How companies can win the race to meet customer expectations
Customer expectations are evolving fast, in step with rapid technological innovation. Companies will need to reinvent their offerings to keep up.
Over the past 20 years, a series of rapid technological advances have helped transform customer expectations while simultaneously providing enterprises with the digital tools to offer cutting-edge services. The pace of this digitization is set to accelerate, spurred on by the very tangible and significant benefits that it promises to deliver to customers.
Customer expectations and the digital revolution
Wave after wave of innovation – mobile, social and now, the Internet of Things – is dramatically altering our everyday lives (see Figure 1). The rapidly increasing penetration of the Internet and smartphones, and ever-decreasing costs of hardware, have meant that we are fast becoming used to a world in which we have access to products, services and experiences anytime and on-demand.
In tandem with the digital revolution, we are witnessing some significant demographic shifts, which are also having a profound effect on customer behavior. The increasing influence of millennials, and the generations that follow them, is having the most significant effect on customer expectations. Raised as digital natives, not only do millennials have starkly different expectations than customers of previous generations, but they can also imagine for themselves how technology can be used to improve their lives, making them much harder to surprise.
Debunking myths about customer expectations
Digitalization is rapidly changing customer behavior and, at the same time, giving rise to considerable uncertainty across industries. During our research, we discovered several myths about what ‘digital customers’ expect and how these expectations can be met.
We would like to bust three particularly influential myths.
Myth 1: Rapidly changing customer expectations in the digital age are confined within the B2C world and do not cross industry boundaries.
Reality: As customer expectations become more important, their nature is also changing. These customer expectations now transcend traditional industry borders, with customers expecting levels of personalization, on-demand access and accessibility that match the leaders in customer experience across all their interactions. Customers are beginning to judge the quality of products and services they receive not only against other companies in the same sector but also against the best customer service they have experienced in any industry. These developments are all-encompassing, affecting both the B2C and B2B worlds. Research found that 81% of B2B buyers said that they would choose a supplier that offers a consumer-like experience over an equally priced alternative that does not.¹ B2B e-commerce transactions are surpassing B2C in terms of volume and projected to rise to $6.7 trillion by 2020.²
Myth 2: The implications of digitalization for customer expectations are only relevant in developed markets.
Reality: Customer expectations defined in developed markets are easily transferred and adopted in developing markets (and vice versa). Companies such as Didi Kuaidi (on-demand mobility) in China and Flipkart (e-commerce) in India have raced to valuations exceeding $1 billion by delivering the speed, convenience and on-demand access that have defined customer experience leaders in developed markets. India is now among the five largest startup communities in the world with the number of startups surpassing 4,200 in 2015.³ According to a recent survey by Cisco, 89% of respondents in China are using independent shopping apps (such as JD.com or Tmall) on a smartphone at least once a week, compared with 40% globally. In markets such as China and India (85%), tech-savvy shoppers appear to be bypassing traditional retail options.⁴
Myth 3: Customer-focused investments in digital are only relevant to sales and marketing and best driven by that function.
Reality: To maintain a common vision for an end-to-end customer experience, companies need their leaders to advocate for customer-centric digital transformation and establish executive ownership over digital strategy and investments. Placing a digitally enabled customer experience strategy on the C-level agenda will set the stage for a wider cultural shift in organizations that puts the customer at the center. A recent survey found that 58% of companies that define themselves as more profitable than their competitors have their CEO in charge of customer experience, whereas only 37% of less profitable companies do.⁵ Companies where the CEO is put in overall charge of customer experience initiatives are also most likely to prioritize investments in customer experience (71% of the time).
Revealing the reality behind these myths underscores two important points. First, all enterprises – whether in the B2C or B2B world, whether in developed or emerging markets – need to focus on meeting and exceeding customer expectations. Second, companies need to provide a customer experience that competes both with rivals in the same industry and with best-in-class companies across sectors.
As a result, customer expectations are becoming increasingly exacting. Some essential attributes of customer expectations in today’s digital world include contextualized interactions; seamless experience across channels; anytime, anywhere access to content and services; transparency; and access to peer review and advocacy.
Some forward-thinking companies are already redesigning their business and revenue models to meet or exceed these new customer expectations.
Pager is a mobile-based service that promises to arrange on-demand house calls by doctors within two hours. The New York-based company matches users in Manhattan to a doctor from the local area, to help with checkups, illnesses and arranging prescriptions. Pager was founded by former Uber engineer Oscar Salazar and has to date attracted $24.4 million in funding. Unlike Uber, which selects a driver automatically for the user, Pager gives customers power to select which doctor they would like for their appointment. As a consequence, Pager offers its users a convenient and speedy service, and extends greater control than might be the case with traditional healthcare services.
Amazon Business launched in April 2015, with the aim of extending its consumer-friendly platform to a specialized marketplace for businesses to buy from Amazon and third parties. The platform is flexible, allowing individuals to buy products on behalf of their company, and also offers buyers the opportunity to ask manufacturers questions about their products through the Live Expert program. Amazon Business took over from Amazon Supply, increasing the range of merchandise it offers from 2.25 million to hundreds of millions of products. The platform is taking on the challenge of providing a user-friendly service, personalized by industry vertical, offering a viable supplementary platform for many B2B sellers.
In September 2015, IndusInd launched the Onthego social banking feature, which facilitates fund transfers through social media platforms such as Twitter and Facebook, while also retaining traditional online banking features. To make it more convenient for customers, the service does not require users to download an additional app. It can also send money to users who are not on Facebook and Twitter. The bank also launched a digital branch and video banking facilities to cater to customer expectations of anytime, on-demand access.
How can companies stay ahead of rapidly changing expectations?
Customers are now becoming increasingly accustomed to contextualized and relevant interactions, and businesses and industries are already seeing this become a mainstream expectation. To succeed, companies will need to evolve into a world of design doing – enhancing their design process with a much deeper understanding of the individual customer context, and at the same time, accelerating the pace at which they develop and take products to market, learning rapidly from customer responses to scale or fail.
- Businesses will need to move away from sole reliance on traditional customer research approaches to a mix that includes the application of design thinking, which helps businesses gain a deeper understanding of a customer’s context, emotional needs and drivers. This idea requires a fundamental shift from designing one product or service for many to designing many experiences for one, with the ability to constantly learn and adapt to changing needs of customers.
- ‘Experiential pilots’ can help businesses observe human behavior and draw insights about any new consumption experience: How are customers engaging with a new technology, product or service? How are customers interacting and influencing one another? What new emotions or behaviors are being formed through the customer experience? Continuous and iterative innovation and prototyping needs to be supported by a clear understanding of how each version is impacting the customer experience.
- Today’s world requires much speedier development of consumer-led ideas that can be tested in the market. Prototyping is an approach that helps companies get to market fast, even if it’s only with an ‘80%-there’ product or service, and then try to understand customer reactions and how to improve it. Venture Capital firm Bolt and innovation lab Iterate Studio have based their models on prototyping and are driving gains based on iterative innovation.
- Companies will have to rethink their design process, allowing their products to evolve by letting elements of their offering be widely distributed and shaped by other services. We call this brand atomization. Spotify has become a pioneering example of an atomized service, achieving ubiquity by enabling access through multiple third-party touchpoints (e.g., Sonos, Ford, iOS, Android and Samsung Smart TVs).
In the following articles, we assess three key areas – products and services to experiences, hyper-personalization and ownership to access – where the battle to attract and retain digital customers will be fiercest.
1. Avanade, Global Survey: B2B is the New B2C, 2015. http://www.avanade.com/~/media/documents/research%20and%20insights/the-new-customer-journey-global-study.pdf.
2. “The Amazon B2B method of thriving in the new era of B2B e-Commerce”, Handshake, May 15, 2015. https://www.handshake.com/blog/amazon-wholesale-how-to-thrive-in-b2b-ecommerce/.
3. “India ranks third globally in number of startups: Nasscom Report”, Times of India, October 13, 2015. http://timesofindia.indiatimes.com/business/india-business/India-ranks-third-globally-in-number-of-startups-Nasscom-report/articleshow/49338236.cms.
4. Cisco, China’s Retail Innovation Imperative, 2015. http://www.cisco.com/c/dam/en/us/solutions/collateral/industry-solutions/dlfe-688118462.pdf.
5. The Economist Intelligence Unit, The value of experience: How the C-Suite values customer experience in the digital age, 2015. http://www.economistinsights.com/analysis/value-experience.
6. Pager website: www.pager.com.
7. Amazon website: www.amazon.com.
8. IndusIndBank, Onthego Social Banking, 2015.http://www.indusind.com/content/dam/indusind/PDF/Onthego%20Social%20Banking%20at%20IndusInd%20Bank.pdf.
Digital consumption is one of four cross-industry themes (along with digital enterprise, societal implications, and platform governance) that have been the focus of the World Economic Forum’s Digital Transformation of Industries (DTI) 2016 project. An overview of the DTI program can be found here.
Our in-depth analysis of the digital consumption cross-industry theme is available in a white paper, which can be downloaded here.
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