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How the Digital Economy Has Changed Customer Expectation

The new digitally evolving world has created economic and technological shifts that have fundamentally changed how customer behaviour. Customer expectation in the digital economy has changed, and businesses must evolve and adapt to this new expectation to connect and sell to customers.

In a previous post, we explored how customers researching habits before making a purchased has changed in the new digital landscape. Here are two more ways that customer expectation has changed in the digital economy:

CHOICE OF USE OVER OWNERSHIP

The past decade has seen a dramatic shift in customer mindset from ownership to “usership”. People are not as interested in filling their homes with physical goods anymore. They do not want to deal with upfront costs, the hassles of storage and maintenance, and the frustration of obsolescence.  People are owning less but using more and more services.[1]

The Harris Group, a company that’s known for its insights on consumer sentiment, recently surveyed more than 13,000 adults in 12 countries around the world. And they discovered some interesting trends. Nearly three-quarters of adults believe that in the future, people will subscribe to more services and own fewer physical products.

More than 70% of adults have subscription services, up from roughly 50% five years ago. And overall, a third of adults (34%) believe they will be using even more subscription services two years from now.[2]

The rise of what is being called the “subscription economy” or “sharing economy” has enabled the shift from ownership to using and sharing through subscription-based services, common-usage of resources, all made accessible over digital platforms immediately and in a transparent way.

Consider the entertainment media industry, the sales of CDs and song downloads continue to decline. Still, more money was spent on subscription services like Spotify and Netflix last year than on physical DVDs and CDs, according to new figures from the Entertainment Retailers Association. In music, subscription now accounts for 62% of total revenues, while video on demand has a 55% market share.[3]

In the automobile industry, global sales are down 2.8% from 2017.[4] Millennials are about 29% less likely than those in Gen X to purchase a car.[5] But according to the US Department of Energy, overall miles driven are on the rise.[6] People are still using cars, but they are just not owning them. Instead, they are replacing them with car-sharing services, car subscriptions and ride-sharing services like Uber, Grab and Lyft.

While newspaper sales and advertising revenue has been steadily declining over the years[7], digital news consumption has increased. Due to the shift away from traditional print media, news organisations are increasingly looking to subscription and membership or other forms of reader contribution to replace revenues.

Technology and digital platforms have allowed customers to access personalized products and services with ease and immediacy. This has resulted in the change in customers’ attitudes, where value access and outcomes over ownership.

[1] Afshar, Vala, “5 Trends Driving End of Ownership and Growth of Subscription Economy“, (Jul 2019). ZDNet.com.

[2] “New “International Survey Reports on The End Of Ownership And The Rise Of Subscriptions“, (Apr 2019). Zuora Inc.

[3] Savage, Mark, “How Subscription is Replacing Ownership“, (Mar 2019). BBC.com.

[4] Moss, Trefor, “Global Auto Makers Dented as China Car Sales Fall for First Time in Decades“, (Jan 2019), The Wall Street Journal.

[5] Cortright, Joe, “Young People are Buying Fewer Cars“, (Apr 2015), City Commentary.

[6] “Annual Vehicle Miles Traveled in the United States”, (2018) U.S. Department of Energy, Alternative Fuels Data Center.

[7] Barthel, Michael, “5 Key Takeaways About the State of The News Media in 2018“, (Jul 2019). Pew Research Center.

Customer Expectation in the Digital Economy

CUSTOMER EXPERIENCE & EXPECTATION

Related to what was discussed above in “Choice of Use Over Ownership”, people also value experiences over ownership.

A staggering 74% of Americans prioritize experiences over products. The focus on experiences is closely related to the growth of the subscription, sharing and experience economy.[1] People crave for unique experiences and want to be able to share it with others.

Since 2003, Cornell psychology professor Thomas Gilovich has studied and concluded that experiential purchases are more satisfying than material purchases.[2]

Instead of playing board games at home, people now go to escape rooms. The typical bar experience has been replaced by organized bar crawls, scavenger hunts and distillery tours. Even running has turned into an experience with the growth of novelty races, such as the Spartan and Zombie races.[3]

Shopping malls are being reborn as experiential destinations with different food & beverage establishments, concept-focused lifestyle retailers, entertainment attractions and theme parks.

Even with the purchasing of non-experiential products and services, customers’ expectations of the purchasing experience have changed too.

The modern customer expects seamless shopping experience as they switch from an online to a brick-and-mortar offline store or vice versa to purchase products.

The primary reason for this consumer behaviour evolved from the growing accessibility of technology, specifically the advent of the smartphone and the access of information afforded by the Internet.

82% of smartphone users turn to their devices to help them make a product decision. And, 87% of consumers do research before entering a store.[4]

This behaviour has resulted in two concepts known in the e-commerce space as ‘showrooming’ and ‘webrooming’.

According to Techopedia, showrooming can be defined as:

“Showrooming is when a shopper visits a store to check out a product but then purchases the product online… This occurs because, while many people still prefer seeing and touching the merchandise they buy, many items are available at lower prices through online vendors. As such, local stores essentially become showrooms for online shoppers.”

Dr Gary Edwards, chief customer officer at Empathica, offers an excellent definition of webrooming:

“Webrooming is the opposite behaviour to ‘showrooming.’ With showrooming, retailers are faced with the challenge of customers coming into the store to browse and test products, only to subsequently go home and actually complete their purchase online (often through a competitor.) Webrooming, on the other hand, is when consumers research products online before going into the store for a final evaluation and purchase.”

Given that customers go back-and-forth while purchasing the products, businesses need to ensure the seamless flow of services and products between the offline and online space.

E-commerce has also raised the standard expectation when it comes to the delivery time and shipping costs. According to the Future of Retail 2016, an annual study from the PR firm Walker Sands, consumer expectations for seamless shipping, delivery and returns have increased in the past three years. An overwhelming majority of consumers now expect companies to offer free and one-day shipping. Free returns and exchanges, as well as easier online returns, are also common expectations.[5]

Finally, customers also expect a seamless, personalized shopping experience; one that is consistent no matter what device they are using for their shopping or what stage of the customer journey they are in.

According to Accenture’s 2018 Pulse Check report, more than 90 percent of consumers are more likely to shop with brands that recognize them and personalize the experience.[6]

[1] Turner, Matt, “Stats: 74 Percent of Americans Prioritize Experiences Over Products“, (Mar 2018). Luxury Travel Advisor.

[2] Gilovich, Thomasl Kumar, Amit; and Killingsworth, Matthew A., “Waiting for Merlot: Anticipatory Consumption of Experiential and Material Purchases“, (Aug 2014), Psychological Science, APS.

[3] Morgan, Blake, “NOwnership, No Problem: An Updated Look At Why Millennials Value Experiences Over Owning Things“, (Jan 2019). Forbes.com.

[4] Adams, Laura; Burkholder, Elizabeth; Hamilton, Katie, “Micro-Moments: Your Guide to Winning the Shift to Mobile“, (Oct 2015). Google.

[5] “Nearly a Third of Consumers Now Shop Online At Least Once Per Week”, (Jun 2016). Third annual Walker Sands Future of Retail Study.

[6]Why Brands Must Move from Communication to Conversation for Greater Personalization“, Accenture Pulse Check 2018.

J C Sum

J C Sum is a certified management consultant (TR 43:2015), an American Marketing Association Professional Certified Marketer (PCM®) in marketing management as well as a certified digital marketing strategist (SSG-WSQ accredited) with 11 years of experience specializing in search engine optimization, content marketing and analytics. He is the author of "Evolve, Adapt or Collapse" and has been featured on The Straits Times, Business Times, Channel News Asia, The Edge Singapore, CNA938 and Money FM 89.3.

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