Evaluating the Impact of the Online Sales Channel on Customer Profitability

The objective of this paper is to identify the sources of profitability differences between offline and online customers in order to allow for the development of efficient and effective multi-channel management strategies. Therefore, we distinguish between the profit contribution due to the self-selection effect and due to the channel effect. The former occurs if online customers have always been the more profitable customers, whereas the latter arises if online customers are more profitable because they started to use the online channel. The distinction between those two effects allows us to evaluate the impact of the online channel on the customer profitability and to derive profit enhancing multi-channel strategies. A large empirical study indicates that selection bias is a serious issue when measuring channel performance. We contribute to the existing multi-channel research by evaluating the impact of online channel usage on customer profitability while accounting for self-selection bias.