mainly the
publicity function, which makes it possible for the information to be passed
on to consumers timely and clearly, so that the consumers can choose the
products and services they need. Secondly, marketing channel also has the
function of feeding back the consumer’s information of demand and usage
to the operators, which is the information collection and feedback function.
In this way, operators can know consumers’ needs and usage, so as to adjust
in time, to guarantee that the products and services they provide can meet the
demands of consumers. General speaking, marketing channel not only pro-
vide consumers a path to know the product and service information of opera-
tors, and satisfy their buying demand, but also provides operators a bridge
to know the market and the information of consumer demands, ensuring the
timely and effective adjustment of product design, sales and maintenance ser-
vices, to meet consumers’ needs. At the same time, it improves the propagation
of the telecom operator’s brand image, the degree of consumer satisfaction
and trust, and these are all guarantee for operators’ survival and development.
(2) Business Acceptance
The main task of telecom operators is sales of telecom products and ser-
vices, and the jobs are completed through channels of contacting consum-
ers. This determines that the telecom marketing channels must bear a core
function: business acceptance. In actual operation of the operators, business
acceptance includes sales of products and services, basic business handling,
terminal sales, consulting of product prices, business information query,
business order and unsubscribe, accepting and solving complaints, etc. This
is the most important work in operators’ daily operations, and only when the
business can be conducted normally, can operators obtain income and profit.
(3) Advertisement and Publicity
Telecom marketing channels, as the most direct and comprehensive window
for operators to contact consumers, are doom to have the function of advertis-
ing and publicity in its actual development process. In today’s market develop-
ment, advertising plays a more and more important role. It not only has the
function of the corporate image and product publicity, but also, in some sense,
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increasingly takes on the function of the product sales. At the same time, the
channel is the main way for operators to transmit the enterprise image and
products to the society. In most cases, it contributes to the public understand-
ing of the operator and its product image, including enterprise brand image,
product image, staff image, etc. Telecom marketing channel shows the images
vividly and directly to consumers, and then forms some kind of advertising
effect. This makes the marketing channel also play the function of advertising
to consumers at the same time of selling products and services.
(4) Logistics Guarantee
Besides the publicity, sales and after sales of product and business, market-
ing channel is also responsible for the delivery and circulation of a variety of
products and related business materials, namely logistics guarantee function.
During the process of things such as terminal sales and all kinds of business
handling, what the heads of marketing at all levels need to inspect includes
kinds of end products such as mobile phones and so on, publicity materials
such as posters and leaflets, showing stands, and so on, business materials
such as printed receipts, agreement contract, and so on, as well as all kinds
of marketing gifts. This is to ensure that all these things can be circulated and
delivered timely and effectively among different regions and business halls.

2.2. Mobile Electronic Commerce

Mobile E-commerce is the commodity transaction or service transaction based

on the wireless network, using mobile communication devices such as laptops,
mobile phones, personal data assistants, and so on (Yang, 2004).It mainly cov-
ers bank, trade, booking tickets, shopping, and entertainment (Yang, 2004).
Fig. 16.1 shows the general framework of mobile electronic commerce from
the user’s level and the developer and provider’s level (Ren and Ding, 2001).
Li (2011) emphasizes that the composition of the commercial model in
mobile internet mainly includes four aspects: value providing, industry posi-
tioning, profit model, and technical realization. The profit model is the key
to the electronic commerce management, and Table 16.1 summarizes several
profit models of mobile internet.
Further, Yang (2004) summarized the marketing strategy of mobile
E-commerce as four aspects: creating “mobile” demands, highlighting the
characteristics of “mobile,” strengthening “mobile” publicity, and develop-
ing small projects. Fig. 16.2 shows the characteristics of mobile E-commerce
and its profit growth source. Mobile E-commerce has greatly strengthened
the link between businesses and consumers, and saved the transaction time.
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The Developer and Operation Source

Provider’s Level and Server
Maintenance

Service
The User’s Level Terminal

Content
Application Layer Application

Wireless
User Infrastructure Internet
Mobile
Wireless
WAP
Network Infrastructure

Fig. 16.1.  General Framework of Mobile Electronic Commerce.

Source: Ren and Ding (2001).

Table 16.1.  Profit Models of Mobile Internet.

Profit Model Source of Income Typical Website

Advertisement Charging fees in advertising Yahoo.com

Subscription Charging fees from subscribers in WSJ.com
providing information services
Transaction Fee Charging fees through license deals or eBay.com
trading
Sale Selling products, information or services Amazon.com
Membership System Charging fees in business recommending MyPoints.com
Source: Li Yiming (2011).

Positioning Product
Sales and Services

Mobility Personalizing
Products

Mobile Advertising
E-commerce

Continuous
Directness

Convenience

Fig. 16.2.  The Characteristics of Mobile E-commerce and its Profit Growth
Source: Yang (2004).
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3. Project: Yunnan Mobile

Through many years of continuous construction and development, YNYD

maintains a large scale of competitive advantage in the Yunnan communi-
cations market, in terms of marketing channel construction. Up to August
2015, YNYD has altogether 34,728 entity channel networks in the province,
in which 604 are corporate marketing channels, carrying 41.67% of the busi-
ness; 34,124 are social cooperation entity channels, and the business capac-
ity of electronic business channels is 58.33%. The construction situation of
YNYD marketing channels will be analyzed from two dimensions of entity
channels and electronic channels, according to the carrying attribute of the
marketing channel.

3.1. The Construction Situation of Entity Channels

The entity channel system of YNYD mainly consists of corporate channels

and social channels, and the analysis of the construction of YNYD entity
channels includes the following two aspects:
(1) Construction of Corporate Channels
It mainly includes the construction of 100 communication halls. According
to the statistics, by the end of August 2015, the number of YNYD corpo-
rate channels reached 604, making up 1.77% of the total social channels.
According to different operation positioning, YNYD undertakes a fine clas-
sified management for all the corporate channels, which are mainly divided
into three categories: first-class, second-class, and third-class business halls,
and different development goals and functions are given according to differ-
ent levels. The first-class halls are mainly in charge of establishing the brand
image of the company, providing comprehensive service content and good
customer experience as well as strengthening the exemplary role of the sec-
ond-class and the third-class halls. The second-class halls mainly focus on
its sale ability, providing the new customer development, the main business
processing, handling of terminal and other popular marketing activities, and
emphasizing the services radiation ability in the area. The third-class halls
focus on strategy, primarily facing a specific customer base to provide par-
ticular business services.
(2) Construction of Social Channels
It mainly includes the construction of designated stores, appointed agent
stores, and service stations at the village level. According to the statistics, by
the end of August 2015, the number of YNYD cooperation channels reached
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34,124, accounting for 98.23% of all entity channels which is a major com-
ponent of the YNYD entity channels. In the construction of cooperation
channels, having spent years in expanding qualified social channels, YNYD
has greatly improved the controlling ability of channels for Yunnan’s telecom
market. Based on the expansion of channel coverage, YNYD has also actively
carried out cooperation with chain marketing channels, such as Suning,
Gome, D-phone, Ch999, etc., to combine and match different kinds of mar-
keting resources and to carry out cooperation with various social channels,
by signing cooperation agreements. At the same time, the basic management
of the social channel is continuously strengthened and the business practice
and behavior of cooperation channels are standardized. Concerning the out-
standing problems of social channels such as high remuneration cost, the cost
of maintaining unsold cards as sold cards, arbitrage risk, and so on, corre-
sponding policies and specifications have been formulated, such as promoting
centralized management of the agency fee in the whole province, deferred
payment of remuneration, remuneration deduction due to violations, and
transparent remuneration query. These measures have not only fully aroused
the marketing enthusiasm of the cooperation channel and enhanced the sat-
isfaction of cooperation channels for remuneration payment but also greatly
improved the use efficiency of the remuneration lever and the quality of busi-
ness development.

3.1.1. The Construction Situation of Electronic Channels

With the rapid development of the domestic internet, E-commerce, and the
mobile internet business, electronic self-help channels have been received
attention and are used by many consumers. Accordingly, electronic chan-
nels have also become a very important channel for telecom operators to
choose. In the construction of electronic channels, YNYD has obtained cer-
tain achievements in its systemized and scaled operation practice for many
years. On one hand, customers are provided with convenient business query-
ing and handling, and on the other hand, the traffic of entity channels are
also efficiently distributed, and the costs of operating channels are reduced.
So far, YNYD electronic channels mainly include WeChat, microblog, SMS
business hall, mobile business hall, hand-held business hall, online business
hall, online customer service, mobile phone mall, as well as life, self-service
terminal, and hotline. Although the proportion of the whole channel in num-
ber is very low, its proportion of business operation is up to 58.33%, and the
number of using customer is 18 million, with the customer popularizing rate
reaching at 47.34% and the fee payment rate at 31.73%.
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3.1.2. Problems of YNYD Marketing Channels

After more than 10 years of continuous construction, the YNYD market-
ing channel has been formed as a relatively complete system structure, but
due to the change in times, with the strong impact of mobile internet and
the “decentralized” characteristics of the internet, the hidden disadvan-
tages of channel construction, which telecom operators regard as a trump
in the past, have been gradually exposed. In the era of transformation to the
mobile internet, the problems of marketing channel become more obvious
in the process of business development and restrict further development of
YNYD in the increasingly competitive, market transforming, and queasy
environment.
(1) Resource Investment
First of all, in 2014, SASAC issued a document, requiring the three
operators to cut down their marketing costs within three years, falling 20%
year by year. It also affects the layout of the entity channel strategy of
the three operators. In the process of YNYD development, the reserve
of entity channels is relatively excessive. Although the entity channel mode
of one shop in one village played a considerable role in the past, the current
remuneration resources would surely be critical with the implementation
of cutting down the cost, and so in the future, small and medium-sized
social channels will be gradually eliminated by the market. With the gradual
decrease of new market business and the ARPU, the investment benefits
of some self-supporting channels are reducing year by year, part of which
may become negative assets, and so transformation becomes imperative. We
need to re-measure the value of a large number of self-supporting networks
constructed in the speedy business development period, for cooperation
with low cost and high efficiency will be an inevitable trend in future devel-
opment. In addition, currently, YNYD business development excessively
depends on social channels because of self-supporting channels’ and elec-
tronic channels’ lack of marketing capacity, which causes great pressure on
the cost of channel operation. For example, in the first half of 2014, 95%
of the terminal sales were from entity channel sales, 1% from the electronic
channel, in which social channel sales accounted for 90%. In traditional
social channels, the pressure of remuneration cost is increasing, and the
social channel system driven by a single remuneration pattern cannot meet
the needs of the development of enterprises. The social channels driven by
a remuneration incentive sustained a huge marketing network for YNYD
in the voice service era, but due to the shrinkage of traditional business and
the decrease of new customers, social channels in the traditional pattern are
losing the original value.
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(2) Procurement Supply Chain

First of all, the supply mode of terminals of the entity channel has prob-
lems and causes loss in company cost. The two main supply modes of the
current YNYD entity channels are provincial centralized purchasing and
distribution, thus attracting dealers to enter. The disadvantages of provincial
centralized purchasing and distribution are the long selection process, miss-
ing the peak selling time of new models, long delivery time, and costing 4–5
days from the shortage requirements of business halls to the actual delivery.
Because the supply of some terminals is insufficient and there is no transpar-
ent management of purchasing, selling, and storing, it is difficult to allocate
between halls. While, attracting dealers to enter the hall means being overly
dependent on the supply platform, with the problem of a weak sale ability of
the entity channel staff. In addition, the supply models of social channels are
diverse with complex hierarchy and are not involved in the terminal industry
chain management. In the terminal supply modes of YNYD social channels
at present, the more remote the place, the more complex the hierarchy is, and
roughly the modes are direct supply by terminal companies, direct supply by
manufacturers, platform distribution, and regional distribution, etc. The most
terminal models that social channels can obtain are the biggest profit models
for contractors, and so their choice is narrow; also, the best-selling models are
usually difficult to stock. Moreover, the separation of the series code of the ter-
minal from the material object makes the management of risk easy. Currently,
the YNYD terminal management only concerns the series code and does not
participate in the storage of the supply platform and logistics management,
and so there is no contact with the terminal itself. Manual assignment of the
series codes demands a long process, and if it is delayed, sales will be affected.
(3) Channel Operation
In channel operation, the main problems of YNYD are unreasonable ter-
minal sales, insufficient centralized operational support, unreasonable man-
agement, and the operation mode of corporate halls. The unreasonable
terminal sales model reflects on the low sales enthusiasm of corporate busi-
ness hall staff, the low exposure of terminals, and the weak sales atmosphere.
If the change takes place so that “enclosed” attracting dealers enter halls,
there will be difficulty in defining terminal sales. The insufficient centralized
operational support shows that there are too many element tasks for front-
line staff; the sales ability of the foreground is not released effectively, and
the main reason is the centralized support ability of the background is weak,
and the capability of the IT support system is insufficient. The unreasonable
management and operation mode of corporate halls mainly displays in the
small amount of customers served in a single hall. The proportion structure
Mobile Internet 519

of the business hall staff is unreasonable, and the scale and base number of
business halls is big.
(4) Channel Planning
There is a lack of overall planning of all channels for the transformation in
the mobile internet era, and so entity channels and electronic channels have no
unified standard and mechanism of construction and are unable to form joint
channel force. First of all, there is a lack of top design of overall channels,
the channel drainage mechanism is unidirectional and is focused on entity
channels. The multiple channel strategy has not been established. Emphasis
of entity channels is on construction and not on planning, on quantity not on
quality and channel efficiency. Electronic channels have many entrances, and
the unified planning and operation capability is insufficient. Secondly, the
collaborative ability of online and offline channels is insufficient. The offline
channels have larger quantity and wider coverage, but like electronic channels
they do not have functions such as sales promotion, publicity and popularity,
or logistics node. Finally, the information of various channels cannot be uni-
fied and shared to form the coordination effect, and so ultimately it is hard to
form an integration operation of information flow, capital flow, and logistics.

3.1.3. YNYD Channel Transformation Planning and Strategy under Mobile

Internet
Under the background of the mobile internet era, through the analysis of the
environment of YNYD development, the possible opportunities and chal-
lenges, combined with relevant theoretical guidance the experience reference
from other operators, this part formulates the general approach for the trans-
formation and development of YNYD marketing channels, planning the
channel transformation strategy, and formulating the detailed path.
(1) General Approach for the Transformation of Marketing Channels
According to the new characteristics of operating in the mobile internet
era, YNYD needs to optimize the existing channel structure to achieve the
unified operation interface of customization through the standardization
of products, to support the centralized operation of channels through the
construction of the background supply chain system to implement deeply
integrated marketing online and offline channels and to make YNYD a new
ecosystem to meet customers’ diversified demands in the mobile internet
environment through the reformed platform. Generally speaking, the trans-
formation direction of YNYD marketing channels is an online and offline
integrated operation to create an internet integrated life platform of all chan-
nels with customization, platform, and centralization.
520 QIONGWEI YE AND BAOJUN MA

First of all, customization transformation is needed from the operator-

centered mode in the past to the customer-centered mode, going after hot-
spots of customers and focusing on customer experience. In the era of mobile
internet, user’s trading activities are gradually transferring from offline to
online, forming a new situation of online and offline integration. The “post-
internet age” is coming with mobile internet and social networking. The user’s
living habits and consumption characteristics have changed greatly toward
mobile applications (being accessed anytime and anywhere), personalization
(from pack consumers to individual consumers), sensibility (purchasing what
they like with good experience), and simplified process (without complex).
Therefore, in terms of channel layout, customers’ characteristics of aggrega-
tion consumption needs to be chased and the layout and entrance of online
and offline channels need to be planned based on the principle of looking
for customers’ usage scenarios. After finding out the scenario of customer
consumption and analyzing customer requirements, the layout of channels
can be arranged with an entry point of customer consumption scenarios.
The channel system can be deployed according to the customer consump-
tion characteristics. Then the coverage can be conducted according to the
distribution of the application entrance of the online customer base. In terms
of channel contact experience, the contact interface should be simplified; the
construction of network unity should be pushed forward; the internet inter-
face experience to online channels to carry standardized product sales should
be introduced, the sales of offline complex products and solutions should be
drained. In terms of channel management decisions and operations manage-
ment, the mechanism of information feedback and mechanism of optimi-
zation iterations need to be set up, through the analysis of offline channels
and online internet channels, and databases can be provided on the decision
making and management of channel operation and the goal of upgrading the
efficiency of channel operation can be achieved ultimately.
Secondly, platformization transformation is needed, shifting from oper-
ator dominance in the past to a multiparticipating competition pattern.
Operators become the constructor of the industrial chain platform and to
satisfy diversified customer needs, operators need to introduce and integrate
a third party’s products to form a new ecosystem in the mobile internet envi-
ronment. Thus, in terms of product design, products from the other industry
need to be introduced to mobile products to fuse, and to “standardize” the
fused product, so as to enrich the category of products carried by channels.
In terms of platform construction, the construction of online and offline
platforms needs to be carried out synchronously, and a life service platform
can be set up based on the original YNYD channel system, which includes
Mobile Internet 521

draining for virtual products. The propaganda and sensationalization based

on the powerful online information diffusion ability can divert the oppor-
tunity for offline sales. In terms of the construction of corporate marketing
channels, entity sales platforms of life business halls of corporate marketing
channels can be arranged to provide customers a next-stop solution. Through
the cooperation mode of “operator constructs the platform and partners do
the business,” the user’s communication life can really merge into their daily
life. In terms of the electronic channel construction, an online platform can
be formed through the strategy of “Bring In and Going Out” to collect online
customers. Telecommunication services and E-commerce serve as the core,
and complex and diverse services of living, such as information, entertain-
ment, content, social contact, and so on, can be provided to customers to
meet the requirements of the internet ecosystem strategy. In terms of coop-
eration and opening up, the formation of a capability open platform enables
the marketing capacity, taking logistics, capital flow, and sales order flow as
the core to develop to a third party.
Furthermore, centralized operation transformation is needed, by follow-
ing the basic rule of the chaining development and the centralized manage-
ment of the retail industry, showing the advantages of intensification and
scale expansion, and by building a background capability center it is possible
to achieve the support of centralization operation for all channels. In terms
of the purchase–supply chain, the supply chain management center can be
built and the support system of purchasing and supply of all channels can be
set up efficiently to form the support ability of the big YNYD background. In
terms of the construction of the competency center, seven competency cent-
ers can be constructed, namely, supply chain management center, customer
center, product center, ordering center, payment center, marketing center, and
sales center. In terms of the operation management mode, a set of standard-
ized operation and management mode needs to be built to conform to the
centralization operation of channels to realize the standardized construction
and operation of centralized operating halls and stores and ultimately online
channels.

3.2. The Specific Strategy of YNYD Marketing Channel Transformation

3.2.1. Customized Operating Strategy

Customization means value from the perspective of customers with thor-
ough understanding of customer needs and the motivation behind the needs.
Customer needs are very complex and are affected by both organizational
522 QIONGWEI YE AND BAOJUN MA

factors and personal factors. When the customization strategy is made on

these two levels, the products and services provided by the enterprise will not
only help our clients achieve organizational goals but also meet their indi-
vidual needs (Baidu Encyclopaedia, 2015).
(1) Channel Layout
First of all, through the analysis of customers’ characteristics of aggrega-
tion consumption, the online and offline channel layout and entrance bases
should be planned on the principle of looking for customer usage scenarios.
Then the matching relationship between channels and customers should be
determined, according to the adaptation model among channel, business,
and the customer. On the basis of the above analysis, the channel layout of
YNYD can be suggested as Table 16.2.
Then, the customer consumption scenarios should be found out through
the analysis of customer demand and consumption habits and the channels
laid out according to the findings. For the business district customer group, the
customer characteristics are flow concentration, liquidity, demand diversity,
and middle-high consumption, while the customer requirements are one-stop
solution for all kinds of life demands including the needs of communications.
For the online customer group, who are more network connected and empha-
sising personalization, the influence of social circle on consumption are sig-
nificant. While the customers require for the products with good experience
and simple, and more importantly the product they liked. For the community
customer group, customer characteristics are a relatively concentrated cus-
tomer flow, small liquidity, relatively single demand, and daily consumption,
while customer requirements are kinds of services within the community and
availability of door-to-door services. For the rural customer group, customer
characteristics are scattered distribution, liquidity, relatively single demand,
and low consumption, while customer requirements are nearby services and
communications services with standardization and simplification.
Then, the deployment of an offline entity channel system can be conducted
according to the customer consumption characteristics. Entity channels are
planned according to the characteristics of the target customer distribution and
consumption, and the construction takes a radial layout of three-level core chan-
nels: direct sale flagship stores, chain franchise stores, and authorized stores. The
scale is optimized, and the channel network coverage is not overlapped without
blind spots. The specific channel deployment system is in Table 16.3.
Finally, coverage should be proceeded according to the distribution of the
application entrances of the online customer group. The “decentralization”
feature of the mobile internet era makes the online planning layout different
from the offline one. First, online customers distribute in every application
 Table 16.2.  Suggestion of YNYD Channel Layout.
Mobile Internet

Type Layout Policy Positioning Customer Category Channel Distribution

Offline Channel According to the location Bearing main function Business District Life Hall of
distribution hotspot of of sales and service Customer Group Comprehensive Service
public customers to provide customers Community Customer Community Store, Direct-
communications Group sale Store
solutions Urban Village Customer Franchise, Authorized
Group Store
Village and Town Franchise, Direct-sale
Customer Group Store, Authorized Store
Administrative Village Authorized Store
Customers
… Authorized Store
Online Channel According to the layout Mainly to attract Mobile Self-built Website Self-built Mall
channel of customer customers, to drain the Searching Website Cooperation Channel
internet entrance online to the offline, at Social Network Site Cooperation Channel
the same time bearing Game Website Cooperation Channel
the sales function … Cooperation Channel
of simple, standard
products
523
Table 16.3.  YNYD Channel Deployment System.
Channel System Direct-Sale Store Chain Franchisee Authorized 524
Store

Classification System Life Hall Standard Hall High-quality Community Chain Shop Authorized
Goods Hall Store Store

Channel Positioning Brand Display Service Type Sales Type

Type

Area/Operation Mode of the Business Hall 400 m2 100-400 m2 Below 100 m2 Below 50 m2 No area Below 50 m2
(self-support) ( self-support) (self-support) (join-in) limitation

Type of Main Main With service With a To display and sell the Relying on Mainly
Customer Characteristics Characteristics experience standardized products in the way of the the store providing
Base of the of the Channel/ of multiple layout, supermarket, establishing terminal simple and
Customer Analysis of types of customer supermarket-like high- sales, standardized
Customer operation trends and quality goods halls with carrying product
Requirements as the core, sales process low cost and high efficiency, mobile sales,
establishing as the core, achieving the integration contract, village-level
regional driving sales of online and offline traffic, branches
pole through the collaboration and other may bear
flagship basic service products, certain
halls, and people, and centralized function
loading achieving the operation of logistics
new and integration and distribution
complex of service upgraded
products and sales efficiency
and strategy
products
QIONGWEI YE AND BAOJUN MA
Business Customer has the One-stop solution Coverage of Full coverage – – Full coverage
District characteristics to all kinds of the key
Customer of flow life demands, business
Base concentration, including district
liquidity, the needs of
demand communications
Mobile Internet

diversity, and life

middle-high
consumption
Community Customer has the Lazy users : kinds – – Coverage Supplement
Customer characteristics of services according to of the
Base of relatively within the the present communities
concentrated community, communities uncovered
customer flow, including door- by the
small liquidity, to-door services high-quality
relatively goods halls
single demand
and daily
consumption
Rural Customer has the Nearby – Partial Full coverage – Partial Full coverage
Customer characteristics services and coverage coverage
Base of scattered communications
distribution, services with
liquidity, standardization
relatively and
single demand simplification
and low
consumption
525
526 QIONGWEI YE AND BAOJUN MA

entrance, so that the distance between the customer and the application
entrance is zero. The drainage of the entrance is decided mainly by experi-
ence, and the control of the online application entrance is still in the stage
of “blue ocean”; for telecom operators, there is still a chance to build their
own entrance hot spots at a relatively low cost. The deployment of online
application entrance hot spots can be done in two ways: building application
entrance hot spots on their own and cooperating with a third party appli-
cation entrance. The first way of drainage is to start with communication
services as the breakthrough point and extend to the user’s life service by
providing the user one-stop integrated life services and building online appli-
cation entrance hot spots. The second mode of network drainage is based on
the trend of the present popular customer applications, through competence
open and drainage on target application entrances such as instant messaging,
games, video, music, news, searching, and so on.
(2) Contact Experience
In the E-commerce era, the design principle of simplicity has been a major
feature of the internet era, and simplification can bring customers good usage
experience, improve customer satisfaction, and increase the usage viscosity
of customer contacts (Jibin, 2015). Therefore, operators need to transform
and simplify the traditional design ideas of the contact interface, specifi-
cally to promote the construction of “the unity of network and internet,”
to introduce internet interface experience to online channels, and to carry
standardized product sales. Based on standardized products, an ordering
business handling operation process involving network halls, entity channel
receptions, and 10,086 receptions are realized. At the same time, the princi-
ple of clear process instructions and consistent acceptance process should be
followed, and the integration of the acceptance interface in the online and
offline channels should be realized. The online part bears standardized prod-
ucts sales and drains for the offline part in sales of complex products and
solutions. In this way, the handling time of customers can be saved, and the
customer experience can be improved.
(3) Operation Management
In channel operating decisions and management, the information analy-
sis feedback mechanism must be established. Through the index data analy-
sis of offline and online channels, data-driven decisions can be provided to
the channel operating management through the following ways: continuously
optimizing the channel operation process, according to the customer opera-
tion behavior on the channel; continuously optimizing the current design of
operation process; improving customer experience and ultimately achieving the
goal of upgrading the transforming rate; giving guidance to the entity channel
Mobile Internet 527

experience by providing guidance for the optimization direction of customer

experience in business halls; optimizing constantly according to the customer
feedback; understanding customers; and providing the basis for goods/activ-
ity planning. Channel operating managers need to analyze customers through
the customer behavior in the channel, such as browsing, lingering, buying, and
so on, to determine the target customers. They should set up a rapid iteration
mechanism of the support team aiming at problems in the sales section that
effect the customer experience, and good suggestions on system improvement
can be followed up and solved fast by the support team to form a fast iterative
mechanism. Through the above strategy, the ultimate goal is to enhance the
efficiency of channel operation, satisfy the customer preference, and improve
customer experience.

3.2.2. Platformization Operating Strategy

Platformization, explained in accordance with the value chain theory
(Michael porter), means the integration of the same parts in distinct business
value chains to become an essential part of these businesses, and this valuable
part is formed by segments from the value chains as a platform (weiru, 2013).
For the enterprise, building a platform can improve the enterprise’s core com-
petitiveness, although the core competitiveness is not necessarily equal to the
competitive advantage, and the platform can be externalization and imple-
mentation of core competitiveness. YNYD can implement the strategy trans-
formation of channel platformization through the following approaches:
(1) Product Design
By integrating the mobile-owned business, the “atomization” of basic
products is realized, and through the introduction of other industry products
and integration with mobile products the “standardization” of integrated
products is realized, and thus the product category of the channel is enriched
to meet diversified customer demands of products. By enhancing the foun-
dational competency of channel operation, which is based on the ability of
product management, order management, payment, marketing organization,
supply chain management and customer sharing, and through gathering
third-party partners in the form of capability opening, an industrial chain
of comprehensive life services is formed with communication services as the
core, together with content, information, entertainment, social contact, and
other aspects closely linked to the user’s daily life.
(2) Platform Construction
Through the construction of online and offline platforms and the two-
way drainage, YNYD can set up a life service platform based on its powerful
528 QIONGWEI YE AND BAOJUN MA

entity channel system to drain for online virtual products; based on natural
and strong online information diffusion ability, propaganda, and sensation-
alization, the opportunity for offline sales can be diverted, and the goal is to
grab entity traffic and online traffic to adjust the business model.
(3) Electronic Channels
The electronic channel, as an important marketing channel of YNYD,
is always an important approach for business development. In the era of
transformation to the mobile internet, in order to adapt to the needs of
environmental change, YNYD should follow the transformation strategy of
“introducing in and going out,” building an online platform, collecting online
customer flow, integrating resources, and promoting the YNYD channel
transformation. The electronic channel should have basic communications
services and E-commerce as the core, providing customers diversified services
such as information, entertainment, content, social contact, and so on, to
meet the requirements of the internet ecosystem strategy through “introduc-
ing in and going out.” Introducing in mainly refers to electronic channels
using the capability of external internet and introducing external capability
to realize the extension of the field of business of electronic channels. Going
out mainly refers to the maturity of their own platform capability. The elec-
tronic channel sells its products relying on the existing big platform operators
through cooperation, and it packages its products and capability by integrat-
ing with a third party to form integrated products and covers more fields of
the industry.
(4) Entity Channels
The construction of entity channels should transform corporate entity
channels to a sales platform as comprehensive life service halls, providing
customers the next-stop solution. The corporate channel in the urban context
has its positioning in the comprehensive life service hall, providing customer
communication total solutions around the customers’ daily life services. The
life hall is operated in the platform way, through the mode of “operator con-
structs the platform and partners do the business,” setting up a cooperation
mode with internet partners, mobile phone manufacturers, service providers,
life service providers, and really blending the user’s communications life into
their daily life. In terms of roles, YNYD is the platform constructor, provid-
ing the service site and basic management ability such as trading, cashier,
logistics and daily operation organization, and management of the platform;
terminal manufacturers provide live demonstration services of the latest and
hottest models for user experience. Internet application developers develop
the multiple-subject application for users to experience for free and provide
interpretation services. The cooperative application integrator is responsible
Mobile Internet 529

for setting up the platform and providing on-site experiences and live demo
and guide services; retailers are responsible for the providing daily life services
to users, while service providers offer support such as logistics and storage.
(5) Cooperation and Opening-up
In the mobile internet era, the business content construction is increasingly
rich, and so completely depending on the business development and opera-
tion capability of YNYD, consumers’ increasingly rich business needs cannot
be met effectively. Therefore, strengthening the cooperation with third party
manufacturers and strengthening the opening up of the business capability
with each other will be conducive to give full play to the advantages of dif-
ferent subjects on the whole industry chain and realize the maximization of
the efficiency of channel system overall operating. In specific practice, open
platform of capability needs to be built with marketing capacity based on
perfect logistics, capital flow, and information flow and open up to a third
party, attract social merchants, platforms, and manufacturers to open online
shops or through purchase–sell–stock and supply chain systems, set up per-
fect sales management ability for the offline channel, and improve the vis-
cosity of cooperation. This is also an effective starting point for the future
management of social channels and the reduction of channel costs.

3.2.3. Centralized Operation Strategy

One of the basic features of the internet is centralized operation, through
which internet companies can provide users’ consistent experience and can
weaken the user’s sensitivity to regional differences and the price. It arouses
many feelings of traditional telecom operators, because the localized opera-
tion mode of telecom operators has been deep rooted for a long time. One
presentation of localized operation is that different operating processes are
made and executed in different regions, and thus, to a large extent, the result
is low efficiency of management, inconsistent user experience, and other
problems such as these. However, centralized operation can improve effi-
ciency and reduce cost, but in real practice, traditional telecom operators
must change the existing rules and traditions and transform and reform all
aspects of enterprises, so as to promote the implementation of centralized
operation (Yu, 2014).
(1) Procurement Supply Chain
The provincial procurement supply chain system can be started with the
opportunity of the integration of the terminal industry chain. The core
foundation operation management ability should be enhanced by aiming
toward the mobile internet transformation and the retailing transformation,
530 QIONGWEI YE AND BAOJUN MA

including the management and control ability of price and resources, abil-
ity of logistics distribution and centralized payment, etc. The ability of the
procurement supply chain will include the support for the B2C business and
B2B2C business, at the same time considering centralized procurement and
distribution of marketing materials, promotional materials and so on. The
purchase and supply of future wearable terminals and other integrated prod-
ucts should be considered, and the basic support capability of the big YNYD
background should be formed. In order to build core competitiveness in the
new age of mobile internet transformation, YNYD can construct a support
system of an efficient procurement supply chain of all channels from the fol-
lowing four aspects:
I. Lay the foundations of the mobile internet transformation, through the
construction of the B2B platform and the provincial centralized logistics sys-
tem, as the flat management promotes YNYD’s transformation to mobile
internet;
II. Establish a market-oriented operation mechanism with the help of plat-
formization, using the platform to achieve transparent mechanism and open
the price system for manufacturers, making the marketing campaign open,
fair, and just, and establish a market-oriented terminal system;
III. Control the industry chain deeply, through an integrated platform and
centralized logistics, to achieve total direct supply from the upstream plat-
form to the extreme channel, and integrate and control the industry chain
system deeply;
IV. Improve operation management ability based on IT support system,
through the management of IT system to logistics, information flow, capital
flow, and commerce flow, to create the basic operation capability of YNYD.
(2) Capability Center
Follow the basic rule of chain-oriented expansion and centralized man-
agement of retailing, by using the advantages of integral intensification and
scale expansion, through the building of a background capacity center to
achieve the support of centralized operations for the whole channel.
(3) Operation Management Mode
In order to ensure the consistent standard of the channel’s centralized
operation, a set of standardized operations and the management mode
needs to be built to realize finally the centralized and standardized con-
struction and operation of the offline and online platforms. There are four
steps that lead to standardized operation: (1) decide the product (clarify-
ing product category), classify according to the onsale product, clarify the
form and content of every type of products and match the products suit-
able for the channel to sell; (2) determine the form of exhibition (design
Mobile Internet 531

the form of exhibition for products), design the forms of exhibition for
every product category according to the classification result to meet the
customer consumption habits; (3) determine the sales method and process
(combining the handling process), clarify the handling process of different
product categories according to the products and their forms of exhibition,
and determine regional planning (corresponding to the assembling of the
elements of the halls and stores), (4) after the determination of the above
standards, according to the location and area of halls and stores, select the
appropriate category of products suitable for sales, and according to the
result of selection, put the corresponding product form and the process, as
well as the halls and stores, and the online partition in assembling decora-
tion or display.
Finally, based on the standardized four steps and current YNYD operat-
ing structure, optimize the provincial and municipal division of duties of the
channel construction and operation process. The provincial company forms
the standard setting and operation center, encapsulating into the components
by following the four steps, such as the partition of business halls and the par-
tition of online mall, including products, handling process, form of display,
and the corresponding support, while the prefecture plans as a whole the con-
struction and the unified standard of landing, constructing and supervising
according to the encapsulating content, and the districts and counties offer
operating assistance by giving localization synergy.

4. Comments on the Project

Through the analysis of the new features of telecom operation under the
background of the mobile internet era, combining the construction situation
of YNYD’s present channel system, put forward the transformation strategy
of marketing channel for YNYD in the era of mobile internet. There are
three points for the project practice result which are as follows:

4.1. Customization Transformation

Transform from operator-centered in the past to customer-centered, pursuing

hotspots of customers, and focusing on customer experience. In the era of
mobile internet, users’ trading activities are gradually migrating from offline
to online, forming the new situation of the online and offline integration.
532 QIONGWEI YE AND BAOJUN MA

4.2. Platformization Transformation

The layout has changed from operator dominance in the past to multi-par-
ticipating in competition and cooperation. Operators become the construc-
tor of the industrial chain platform to satisfy the diversified customer needs,
operators need to introduce in and integrate products of the third-party, and
forming a new ecosystem in the mobile internet environment.

4.3. Centralization Transformation

Follow the basic rule of the chain-oriented expansion and the centralized
management of retailing, play the advantages of integral intensification, and
scale expansion, through the building of the background capacity center,
achieving the support of centralized operation of the whole channel.

5. Questions for Further THOUGHT

(1) Try to sum up the advantages of the mobile internet and its relationship
with mobile E-commerce.
(2) What are the differences and similarities between the marketing channels
under the mobile internet and the traditional marketing channels.
(3) Summarize the key to the transformation of YNYD marketing channel.

6. Conclusions

The project practice of mobile internet is in response to the developing needs of

the “internet +” and the SoLoMo mode to a great extent, analyzing all aspects
needed to be involved in the development of mobile internet and the popular-
ity of mobile electronic commerce from a more realistic point of view. Based
on this, the business transformation of YNYD telecommunications marketing
channels has been upgraded to a blueprint, summarizing the implementation
of the marketing channel strategy and the application from the three aspects of
customers, platforms, and centralized operation. Thus, emphasize the signifi-
cance for enterprises to carry out the transformation of the mobile internet in
the development of mobile internet, and its close relationship with the imple-
mentation of information strategy.
Mobile Internet 533

7. References

Baidu Encyclopaedia. (2015). Network information: Customization strategy.

Jibin, W., et al. (2015). The internet + : Overturn, organization reconstruction, management evolu-
tion of traditional enterprises and internet transformation. Mechanical Industry Publishing
House.
Li, Y. (2011). Mobile internet business model and typical cases. Telecommunications Science.
Ren, L., & Ding, Y. (2001). Framework and applications of mobile electronic commerce.
Computer Engineering & Applications, 10, 7–10.
Wang, Z. (2003). Forward positions of marketing channel theory and trends of distribution
channel management. Journal of Central University of Finance & Economics, 8, 64–68.
Weiru, C. (2013). Platform strategy: The business model revolution sweeping through the globe.
China: CITIC Press.
Yang, J. (2004). Marketing strategy of mobile commerce. Business Economics and Administration,
2, 4–7.
Yu, N. (2014). Centralized operation, hard for operators to learn. Gossip of Science and
Technology (Special Column for Ning Yu – 66).
 Effect of interactive marketing channels on
service customer acquisition
Kashef A. Majid
College of Business, University of Mary Washington, Fredericksburg, Virginia, USA

Abstract
Purpose – The cost of customer acquisition is one of the largest expenses that service firms incur due to loss-generating quotes/proposals. This
paper aims to connect interactive marketing communications channels with increased customer acquisition and non-interactive marketing
communications channels with decreased customer acquisition by service firms.
Design/methodology/approach – Two field studies using hazard models were used to assess the probability of acquiring a new customer after the
prospect first contacts the firm. Multiple discrete hazard models were used to compare channels against each other.
Findings – Three interactive marketing communications channels (word-of-mouth, online review forum, search engine optimization) increased the
rate of acquiring a customer over time. I also compared non-interactive channels (billboard/signage, direct mail), but the analysis did not reveal any
significant impact on acquisition rate by the non-interactive marketing communications channels.
Originality/value – The present study illustrates why the cost of acquisition is so high in the service sector and takes the unique step of linking
interactive marketing communications channels with higher customer acquisition rates over time in a services context. Specifically, interactive
marketing channels enable customers to find firms that offer the attributes that they seek, thereby increasing acquisition probabilities and
decreasing acquisition costs.
Keywords CRM, Relationship marketing, Professional services, Digital, Asymmetry, Marketing communications channels, Interactivity
Paper type Research paper

1. Introduction converting to paying customers. Prior work has indicated that

Conventional wisdom suggests that attracting more leads and
generating more activity in the sales department will accelerate
customer acquisition and ultimately enhance revenue and
profit (Kotler et al., 2006). However, many service firms incur a
cost proportional to the number of customers who contact the
firms. Providers of professional services (e.g. architects,
security firms, contractors and electricians) respond to
customer inquiries with a proposal, each time incurring costs to
develop this proposal with no guarantee that the customer will
accept the proposal and ultimately generate revenue. The
service provider thus faces a risk of excessive loss-generating
proposals. As one consultant explains, “[. . .] an unqualified
lead may cost [the company] days, months and sometimes
years of wasted effort” (Jordan, 2018). In the construction
sector, for example, a failed proposal for a routine project can
cost $3,000 to $10,000 (Buckson, 2013). Other service firms in
industries such as real estate or the financial sector risk
incurring costs of marketing to consumers who will not
purchase from them because they are not interested in the key
selling propositions that the firm offers.
To minimize expenditures on consumers who will not
purchase their services, firms must attract inquiries from
potential customers (prospects) with a high likelihood of
The current issue and full text archive of this journal is available on Emerald
Insight at: https://www.emerald.com/insight/0887-6045.htm
Journal of Services Marketing
© Emerald Publishing Limited [ISSN 0887-6045]
[DOI 10.1108/JSM-08-2019-0282]
attracting prospects likely to convert is possible if the goals of
the consumer and the value proposition of the firm are aligned
(Vroomen et al., 2005). For example, prospects who seek a
high-quality option are more likely to seek out and purchase
from firms that offer higher service levels (Vroomen et al.,
2005). If a service provider can identify prospects who seek to
maximize the firm’s key selling propositions, it can minimize
expenditures on consumers who are not going to purchase from
the firm. The challenge, though, is that prospects still approach
the firm via traditional marketing communications channels,
with some marketing communications channels providing
vastly more information to prospects than others (de Haan
et al., 2016; Srinivasan et al., 2015). Traditional advertising
may create awareness, but it may not answer questions about a
service provider and word-of-mouth (WOM) can (Beltramini,
1989). The purpose of this paper is to explore which marketing
communications channels are most likely to bring prospects to
the firm who are likely to become customers.
Substantial research in the relationship marketing and
customer acquisition domains has espoused the importance of
The author would like to acknowledge the help of Andrew Crecelius in the
preparation of this manuscript. He would also like to thank the two
reviewers as well as the Associate Editor for valuable feedback throughout
the review process.
Received 2 August 2019
Revised 19 December 2019
1 March 2020
16 April 2020
13 July 2020
28 July 2020
Accepted 4 August 2020
 Interactive marketing channels
Kashef A. Majid
marketing communications channels in driving prospect
quality (Chan et al., 2011; Datta et al., 2015; Gupta et al., 2003;
Reinartz et al., 2005; Thomas, 2001; Verhoef and Donkers,
2005; Villanueva et al., 2008). The consistent finding that
certain acquisition channels bring higher-value customers to
the firm over other channels provides the basis for this study
(Reinartz et al., 2005; Verhoef and Donkers, 2005). The author
builds on this foundation by arguing that some marketing
communications channels allow prospects to interact with the firm
and customize the information they receive, thereby enhancing the
ability to convert prospects in a timely manner and limiting loss-
generating proposals.
This research contributes to the literature on marketing
communications channels and customer acquisition by
comparing interactive vs non-interactive channels and
consumer interaction with the firm (see Table 1 for a
summary).
The paper proceeds as follows. First, the author draws upon
the theory of information asymmetry to argue that poor-quality
prospects increase sales costs. Second, market communications
channels are delineated based on the level of interactivity
enabled by the channel. Channels with greater interactivity are
more apt to allow prospects to reconcile their wants with the
seller’s key attributes. Hypothesized effects on conversion rates
are tested with a hazard modeling approach using data from a
firm that performs home improvement services and a real estate
brokerage. The two studies are intended to expand the
generalizability of these findings by testing the arguments
advanced in this paper within two different service contexts that
differ on their emphasis on quality. Following the empirical
analyzes, the author discusses the results and presents
theoretical and managerial implications pertaining to customer
acquisition.
2. Customer acquisition and information
asymmetry
Literature in customer relationship management (CRM) links
successful acquisition and retention to greater financial
valuations (Schmitt et al., 2011; Schulze et al., 2012; Verhoef
and Donkers, 2005). The strength of a firm’s CRM lies in its
ability to identify and acquire new customers and retain these
customers to extract value over the customer’s lifetime (Kumar
and Reinartz, 2016; Lewis, 2006; Lewis, 2005). Customers are
considered assets that provide varying degrees of value to the
firm. When customers are acquired through discounts, they
may not prove to be long-term revenue
producing assets
(Lewis, 2006), which puts greater emphasis on firms to acquire
customers who seek more than intermittent sales promotions
(Lewis, 2006, 2005). However, at the time of acquisition, the
customer has thus far created a negative net value for the firm
due to the cost of reaching this customer from a pool of
prospects; the greater the cost of acquisition, the longer the
time until the customer provides break-even value for the firm.
The heart of any CRM strategy is cost-effective acquisition,
which sets the stage for the firm’s retention efforts.
2.1 Acquisition costs
Cost-effective customer acquisition is particularly challenging
given that firms spend considerably more money to acquire a
Journal of Services Marketing
customer than to retain that customer. For example, in a study
of professional memberships, Thomas (2001) estimated that a
professional services organization spent $26.94 to acquire a
customer versus $2.15 per annum to retain a customer. The
high cost of acquisition is largely attributed to the expense of
reaching prospects who the firm is ultimately unable to convert.
For example, a firm that pursues traditional advertising, such as
signage or television ads, spends the same amount per prospect
even though only a small percentage of those prospects will be
converted into customers. A service provider that spends
$10,000 on a billboard advertisement and acquires 50 new
customers as a result of that advertisement incurs an acquisition
cost of $200 per customer, with much of this figure incurred
from reaching audiences that have no need of the firm’s
services.
The aforementioned situation illustrates an application of the
theory of information asymmetry. The acquisition cost that the
firm incurs is fueled by the asymmetry that exists between firms
and consumers in the marketplace (Kirmani and Rao, 2000).
Traditionally, the seller often has more information on the
seller’s quality than the buyer, causing prices to drop because
buyers demand a discount for the increased risk of purchasing a
low-quality service (Akerlof, 1970). However, when buyers
have more information about the buyers’ intentions than the
sellers do, the prices can rise. Thus, unlike the asymmetry that
exists when the seller has more information on their quality
than the consumer does and prices decrease as a result, when
consumers have more information regarding their intentions,
prices increase. In the service context, this is novel and more
pronounced because time is perishable, and each time the firm
pursues a prospect, it reduces the amount of time they could be
using performing paid work. To illustrate, if a customer wants
to remodel their home and obtains three estimates from firms,
one of whom the customer already prefers, then the remaining
two firms that do not receive the contract incur the cost of
providing the estimate but no revenue from the customer. This
condition is consumer asymmetry, where sellers lack the
knowledge of which prospects will provide more revenue than
the costs the firm incurs to acquire the customers. When sellers
cannot differentiate between those who provide them with
profits and those who increase their costs, they incur increased
costs due to resources spent on prospects who cost the firm
more than the revenue they provide (Thomas, 2001). The cost
of prospects would have to be offset by the revenue from the
few who purchased the firm’s services. To reduce the cost of
acquisition, the firm must improve its targeting ability and
focus its resources on those prospects who are most likely to
provide revenue.
This paper advances the discussion of acquisition costs with
a focused investigation of different marketing communication
channels, leading to acquisition in the service sector: those that
are more interactive and inclusive and those that are more
passive and exclusive. To the extent that one of these
approaches is more (or less) effective in quickly converting
prospects into paying customers, it may be viewed as
contributing to a more (or less) cost-effective acquisition
strategy. When discussing quality providers in the professional
services sector, firms emphasizing quality will charge more than
firms that compete primarily on price.
 Interactive marketing channels Journal of Services Marketing
Kashef A. Majid

Table 1 Outline of contribution relative to other major work

Variables of interest
Comparison of
acquisition based on
interactive vs Consumer
non-interactive interaction
Study Channels channels with firm Summary of key findings Industry
Chan et al. Google search/Web traffic  Customers acquired through Google Biomedical and
(2011) search advertising are more valuable chemical
than customers acquired through other
digital channels
Datta et al. Direct mail, e-mail  Customer value of free-trial customers Digital media
(2015) is lower than of regular customer but
free-trial customers are more
responsive to marketing
communications
Kumar et al. Word of mouth  A new four-step approach to compute Financial services,
(2010) customer referral value is created. The retailing
method is used to target the most
promising customers
Libai et al. Customer-to-customer  The authors demonstrate how Higher education,
(2013) acceleration and expansion combine to technology,
generate value in a WOM seeding entertainment,
program for a new product retail and services
Reinartz et al. Telephone, face-to-face, Web, e-  Insights are presented pertaining to B-to-B high-tech
(2005) mail how much to spend to balance manufacturing
acquisition vs retention. The
relationship between acquisition
expenditure and retention expenditure
is demonstrated
Scmitt et al. Word-of-mouth  Referred customers have a higher Financial services
(2011) contribution margin, higher retention
rate, and are more valuable in the short
and long run
Steffes et al. Internet, direct mail, direct sell,  Internet and direct mail efforts Financial services
(2011) telesales generate more profitable customers
than telemarketing and direct selling
Thomas (2001) Direct mail  Customer acquisition is more costly Membership of
than customer retention trade association
Trusov et al. Word-of-mouth  Word-of-mouth referrals have Social networking
(2009) substantially longer carryover in a
social networking site than traditional
marketing actions
Verhoef and TV, radio, print advertising, direct  Direct-mail acquisition as a channel Financial services
Donkers (2005) mail, outbound telephone, in-house performs poorly on retention and cross-
magazine, website, word-of-mouth selling
Villanueva Word-of-mouth, online ad banner,  Marketing-induced customers add Internet firm that
et al. (2008) TV, radio, magazine, newspaper more short-term value, but WOM provided free Web
advertisement, e-mail links, direct customers add nearly as much long- hosting
mails term value to the firm
This study Word-of-mouth, review forum,   Interactive channels such as WOM, Home
search engine optimization, direct review forum and SEO increased improvement, real
mail customer acquisition over time estate

2.2 Marketing communications channels interactive types of communication (Srinivasan et al., 2015).
Before prospects purchase from the firm, they move through a However, more interactive channels are unique in their
funnel where they are exposed to multiple marketing relationship to the message’s surrounding content (Stephen
communications channels, including both more and less and Galak, 2012). Content-integrated messaging is incorporated
 Interactive marketing channels
Kashef A. Majid
into the medium’s editorial content (Russell and Belch, 2005).
For example, with search engine optimization (SEO), relevant
sponsored listings (the message) appear alongside results of the
prospect’s Web search (the surrounding content). Content-
separated messaging is independent of the medium’s content;
banner advertising at the top of a Webpage, for example, need
not relate to the contents of the page. Content-integrated
messaging has been found to be more persuasive because it
provides richer and more relevant information (de Haan et al.,
2016). This is important in the professional services sector
because the purchase decision is preceded immediately by the
proposal stage. At this stage, the prospect may be more
informed through content-integrated messaging and
potentially has more knowledge of the firm and its services.
Alternatively, the prospect may be relying more on content-
separated messaging, which puts a greater onus on the proposal
to provide information to the prospect.
3. Customer acquisition via marketing
communication channels
Marketing communication channels traditionally involved
reaching out to customers with mass media and encouraging
them to respond to the appeal (Luo and Donthu, 2006).
Marketing communication that is initiated by the firm and
pushed onto prospects with minimal opportunity for
interaction is very much alive; in 2015, marketers in the USA
spent $11.9bn on direct mail and $8.1bn on billboard and
outdoor advertising (Morea, 2016; Palmer, 2016). However,
this expenditure represented an increase of only 0.1% and
0.01%, respectively, from the year prior (Morea, 2016; Palmer,
2016). Total spending on these passive, non-interactive forms
of advertising is expected to trend downwards, largely because
of increased expenditures on more interactive forms, such as
SEO or viral advertising (Stivaros, 2016; Verhoef and Donkers,
2005). Passive channels such as television advertising may lead
to greater awareness and drive prospects to other channels, but
prior work has demonstrated that they lack the ability to evoke a
cognitive assessment or conative action (e.g. purchase) on the
part of prospects (Srinivasan et al., 2015). Traditional channels
do not allow for two-way communication, and thus do not
allow prospects to customize the message to suit their specific
needs (Villanueva et al., 2008). In contrast, more interactive
forms such as SEO, WOM or a firm’s website allow prospects
to gather information that they seek, which moves them closer
to purchase (Florenthal and Shoham, 2010; Villanueva et al.,
2008; Vroomen et al., 2005).
The nature of emerging channels (such as digital
communications channels) allows for prospects to customize
the information that they receive so that they can assess the
message on the attributes of the firm in which they are most
interested (Chan et al., 2011; Lagrosen, 2005). The preceding
example illustrates a key delineating feature of marketing
communications channels: their level of interactivity.
Interactivity is defined as:
[. . .] an expression of the intent that, in a given series of communication
exchanges, any third (or later) transmission (or message) is related to the
degree to which previous exchanges referred to even earlier transmissions
(Rafaeli, 1988, p. 111).
Journal of Services Marketing
Though there is much debate over what constitutes
interactivity (Kiousis, 2002), there is general agreement that it
is captured in two factors that distinguish interactive
communication from passive communication:
1 The ability to receive and respond to messages (Heeter,
2000; Rafaeli and Sudweeks, 1997; Rafaeli, 1988;).
2 The level of control that the receiver has in crafting the
message (Downes and McMillan, 2000; Hoffman and
Novak, 1996).
This distinction matters in the discussion of alleviating
asymmetry via marketing communication channels because it
allows for the customer to obtain the most pertinent
information for the service provider. In the classical sense of
interactivity, the two-way communication happens in sequence
and simultaneously between individuals, such as a conversation
(Shannon, 1948). In marketing communication, this would be
similar to WOM communication. However, increasingly digital
channels are also seen as facilitating interactive communication
(Sundar et al., 1998). These are digital channels that allow
prospects to engage in sequential communication that leads to
a customizable message for the prospect (Hoffman and Novak,
1996; Sims, 1997). For example, a prospect may initiate a
search for a firm online; they can choose which hyperlink they
follow and gather information that pertains to their needs
(Kiousis, 2002). The prospect is communicating in the digital
realm what they communicate in the physical realm. Searching
for a plumber via an online search and then narrowing the
search based on which ones can perform a certain job is similar
to the communication sequence of asking a colleague if they
know any plumbers and which can do a particular job well.
This ties directly into the central argument that prospects who
go through particular marketing communication channels may
have a higher likelihood of becoming an actual customer. The
engagement that interactive channels provide allows prospects
to find information most relevant to them. This would help
customers find the right firm for them because the channels
help customers to screen firms before contacting firms they are
interested in. A prospect who is concerned with quality can
read reviews for the firm on an interactive online forum and
reach out to only those firms that were perceived as having the
greatest quality. A prospect who prioritizes responsiveness in
the service provider may use digital channels (e.g. review
forums) to screen out any that do not respond quickly and only
contact those that are most likely to reply quickly. From the
service provider’s perspective, the firm may use the marketing
communication channel to reach prospects who have
determined the key selling attributes of the firm and have
reached out because the firm is more in line with what
the prospect seeks than other firms in the same service sector.
The argument is displayed in Figure 1. Interactive marketing
communications channels allow prospects to determine the key
selling attributes of the service provider above what non-
interactive channels (such as direct mail and signage) are able
to convey. Non-interactive channels such as television, radio
and signage typically reach a large group of prospects with a
consistent message (Bezjian-Avery et al., 1998) and are
generally used to create awareness within a broad group of
prospects (Trusov et al., 2009). Acquiring a broad group of
prospects can be detrimental to those in the service sector
 Interactive marketing channels Journal of Services Marketing
Kashef A. Majid

Figure 1 Model of service quality and marketing communications channels

Interactive marketing
channels allow
customers to ascertain
service quality
- Word-of-mouth
- Review forum
- Search engine Firms that align
All Customers optimization
Customers with the
who seek (SEO)
attributes that
certain
the customer
attributes
seeks

Non-interactive
marketing channels
- Direct mail
- Signage
- Passive
advertising

because, for some, it creates costs in the form of proposals; for
others, it involves making an investment in time and effort
before the prospect is converted. The challenge to the firm is
that it lacks information, ex ante, on the likelihood that a
prospect can be converted into a customer.
Passive, non-interactive channels often use a shotgun approach
by reaching as many prospects as possible and, as a result, they
reach many prospects who are not interested in the firm’s
offerings. These prospects may not be able to ascertain whether
the firm excels at the attributes in which the prospect is most
interested.
To alleviate the problem of directing resources to prospects
who are unlikely to make a purchase, interactive marketing
communication channels serve as screening filters. As noted,
these channels inherently support content-integrated
messaging, with the prospect seeking out the medium for the
message and receiving more relevant information (de Haan
et al., 2016). Interactive methods, such as WOM, review
forums and SEO, are initiated by the prospect who also
controls the flow of information (Florenthal and Shoham,
2010). A customer begins with a search of what the customer is
looking for in a firm and then conducts her investigation based
on those criteria. The firm’s message may well be seeded via
SEO, WOM marketing programs and social media campaigns,
but it is discovered on the prospect’s terms and based on the
prospect’s preferences. A passive marketing communications
channel is unable to customize the message for each individual
prospect, which then leaves a gap between the information the
prospect seeks and what is communicated through the channel.
The aforementioned rationale demonstrates that when the
prospect is able to interact with the message, it can mitigate the
asymmetry problem faced by the prospect. Compared to
messages received from less interactive channels, prospects
gain more relevant information. Therefore, such channels
enable prospects to discern which service providers align more
effectively with their needs and which do not.
To illustrate, a prospect who is considering having their car
serviced may study reviews online and choose the two
businesses with the highest ratings while disregarding others as
lower quality. A consumer who visits a service garage after
seeing a billboard advertisement has done nothing to assess
quality of the garage and may have to shop around further to
reduce the probability of taking their car to a low-quality
garage. This example demonstrates a competitive advantage of
interactive marketing communication channels for firms to
compete on selected attributes. By focusing on drawing in
prospects who have already begun to alleviate their asymmetry
problem (differentiating good sellers from bad), the firm’s own
asymmetry problem (differentiating good prospects from bad)
is mitigated.
Hypothesis:
H1. The acquisition rate of prospects exposed to a firm’s
marketing communications in interactive channels will
be higher than for those exposed to communications in
non-interactive channels.
4. Methodology
The analysis is divided between two studies. In Study 1, the
context is the home improvement marketplace. In Study 2,
the context is a residential real estate brokerage. In Study 1, the
author examines the likelihood of customer acquisition through
different marketing communications channels. Study 2
provides a different service context where the service operator
relies heavily on an interactive channel (referrals). Both
contexts represent different aspects of the service sector;
however, in the home improvement context, service quality is
identifiable and measurable, thus it can be argued that concerns
over quality may cause consumers to opt for certain marketing
communication channels over others. Study 2 added a context
(real estate) where quality was not as easily discernible.
4.1 Study 1
The home improvement sector represents an industry where
service providers vary greatly both in the quality of the services
provided and in the overall service experience. US prospects
spent over $325bn on home improvement services in 2015
alone (Bender, 2016). This sector is seen as an indicator of
economic prosperity and employed over nine million people in
the USA (United Census Bureau, 2011). The term home
improvement is quite inclusive; services vary from basic cosmetic
upgrades such as replacing a floor to larger maintenance issues
such as roof repair. The study focuses on cosmetic
improvements – interior remodeling and painting – that
consumers make to their homes. Focusing on cosmetic
improvements allows the reduction of the potential impact of
 Interactive marketing channels Journal of Services Marketing
Kashef A. Majid

urgency in the consumer’s decision. The consumer must be
careful to identify a high-quality firm or risk paying too much
for poor-quality work. Some firms may even identify a problem
that does not exist or a solution that is unnecessary
(Pierce, 2015). The onus is on the homeowner, who lacks
expert knowledge, to evaluate proposals and choose the one
that is most appropriate for the work that they want.
4.2 Data
The sample was drawn from the customers of a multimillion-
dollar, privately held, home improvement firm, serving three
states and headquartered in a large metropolitan center in the
eastern USA. The firm offers interior services only (e.g.
painting, repairs, cabinetry, flooring) to residential homes and
is generally perceived as providing superior service. This firm
consistently receives top marks from online review forums such
as Angie’s List and Yelp, where it has an average rating of five
stars and an A1 rating from the Better Business Bureau. The
firm’s main advantage in the marketplace is that it competes on
quality and not on price, describing its competitive advantage
as a “total quality experience” wherein it seeks to provide high-
quality service and high-quality work throughout its dealings
with each customer.
Each time the firm receives an inquiry, it arranges for one of
its employees to visit the location to assess the work to be done
and then prepare an estimate for the customer’s approval. If the
estimate is not approved, the firm does not receive any
compensation to offset the cost of completing the estimate.
This situation exemplifies the need to screen prospects because
if the firm were to expend an equivalent amount of resources on
each prospect, then it would overspend on consumers who will
never buy and underspend on consumers who have the highest
likelihood of becoming a customer.
From 2010 to 2013, the firm gave out over 1,500 estimates to
prospects in its market area. The author evaluated the efficacy
of different marketing communication channels by assessing
the acquisition rates of various means of contact that led the
prospect to approach the firm. Prospects approached the firm
as a result of a variety of forms of contact, some of which had
been paid for by the firm and others for which the firm did not
directly pay. In terms of paid forms of contact, the firm used
direct mail (non-interactive), signage (non-interactive) and
Google search optimization (interactive). The direct mail
campaign involved a flyer promoting the firm, which was sent
out weekly to potential customers within a bundle of coupons
for other businesses. The signage for the firm appeared on the
firm’s fleet of vehicles and on the lawns of customers who were
having their homes renovated. The Google SEO placed a link
to the company’s website as a sponsored result when prospects
entered certain keywords for area home improvement firms.
The primary forms of unpaid advertising contact included
WOM and review forums. Although some firms used
marketing programs to incentivize WOM and customer
reviews, this firm did not. In this setting, both of these forms of
contact originated from prior customers who were not
compensated to share their experiences. Therefore, this study
may provide a conservative estimate of the customer
acquisition efficacy of these forms of contact as the firm had
done nothing to seed its own message in these channels. The
author identified some less common methods of customer
contact such as trade shows or the sponsorship of charitable
endeavors, but these were omitted from the analysis due to their
low rates of incidence. The author provides a breakdown of the
number of estimates per marketing method source in Table 2.
Because the analysis focuses on customer acquisition, it only
included first-time customers. The firm recorded the date the
estimate was given and the date the prospect accepts

Table 2 Marketing communications channels for Study 1 (home improvement firm)

Referral source (abbreviation) Explanation Mean in days (SD) Events Censored
a
Personal referral (WOM) Referral from a personal acquaintance (professional or 452.81 (396.45) 308 219
otherwise)
Review forum (Re)a The review forum that we drew upon was Angie’s list. 787.44 (609.61) 145 149
Angie’s list is a subscription-based forum that rates
service providers and allows members to leave
feedback on specific firms
Search engine optimization (SE)a The firm pays Google to maximize its presence when 563.10 (560.10) 56 85
consumers in the geographic region conduct searches
for home improvement firms. The firm also attempts to
create as much traffic to their website so as to
optimize their presence when customers search for
firms that contain certain keywords
Direct mail (DM) The firm uses a direct mail campaign that provides 1,364.11 (1,136.19) 69 107
potential customers with a brochure promoting their
services and their service ratings
Billboard/signage (Sg) The firm pays for bus station advertising on various 1,321.03 (1,101.50) 15 41
bus stops throughout the metro area. The advertising
lists contact information and contains pictures of the
types of work that the firm does
Total 593 601

Notes: Inclusive/interactive marketing channels. Days from first contact with the firm to time of proposal acceptance
a
 Interactive marketing channels
Kashef A. Majid
the estimate, if at all. If the prospect had not accepted the
estimate within a year, the file was closed, and the firm assumed
that the prospect chose a competitor. Each time the firm
prepared an estimate, it recorded the type of work to be done,
the estimated cost, the marketing channel and the location of
the potential customer. The referral source was provided in
response to the prospect’s answer to the following question at
the time an estimate is given: “How did you hear about us?”
Prospects could state multiple sources, but few did so. To avoid
misattribution, only those estimates where the prospect listed
one source were used. The author acknowledges that the
prospect may have encountered multiple marketing
communication channels before approaching the firm (e.g.
direct mail followed by a review website). The inability to
observe such sequences is a limitation of this study. However,
prior work has demonstrated that more interactive channels
such as SEO and WOM are used closer to the purchase stage
(Srinivasan et al., 2015). The prospect is asked about the
channel immediately preceding the proposal – it stands to
reason that customers selecting non-interactive media were
unlikely to be exposed to the more interactive channels earlier.
4.3 Hazard model
To test the argument that inclusive, interactive marketing
communication channels increase the rate of acquiring a
customer while exclusive, less interactive channels decrease it, the
author used a hazard model. The hazard model is most
appropriate to the analysis because it presents an empirical test of
the theory that was advanced earlier pertaining to prospects
taking time (while costing the firm money) to become customers.
Many of the prospects in the sample did not become customers
(with the firm absorbing the cost of acquisition efforts), and these
prospects entered and exited the period of analysis at different
times; a survival analysis accounts for these factors.
The author used an accelerated hazard model with an
exponential distribution to assess the probability over time of
acquiring a new customer after giving an estimate. H1 posited
that more interactive channels can increase the probability of
turning a prospect into a customer over time. To demonstrate
this conversion, the author had to relax the assumption that the
differences resulting from all channels are the same across time.
The exponential distribution had the best fit; the scale result
was only one and the plotted hazard did not reveal a significant
number of variations with respect to time. To ensure the
appropriateness of the exponential distribution, the log
Table 3 Parameter estimates for Study 1 (home improvement firm)
Parameter Estimate Std. error
Intercept 6.555 0.268
Personal referrala
1.097 0.099
Review foruma
0.507 0.183
Search engine optimizationa
0.639 0.167
Direct mail 0.316 0.242
Billboard/signage 0.247 0.222
Log CA 0.401 0.075
Scale 1
Notes: Lagrange multiplier, x 2 = 2,134.66, p < 0.001; aInclusive/interactive communications channels
Journal of Services Marketing
likelihood of the exponential distribution model with a Weibull
distribution model was compared and found that the former
produced a better fit (Exponential,
2LL = 16,610.62 versus
Weibull distribution,
2LL = 17,103.76).
Each of the firm’s marketing communication channels
identified earlier was included within the model (see Table 2
for abbreviations). The range of prices for estimates
contained a great deal of variation. At the low end was an
estimate of $300 for the painting of one room to a high
estimate of $69,275 for renovating multiple rooms within
the home. Because the size of the project might be correlated
with both contact method and conversion likelihood, the
author controlled for the price of each project by taking the
natural logarithm of each estimate (CA; contract amount).
The dependent variable in the model was the likelihood of
customer acquisition over time H(t), which represents the
probability at different time points that the prospect will
become a customer. The betas represent the impact that the
channel has on the likelihood of customer acquisition. The
accelerated hazard model is as follows:


H ðt Þ51
e b0 ð
1ÞðtÞ 1 b1 ðWOMÞ 1 b2 ðReÞ 1 b3 ðSEÞ 1 b4 ðSgÞ 1 b5 ðDMÞ 1 b6 ðCAÞ 1 ei
(1)
The first contact with the customer in the model – time zero –
was recorded as the date the estimate was given. If the
prospect accepted the estimate, then the event has occurred;
if the prospect did not accept the estimate during the three
years of the investigation, they were right-censored. If a
person arrived at the firm via a personal referral, then they
were 67% more likely to become a customer at time (t) in
months than if they arrived at the firm through a channel that
was not a personal referral. The full results from Study 1
(home improvement firm) are displayed in Table 3. In
Table 3, the parameter estimates are listed that indicate the
impact that each marketing communication channel has on
the probability of acquiring a prospect over time. It should be
noted that the author tested for heterogeneity in the effects
with respect to project size by estimating interaction effects of
the CA with each marketing channel. The author did not find
any significant interactions, thus providing evidence of the
homogeneity of the main effects.
The author also investigated whether there were significant
differences in terms of acquisition probabilities between the
different forms of more interactive channels. Using multiple
x2 Pr ( x 2) Increase in probability at time (1)
596.58 <0.001
120.85 <0.001 67%
7.64 <0.01 40%
14.56 <0.001 47%
1.23 0.267
1.71 0.192
28.42 <0.001
49%
 Interactive marketing channels
Kashef A. Majid
discrete hazard models, the author compared each channel
against the others. Equation (2) represents the general equation
for the analysis:
hit ¼ PrðTi ¼ t jTi  t; xi 
xi ¼ ðWOMi ; REi ; SEi Þ (2)
The results of the discrete hazard models are displayed in Table 4.
A graphical illustration of the probability of acquisition over time
for interactive marketing communication channels compared to
non-interactive marketing communication channels is contained
within Figure 2.
4.4 Findings
The primary argument, captured in H1, was supported: it was
found that all three interactive marketing communication
channels increased the rate of acquiring a customer over time.
The results of the discrete hazard models revealed further
differences between the channels. WOM marketing increased
the probability of acquisition above what was provided by the
referral forum or SEO. In a comparison of probabilities over
time between the review forum and the SEO, the author found
significant differences in favor of SEO. Customers who
approached the firm from a search engine were more likely to
become a customer of the firm over time. The author did not
compare the passive, less interactive channels because they had
already been revealed as insignificant predictors of customer
acquisition in the earlier analysis.
4.5 Study 2
Study 1 examined customer acquisition in a sector where
perceived quality fluctuated significantly. As discussed earlier,
contractors are rated publicly by consumers, and potential
customers are likely to differentiate between poor quality and
good quality firms through interactive channels that allow them
to extract information to form perceived quality of the
contractors. However, the limitation of the first study is that
one could argue that interactive channels are best suited for
sectors where quality varies widely. For many service providers,
perceived signals of quality show little variation. For example,
prior work has found that in the sharing economy, most of the
hosts who offer accommodations for others receive a rating of
five out of five stars, there is very little deviation beyond four to
five stars (Zervas et al., 2015). To move past the argument that
the earlier findings are applicable only to those high-quality
Table 4 Comparison of marketing channels
Comparison Model fit global test statistic: Wald
Comparison between inclusive/ x = 93.671,
2
interactive channels and exclusive/ p < 0.001
less interactive channels
Comparison between WOM and x 2 = 74.193
third-party review p < 0.001
Comparison between WOM and x 2 = 92.334
SEO p < 0.001
Comparison between third party x 2 = 37.997
reviews and SEO p < 0.001
Journal of Services Marketing
Figure 2 Comparison of probabilities between interactive and
non-interactive marketing communications channels
service providers who stand out in a market with significant
variation in service quality, the author expanded the research to
the real estate sector. Unlike other sectors of the service
economy, realtors do not have many identifiable signals of
quality. Realtors can be rated on different review forums, but
the sheer volume of realtors with high ratings minimizes ratings
as a signal of quality. According to the National Association of
Realtors (NAR), in 2018 there were estimated to be
approximately two million active real estate licenses in the USA
(National Association of Realtors (NAR), 2018). Real estate
services represent a service that has a high degree of fit between
the clients and providers. In 2018, it is estimated that
residential buyers in the USA spent over $80bn on purchasing
residential properties (O’Connor, 2019).
4.6 Data
The sample for Study 2 was drawn from a small real estate
brokerage that operated from 2013 to 2018 in the suburbs of a
major metropolitan area on the east coast of the USA. In 2018,
due to declining commissions and increased competition from
larger brokerages, the firm was absorbed by a larger brokerage.
At the time the firm was absorbed, it had less than 50 agents
and prided itself on being a small shop that could give their
clients individual attention. The downside is that the agents did
not have access to as many resources or as large a network as
Test of equality: Wilcoxon Parameter estimate
x = 8.852,
2

1.539,
p < 0.01 p < 0.05
x 2 = 3.681
1.628, p < 0.10
p < 0.06
x 2 = 15.667
1.362, p < 0.001
p < 0.001
x 2 = 21.035 1.393, p < 0.001
p < 0.001
 Interactive marketing channels Journal of Services Marketing
Kashef A. Majid

other brokerages. Agents for this brokerage worked on 100%
commission; they could earn commissions (ranging from 2%–
3% of the sales price) as either the buyer’s agent or seller’s
agent. They could also earn commission on the final sale by
referring either the seller or buyer to another agent (typically
0.1% to 0.5% of the sales price). Once the sale was complete,
the agent would pay the broker 0.5% of the commission that
they acquired.
Due to the potential for commissions, the firm kept track of
all referrals, even if the relationship did not materialize. Agents
were encouraged to keep track of their leads so that if any of the
prospects reached out to the firm, the broker would know who
the assigning agent was. The firm also allowed agents to
purchase into an automatic postcard mailer that would be sent
to certain zip codes each quarter. The postcards would
promote the individual agent but would also provide
information to potential customers such as guidance on how to
turn off the water supply in the winter and how to weed one’s
lawn in the spring.
The majority of agents did not enter their leads into the
database. Only 11 agents participated, and of those 11 agents,
only 8 did so regularly. Over the course of 2016–2018, there
were 308 leads. A total of 165 of these prospects
were converted into customers while 143 of these leads were
considered dead (after six months) or were right censored. It
should be noted that customer acquisition in this case does not
equate to the agent earning commission from the client. If a
client did not buy or sell a home within a six-month time period
(when the agency relationship expires), no commission was
earned, but the client was still acquired. The author was not
able to ascertain whether the agents earned commissions from
all the clients whom they acquired. The agents achieved
prospects from four channels: referrals, networking, postcard
mailers and open houses. A full description of each marketing
channel, along with the number of prospects and conversions
per channel, is provided in Table 5.
Referrals, networking and open houses were classified as
interactive methods because the prospect was able to initiate
contact with the sales agent, and they were able to customize
their interaction. Postcards were the lone non-interactive
marketing channel that drew prospects to the respective sales
agents.
4.7 Hazard model
Similar to Study 1, the author used an accelerated hazard
model to test the arguments advanced in H1. Prospects
contacted the agents at varying times, and some did not
become customers by the cut-off point; this format lent itself to

Table 5 Marketing communications channels for Study 2 (real estate brokerage)

Referral source (abbreviation) Explanation Mean in days (SD) Events Censored
Referral 13.04 (21.41) 53 3
Referral from a previous
customer or affiliate partner
such as contractors
Networking 35.56 (49.18) 22 10
The realtors attended different
events and volunteered with
multiple organizations such as
amateur sports teams and
parent teacher associations. By
doing so they developed
networks
Open houses 68.14 (53.87) 22 34
Realtors often host open
houses not only for their clients
but for other agents as well.
The purpose is to meet
potential buyers and
accumulate contacts for those
that are not represented by
another agent
Post-cards 56.54 (50.87) 68 96
A form of unsolicited direct
mail where the realtor provides
their contact information, as
well as information that the
homeowner can use such as
how to turn off the water to
the outside of the house
Total 165 143
a
Note: Inclusive/interactive marketing channels
 Interactive marketing channels
Kashef A. Majid
a survival analysis. The appropriateness of the exponential
distribution was assessed by comparing the log likelihood of the
exponential distribution model with a Weibull distribution
model and revealed that the exponential distribution model was
a better fit (Exponential,
2LL = 1,583.62 versus Weibull
distribution,
2LL = 1,602.17). The author used all four
marketing channels in the accelerated hazard model; the model
is as follows:
H ðtÞ ¼ 1
e b0 ð
1ÞðtÞ 1 b1 ð Referral Þ 1 b2 ðNetworkingÞ 1 b3 ðOpenHouseÞ 1 b4 ðPost
CardÞ 1 ei
The first contact with the prospect was recorded as time zero.
For the sole, non-interactive method – postcards – this was the
first time a prospect contacted the agent after receiving the
postcard. The prospect was recorded as having converted to a
customer (conversion was recorded as an event) when the
prospect signed an exclusive right to represent contract with the
agent. The results demonstrate that at time t (month), those
who approached the firm from a referral were approximately
87% more likely to become a client than those who approached
the firm by another channel. Table 6 lists the parameter
estimates for Study 2.
4.8 Findings
The one non-interactive marketing communication channel
did not have a significant impact on customer acquisition
(0.374, p = 0.603). The only marketing channel that was found
to have a significant impact on customer acquisition was
referral (
2.040, p < 0.001). The referrer acts to provide a
WOM endorsement of the agent to the potential customer.
Similar to WOM from Study 1, potential customers can ask the
referrer questions, thereby interacting with the communicator
to ascertain the fit between the strengths of the agent and their
needs as a client. Also, similar to Study 1, this interactive
channel increased the rate of customer acquisition. Neither
the networking nor open houses had a significant impact on the
probability of customer acquisition. One reason why these
interactive channels did not have a positive impact on customer
acquisition may have been the interest of consumers when they
first encountered the particular channel. Recall from the earlier
conceptualization of interactive methods that prospects seek
out the medium for the message (de Haan et al., 2016). For
both networking and open houses, the customer may not have
sought out the channel but had it thrust upon them. A
customer may have visited an open house or met the agent
through a networking event, but the activity was what caused
the customers to meet the agent. The customer may not have
Table 6 Parameter estimates for Study 2 (real estate brokerage)
Parameter Estimate
Intercept 4.682
Referrala
2.040
Networkinga
0.736
Open housea
0.569
Post-cards 0.374
Scale 1
Notes: Lagrange multiplier, x 2 = 87.303, p < 0.001; aInclusive/interactive communications channels
Journal of Services Marketing
interacted with the agent for the purpose of acquiring real estate
representation. Though there may have been a level of
engagement with the agent (Rafaeli and Sudweeks, 1997),
which qualifies the channel as an interactive channel, the
customer may not have sought the agent, and thus was an
unlikely client before going through the interactive channel.
Despite the result not being statistically significant, it is an
important finding because it alludes to a boundary condition on

the power of interactive marketing communication channels to
acquire customers as demonstrated by Study 1. When the
(3) channel is pushed onto consumers, it may lose its ability to
increase customer acquisition.
5. Discussion
Interactive marketing communication channels allow the
prospect to direct their information search and ascertain the key
selling propositions of the service provider in the professional
services sector. These channels allow prospects to identify firms
that most align with their goals, thereby increasing the
likelihood of acquisition. In the home improvement sector
(Study 1), interactive channels may favor high quality firms, but
in sectors where perceived quality is not as evident (Study 2),
the interactive channels allow consumers to assess perceived fit.
It should be noted that interactivity may not have a significant
impact on consumer acquisition if the channel is pushed onto
consumers compared to when it is initiated by the consumer.
Practitioners place a heavy focus on customer acquisition, with
lead generation and turning customers into assets frequently cited as
marketers’ top priorities (Marketing Science Institute, 2018). This
focus is justified given that acquisition is often the largest cost that a
firm incurs during a customer relationship, and it precedes retention
(Thomas, 2001). By connecting marketing channels to customer
acquisition, this paper contributes valuable knowledge to this
important domain.
This paper revealed that interactive marketing
communication channels increase customer acquisition
likelihood over time while less interactive channels do not.
When customers can interact with the channel, they can better
ascertain the attributes of the firm, while channels that are
pushed onto prospects hinder the ability to assess the seller
ahead of time. The findings support the former statement but
not the latter.
The evidence is consistent with the primary argument that
interactivity increases customer acquisition (thereby reducing
acquisition costs). Channels that leverage prospects’ own self-
guided search and self-initiated contact drive prospects toward
the firm that has already done part of the work to reduce the
Std. error x2 Pr ( x 2) Increase in probability at time (1)
0.707 43.84 <0.001
0.721 8.02 <0.01 87%
0.739 0.99 0.319
0.742 0.59 0.443
0.719 0.27 0.603
 Interactive marketing channels
Kashef A. Majid
information asymmetry issues between the seller and the
prospect. The prospect has a greater awareness of the quality of
each prospective firm a customer contacts, while the firm’s
problem of differentiating profitable from unprofitable
prospects is mitigated. Due to this reduction in asymmetry,
prospective customers who have had contact with the firm via
interactive channels have a greater acquisition rate.
6. Limitations and future research
One of the biggest challenges when examining the effect of a
method of marketing communication channels on a particular
outcome is the interaction and accumulated effects of multiple
methods. For example, a prospect may view a billboard for
the focal home improvement company enough times to
become aware of the firm and ask their neighbor if they have
used the firm before. It is possible that the prospect contacts the
firm after exposure to passive marketing communications
channels. Study 1 relied on consumer self-reporting to
determine which channel affected the probability of customer
acquisition. The author does not make the argument that each
marketing channel operates in a vacuum.
This study accounted for the method that was most salient to
consumers when asked how they chose the firm. The process
from awareness to action is complex and susceptible to
influence at various stages (Payne et al., 1991; LeDoux, 1998).
While passive channels such as signage and direct mail may
create awareness, more interactive channels largely move
beyond the awareness stage because the communication is
initiated by the consumer. The study did not find that non-
interactive channels had a significant impact on customer
acquisition, and this may be a sign that their purpose is not
conversion but rather awareness. Thus, it is possible that less
interactive channels strengthen interactive channels. The
author invites future research to explore channels at various
stages of the consumer decision-making process.
7. Conclusion
The cost of acquiring a new customer is often several times
greater than the cost of retaining an existing customer in a
services context. One of the factors that inflates the cost of
customer acquisition is that service firms often spend money on
prospective customers who will never purchase from the firm.
Such expenditures include incurring expenses generating
quotes and proposals or selling to a customer who might not
generate revenue. To reduce the cost of customer acquisition,
the firm needs a method to screen customers and attach a
higher probability of acquisition to certain customers than
others.
The study investigated whether service firms would be able
to screen prospects based on the marketing communication
channels used to reach the firm. Interactive channels such as
WOM and third-party review websites are more engaging and
interactive than their less interactive alternatives (such as
billboard advertising or direct mail). The author found that
prospects were more likely to become customers if they arrived
at the firm via more interactive channels. The findings reveal
that firms can leverage their service quality through interactive
channels to reduce acquisition costs while increasing their
optimal acquisition rate.
Journal of Services Marketing
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About the author
Kashef A. Majid is an Associate Professor in the College of
Business, University of Mary Washington, Virginia, USA. His
teaching and research areas include CRM, international
marketing, interactive advertising and signaling. He has
published in the Journal of Business Research, International
Marketing Review, Marketing Intelligence and Planning and the
Journal of Product and Brand Management. Kashef A. Majid
can be contacted at: kmajid@umw.edu