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What is presence?

Improving physical availability through increasing a brand’s market presence means making a brand easier to buy or access. Although services may provide, in most cases, intangible goods, having market presence is just as crucial for a service provider’s growth. As discussed in Corporate Report 76, ‘presence’ is one aspect of physical availability, which is described as having distribution in the right places and accessible at the right time for customers. Presence in the context of a service sector occurs through channels. The channels discussed in this report relate to the points at which service providers and customers interact (e.g., a mobile website), rather than one-way channels such as media channels.

Channel management assumptions

A channel management strategy may include:

• focusing on the most popular channels in the category; and/or
• providing numerous, functionally different channels to service various customer service usage situations; and/or
• investment in channels that target a specific customer segment(s).

Investment in multiple channels may naturally occur as a service provider grows and channel management becomes splintered across business units.

Service providers may assume that different customers use different channels, and this means multiple, different channels are required to have adequate market presence. For example, younger customers are more likely to use newer, online channels like mobile apps, while older customers are more likely to use more ‘traditional’ channels like brick-and-mortar branches and phone calls. Previous academic studies (e.g., Konus et al., 2008) have used complex modelling to suggest that different customer segments do use different channels. Accordingly, there are recommendations, both from academics and those in practice, that different channels should be aimed at reaching different customer segments. These assumptions may raise significant debate within a service organisation. Understanding expected channel usage patterns will help service organisation stakeholders discuss their channel or touchpoint strategies using objective information.

To gain insight into customer channel usage behaviours, we surveyed over 400 consumer banking customers in Australia, and analysed their channel usage using patterns that are known to describe other contexts of consumer choice. Australia has an advanced banking sector, where customers can choose to interact with banks through numerous channels.

Double Jeopardy: How channels differ in usage

The Double Jeopardy law describes that there is a positive relationship between penetration and usage frequency across numerous contexts including brand buying and retailer usage. Small brands have the double disadvantage of having lower penetration and having customers who buy the brand less frequently than larger brands (Ehrenberg et al., 1990). We explore if this pattern also holds for customer channel usage.

Six-month channel usage incidence and average usage frequency reveals a pattern consistent with Double Jeopardy, when ordered by the share of usage as a proxy for market share. Table 1 shows a positive, linear relationship (r=0.7) between channel customer penetration and usage frequency of channels: larger channels (mobile apps and website on a desktop/laptop) have more customers, and these customers use these channels more frequently.

Table 1: Double Jeopardy of channel usage in banking

The presence of the Double Jeopardy pattern in channel usage is consistent with the idea that channel growth likely occurs similarly to brand growth—that is; through increasing the number of users, rather than trying to increase channel usage frequency. Double Jeopardy analysis also allows for deviations from the pattern to be identified. Similarly, deviations from this pattern likely suggest that a channel has barriers (physical or mental) to usage which may need further investigation.

The implications of Double Jeopardy are that the best use of a service provider’s resources is investing in communications to inform customers about their brand’s presence in the largest category channels (that is; building mental availability), as well as making these channels easier to access for customers.

Duplication of Purchase (Usage): Reinforcing the importance of larger channels

It is also important to query how customers use multiple channels in a category. Duplication of Purchase (Usage) analysis sheds light on this question. In a brand purchases context, Duplication of Purchase shows that brands share more customers with larger brands, and fewer customers with smaller brands (Ehrenberg, 1988). We investigate whether Duplication of Purchase-like patterns also describe multichannel usage.

When channel usage co-occurrence from the personal banking survey is mapped onto a matrix and ordered by size (penetration), a Duplication of Purchase-like pattern is broadly apparent (named ‘Duplication of Usage’ in Table 2). We see that channels share customers in-line with channel size—more specifically; there is a positive, linear relationship (r=0.9) between channel penetration size and average duplication. For example, branches share more customers with the larger channel of mobile applications (67%) than with the smaller channel of email (32%).

Table 2: Duplication of Usage across channels in banking

It shows that multichannel usage is common, with high sharing of popular channels and predictably less sharing with smaller channels. This means users of smaller channels are likely going to also be users of the largest channel for interacting with personal banking providers. As detailed in Corporate Report 53, (Understanding How Brands Compete: A Guide to Duplication of Purchase Analysis), a Duplication of Purchase-like pattern is evidence of substitutability between channels. It also shows that typical category customers are multichannel users. Duplication of Usage analysis also allows for deviations (over or under sharing from the average duplication) which may warrant further investigation. Factors related to these deviations may include the presence of direct contact with staff or the need of technology platforms to access the channels. In practice, the Duplication of Usage pattern suggests that smaller channels may be redundant, as users of these smaller channels are users of all the other channels. This does not, however, necessarily suggest that these smaller channels should not be utilised, as they may be growth channels or have functional advantages over other channels over time.

User profiles: Do different customers use different channels?

We finally investigate whether there are distinct customer segments for different channels. The underlying motive of segmenting customers is to be more efficient and effective by attempting to reach only the most relevant customer segments. It has been identified in the context of brand choice that user profiles seldom differ between competing brands in a category (see Corporate Report 7), rendering segmentation studies, many of which can be highly complex, largely unfruitful for brand management. Given that brand user profiles seldom differ, it’s possible that user profiles are unlikely to differ between the channels used for interacting with brands. Rather than using complex modelling to segment customers and their channel usage, using a simpler method like average Mean Absolute Deviations (MAD) across channels is a more transparent way of describing how user profiles differ across channels.

Several demographics (gender, age, income and education), psychographic and category perception (time pressure, complexity, personal contact and customisation) variables were measured for each channel’s usage rate and compared against the variables’ average across the channels. A higher average MAD shows greater variations between channels for the given variable. The extent to which an average MAD should be considered notably high includes the need for expert judgement. In a different context, we know from brand user profile studies that ≥5 percentage points is likely a deviation (Kennedy et al., 2000).

The results (see Table 3) show the average MAD for each variable across the channels¹.

Table 3: MADs for personal banking channel usage

An overall average MAD of 3.8 percentage points across the variables tested suggests that user profile differences tend to be small across channels. A higher MAD of 6.8 for perceived service customisation can be explained by seeing that functionally different channels are associated with differing levels of customisation: In the data, we observed that channels like desktop websites, mobile applications, and mobile websites were associated with lower levels of customisation, while the face-to-face meeting channel was associated with higher perceived service customisation.

In summary, the small differences imply that a service provider’s aim for choosing and resourcing channels should be the potential reach of the channel and the opportunity each channel provides for growing customer penetration, rather than aiming different channels to service specific customer segments.

This is how you build presence through channels

Here are two recommendations for channel management strategies that aim to build presence to grow your service organisation’s customer base:

1. Ensure your services are first-and-foremost present and able to meet customer needs in the largest category channels.
   Customers use a portfolio of channels; a customer in smaller channels is also likely a customer in larger channels. Investment in smaller channels may, however, be appropriate in growth channels, or when the channel has unique service delivery functionalities.

2. Channel presence should be promoted to as many category customers as possible, rather than promoted to specific customer segments.
   This means building the mental availability of the service provider’s brand in the channels, so the brand is thought of in a usage situation².

These patterns should be tested on your own channel data to support effective decision-making. In the absence of your own data, this report has preliminary evidence of expectations regarding channel usage. Channel management strategies should focus on channels where the most category customers are available, as we know that service brands grow by increasing customer penetration. Customer penetration increases when your service brand becomes easier to buy (physically available) and easier to think of in a buying situation (mentally available).

Conclusion

Double Jeopardy, Duplication of Purchase (Usage) and User Profile analysis of channel usage will provide insight for the channels you need to build presence in or work to remove barriers to usage for your service brand. Service providers should be aware of new category channels, but these should only utilised if there are advantages to the brand and, more importantly, their potential to service new and existing customers.

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¹ A top-2 box approach (that is a penetration of respondents who ‘agree’ with the statements used to test the variable) was undertaken for the psychographic and category perception variables that were measured on scales.

² Promotion of a service provider’s channels should primarily be advertisements for the brand by prominently featuring the brand’s Distinctive Assets. Advertisements can feature channels as category entry points (see Institute report Defining and Explaining Category Entry Points (CEPs)).

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