Building intimacy and trust with your customer
Building intimacy and trust with your customer: What retail can teach financial services and energy providers about emotional loyalty
By Andrew Smith, Senior consultant for Capgemini Invent, Capgemini
Irrespective of what they are buying or investing in, today’s customer expects a frictionless, tailored and useful experience every time. Driven by rapid technological advancement and market disruptors tearing up rule books it has been dubbed as the age of the customer: Expectations have never been higher. Arguably the retail sector, where brands such as ASOS and Amazon have created online empires through their consistently improving user experiences, lead the way. You can order a product from a vast range and get it delivered in a day or less. There are no boundaries to customer experience.
Yet many sectors continue to lag behind, and are suffering as a result. Energy providers are losing ground to new entrants offering more connected homes, and banks are losing their increasingly disloyal customers to disruptors offering linked-up, real-time experiences that are often exclusive/application only.
So what lessons can industries like financial services and utilities providers learn from retailers around building intimacy and trust with the customer?
You’re not just selling a product or service, you’re selling a vision, mind-set or shared sense of community.
Despite the size of the retail market, working in this industry has and always will be a margins game. They are in fact getting tighter and tighter and as such the big retailers are looking at how their smaller counterparts are operating. Technology, people, and processes are all being re-evaluated in an effort to drive market share and customer loyalty, which is in turn driving innovative new revenue streams and business models. Take for example, Graze (The company selling snacks delivered your door) have a new business model competing with traditional retailers. With a subscription you can receive your snacks on a weekly basis while having your choices personalised. Not only continuous replenishment but hyper-personalisation will continue to become more popular over time as retailers try and create deeper relationships with their consumers and understand their context in a specific moment in time.
Furthermore, selling a purpose or vision is becoming more prevalent. The Body Shop don’t just sell a beauty cream product, they sell the vision of cruelty-free, ethically-sourced and sustainable products. This appeals to specific audiences and enabled the company to stand out from the crowd creating a movement and community of engaged consumers believing in the mission.
Next to the changes to business models, the offers retailers provide are adapting to consumer needs. A retailer might start providing a new offers such as a full service or package model whereby they are selling an aspirational lifestyle rather than an individual product, e.g. The product might not just be a TV but have the additional benefits of a complementary full sound system, subscription to NowTV, connection to your smart home suite, insurance, and a promise of ongoing maintenance if required included as an example. As well as immediately appealing to a target audience, it builds an emotional connection between the brand and customer. The bundled products in this example might be targeted to a busy household with children satisfying their entertainment needs and removing any hassle to purchase products individually. Provided this customer experience is seamless, it can turn them into brand ambassadors which arguably is one of the strongest forms of marketing. In short, retailers are going above and beyond, selling a lifestyle vision build a relationship with their customer and build loyalty.
Not just an energy provider…
Just like the retail market, the energy market is also heavily dictated by margin and price points. Unlike retail however, each individual customer investment has the potential to become a life-long revenue stream if the experience is good enough rather than a one off purchase. As such, there has been recognition from the industry that it must cater to a lifestyle choice rather than just provide energy, following in retail’s footsteps.
Retail energy is attempting to reach a place where its customers trust them to sell comfort or security, not just energy. There has been a switch in language whereby the industry defines itself as ‘no longer an energy provider, but a services provider’. This shift has been largely driven by two factors: Regulation and new entrants – establishing new pricing rules and new digital operating models. The consumer appeal of this change is self-evident, by offering connected homes to pure-play digital user experiences that compete on price the service and lifestyle that is now possible maps to modern expectations. It also sets them in future competition with the Googles and Amazons of this world. In order to keep up, the energy sector is actively looking outside the industry to find ways of persuading the customer to want to talk to them, including hiring C-Suites from different sector backgrounds including retail – people who can help mould and sell this vision not only to the their customers, but to companies themselves.
Starting afresh to spur evolution in financial services
The financial services (FS) industry has also recognised the need to stretch across into new territory on top of their existing service. This is all with the aim for anticipating what the customer will find useful in the future and building loyalty. Forced to learn from industry parallels, many FS are in fact leading the way in terms of creating a smooth online mobile experience such as mobile banking and payments. Yet the larger institutions are battling new entrants, like Monzo, who don’t come with consumer trust issues, offer new connected experiences and are not tied down to legacy systems. This has driven a steep learning curve of how costly it is to originate a customer into your product portfolio and then lose them after all that hard work.
In order to combat this and offer a digital first, lifestyle offering, banks have essentially had to start afresh. You now have every single bank opening a new (IT) legacy-free bank. Lloyds, for example, are doing it without changing the branding, but still offering a new platform. The approach essentially sees every new customer captured going to the new digital-first system, with long standing customers gradually migrated. With the advent of open banking (enabling select third party developers to make applications and services for your bank) financial services, in its new legacy free state, can truly embrace the learnings of retail and drive the trust and loyalty.
The main learning is that all of these industries – be it retail, utilities, financial or others – are now, or will be in future, competing with one another in some way. This shift to a lifestyle service offerings will become more and more linked and all encompassing, with the boundaries blurring. But for now, there is still plenty of work to be done in learning from one another and driving customer loyalty.