The digital economy has shattered our traditional perceptions of customer behavior — and some marketers are still waking up to the economics of this new reality.
Today, it’s not enough for a company to sell products or services. Now, companies have to also consider consumption models based on access instead of ownership.
In short, they have to offer real solutions that are helpful and relevant to their customers, with an emphasis on ease, accessibility, and speed.
That means understanding the tasks or activities their customers want to accomplish, and then designing products and services that address those needs, with an emphasis on concepts like sharing, renting, and swapping.
Remember, this is the Age of the Customer. Companies and brands are measured on their abilities to engage their customers in personalized, authentic, and novel ways.
Technology Has Disrupted Customer Behavior
It’s a buyer’s market now, and the balance of power has shifted away from companies and brands. Customers are empowered by shopping apps, retail websites, and user-generated content, which collectively gives them the power to compare prices, read reviews, and shop on the go and at any time of day.
A new report from KPMG, a global advisory firm, concludes new technology platforms “have upended the old ecosystem of what, when and why to explain how consumers open their wallets to buy something.”
“Differentiating your products, services, and experiences requires a deep understanding of the trade-offs customers are willing to make, as well as the forces impacting their decision to open and close their wallets,” explained Julio Hernandez, head of KPMG’s Global Customer Center of Excellence and U.S. Advisory Customer Solutions lead partner.
KPMG surveyed 10,000 consumers globally, including 2,500 in the United States to assess customer behavior.
The Quest for Customer Loyalty
Customer loyalty now is tenuous at best. According to Salesforce’s latest “State of the Connected Customer” report, seven out of 10 customers said technology has made it easier than ever to take their business elsewhere.
Today’s buyers will happily switch from brand to brand to find an experience that matches their expectations. This customer behavior is creating “harsh and unfamiliar demands on institutions, requiring changes in how they develop, market, sell, and deliver products and services,” Forrester noted.
Understanding Consumption Models
How can businesses keep customers satisfied? For starters, they have to acknowledge many customers today like the flexibility of pay-as-you-go or flexible consumption models.
As Deloitte concludes, “Increasingly, customers are demanding that they be able to consume offerings —from media content to technology infrastructure and enterprise software solutions — in a flexible, scalable, and secure manner. Customers want to be able to choose where, how, and how much they consume and pay for.”
Almost every business has some type of consumption and ongoing revenue model — or is trying very hard to implement one.
While these new models make sense, they create challenges. “Flexible consumption requires an entirely new business model that fundamentally alters how products and services are sold and to whom. Moving to a pay-per-use business model may call for changes to business capabilities, operating models, and enabling technology platforms,” Deloitte acknowledges.
Consumption Models Affect the Bottom Line
Businesses that adopt these new models will enable new revenue opportunities, better differentiation from competitors, and access to new customer segments, proponents argue.
A subscription option, for example, provides greater financial stability by turning a single sale into a long-term revenue stream that is more predictable and profitable.
However, companies that move from a traditional business model to consumption-based models are likely to see revenue fall in the short term. In addition, cash flow and revenue recognition may not initially align with actual costs.
Flexible consumption models also significantly increase customer lifecycle costs.
In the not so distant past, companies had a marketing team that was singularly focused on lead acquisition and conversion. These teams calculated a cost of sale as a “simple” equation.
Now, marketing has become very nonlinear. Marketers are challenged to align to a customer journey that starts at awareness and hopefully continues to advocacy. At the same time, they need to address multiple channels and touchpoints.
4 Ways to Address New Business Models
Adoption is the new acquisition. If you aren’t helping your customers use your products, then you will lose the revenue stream and the referrals.
What can you do?
- Think about how you would design your business if you were starting it today.
- Calculate the total cost of the customer lifecycle.
- Remember that the day your customer buys from you is the beginning of the relationship, not the end.
- Above all, stay focused on your customers. Their wants and needs — not yours — should remain paramount.
Could your company benefit from a more customer-focused strategy? Email Margaret Wise for more information.
Atlanta-based Arke develops strategies and implements digital technologies for better brand experience for your customers.