During the COVID-19 pandemic with its various lockdowns, there has been a huge surge in online shopping. With many shops forced to close for weeks, choice became more limited. Some products could only be bought online. This has profoundly changed consumer behaviour. Shoppers were forced to buy clothes, shoes and household goods in e-commerce transactions when, in normal circumstances, they would have purchased such items at a physical store.
I am interested in customer value and how it drives companies’ marketing strategies.
Customer value refers to the value customers get from using products they buy; a smartphone customer gets value from the voice and video calls they make, the emails they send and the photos they can take with that smartphone. In addition, the way customers use and engage with smartphones can influence the evolution and structure of the market for related products such as apps and accessories, which enhance the smartphone experience.
Setting great store by digital
Customer value has driven the expansion of companies’ innovation and marketing on digital platforms. Nowadays companies can engage with their customers in multiple ways.Traditional routes include in store and print-based marketing. These can now be complemented through the use of digital platforms such as SMS, email, Instagram and Facebook. As customers have adopted and used digital platforms, this has affected the operations and behaviour of firms. It has also shaped the market for products. Having a presence on these platforms allows businesses and retailers to communicate with their customers, keeping informed of their needs and wants.
Whole ecosystems have been created around digital platforms. Multiple actors and stakeholders are now involved in value co-creation. Take a small business that prints images on T-shirts, mugs and keyrings. The base products (the T-shirts, mugs and keyrings) are probably manufactured abroad. These are then sent to the printing company and the images printed on them before being sold in store or online and shipped to the customer. This supply chain involves multiple actors: manufacturers, suppliers, distributers, retailers, couriers etc. These actors work together in creating customer value. The small printing business is a cog in the wider ecosystem.
There are many examples of retailers partnering with their suppliers and customers to deliver value to customers. In essence they manage their relationship with customers by bringing in actors to effectively deliver value. Think of celebrity endorsements and social media influencers promoting products, services and lifestyles such as celebrity chefs using specific products or equipment in the preparation of their dishes.
Minding the shop
Businesses are also acquiring more and more data about (and from) their customers.
They monitor customer behaviour and activity on various platforms to glean what customer preferences are and use that knowledge to develop or enhance products and services. Overt feedback on ratings sites like ‘feefo’ and ‘trip advisor’ plays a role here, as does covert feedback, customer complaints and queries, all of which needs to be carefully managed both from reputational and data protection perspectives.
Manufacturers and retailers must be constantly on the alert, seizing opportunities to innovate. Business models are tweaked to remain relevant, existing products have to be improved and new products developed, customer feedback needs to be solicited and managed. Businesses must search for additional ways to deliver value to customers, exploring alternative business models, channels to market or ‘buy now, pay later’ systems.
Pandemic panic buying
The pandemic saw a surge in online purchases. Some queried whether the High Street was dead.
It is probably too simplistic to say that most purchasing will move online. A lot depends on the product being purchased and the preferences of the consumer purchasing it. There are limitations with online shopping. Products, such as jewellery, plants and musical instruments, are not ideal e-commerce purchases. It is not generally possible to see or feel the merchandise up close before you buy online; a pair of shoes must fit well, a cushion has to match the colour and shade of other soft furnishings. Getting it wrong is often a deal breaker.
Retail businesses need to ensure their customer relationship strategies and operations deliver complete online and offline (bricks and mortar) customer experiences. Both of these experiences need to operate effectively by themselves; they should complement each other so that a customer can switch seamlessly from one to the other as and when they want. They need to engage and keep the customer but let them choose how and where they shop. In essence this is three strategies: online, offline and ensuring both are complementary. It is detrimental to have the off- and online experiences competing with each other.
Offline and online experiences can work together. ‘Showrooming’ is a growing trend. This describes the process whereby people see an item in a physical shop; try it on for size, touch it, feel it, match the colour (all of which can be problematic online) and, rather than purchasing it then and there, buy it later online, often under the (at times mistaken) belief that it will be cheaper.
When you consider that the consumer has had the item in their hand but has taken the time to search online, find it, order it, get the item delivered (all of which consumes additional resources such as packaging, dispatch and transportation), it sometimes makes sense to buy the item in store.
Online shopping usually incurs shipping costs; large items such as furniture and electronic gadgets are expensive to ship. Even sites that offer free shipping can insist that returning items is at the customer’s cost. Sometimes items are cheaper in a bricks and mortar store because they are discontinued products, or the salesperson is prepared to knock down the price further.
Post-pandemic, I foresee people going back to physical stores to buy items like fashion clothing, especially high-end designer items.
These are often a significant financial investment. To lure customers back, communities and High Street retailers need to devise place-making and customer experience strategies to encourage consumers back into physical shops.
What’s in store?
It is clear technology will continue to play a key role but not every solution can or should be technology-based. We know technology fails from time to time. Some services are difficult to deliver online. Augmented reality can work but is not as effective as the real, in-person experience with the customer physically present. Marketeers need to adapt as their consumers (and markets) evolve. A marketing strategy is often designed for the short-to-medium term whereas strategic marketing looks at the broader societal and environmental changes that influence response.
Sustainability is becoming increasingly important in the retail space; business models need to be inclusive and account for customer, societal and environmental needs. There will be increased emphasis and scrutiny of how retailers can minimise the negative impacts of retail and maximise the positive ones.
By exploring customer value, we try to understand why some companies have more staying power; they stand the test of time and support the sustainability agenda whereas others stumble because they fail to adapt to customer value and environmental dynamics. Marketeers and executives will need to think about their products from an outside-in perspective for a more holistic account of all the factors feeding into the value chain and circular economy rather than focusing mainly on profit margins and commercial gain.