Lesson on changing customer behavior and net customer benefit

A wise man I worked with a few years ago taught me something about customer behavior. Changing customer behavior is extremely hard. If you are dreaming up a product or feature that requires a change in how customers go about their lives, you would have to offer a lot more value in return for that ultimate sacrifice – a change in behavior. Or be prepared to fail.

Focus on the net customer benefit – Contactless Payments

Several examples come to mind that met this bar of adequate value exchange. Equally, tech world is littered with failures where products underestimated their customers resistance to change.

Let’s look at an area that has gone from lukewarm to a moderate success over the years. Contactless Payments. The underlying premise is that carrying and paying with cash or card is cumbersome. Contactless reduces this pain because you always have your phone on you and paying is as easy as tapping your phone. Why did Contactless Payments take a long gestation period?

It boils down to the net customer benefit i.e. targeted customer benefit versus expected change in customer behavior. While Contactless opens a new way to pay, until they become ubiquitous, you still need to carry cash and card. So that knocks one of the benefits down. Also, in most countries, paying with card has improved so much that you can complete a transaction in less than 10 seconds. Finally, the new behavior of tapping a phone appeared as odd to many, at least initially until it becomes the norm. You also have to add the initial effort to setup cards on your phone wallet which can be perplexing if you are not tech savvy. So the net benefit was not as overwhelming as Samsung and others made one believe.

Contactless Payments needed a hero feature. This was security. Apple appeared to understand this better. They talked up tokenization, integration with Touch ID and chip level secure storage of credentials to illustrate how paying with Apple Pay was lot more secure than other methods. Apple also primed the market with partnerships with several retailers so that you can imagine a day sooner than later where you can leave home without cash or card. Note that Apple did not change anything in the tapping experience – that was inevitable. They focused instead on improving the (perception of) benefits and removed other barriers so that the net customer benefit turned positive.

Tunnel vision – Google Glass

Another example is Google Glass. (I know it has been beaten to death as an example. Unfortunately, it fits this context so very well that I have to mention it here.) The makers of Google Glass made a humongous leap of faith assumption that normal folk, even those who wear no glasses except the occasional pair to keep the sun at bay, will want to wear a contraption for the eye at most times so that they can see notifications or directions beamed directly to their field of vision. Anyone wearing glasses as a necessity will tell you that they will happily get rid of them if they could. Barring a minority, of course, who feel glasses add an air of wisdom they otherwise lack. You could take away the glasses when you don’t need them. Ask again those who wear glasses and they will tell you what a pain stashing away glasses can be. So, you have to wear the glasses most of the time for the benefit of easy access to information few times in a day – that’s awful net customer benefit.

Virtual Reality (VR) faces the same challenge. Until someone finds a hero feature for VR, it will remain a niche play in gaming, medicine etc. Augmented Reality (AR), on the other hand, has fewer barriers and minor changes in customer behavior. It is not surprising Apple is more focused on AR right now and might be the first to deliver net customer benefit.

In-store marketing – future that never arrived

Coming back to the lesson I learned – it was in the context of a strategic direction I was pitching for the product. We were in a competitive market with several mobile messaging platforms offering near identical capabilities. I proposed that we put the platform to a different use targeting in-store marketing because brick and mortar retailers were at a data disadvantage over their online peers. Imagine this – Customer walks past the wine section when an offer is pushed to her phone from a nearby beacon. Some will respond to the notification and a final few may take advantage of the offer. We then show the conversion funnel much like an e-commerce site would have access to through site or app analytics. For a retailer, this is data gold mine. Not so much for the retailer’s customer though. For starters, coverage inside a store is patchy. Retailers could offer free Wi-fi but signing up requires effort which has to be outweighed by the benefit. The benefit is an offer or two that might even spook some customers when they mysteriously arrive just as they walk past the corresponding section of the store. They might already be aware of the offer. They may not care for wine or any other offers of the day. In summary, not an exciting net customer benefit. The proposal was dropped. To this date, I have not seen successful in-store marketing campaigns or software providers enabling them. Wisdom served.

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