To prosper we must adapt
May 28 2010 by Oliver Stephens, The Journal
Your customers are changing - and you need to react. Oliver Stephens offers an insight into how you can make sure that your business doesn't get left behind.
IT'S great that we seem to be coming out of the recession. But do we just get back to what we were doing before? It is has often been said “if you do what you’ve always done you’ll get what you’ve always got”. In other words, if you don’t make changes you’ll end up with the same as you always had.
Of course this is no longer true. If you do the same things now you’ll end up with less. Why? Because due to the recession, the environment has changed, and most importantly, so has your customer.
As businesses we need to understand this new customer and adjust how we communicate with him or her accordingly. We have put together a guide identifying seven patterns and some positive actions we can take. It’s based upon the experiences of our clients, a collation of research, press reports and, of course, our own opinions. Here we present to you your new customer.
It’s hardly surprising that consumers and businesses are changing their buying behaviour given what they’ve been through (and are still going through). They’re bruised and scarred and this has changed the way they respond to our communications and products. The behaviours we’re highlighting are obviously very general and are driven by both emotional and rational issues: The emotions of fear of the future, for instance, supported by the rational ability to share and compare online. Of course, the internet and played a huge part in accelerating this behaviour.
We need to understand and recognise these behaviours fast, because some are now so engrained that they have become the new paradigms for buyer behaviour in both business and consumer markets.
1. The New Value Equation
OUR first new rule of engagement is the New Value Paradigm. We all know this bedrock of marketing theory and pricing strategy. It’s simple and goes along the lines of “you get what you pay for”, because there has always been a trade off between what you pay and the level of quality you expect in goods or services.
But things have changed. Now we demand better pricing, but we expect our usual levels of quality. That doesn’t mean that if we pay rock bottom prices we should get top quality, but we want the same overall quality that we were used to getting before. As Peter Vicary Smith, CEO of Which, summed it up “savvy shoppers can make the most of their money without compromising on quality”.
What’s the evidence of this? Well it’s been clear in many markets, but we’ve seen it with two of our retail clients Sainsbury’s and New Look, who have benefited from the new rules. If you want great value and good quality then Sainsbury’s and New Look would be a good choice for you. Sainsbury’s strengthened their position further in the New Value Paradigm by launching a quality, “value” range which captured share. A great strategy under the circumstances.
Other retailers, either at the bottom or top of the pricing matrix had greater difficulty responding. If you discount in these circumstances, you have to discount long term – and that kills your brand. That’s why the trend has been a move towards value added promotional activity.
We’ve seen this first hand in the growth of our own gift card, e-voucher and rewards business. It’s doubled since the recession started and a big part of the growth has been in the business-to-business market, rewarding customers with other manufacturers’ offerings, adding benefit from the association with another strong brand name. The need to reward customers brings us to our next shift in behaviour.
2. Customers are no longer loyal
THIS has been widely commented upon and for brands it has become an ugly truth. Customers are not by nature loyal any more.
It used to be that there was a genuine inertia preventing consumers and businesses switching suppliers of any sort. The recession and the behaviour of suppliers has meant that loyalty is a luxury which the customer can’t afford any more.
There has consequentially been a massive shift in the perception of trust in brands. We no longer trust established brands like banks and utilities (or governments).
We are more likely to put our faith in retailers and online brands like Google or Money Supermarket and this puts them right back in the place where they can compare prices online, putting even more price pressure on suppliers. Given that we all know how expensive and difficult it can be and how long it can take to get a new customer, this means that more than ever we have to focus on loyalty. We have to think about the mix of new relevant products, and where we communicate about them (and we know they’re looking online so that’ll be a good place to start).
Reward will be important and to prove the point Tesco has launched a new loyalty card. The likes of Dell have been working hard on loyalty as well throughout the recession, providing each customer with an account manager and personalised offers. The key will be to provide schemes that will encourage customers to stay with us, but also purchase more along the way, rewarding long term good behaviour, as opposed to one-off behaviour. The principle can be applied to staff rewards to protect and motivate valuable staff assets.