PwC’s third Connected Retail report, Connecting with tomorrow’s customer… now, examines the behaviours that are set to define the customer of the future.

Richard Blundell, Director, Retail & Consumer, and Shannon Orbons, Senior Manager at Digital Services, draw from inspiration across industries to discuss how retailers can prepare for the demands of tomorrow’s customer, providing a personalised service that anticipates and exceeds expectations.

Listen to the podcast using the player or subscribe to the Digital Pulse Podcast on iTunes. A full transcript of the audio is also included below.

 

 

Transcript

Richard Blundell:  Today I’m going to be talking about the retail industry publication that we launched this week, Connecting With Tomorrow’s Customer… Now.  We wrote this publication for retail and consumer businesses trying to understand the rapidly changing behaviours of their customers.

Shannon, you’ve been working across a number of other sectors like telecommunications, and I wanted to ask whether the ideas of how customers are likely to behave resonates also in those sectors.

Shannon Orbons:  I think the first point to make is that when people think about digital and customers, they tend to think about Gen Y, and it’s much more than that.  It’s not just about Gen Y and Millennials.  It’s you, it’s me, it’s my mum, it’s her mum.

Richard:  Yes, we often find that businesses still think they build in digital for the younger generations. A lot of the businesses expect that that’s where the innovation is, that’s where the demand is.  But certainly what we’ve seen over the last few years is actually a lot of the older generations are becoming digitally enabled as well, and that businesses that actually target those generations are having some success.

For example, 43% of Australians aged 55 to 64 were regular tablet users, so it’s a pretty significant proportion of that population.  That’s research done by ACMA last year

Shannon:  I agree, I think if you take the health industry for example, baby boomers obviously have a big impact on that industry over the coming years, and you look at the way that they’re adopting digital technology.  Which baby boomers wouldn’t embrace the convenience of having medical appointments in the comfort of their own home via VC instead of having to traipse across town to wherever their specialist is? Or not having to keep track of big manila envelopes with X-rays in it and getting the blood test results from the last test and not the test before, and managing all that data, that could just easily be managed in the cloud, and they could make it available to all the different specialists.  So I absolutely think that baby boomers, especially, is where we’re going to see a lot of growth in digital services.

It’s not just health. Remember the customers, their expectations are influenced by their entire lives. They don’t silo their life into different industries. If they see something good from banking or from travel or from retail, they expect that in all aspects of their life.  So the point of that for companies is, don’t compare yourself to your traditional competitors, compare yourself to what is cutting edge out there.  Customers just don’t silo their lives that way.

One of the other things that the publication talks about is, customers being ready to ignore traditional boundaries and experiment – and I think that’s absolutely true.  Tomorrow’s customer is going to be so used to new and innovative services and products, they’ll really be throwing caution to the wind in comparison to what we’ve seen traditionally.

What does that mean for brands that rely on habitual buying patterns and established market practices?  Well, they’re at serious risk of disruption.  And that’s especially bad news for incumbents, who have the most to lose.

Richard:  We found in our research based on some work at the University of Sydney, it suggested 74% of incumbent businesses take two years or more to even react to disruption in the market. They’re just not looking for that disruption across other sectors.

Shannon:  I think the flip side of that is also the opportunity though.  It does give brands the opportunity to extend their touch points with customers to other aspects of their lives.  But what it means is both from an opportunity and a threat perspective, it means that companies need to have much more market agility in the future in order to be successful.  They need to be able to respond quickly and cheaply to what their competitors are doing and how customer expectations are changing. This is a real challenge for CEOs who are having to make key investment decisions around essentially ,“Do I self-disrupt my own traditional safe business model? Or do I wait and be disrupted by some competitor at some point in the future?”

Richard:  Another big shift that we talked about in the paper was this idea that customers actually have dynamic personas, and they shift their taste depending on occasion.  By that what we were trying to describe was that they’re not this static segmentation that a lot of businesses are still applying to their customer base.

Shannon:  I totally agree.  I think the days of marketing based on five simple personas are well and truly over.  I think most people would agree with that. We see today the same customer will be shopping for food at discount shops, they will be visiting mainstream supermarkets, they’re also buying premium goods from premium brands, and it’s just going to be too hard to make sense of all those different customer behaviours, unless you have the ability to leverage real-time data and analytics to support that offering.

It’s always been about giving customers contextually relevant offers, and it still will be in the future, but companies now need to move into a regime where they’ve got the ability to leverage that data, identify the right context for the customer at the right time, develop the right personalised offer, and then push it to the customer at the right time. All of that needs to happen in real time. That’s the challenge that organisations face. It’s not an easy one, but it’s where marketing’s going, and it’s where customer expectations are heading.

So Richard, one of the things that the publication talks about is the fact that customers are passionate about brands that they can engage with, but are disloyal in categories where they can’t.  What do you mean by that?

Richard:  Well, Shannon, there’s an interesting study that we came across by Brand Z that looked at how the value of brands has changed over the last decade.  Brands in categories that consumers can experience – so food, drink, technology – are often those sort of products that you can taste, touch or immerse yourself in, saw the greatest growth in value.

Whereas those in categories that have low engagement, like insurance, oil and gas, have the lowest growth.  But do you know what the lowest growth brand category overall was?  Cars.  Well, it turns out that Millennials who, I mean, we’re all starting to resemble in terms of our behaviour, increasingly see a car as just a means of getting from A to B. It’s a very functional product.  It’s no longer seen as an extension of one’s personality.

Shannon:  That makes sense when you think about it.  I suppose that when you think about tomorrow’s customer, they don’t want to invest energy engaging in brands just for the sake of functional products. Customers do still value price and convenience. But increasingly it’s the customer experience that brands provide that really drives loyalty and willingness to pay. And this really links back to the importance of leveraging data to provide a contextually relevant customer experience.

So look for example at someone like a utilities provider, who might cold call a customer to push better unit prices on their electricity bill on the promise of price alone and lower electricity charges. That’s nowhere near as powerful as a utility provider who’s able to identify, “You’re moving house soon, we can make it easy for you to move house, we’ll guarantee that your gas, water and electricity will be switched on when you arrive.”It’s much more compelling, much more contextually relevant, and customers are willing to pay for that.

Richard:  Our last characteristic about tomorrow’s customer was that they make more decisions quickly. Instant access to more information and choices we think changed the rate at which customers are willing to make decisions.

Shannon: Yes, I think this is relevant in all industries.  What this essentially boils down to is, it’s all about removing friction from the customer experience, so that customers are able to choose you and use your products and services quickly and easily.

Uber is a great example of this.  Personally I didn’t realise how painful it was to pay for a cab fare until I used Uber and realised, “Wow, now I don’t have to take my wallet out of my pocket, I don’t have to get my credit card out of my wallet, I don’t have to give it to the driver, I don’t have to enter my PIN, I don’t have to wait for the approval, get my card back, put my wallet away and then finally get out of the cab.” Each of those steps seems like a really small thing, and something that could easily be dismissed as not having a material impact on a customer’s mindset or willingness to pay.  But when you add all of those little things together it has a huge impact, and the overall experience is much more compelling for a customer, and that’s a big part of the reason that Uber’s had the success that they’ve had today.

Richard:  Shannon, it’s been a pleasure, thanks for your time. For those that want to learn more, download the publication, there’s some great examples in it of how retailers can better listen to customers, interpret their behaviour and respond accordingly.

 

Contributor

Richard Blundell

Richard Blundell is a business specialist in PwC Australia’s Digital Services team.

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