In the digital age, where it is easy to compare all available providers on every aspect of a service and its price, services are in danger of becoming commoditised. Without a unique value proposition, it is harder to make money; if providers are all the same, customers have no reason choose you or remain loyal.
In recent Ipsos MORI research among business journalists, almost all (87%) agree that retailers need to be more than just the cheapest and most convenient if they are to achieve customer loyalty.
However, real, game-changing innovations in service markets are uncommon. The introduction of cash machines in financial services and flatbeds in the airline sector are rare examples, but while those who introduced them benefited from a short-term first-mover advantage, they have been copied and so haven’t had a lasting impact.
In customer service, innovation often involves fixing past mistakes and presenting this as differentiated transformation - witness NatWest’s promises of a 'direct line to your branch' and 'UK only call centres'. Tthey gave the bank an edge on its competitors and certainly improved customer satisfaction, but can we call this innovation? And again it was only a matter of time before others did the same.
The response to the threat of commoditisation from the most innovative companies in the service sector has been to transform the service they offer into a personalised, fulfilling experience, something much more memorable and harder to replicate. This provides consumers with a reason to choose them over competitors and, crucially, to stick with them.
These providers set themselves aside from the crowd by focusing on a few small, core moments and creating a more personalised, fulfilling customer experience from them.
These innovations tend to require less investment and are often harder to replicate without appearing like an unimaginative copy-cat.
Here again we turn to the airline industry, where around one in three airline customers recall a few small 'moments of truth' that pleased them over the last six months.
Virgin Atlantic does these small things well, and in so doing, ensures that it owns the flight as entertainment experience space. When Virgin screens in-flight movies it dims the lights and creates a retro cinema environment with cabin crew making their way through the aisles of the aircraft wearing custom-designed usherette trays, serving passengers with choc ices and popcorn
In financial services, Metro Bank does not offer any radically different products. Instead, its branches - which it calls stores - are designed to resemble retail stores: dog biscuits and a 'magic change machine' are offered in branch and they explicitly declare 'no stupid bank rules'. It’s these personalised touches, rather than a fundamentally differentiated product offering, which creates their competitive advantage.
In the experience economy, customers need to be entertained, engaged and inspired. So how does a provider identify these personalised moments of truth which create such a unique experience?
We offer the following suggestions:
- Customer journey mapping. Using structured qualitative techniques to identify those key magic and miserable moments.
- Treating customers as individuals. The digital revolution has made it easier to allow customers to tailor their own experience; O2 has run an entire campaign around bolt-ons. Alternatively, many of our clients are looking to increase the sophistication with which they target their customer bases via database marketing and loyalty algorithms.
- Empowering customer facing staff. We often look to First Direct in banking and John Lewis Group in retail as best practice examples of this, but our research shows that many others are also doing this
Innovation and good customer service often don’t go hand in hand. Many service innovations are more corrections or rebalances than modernisations. And even some of the most radical innovations are concerned with cost-cutting rather than improving the customer experience - for example, off-shoring call centres - which means that they are not always well received.
But by doing the right work to find those key, personal moments - whether by getting under the skin of the customer journey, by allowing customers to create their own personal experience, by exploiting the power of their databases, or finally by harnessing the creativity and experience of customer-facing staff - maybe service providers can find innovations which simultaneously improve the customer experience and the bottom line and allow them to stand out from the crowd.
Rosemary Bayman, head of technology, travel & retail, Ipsos Loyalty, and Claire Emes, head of trends & insight, Ipsos.