Businesses embrace customized digital interactions

MIT IDE
MIT IDE
Aug 7 · 5 min read

By Irving Wladawsky-Berger

Adapting to the ongoing digitization of the economy is one of the key challenges faced by just about every company around the world. While there are many ways a company can leverage digital technologies to differentiate itself from competitors, two are particularly prominent: streamline operations to develop higher quality products at competitive prices, and provide a superior, cost-effective customer experience through digital channels.

The explosive growth of mobile devices means that a company can be engaged with its customers whether they are at home, at work, or shopping in a store. But, digital customers can be fickle and hard to satisfy. A successful business will try to make each of its clients feel special by understanding and addressing their unique requirements, and by providing excellent customer service and quickly resolving problems when they come up. This is hard, which is also why it may very well be the most important way for a business to stand out from its competitors.

“Thanks to new technologies that enable frequent, low-friction, customized digital interactions, companies today are building much deeper ties with customers than ever before,” said a recent Harvard Business Review (HBR) article, The Age of Continuous Connection by Nicolaj Siggelkow, and Christian Terwiesch in its opening paragraph.

“Instead of waiting for customers to come to them, firms are addressing customers’ needs the moment they arise — and sometimes even earlier.

It’s a win-win: Through what we call connected strategies, customers get a dramatically improved experience, and companies boost operational efficiencies and lower costs.”

The End of ‘Buy-what-we-have’

Most companies engage with their customer fleetingly, using what the authors call the buy what we have model. In it, companies provide high-quality offerings at competitive prices, but it’s up to customers to identify their needs and seek out the appropriate products or services to meet them.

The key problem with the traditional buy what we have journey is that company and customer are poorly connected throughout.

The article proposes four connected strategies to help develop a continued relationship between a company and its customers: respond to desire, curated offering, coach behavior, and automatic execution. Let me summarize the key elements of each of these strategies.

Respond to desire. Customers know what product or service they want, and want to get what they ordered as quickly and seamlessly as possible with minimal frictions and hassles. This is the right strategy to follow for customers who are knowledgeable, want to be in control and don’t want to share too much personal data. Speed and simplicity are critical, whether it’s an online retail business, an app-based car service, or a health care provider.

Curated offering. Customers still want to make the final decision but value personalized recommendations and being offered options from which to choose. This strategy works best when the set of options is large and potentially overwhelming. Providing expert, personalized advice is not only helpful to the customer, but also enables the company to steer customers toward products and services that it can best provide at the time. For example, a company might offer the right choices to online customers looking for a toner cartridge based on their previous cartridge purchases, eliminating the extra hassle of finding the model number of the printer or cartridge.

Coach behavior. While the previous two strategies assume that customers will identify their own needs in a timely manner, a coach-behavior strategy is based on proactively reminding customers of their needs and nudging them to act on them. This requires a good understanding of a customer’s needs, and the ability to gather, analyze and interpret customer data. It works best with customers who don’t mind sharing personal data with a company they trust. For example, an online pharmacy might send an e-mail reminding us that it’s time to reorder our usual medications a few weeks before they’d run out; an airline might remind us that it’s time to check-in for our upcoming flight.

Automated execution. In this strategy, customers have authorized a company to meet their needs automatically, without their direct involvement. Customers must be comfortable being monitored, so a company can anticipate and act on their needs as appropriate. They must trust that their data will only be used to fulfill their needs without compromising their privacy. For example, we might sign up with an online retailer to periodically receive household goods like paper towels, shampoo or dishwasher soap, or, in the case of the toner cartridge, we might authorize the printer manufacturer to monitor the ink level over the Internet and send a new cartridge whenever it’s getting low.

The article reminds us that automatic execution is not the best solution to all problems or for all customers.” People differ in the degree to which they feel comfortable sharing data and in having the companies serving them act on that data.”

Some might be delighted if a company correctly anticipates their personal needs based on their digital searches and interactions, while others might find this creepy and invasive.

“Given that companies are likely to have customers with different preferences, most firms will have to create a portfolio of connected strategies, which will require them to build a whole new set of capabilities. One-size-fits-all usually won’t work.”

From Transactions to Connections

The key to transitioning from buy what we have transactional experiences to connected customer, longer-term relationships is to learn from existing customer interactions. Learning from repeat interactions helps the company get better at matching the needs of their customers to their existing offerings, as well as helping them make the appropriate adjustments to their portfolio of products and services. Moreover, such learning leads to powerful network effects. The better a company understands its customers, the more it can offer them personalized products and services. The more delighted the customers, the more likely they are to do business with the company, providing it with even more data that enables it to better customize its offerings.

“We can’t tell you where all this is headed, of course,” write the authors in conclusion.” But here’s what we know:

The age of buy-what-we-have is over. If you want to achieve sustainable competitive advantage in the years ahead, connected strategies need to be a fundamental part of your business.

This holds true whether you’re a start-up trying to break into an existing industry or an incumbent firm trying to defend your market, and whether you deal directly with consumers or operate in a business-to-business setting. The time to think about connected strategies is now, before others in your industry beat you to it.”


Originally published at https://blog.irvingwb.com.

MIT Initiative on the Digital Economy

The IDE explores how people and businesses work, interact, and prosper in an era of profound digital transformation. We are leading the discussion on the digital economy.

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Addressing one of the most critical issues of our time: the impact of digital technology on businesses, the economy, and society.

MIT Initiative on the Digital Economy

The IDE explores how people and businesses work, interact, and prosper in an era of profound digital transformation. We are leading the discussion on the digital economy.

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