Cross-Channel Marketing on E-commerce Marketplaces: Impact and Strategic Budget Allocation

Problem definition: As the ecosystem of e-commerce marketplaces becomes more competitive, retailers on the marketplaces are increasingly relying on cross-channel marketing to access potential customers. Despite the growing popularity and widely expected benefits of cross-channel marketing, retailers may find it difficult to allocate their budget to various marketing channels with different characteristics.Methodology/results: Using data from a world-leading retailer on a popular e-commerce marketplace, we empirically verify and quantify the impact of cross-channel marketing on boosting the retailer's revenue. Specifically, we identify important promotional, cross-period spillover, and cross-product spillover effects that should be included in the analysis. Incorporating empirical estimations into an optimization model, we propose an empirically-grounded modeling framework for optimizing marketing budget allocation in the marketplace. Our study suggests that this framework can substantially improve the retailer's profit. Managerial implications: We find it worthwhile for a retailer to adopt cross-channel marketing by investing in various channels to engage customers in different scenarios. We guide retailers to strategically invest in different marketing channels on e-commerce marketplaces. For marketing channels designed to spotlight products on a marketplace homepage (Banner), the retailer should invest in them when it is near promotion periods. Second, the retailer should allocate more budget to recommendation channels (Recommender) that can reach relevant customers throughout their shopping journey especially during promotion periods. Third, the retailer should focus her investment on pre-promotion periods for marketing channels that prioritize products in keyword search (SEO-product), while keeping a relatively high investment in other periods. In contrast, for marketing channels that rank online stores in keyword search (SEO-store), the retailer should maintain a relatively steady investment across different periods.