Digital consumption: new battlegrounds for engaging digital customers
Enterprises need to constantly reinvent their offerings to keep up with rapidly evolving expectations of digital customers.
Businesses have always raced to keep up with changing customer expectations, but since the beginning of the 21st century, something remarkable has happened. A series of rapid technological advances have contributed to the transformation of customer expectations while simultaneously providing enterprises with the digital tools to create the beguiling experiences that are now needed to satisfy customers.
Today, companies are offering experiences that customers would not have imagined were possible five years ago, let alone become a part of their everyday lives. The race to deliver what ‘on-demand customers’ want has sped up dramatically. These expectations now transcend traditional industry barriers, with customers expecting similar quality of experiences across the products and services they consume.
Present and future generations have expectations that are markedly different than those of the past. Raised as digital natives, they not only adopt new technologies faster, but can also imagine for themselves how these technologies can be used to improve their lives, making them much harder to surprise.
All enterprises – whether in the B2C or B2B world, whether in developed or emerging markets – need to focus on meeting and exceeding customer expectations.
Three battlegrounds for engaging the digital customer
We have identified three areas that are emerging as battlegrounds to attract and retain customers in a digital world:
|Products and services to experiences|
In today’s digital economy, offering just goods and services is no longer enough for businesses to achieve success. A number of companies are using digital technologies to offer customers unique and unforgettable experiences, as an increasingly important differentiator alongside the quality of their core offering.
Customers increasingly expect personalized and highly relevant interactions, catering to their individual contexts. Digital technology is enabling companies to meet these expectations by delivering personalization to large numbers of customers at low cost. However, while recognizing the need to personalize, businesses are struggling to understand how much personalization customers want, with the answer often clouded by customers’ unwillingness to share personal information.
|Ownership to access|
The concept of access instead of ownership has become mainstream: in North America alone, more than 110 million people now participate in the collaborative economy. Customers are attracted by the convenience of on-demand access, the prospect of financial savings and its potential to improve their quality of life. Companies traditionally engaged in ownership models are evaluating opportunities to cater to new expectations of access, before competitors or start-ups sweep in.
Focus on ownership to access
Today, an economic model, built around ideas of peer-to-peer collaboration and on-demand access has become big business. The global market for shared goods and services across five key sectors is estimated to reach $335 billion by 2025.¹
While sharing and the desire for access to goods and services may be age-old concepts, increased digital connectivity has enabled greater efficiency and access to services and products through peer-to-peer markets and matching platforms. Moreover, the growth of social has unleashed the power of peer reviews and laid the foundations for building trust in peer-to-peer transactions.
Customers are attracted by the convenience of on-demand access, the prospect of financial savings and the potential for it to improve their quality of life. More than half of people surveyed recently in North America said they would consider switching from buying to sharing if it lets them save 25%.²
So far, much of the disruption from access-based models has focused on two sectors: space and transport. We are, however, seeing access-based models spreading to other sectors in both the B2C and B2B worlds, including luxury consumer goods, and even the B2B construction and medical equipment markets.
Case study: Cohealo – a B2B access-based model
Cohealo, a US-based technology company, has created an innovative platform offering on-demand access to medical equipment.³ It’s a pioneering example of an access-based model being used in the B2B world. Cohealo allows health systems to share equipment across hospitals, reducing the need to buy assets and boosting profit and utilization rates. With one study finding the average utilization rate of hospital equipment at 42%, Cohealo aims to boost this to between 75 and 80%. Cohealo is now being used by healthcare providers serving around 15% of the US population. Cohealo says that its service has saved hospitals $1-2 million each and claims that this could rise to $7 million if they use the service longer.⁴
The scale and speed of change across sectors, however, is likely to be driven by a series of factors, including the value of the ‘asset’ after adjusting for transaction costs, the level of underutilized asset capacity, a ‘shareability quotient’ accounting for user willingness to share, and the regulatory environment in a particular sector. Some sectors will have more potential for disruption by access-based models than others.
Which sectors are most likely to be disrupted by access-based models?
Source: World Economic Forum / Accenture analysis
Several incumbents have identified this shift in customer expectations and are taking action to benefit from it. Some have invested in digitally native rivals. Avis, for instance, acquired Zipcar, the car-sharing service, for $500 million in 2013.⁵ Others such as BMW, with its own DriveNow car-sharing service, have gone further by adapting their traditional business model to take into account their customers’ preference for access over ownership.
Case study: BMW DriveNow
BMW is an early example of a mainstream company adapting to the collaborative economy with its own sharing service. BMW’s DriveNow service is available in San Francisco and a number of European cities. It gives users on-demand access to BMW i electric cars based on the principle of ‘pick up anywhere, drop off anywhere’. Customers are billed by the minute, with fuel costs, insurance and parking charges in public car parks included, and hire costs limited to a maximum of $60 a day. Although there is potential for the DriveNow service to cannibalize sales of new BMWs, this may be a necessary strategic move by an analogue incumbent to meet customers’ preference for access over ownership and perhaps even expand its customer base.
Key questions for business leaders and policy-makers
As the rate and scale of disruption accelerate, and customer expectations evolve, companies face an increasingly important need to change the way they track and respond to customer expectations. This presents some specific and urgent questions for businesses to answer:
Outpacing customer expectations
- How can businesses best combine digital tools with techniques such as design thinking and experiential pilots to assess customer expectations and needs?
- How can companies build agility in revenue models to meet rapidly changing needs in the digital age? Can tools such as iterative innovation and prototyping be easily adopted by organizations?
Developing compelling customer experiences
- How can companies identify and assess the customer experience strategies that will drive differentiation for their business? Which digital tools and techniques can help deliver outcome-driven experiences to customers?
- How can interoperability and ecosystem partnerships be leveraged to define experiences that go beyond just one brand?
Bringing hyper-personalization to life
- To what extent will shifting towards digital segmentation tools be effective in identifying and delivering the right level of personalization for the right customers?
- What incentives can individual businesses offer customers to share data in exchange for personalized products and services? What can be done to improve trust in data privacy and security?
Defining a role in the access economy
- How can companies and industries determine their amenability to disruption by access-based models?
- What business model options do companies have as customer preferences shift towards access-based models (over ownership) in their industries?
Questions for policy-makers and regulators
Digitalization of the customer environment also poses some important questions for governments and regulators, particularly in emerging areas where the implications of digitalization on consumer interests do not have clear precedent.
- As customer data is increasingly used to drive digitally enabled revenue models, how should data ownership and monetization be governed across businesses and sectors?
- As an increasing number of partnerships emerge to drive new customer experiences, how can regulators identify and ascertain ultimate responsibility for ensuring customer interests are met?
- What role can policy-makers and regulators play in enabling business models that promise to drive significant gains for customers? (e.g. sharing-based models that democratize access to goods and services that were previously inaccessible under ownership-based models, especially in developing markets)
The race to keep up with customer expectations is a particularly challenging one. On one hand, it is a sprint. With the accelerating pace at which technology advances and customer expectations change, enterprises need to be faster than ever to keep up. On the other hand, it is also a marathon. Customer expectations never stand still and are already being reshaped by the next wave of technology.
There is no finish line in sight.
1 PwC, The Sharing Economy, Consumer Intelligence Series, April 2015.
2 Samuel, Alexandra, “What customers want from the collaborative economy”, Harvard Business Review, 8 October 2015.
3 Cohealo website: www.cohealo.com.
5 Botsman, Rachel, “Sharing’s Not Just for Start-Ups,” HBR, 2014.