Multichannel Customer Onboarding
Stephen A. Samaha, University of Washington, Irina V. Kozlenkova, Jordan W. Moffett, and Robert W. Palmatier, 2019, 19-115-04
Anecdotal evidence suggests that the earliest phase of a customer’s relationship with a firm deserves special attention, but surprisingly little research to date studies customer onboarding from a marketing perspective.
With data on 201,398 new customers of a large Fortune 500 firm, the authors introduce a new theoretical framework that outlines key mechanisms of customer onboarding and reports on an empirical investigation of the influence of customer onboarding on performance in a multichannel communication environment. Their research is the first to introduce and explicitly incorporate onboarding (time-varying) carryover effects.
Overall, they find that all communication has significantly greater effects early in the customer relationship (encoding effect), and richer channels achieve especially substantial benefits in the early stages. Onboarding carryover effects vary over time with greater carryover during the early, onboarding period, and its benefits do not last forever; approximately 50% of the benefits of onboarding dissipate after four months. Thus, firms have a relatively short time window during which to build a relationship foundation to ensure long-lasting effects.
These results and the authors’ analyses provide rich managerial insights regarding how to design effective multichannel onboarding strategies.
Because communication is more effective early on, managers should devote additional communication resources to nurturing new customer relationship foundations to leverage their longer-lasting effects. For example, face-to-face (FTF) and email communication have, respectively, 19 times and 14 times greater impacts on share of wallet in the first month than they do two years later. Customer lifetime value (CLV) models also might benefit from incorporating dynamic onboarding effects, because the same firm intervention strategies may have different CLV implications if performed early, during onboarding, versus later in the relationship.
Further, their research also demonstrates the importance of using richer channels, which benefit proportionally more during onboarding. Managers should note the incremental benefits of richer communication carefully; many firms are shifting resources away from richer communication channels in favor of leaner, more “cost-effective” channels. But doing so entails an opportunity cost. Because onboarding benefits are available for a limited time only (i.e., “you only get to make a first impression once”), firms that fail to capitalize on the relationship-building benefits of rich, early communication may not be able to reap the benefits later in the exchange either.
Stephen A. Samaha is Executive Research Fellow, Foster Business School, University of Washington. Irina V. Kozlenkova is Assistant Professor of Commerce, Marketing Department, McIntire School of Commerce, University of Virginia. Jordan W. Moffett is a Ph.D. Candidate, Department of Marketing, E.J. Ourso College of Business, Louisiana State University. Robert W. Palmatier is Professor, Department of Marketing, and John C. Narver Chair of Business Administration, Foster Business School, University of Washington.
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