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This article was originally published in Volume 41 Number 5 issue of “Strategy and Leadership,” a journal published by Emerald Group Publishing.
By Paul Nunes, Olivier Schunck, Joshua Bellin and Ivy Lee
With a burgeoning stream of online choices available to customers, it is harder than ever to predict how they will make decisions. By the time marketers figure out a way to reach a targeted set of customers, their audience may have new needs and new pricing information. Furthermore, customers are not all moving in synch, and so what motivates one group may turn away another. To secure customer loyalty today, companies must become masters of the new ‘‘nonstop customer’’ experience. They will at times have to analyze the data on their customers’ behavior for new opportunities, and at other times directly influence their customers’ choices.
The nonstop customer experience
‘‘Your ability as a marketer to control your brand image is significantly less than it was ten years ago,’’ JetBlue marketing chief Marty St George observed in a recent interview. ‘‘Because you’re not the only one who owns the brand image; your customers own it, too. That’s the big difference’’. Executives at the low-cost airline know the potential pitfalls all too well. The brand’s value proposition of affordability while ‘‘bringing humanity back to air travel’’ can easily be undercut by a disgruntled passenger complaining on Facebook, Twitter or YouTube. And the brand is further threatened by instant price comparison websites that display the airline’s every-day low-cost fares against the sale prices of its competitors.
Most companies today face similar perils in one form or another. Their customers continue to escape from traditional marketing channels into digital realms where they can become more knowledgeable and empowered than they have been in the past.
Customers can now comprehensively inform themselves – for example, more than a fifth of consumers have reported using mobile phones to compare prices while in a retail store. And, they can loudly inform others: nearly a third of consumers report having penned negative online reviews after disappointing experiences. It is hardly surprising that 80 percent of consumers say they are reevaluating their purchase choices more than they did just two years ago – a fact which is worrying to marketing departments that rely on customer segments moving predictably along a linear path to purchase.
That linear path to purchase has traditionally been known as the marketing funnel – a customer itinerary that begins with awareness, moves through consideration and evaluation and ends with purchase and use. But there is an emerging consensus that this model is losing its relevance. It is too slow, too static and too generic to be used as a foundation for companies’ marketing, sales and service strategies and as a guide to their execution. As JetBlue’s St George puts it, marketing has ‘‘twisted into a different shape.’’
Drawing on decades of client experience and research on consumer behavior, Accenture has sketched a new shape for the customer journey – the nonstop-customer experience model – that captures what is really going on. While other replacements for the funnel have been proposed, the nonstop-customer experience model uniquely places evaluation, not purchase, at its center. Even after a purchase, customers today frequently reevaluate their decisions, and compare promises made against experiences delivered. With fingertip access to information they can ask, ‘‘What if I can find a better deal by checking just one more place?’’ Or, ‘‘I know that the product’s in the mail, but now that I’ve learned about other options, is there still time to cancel?’’ The ubiquity and accessibility of information today makes it easier than ever for customers to change their minds.
Catching up and staying in synch
The new model of customer choice presents marketers with two formidable challenges. First, marketing organizations must constantly change the way they interact with customers – at the speed that customers are changing their behaviors. Move too slowly, and the audience for that perfectly crafted message or impeccably calibrated offer will no longer be paying attention. In one example, marketing executives at a large discount retail chain tried numerous times to reach a social media audience. The first effort was in 2006, when the company launched an unpopular and short-lived competitor to social media site MySpace focused on its brand and products.
But the discount retailer also found that it is not just about speed – it is also the quality of the interaction that matters. The company’s subsequent efforts on Facebook also achieved few positive results – local store pages have been sparsely visited. Negative comments on the national brand’s page are usually vetted by the company, leading angry commenters to frequently derail what little brand-oriented conversation happens with tirades about censorship. Analysts have panned the company’s social media strategy for always being several steps behind customers.
Second, now that customers can take multiple paths to purchase, some of them customized, what will delight some customers might precipitate a revolt among others. Consider the polarized reactions to department store JC Penney’s 2012 shift in pricing strategy. When the retailer announced an end to its well-known practice of offering discounts, promotions and coupons, some customers applauded the shift, finding that they could evaluate their purchases at the store more easily. ‘‘I have spent more money at JC Penney in the past year than I have in the past 20 years,’’ wrote one online customer who cited more transparent pricing as a reason.
However, other existing customers were unenthusiastic about the new ‘‘everyday low prices’’ – they could not see as much value in the deals anymore, which forced them to compare and evaluate the new set prices against those of other stores. When JC Penney reverted to the old pricing scheme, the company acknowledged that its most loyal customers ‘‘are motivated by promotions and prefer to receive discounts through sales and coupons applied at the register’’. Given these hurdles, how can companies catch up and stay in synch with today’s unpredictable and fast-moving nonstop customer?
Four patterns of nonstop-customer loyalty
‘‘Know your customer’’ may be the first rule of marketing. But the emergence of the nonstop customer means that this rule must now get more specific. The new Rule 1 is, know your customer’s behavior on their path to purchase. Know what causes your customer to evaluate and reevaluate and what keeps them coming back to your brand.
To simplify what could otherwise be a near-infinite number of potential customer journeys, loyalty behaviors can be grouped into four general archetypes: emotional loyalty, inertia-based loyalty, conditional loyalty and true deal chasing. To be effective, marketing plans will need to acknowledge that different categories of behavior demand different responses.
Some customers in certain product categories will exhibit a deep emotional connection with a brand. They will not shop for deals, and will be largely driven by their trust in the quality of the product or service. While they will not often be looking to discover and consider competitors, they will be avid consumers of third-party opinions – perhaps even contributing reviews themselves. Think, for example, of the loyalty that Apple commands in consumer electronics, where so many product categories trend towards commoditization. A recent survey shows that only 9 percent of iPhone owners would be willing to switch to a competing smartphone operating system. In contrast, nearly a quarter of those with Android phones would be willing to try a competing device like the iPhone.
Some customers will stay with a brand out of habit when it comes to certain purchases. They are neither likely to research the product or service to any great extent, nor are they likely to shop for deals – they are just fine with what’s for them ‘‘tried-and-true.’’ Accenture’s recent survey of global consumers finds, not surprisingly, that electricity providers – even in deregulated competitive markets – often serve customers of this mindset. While technically loyal, these consumers do not have much of an emotional connection to the brand. A bad experience or a tempting competitor offer could easily spur them to switch.
Customers often align to certain brands for certain specific reasons – and can be easily influenced if or when circumstances change. A customer may, for example, shop for apparel at a particular retailer only so long as that brand remains popular among his friends. Similarly, a customer may default to her local bookstore, but buy her books online when it becomes more convenient. A traveler may prefer to use an airline from which he accumulates frequent flier miles – unless he finds a competitors’ fare that’s a fraction of the price. Although they might like their current brand of choice, customers behaving in this pattern are highly susceptible to outside information and will likely reevaluate their purchase intentions when they learn something new.
True deal chasing
Deal chasers behave within a product segment without any attachment to particular brands. Whether purchasing the lowest-cost vacation package or finding the best value for money on a flat-screen television, they will look to choose among a diverse range of potential purchases. They are unlikely to be swayed much by outside information in their hunt for the best deal, and can be lured into making a purchase by an irresistible coupon or offer.
Armed with these general categories of loyalty, companies can more readily evaluate their plans. The discount retailer could have understood that Facebook was home to few of its most emotionally loyal customers – and most other types of customers had little use for a non-interactive brand-directed Facebook page. Similarly, JC Penney could have concluded that its most loyal customers were motivated more by chasing deals than by the high-end appeal of the stores.
Reinforcing and redirecting
To use these patterns more like a navigation tool and less like a rear-view mirror, marketing departments can act on the insight they gain from analyzing their customers in terms of the four loyalty profiles in two ways: by sometimes reinforcing customer behaviors, and at other times redirecting them.
Reinforcing existing behaviors
Why might a company want to encourage and reinforce existing customer behaviors? Sometimes it’s because marketers intuitively understand that certain behaviors increase the odds that a consumer will make a purchase. For example, some companies urge their customers to act like deal chasers by exhorting them to ‘‘compare our prices.’’
But other times it is because certain behaviors enable a new path to loyalty for a subset of customers. For instance, when Microsoft released the motion-sensing Kinect device for the company’s Xbox 360 videogame console in 2010, the company encountered a worldwide community of hackers and tinkerers intent on adapting the Kinect for numerous applications beyond the Xbox. The company initially responded to these experiments with mild suspicion. ‘‘Microsoft does not condone the modification of its products,’’ the company responded to a media inquiry.
However, executives soon realized that the persistence and ingenuity of the Kinect tinkerers demonstrated a new possible avenue to loyalty. Microsoft shifted towards promoting tools for developers, supporting innovative development efforts, and finally releasing actual open source code. Why did Microsoft change how it engaged with the hackers? Because embracing them not only secured that group’s conditional loyalty, but also helped to create an ecosystem of products and services stemming from the device. As a result, the Kinect has become more attractive to an even wider range of businesses and consumers.
Sometimes, a primary reason that customers go elsewhere comes down to how they go about making a purchase. When this is the case, a company should aim to identify the behaviors that end up turning certain customers away. With this knowledge, companies can intervene to redirect these customers’ decision paths.
Consider the challenge faced by online retailers. When shopping online, customers very often walk away from a transaction they’ve started – so-called ‘‘shopping cart abandonment.’’ Some studies estimate the rate of abandonment to be as high as 80 percent, with the most common reason being the sticker shock of seeing the total price including shipping.
Amazon.com found a way to modify this customer behavior and introduce a new form of loyalty through its Amazon Prime membership. In addition to offering free streaming of certain movies and television shows, Amazon Prime guarantees free two-day shipping on most of the products Amazon sells. The service costs $79 annually, which to the average member is a net benefit; one report concluded that the average member uses $90 of free shipping and digital streaming (a net loss of $11 per customer to Amazon).
And yet, Amazon profits highly from the service because of the way it redirects members’ behaviors. With shipping already taken care of, subscribers become less tempted to reevaluate their purchases at the final moment due to sticker shock. Not only do Prime members complete more transactions, but they also tend to purchase new items from Amazon that they would not have considered in the past. ‘‘In all my years here, I don’t remember anything that has been as successful at getting customers to shop in new product lines,’’ Robbie Schwietzer, vice president of Amazon Prime, said in an interview. Amazon Prime lures its most active customers away from patterns of conditional loyalty and deal-chasing and towards a frictionless inertia-based loyalty, in which they’re likely to purchase any product category from Amazon with little thought or hesitation.
Serving the nonstop customer
The urge to double-down on familiar marketing methods in the face of greater consumer volatility is a strong one. But by better understanding the journeys taken by their customers, companies can learn to serve the nonstop customer at the right place, at the right time, with the right message. Companies that cannot adapt to the nonstop customer by accounting for different patterns of loyalty will risk seeing their customers escape for good.
Paul F. Nunes is global managing director of research at the Accenture Institute for High Performance.Olivier Schunck leads offering development efforts for Accenture’s Sales and Customer Services group.Joshua Bellin and Ivy Lee are researchers with the Accenture Institute for High Performance.
Notes1. ‘‘JetBlue & You: Marketing chief Marty St George on humanity, loyalty, and the JetBlue journey,’’ The Hub Magazine, November-December 2012.2. Data from the ‘‘Accenture Global Consumer Pulse Research,’’ Accenture.com 2012.3. Comment by Michael Golubiewski, ‘‘J.C.Penney: Was Ron Johnson’s Strategy Wrong?’’ Forbes.com, April 9, 2013.4. ‘‘Penney revives ‘mark-up mark-down’ to boost sales,’’ Chicago Tribune, May 27, 20135. Yankee Group, ‘‘Consumers will drive iPhone ownership past Android’s Peak,’’ April 25, 2013.6. InvestBlog, ‘‘Shopping cart abandonment rate statistics,’’ May 16, 2012.7. Brad Tuttle, ‘‘Amazon Prime: bigger, more powerful, more profitable than anyone imagined,’’Time, March 18, 2013.
This article is © Emerald Group Publishing and permission has been granted for this version to appear on Accenture.com. Emerald does not grant permission for this article to be further copied/distributed or hosted elsewhere without the express permission from Emerald Group Publishing Limited.
November 13, 2013
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