The Year 2020 has had a dramatic effect on consumer lifestyles that will fundamentally transform the manner in which firms must deliver their services. Consumers are increasingly being forced to use and are being educated in the use of digital technologies in every aspect of life. Examples include the use of mobile apps for financial services, online ordering of products and telemedicine. As the world emerges from the COVID-19 pandemic, companies must ask the questions of “what is the new normal?” and “what do customers expect from us?” When viewed through the lens of a channel segmentation, we learn that many consumers are readier than ever to shift their behavior to digital formats, while others will continue to desire a more personal and tangible relationship with providers. The key to winning in this brave new world will be to design service channels that accommodate the unique preferences of different consumer segments.
In a recent survey Rockbridge conducted in late June with a cross-section of U.S. adults, we learned that only a quarter of consumers conduct all or most of their business through virtual channels. This is only slightly influenced by the risks and restrictions due to COVID-19. Despite the pandemic, consumers are behaving in line with their preferences. Companies should think carefully before making significant reductions in in-person channels. When asked what they would prefer in the future when conducting business with a service provider, the sentiment leans towards personal channels with twice as many consumers having a preference for in-person channels than virtual channels.
As companies think about their channel strategy for the future, understanding consumers’ motivations and higher-order needs are an important part of the equation and can help in designing an appropriate strategy for their audience. We segmented consumers based on their opinions about in-person and virtual service channels and the functional and psychosocial benefits they satisfy, including having fun, gathering information, saving time, safety, convenience, control and relaxation. It turns out that most consumers prefer a mix of virtual and in-person channels, while varying their preferences by the needs they seek to satisfy.
The figure below summarizes these segments, ordering them by their inclinations towards a particular channel. Consumers fit it into one of five segments, ranging from 13% to 28% of the market. Some are dogmatic about whether they want to conduct business online or face-to-face, while one segment, “Channel Hoppers,” require multiple channels from their providers. While the segments are defined based on views about virtual versus in-person channels, they correlate strongly with general views about technology adoption based on our Technology Readiness scoring and segmentation. The segments also differ demographically – consumers who want to continue with as much face-to-face interaction as possible are the oldest and the least ethnically diverse, while those who prefer richer channel interactions with a provider tend to be more ethnically diverse, younger and more likely to have families.
The channel segmentation has implications for companies’ service strategy to meet customer needs in the future when the world becomes more predictable (hopefully). In the post-pandemic world, only a small fraction of consumers is ready to give up on physical locations in favor of staying at home and doing all their business virtually. An equally small fraction, comprising older and technology-resistant consumers, will want to return to the “good old days” and conduct all their business face-to-face.
Successful companies will offer multiple channels but emphasize redesigning their virtual and bricks-and-mortar operations to work together in a synchronized fashion. As an example, banks and credit unions are increasingly focusing on turning physical branches into financial centers where customers can interact with skilled advisors, while relegating more mundane transactions to online banking and mobile apps. Other industries, such as travel and retail, will rely on digital solutions for routine processes like check-in and check-out, while using on the ground employees with greater emotional intelligence to satisfy more complex needs. Technology will be the key to saving customers time, while face-to-face agents (with the aid of integrated technology) will be key to reassuring customers that the process is safe and free of mistakes, and that the customer is in control.
All businesses are different, so we advise a company to confirm the distribution of its own customers along the channel segmentation framework. Depending on the results, it will be necessary to emphasize delivering services along one or more of the following strategies:
- One-stop shopping virtual services for customers who want to save time and find it stressful interacting with employees.
- One-stop shopping in-person channels for primarily older customers who shun technology and do not feel it is fun.
- Integrated channels for customers who want to do things in-person but are willing to leverage virtual channels as well to ensure a more holistic experience. These customers expect physical locations even when they are not necessary for the underlying service, but will rely on technology like online interfaces, apps and robots to save time. Expect these customers to be younger, more diverse and have children in tow.
We look forward to a brave new world where companies will need to reconsider their customers’ needs and redesign their services. In doing so, it will be important to realize that customers will have different needs and expectations and company strategy will need to reflect the needs of its customer base.
Rockbridge can help your business understand and measure your channel segments to guide your strategy. Contact Joe Taliuaga, Director of Client Development, to learn more.
Learn more about Rockbridge’s approach to customer segmentation, MaxSeg™, here.
About the Study: The survey was conducted by Rockbridge Associates June 23-26, 2020. A total of 1,000 U.S. consumers participated in the survey. Results were weighted to match census characteristics. The margin of error on the findings reported here is plus or minus 2.9 percentage points.