By setting out their online store with a mindset that it is there to help prospective customers, online traders begin to create an open, supportive relationship. When customers visit a shop offline, every aspect of their visit has been planned. This is not manipulation – rather it is the application of the retailer’s experience over time regarding the best layout, lighting, music and atmosphere, all of which combine to help the shopper buy more on each visit. Even though an online store does not have the same number of opportu- nities to create an enticing ambience, that is no reason why a visit to a virtual store should not be a satisfying experience.
The main advantage that a digital store has over its physical counterpart is that it can be dynamically rearranged, in real time, for each of its customers. At least, that is the theory. To begin to get close to that ideal, the online store must have a considerable
amount of information on each customer, and to be able to predict what he or she is most likely to want to see now, and next.
Moreover, care needs to be taken to ensure that the design does not become confusing or visitors will simply become disorientated and will lose interest.
As they attempt to make the visitor’s experience as rewarding as possible, digital marketers have one significant advantage over the retail store. Online, it is possible to track and analyse most customer movements. Every click can be tracked, and the time that visitors spend on each page can be measured, so it is possible to observe what interests visitors most. It is not possible to know which elements on a page visitors spend time reading, or which of the elements interested them, or which were most useful to them.
Visitors may, after all, click to find out more about a topic that was not fully explained, leaving a page on which there were topics in which they were interested. However, with this qualification, it is possible for digital marketers to show visitors more of what they want to see.
This process is not unique to computers, and will progressively add benefits to a wide range of transactions and decisions made over other digital networks. For example, digital video recorders are now able to build a profile of the programmes that different members of a family prefer to watch. Over time this develops from being reactive to become proactive. Once this level of under- standing of family members’ viewing preferences is reached, the recorders are able to record programmes that might interest them.
Having recorded these programmes, the devices make sure that the family does not miss any programmes featuring their favourite stars, teams, or subjects.
Digital profiles turn a product into a service
For 20 years the video recorder has done sturdy service in the home. A reliable, if sometimes frustrating product, it recorded television on demand. It was connected only to a television set. The retailer who sold the video player could only hope to sell its replacement (and other household electrical goods as well.)
The video’s digital descendant is a networked learning device. It understands who is in the household, and what they want to watch – and records not only their favourite programmes but similar programmes too. And learns from the household’s
reaction. The retailer is now an agent for the service provider – for whom the manu- facture of a TiVo ‘product box’ is not the goal: signing up households to the programme profiling service, and an ongoing income stream, is their objective.
The alternative method of building a more interesting Web site for users is to give them the opportunity to tailor what they see based on what they believe will interest them. However, we do not always know what will interest us tomorrow.
The most effective and interesting content is likely to be delivered by a combination of both methods. By asking visitors for their preferences, the full range of possible content can be narrowed. Subsequent analysis of their observed activities can then enable the topics displayed, and their priority on the screen, to be varied automatically for viewers.
Figure 4.1 TiVo tracks viewer preferences and reschedules television to suit individual tastes
This approach of accommodating the requirements of individual customers can change the nature of the products themselves. In place of companies selling product ‘hardware’ and service ‘software’ they are more likely to find that customers wish to buy continually renewing services. In place of making a one-time purchase, products will increasingly be marketed as contract arrangements.
Rather than selling customers a single finite object, companies will increasingly undertake to meet customers’ basic needs. So instead of selling a customer a car, for example, a company will undertake to meet the customer’s transport needs. The product can regularly be updated to the latest specifications, because increasing propor- tions of vehicle components are software rather than hardware, or are easily interchangeable hardware elements. Ford’s past pres- ident, Jacques Nasser, gave a number of interviews during his tenure indicating that he expected that his industry would not sell
‘cars’ in the future. Instead, they would sell ‘transport contracts’ – agreeing to provide transportation to companies and individuals over a fixed period, for a standing regular payment. This could mean that customers would receive replacement vehicles if their own needed servicing; if they were abroad their contract could include the use of an equivalent vehicle; a number of ‘swap’
Customer goals Continuous
product evolution
Frictionless information
flow
Connected service
loop
Figure 4.2 Customers may draw several different and complementary benefits from continuing contractual agreements
weekends might be built into the contract, allowing a family to trade their usual saloon for a 4 × 4 or sports car, depending on need.
In place of products being thought of as ‘new’ and ‘old’, they will increasingly be seen as continually renewed, or upgraded.
More and more physical products will begin to behave in the way in which software has developed over the past five years.
Partnerships in development and manufacturing will remove costs and increase flexibility, enabling companies to remain competitive.
Should the customer require a slightly different vehicle, it may be included within the terms of the contract, or available for a small upgrade charge.
Customers will make smaller but more regular payments, which will increase the number of customers that companies retain simply by increasing the ‘cost of change’. Some products will be changed completely. For example, most insurance is currently sold on the basis that the insuring company charges the customers for carrying risk. Applying the digital service approach, customers would pay a nominal monthly amount to be insured, but customers would carry the risk of making an up-front payment if they had to make a claim on the policy.
If the frictionless information environment is used to its full effect, product and service support can only evolve as quickly as customers’ needs change. The purpose of marketing activity changes, however. Initially it seeks to harvest sufficient infor- mation from prospective customers to engage them in companies’
digital services. Subsequently, marketing must take responsibility for maintaining exceptionally close contact with customers’
expectations and aspirations, to feed development of the companys’ products.
The information gathered should not only include transac- tional processing but also data gathered through customer service and support activities. Transaction data will indicate which products the customer has just purchased but contacts with the service team are quite likely to reveal which other products in the company’s portfolio the customer already owns, and how they are used.
Using frictionless channels to reinvent a product
As a leading breakdown recovery provider, how should the RAC respond to potential competition (and opportunities) in digital networks? Rather than waiting to see what might emerge from new or existing competitors, the RAC opted to become its own best competition. Like many insurances, breakdown cover is often a ‘grudge purchase’, but when it is needed, customers consider it to be good value.
The value of insurance is not generally perceived to be the RAC’s mechanical knowledge which allows it to fix the vehicle, but its ability to get customer to their destination, so the RAC formed a policy called RedRAC, which minimizes customers regular payments: £1 per month – a rate that is tough (and pointless) for competitors to undercut. The RAC then charges a flat call-out fee each time the service is used.
By using this method, the unpleasant annual renewal hurdle – the point at which most customers are lost – disappears for both company and customer. The annual purchase of a breakdown policy is replaced with a low-cost service, highly valued when it is needed, and with just a minimal automatic monthly debit when it is not.