Behavioral Consequences of Customer-Initiated Channel Migration

Abstract

When customers deliberately change the channel through which they do business with a firm, is that an indication of behavior change, and thus, future revenue? This research investigates the causal effects of customer channel migration to direct, company-managed or indirect, independent agent-managed online and offline channels using data from a leading international airline. In a quasi-experimental design via Mahalanobis-metric matching and conditional difference-in-differences estimation, the authors show that channel migration affects customer relationship breadth and depth: (1) Customers migrating from indirect to direct channels exhibit lower levels of relationship depth (revenue), (2) customers migrating from offline to online channels exhibit higher levels of relationship breadth (cross-buying), and (3) customers migrating from indirect offline to direct online channels exhibit higher levels of relationship depth (sales) and breadth (cross-buying). These findings expand our understanding of customer channel migration in service industries and suggest reconsidering and evaluating service firms’ strategies for direct channels as a lever for short-term revenue increase. Improving service firm’s direct channel relationship depth and breadth, pricing structure in direct channels must be adapted to compensate for lower sales figures per customer. In addition, direct channels services should be optimized to achieve higher conversion rates.