Firms constantly re-evaluate their service channels. Customers are serviced through multiple channels, but usually use their preferred channel most frequently. However, some channels are more costly for the companies than other channels. Channels involving service employees, such as call centers, are much more expensive, especially when compared to the digital self-service channels. As a consequence, many firms like to steer customers to their less costly channels. By doing so, companies can improve their bottom-line and eventually eliminate the more costly channels. Although digital channels can be perfectly suited to serve customers, steering customers to the digital channel can have negative consequences! We investigated negative consequences of steering customers to a digital channel in an experimental study with Dutch customers. Migrating customers can be a painful process, but as our research shows, the negative consequences can be softened or eliminated.
Typically firms have a number of different strategies for migrating customers to digital channels:
- Companies can offer customers the digital channel and customers can switch voluntarily.
- They can force customers to use the other channel, while eliminating the costly channel.
- Companies can use a carrot and stick approach. Customers using the old channel can be punished with monetary fines, whereas small monetary rewards can be given to customers migrating to the digital channel.
One core problem with forcing customers to use another channel – it makes the customers feel that their freedom is threatened. This effect is explained by a well-known psychological mechanism discussed by psychologist Jack Brehm in 1960’s. He suggested that when individuals feel that they cannot choose what to do, they feel a strong negative emotional reaction: reactance. In extreme cases this can even induce a boomerang effect, where initial positive attitudes become very negative. Consequently, reactance can cause dissatisfaction and customer defection.
Should firms then never attempt to actively migrate customers to new digital channels using some enforcement tactics? The main results of our study seem to suggest that. Still firms have to balance the two competing priorities: keeping customers happy and lowering the cost to serve. What is more, in some cases digital self-service channels are more strongly valued, because customers co-create value by participating in these channels. By using digital self-service channels, customers can have a stronger influence on the outcomes and make the service less dependent on service employees.
In our study we considered whether a good relationship with customers can help firms in migrating customers. And indeed we find that the negative effects of enforcing the use of the digital channel is substantially lower for more loyal customers. These customers are more forgiving, their feelings of loyalty act as a buffer. Therefore, our research suggests that creating strong relationships with customers will enable firms to actively migrate customers.
In sum, our findings suggest that, given that migrating customers can be a painful process, firms should carefully develop a migration strategy. Our findings clearly suggest that in order to overcome the negative emotional reactions, firms should not force customers to migrate to a new digital channel or punish for the use of the old channel. Rewarding customers to use the new channel has a more positive result. However, having good relationships with customers can mitigate the negative effect of reactance. This is yet another pledge for creating strong relationships with customers, as these good relationships not only will create loyalty, but can also help firms to implement unpopular measures, such as eliminating a service channel.
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The article Customer Responses to Channel Migration Strategies Toward the E-channel featured in the post was co-authored by Debra Trampe (University of Groningen, The Netherlands), Umut Konuş University of Amsterdam, The Netherlands) and Peter Verhoef (University of Groningen, The Netherlands). It is published in the Journal of Interactive Marketing, Volume 28, Issue 4, Pages 257-270.
Peter C. Verhoef is Professor of Marketing at the Department of Marketing, Faculty of Economics and Business, University of Groningen, The Netherlands. He also holds a visiting position as professor at BI Oslo Norwegian Business School. He obtained his Ph.D. in 2001 at the School of Economics, Erasmus University Rotterdam, The Netherlands. His research interests concern customer management, customer loyalty, multi-channel issues, category management, and buying behavior of organic products. He has extensively published on these topics. His publications have appeared in journals, such as Journal of Marketing, Journal of Marketing Research, Marketing Science, International Journal of Research in Marketing, Harvard Business Review, Marketing Letters, Journal of Consumer Psychology, Journal of the Academy of Marketing Science, and Journal of Retailing. His work has been awarded with the Donald R. Lehmann award for the best dissertation based article in the Journal of Marketing and Journal of Marketing Research in 2003, the Harald M. Maynard Award for the best paper published in Journal of Marketing, and the Sheth Award for long-term impact of the Journal of Marketing in 2013. He is currently an editorial board member of the Journal of Marketing, Journal of Marketing Research, Marketing Science, Journal of Retailing, Journal of Service Research, Journal of Interactive Marketing, and the International Commerce Review. He functions as an area editor for Journal of Marketing Research and he International Journal of Research in Marketing. He has extensive teaching experience for undergraduate, graduate and Ph.D. students. He is also involved in executive teaching on customer management and is the founder of the Customer Insights Center, University of Groningen. He is department chair of the marketing department.
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