In the previous installment of this series, we detailed how merchants and stores had to scale up to keep up with the demand of growing populations, and how that scale came at the expense of individualized service to the customer. The customer relationship with the purveyor of goods and services eroded, and the customer experience was adversely affected. Buying became the result of a need for convenience and speed.
This post leads us from the deadening of customer engagement to the awakening of companies to the dangers of losing customer loyalty. In a buyer’s hunt for convenience and speed, whatever product is there at the right place and right time (for the right price) wins out. If there is no one on the other end to interact with them, they may as well be pushed out the door.
Back in the day
As mass communication came into being and vastly increased companies’s ability to reach large audiences, the fight for the customer’s attention was on. Marketing focused on the 4Ps—also known as the “marketing mix” that originated in 1964, or the producer-oriented model: product, price, promotion, and place.
Notice it’s referred to as the producer-oriented model, not the customer-oriented model. None of this places any reliance on the feedback of the customer. Companies placed their hopes of success in the hands of sales reports, not in customer satisfaction. That’s all changing.
Go big or go home
With the e-commerce environment today and the ubiquitousness of data and access, the 4Ps must become the 5Ps, adding “people” to the mix.
- Product becomes solution
- Price becomes value
- Promotion becomes conversation
- Place becomes any place
- People emerges as both customer experience and employee engagement
These transitions must be based on data, but currently too many companies are using generic, commoditized data coming through marketing filters, yielding information that is not personalized. Scale is still coming at a sacrifice of the customer voice and the individual customer experience.
Digital transformation however has brought us big data: networks can now process huge amounts of data, and businesses can now understand a million customers individually. They can drill down and analyze data to the Nth degree and create a personalized experience accordingly.
On foot or online
It doesn’t matter whether it’s a brick-and-mortar venue or online. The objective is the same: keep the customer in the store. It may be that with things like convenience, proximity, ease, and speed dictating buyers’ choices there is no need to go to Macy’s, but IKEA in fact is one example of a success story in foot traffic. Traditionally, the average time customers spent in a furniture store was minimal, but IKEA came on the scene and exponentially increased the in-real-life version of “time on site.” Adjacency became a driver of sales. While many retailers are suffering—even closing stores in droves—from lack of shoppers due to online competition impacting traffic and the ability to cover real estate costs, IKEA is famous for not only creating a community but subtly getting people to overbuy.
Why? Because it started selling an experience. There’s a place to put your kids, a place to eat, and long circuitous routes featuring a logical progression of products and their add-on knick-knacks that somehow fall into your shopping cart. IKEA perfected the upsell by creating a maze that was difficult to leave. This is one example of a retailer fighting for the customer relationship.
Another example is the “store within a store.” Manufacturers are making strides toward increased brand engagement by paying for their section of the floor within, say, Best Buy’s 44,000 square foot stores. Best Buy gave up its commission model for its sales staff, leaving inventory and self-service product information out on the floor available for customers. But who was communicating with the customer personally, when it was so hard to find someone in a blue shirt with no incentive to sell other than to stay employed? Manufacturers and service providers like Maytag etc. did not respond well to this and pulled their products—until Best Buy’s revenue convinced them otherwise. But to maintain a personalized relationship through this third-party venue, companies like Apple and Samsung place dedicated staff in a specific area in Best Buy to deliver the brand message directly to customers—and they pay Best Buy for that in-store real estate. This also speaks to the reduction in experts available to explain products to customers, as mentioned in part one of this blog post series.
Amazon on the other hand has perfected the customer experience for the online shopper—based on big data insights. “Frequently bought together” shows up on each product page, offering an upsell (often adding up to a discount) as well as a “Customers also bought” section on each order confirmation page post-sale. Before they know it, customers find themselves buying something they weren’t planning on. Internally, Amazon became the master of distribution. Similar to the Japanese kanban system, and also courtesy of big data, Amazon’s satellite stock houses only order enough inventory based on shoppers’ buying patterns.
From then to now
In the beginning, in the time of the blacksmith and the general store, the customer relationship made the producer successful. During and subsequent to the Industrial Revolution, success was generated by efficient production. To various degrees, this stretched all the way into the twentieth century.
As populations grew in the early twentieth century, efficient production gave way to efficient distribution as the winner. That gave way to a company’s ability to react to trends, consumer sentiment, and buyer behavior as the market differentiators after big data came online. In an increasingly fragmented world, reclaiming the customer relationship has to start with listening.
Amazon’s exploitation of data helped it perfect inventory and delivery processes and timing; when there’s a surge in sales of one product, they stock the satellite distribution centers in those locations to have that product on hand. And it’s not just about reacting, it’s about reacting quickly. Customers rely on Amazon for truth in their delivery estimates—and if Amazon doesn’t make it, it owns up and refunds the charge. E-commerce has meant companies are owning their own distribution, and getting and acting on feedback is critical to serving up a superior customer experience, with a side of that personalized feel.
All of this points to a superior customer experience. Big data, direct sales, the customer relationship—the fundamental shift in the way business is conducted is underway and will be presented in an upcoming white paper series here at MindTouch.
The next installment in this blog post series, The Evolution of the Customer Relationship, will look ahead to where commerce is heading: subscription services and their effect on the customer relationship.
This series and the upcoming white paper series are inspired by presentations by Aaron Rice, COO of MindTouch.