by Jonathan Hurvitz. There was a time, not so long ago, when retailers could compete based almost solely on product. If you wanted people to come into your stores, your best bet was to stock something that no one else did or sell that product at a price that no one else could. But in a world where people have a multitude of options when it comes to both products and price at their fingertips, those approaches are no longer viable.
Retailers now have to focus their energy on ensuring that their customers feel like they’re understood as individuals. This shift to customer experience as the key differentiator between competitors is one that has grown over the years and is becoming even more critical in the shifting economic landscape. It is paramount that retailers continue to create and consistently maintain the customer experience across a range of channels and platforms.
The power of CX
Before digging into how retailers can take such a people and experience-centric approach, it’s worth taking a look at exactly how important the customer experience really is. According to research from Salesforce, some 66% of customers expect companies to understand their needs and expectations. Another survey, meanwhile, showed that 82% of customers expect retailers to be able to accommodate their preferences and meet their expectations. Additionally, customers are willing to pay more for a great experience. That’s not vertical-specific either. Across the board, customers are willing to pay up to 10% more for an excellent experience.
The benefits for companies who provide these experiences are significant too. According to Hubspot, customer-centric companies are 60% more profitable than those that aren’t. They’re also more likely to retain customers, something that’s critical when you bear in mind that 65% of a company’s business typically comes from existing customers.
Making the shift
It’s all well and good to understand how important this customer experience-centre approach to retail is, but how should retailers go about taking such an approach? Well, a good place to start is by looking at forms of retail that have already achieved some success when it comes to focusing on people over product. Perhaps the best examples of this are in the subscription economy. Used to describe a business landscape in which traditional pay-per-product (or service) companies move toward subscription-based business models, the subscription economy is massive and growing fast. The digital subscription economy alone is worth US$650-billion and in the nine years leading up to 2021, the subscription economy grew 435%.
Almost all of us participate in the subscription economy as consumers at some level. If you pay a monthly fee for a cloud-based piece of software, such as GSuite or Office365, you’re part of the subscription economy. The same is true if you stream your favourite series and movies through Netflix or the newly launched Disney+, or if you use a paid Spotify subscription to listen to music.
There are a few things that unite these services, including the fact that they give customers a high degree of flexibility (not least because you can cancel them at short notice) and offer a high degree of personalisation. You only have to compare your Netflix or Spotify recommendations to someone else’s to see how tailored their offerings are to you as an individual. But the subscription economy isn’t limited to the digital world. It’s increasingly making its presence felt with physical goods and services too. There are now subscription services for everything from appliances to furniture to cars.
Removing ownership ties
When you think about it, that makes a lot of sense. Splashing out a massive amount of cash on a new fridge, latest smart TV or a car, can be a massive financial undertaking, especially if you’re not sure that you’re going to be in the same city or country in a few months’ time. It means saving up a large sum of money that could be used on experiences, or possibly getting into debt to fund the purchase. Subscription-based services removes the onerous aspects of ownership and gives the customer access to what they want, when they want it for as long as they want it.
That’s not to say that the subscription economy is sounding a death knell to ownership. When it comes to subscribing to material products, there are companies that offer ownership after a specific term with added benefits like maintenance and risk cover included in the monthly subscription cost. The subscription model has identified customers’ need for flexibility, convenience and freedom of choice along with a high degree of personalisation.
Of course, not every retailer can make a play in the subscription economy, but they can learn from its focus on meeting people’s tailored wants and needs to create great experiences that build lasting loyalty.
Main image credit: Pexels.
Jonathan Hurvitz is the Group CEO of online retailer Teljoy, and a registered Chartered Accountant in South Africa.
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