If you read the signs right, it makes sense. The X-factor that defines your brand and drives people to pay for it, may not be what it was a decade before. You should have seen this change coming.
How feature-rich your product is doesn’t cut it anymore. Your wallet-friendly pricing plans will soon stop convincing people to switch. The economy doesn’t work the way it did in the post-WWII flurry. Things have changed. Evolved.
For most of Generation Y, the notion of ownership seems more like a burden than an achievement. Josh Allan Dykstra, in this popular article, discusses how millennials are “[thinking] differently about what it means to “own” something”. It is safe to say that millennials value experiences over owning things.
Rather than kick against this wave, economists, entrepreneurs, and marketers worth their salt are planning ahead. Brands everywhere are strategizing to make their customer experience the absolute best because nothing less will do. And you may want to do the same too if you plan to make it.
Reason #1: The great subscription economy shift
We might as well be into the sixth industrial era already. Welcome to the subscription economy where nobody owns anything.
Look around you, it’s happening even as we speak.
Fewer millennials are buying homes. Ownership means less to the current generation than baby boomers and Generation X. And it’s not all because of their freewheeling lifestyle, either. They are unwilling to ditch renting in favor of homeownership, and with a good reason too.
Remember the crash of 2008? Many people lost their jobs and homes and they witnessed in disbelief as their life’s savings went down the drain in a horrifying wink. The average American household lost a third of its net worth during the recession. And the Millenials were watching as their parents lost all that they saved up for years. Is it any wonder then that ownership means less to them than access?
This is but one of the factors that led to this paradigm shift. A confluence of several other socio-economic trends caused this. Buying ‘stuff’ has stopped to be being about the thing itself. Instead, what we get from the acquisition has come to matter more. Experience won over ownership.
In every industry, from real-estate and cars to software, a subscription economy is winning. The idea of ownership is redefined as one of the many advantages of the subscription system is that the downpayment is relatively insignificant compared to what you get in return.
Nothing should be outrageously expensive, people realize that now. Why pay an arm and a leg when you can enjoy the same experience by subscribing to it for a short-er term at an easy price? Or plan, as that is the rage now.
Reason #2: Switching Cost is Not very high
The popularity of the subscription economy largely owes it to the ease of doing it.
Switching cost is ridiculously high when you own something. But it is seemingly trifling when you are only subscribing it. The choice suddenly is vast, the advantages much more attractive, and the ordeal of swapping products is transformed into a pleasant experience. Generation Y is sure to favor the choice of a premium experience with no strings attached.
Thus, in an economy where nearly everyone can afford anything, what would be the ‘it’ factor? The experience, of course.
Brands will be wrestling over who offers the extra-good customer experience and who spoils their customers silly. It is inevitable that people will pay a higher subscription fee if their brand experience can match.
Already, 89% of companies compete primarily on the basis of customer experience – up from just 36% in 2010. But while 80% of companies believe they deliver “super experiences,” only 8% of customers agree. That’s quite some way to go.
Reason #3: Accessibility to reviews that convince better than any ad
An astounding 84 percent trust online reviews as much as a personal recommendation. The word gets around quick and reviews sites are the places where it happens. Customer experience is at the top of whether or not the customer will decide to keep doing business with a brand.
Research suggests that 91 percent of people regularly or occasionally read online reviews and they make up their mind quite quickly. Up to 68 percent form an opinion after reading between one and six online reviews.
Pro tip: Create and sustain a process that encourages your customers to leave feedback, and work on your Achilles heel.
People are clearly expecting a better experience and ready to pay the price. In fact, 86% of buyers will pay more for better customer experience, but only 1% of customers feel that vendors consistently meet their expectations. A lot of room for improvement, clearly. Is there a better reason to focus obsessively on CX? I thought the same.
Reason #4: Selling to existing customers are way cheaper than acquiring a new customer
While we can agree that this subscription trend is about pampering customers with a premium experience, what is in it for the brands?
Well, take this. It costs 5x more to obtain a new customer than to keep an existing one. Studies point out that the probability of selling to an existing customer is 60-70% while selling to a new customer can only be 20%, at best. Your existing customers are listening, so make the message more alluring. That’s cross-selling and upselling for you!
If you were to keep the ones you have happy, they’d pay you more to keep doing it. Your customers are 50% more likely to try your new products and spend 31% more, on average. Don’t hold back on the CX department, and you’ll do just fine.
Reason #5: Good customers always create a viral effect
Customer experience is good karma, I believe. You get it right, and you’ll be paid back in folds. If you fail them, well, you are over.
This is the time of brand crises. When big brands go out of business because a 3-minute video clip went viral, crashing all the goodwill that millions worth PR painstakingly build.
Happy customers brag about you and create this ripple effect that is more effective than any paid marketing. Your marketers might complain about impatient customers and skeptical audience. But all this skepticism turns into mush when a satisfied customer is doing the talking.
With a great customer experience, you can build your very own brand fandom. And these brand fanatics will sell your product for you. If only you earn their loyalty the right way.
Align your brand with customer experience, and you won’t regret it. Businesses that kick against this wave may not live to tell the tale. Ominous as it may sound, that’s where the arrow points. Do well!
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