Developing Strategy for New Customer Expectations
The pandemic caused organizations around the world to rethink how they were doing business. Remote work, distance learning, and curbside retail pickups became a necessity, whether or not managers felt they were a good idea before the pandemic. Preparing for the post-pandemic era requires leaders to weigh their options for the future. What is the right combination of the old ways and the new ways? What do customers and employees really want as we move forward?
Making these decisions requires not only weighing new options but also rethinking the decision-making process itself. The unspoken assumptions that helped to speed decision-making in the past may lead companies to take the wrong path. As leaders develop strategy for a future that has been reshaped by the pandemic, they need to rethink their fundamental assumptions about how employees work, what customers want, and how to drive change in organizations. In this article, I will examine some key assumptions about what customers want. While some prior assumptions may remain true, all of them need serious consideration, and many will need rethinking for the post-pandemic economy.
Customer Assumption 1:
Customers want the human touch.
People want personal service — but they don’t necessarily need it from a person. Consider that 71% of customers expect personalization from brands and businesses, and 76% get frustrated when they don’t experience it.1 Meanwhile, digital retail transactions skyrocketed from 16% to 27% in the first two months of the U.S. COVID-19 outbreak, compared with two decades of annual growth in the 1% range.2 This growth in e-commerce showed how many people are just as happy with self-service shopping as they are with buying from a person, and the pandemic accelerated this preference.3 Now nearly every product, whether books, insurance, or cars, can be sold effectively online. As technology continues to become more sophisticated — with increasing numbers of algorithm-based recommendation systems and chatbot-based customer service processes — more aspects of commerce can cut back on human interactions. After COVID-19-related restrictions reduced the role of in-person interactions in the restaurant, retail, and real estate industries, among others, customers are seeing even less need for them during the buying process.
Companies that rely on human salespeople should consider whether that approach will remain viable for their products in the coming years. Where humans are essential in selling, providing luxury services, or making people comfortable (such as during insurance transactions or at luxury hotels or funeral homes), consider how to optimize the human contact. Where humans provide cover for bad back-end processes or data, work to fix those processes now. For situations where human contact is needed, such as managing exceptions, providers should rethink the assumption that making helpers hard to reach will make customers more willing to engage in self-service. It may just convince them to switch to companies that seem to care more for their customers.
Questions to consider:
What types of service do your customers really want?
Are you using people for the right types of selling and service activities? Or just in the areas where you’ve always used them?
Are humans in the loop mostly to cover for challenges in your processes and data?
How can you redesign your products and services to improve human-free personalization?
Customer Assumption 2:
In person is better than digital.
Prior to the pandemic, many industries had experimented with virtual offerings but resisted using them for fear that customers would not adopt them in sufficient numbers. For example, telemedicine and virtual learning have been practiced for years, but not widely. During the pandemic, experiences that previously had to be in person — doctor visits, school, and so on — quickly flipped to digital. Providers learned that customers often preferred the convenience of digital visits over the perceived benefits of in-person engagement.
When thinking about going back to “normal,” companies should consider a combination of physical, virtual, and hybrid approaches so that customers can make their own choices. For example, many medical practitioners are considering models where initial patient visits take place in person while follow-ups happen online. Beyond serving existing markets better, organizations can use this approach to expand their geographic market and position themselves for other growth opportunities down the line.
Questions to consider:
Why did your formerly in-person activities happen that way? Were you optimizing for the customers’ convenience or the company’s?
What would you have to change to develop a hybrid experience for your customers?
How might these updates vary across different customer segments?
Customer Assumption 3:
People won’t pay full price for a digital version of a product/service.
A funny thing happened in the executive education world during the pandemic: When courses moved online, prices didn’t drop. Enrollment, after an initial dip, is strong again. Executive students realized that the value of professor engagement still holds during synchronous online learning, while the digital approach to learning doesn’t require the cost or inconvenience of traveling. Interactions with other students can happen virtually through breakout rooms or other mechanisms. In the post-pandemic era, many educational institutions will maintain “live remote” offerings in addition to in-person or asynchronous digital programs. The schools can charge the same price, but the all-in cost to students is lower, while the value of the experience is still strong.
Other industries have found that customers are happy to pay more for a digital experience than previously thought. For example, Disney now launches some movies for a premium above what customers already pay for their Disney+ subscription. The price to watch Black Widow at home was the same as paying for a theater ticket in Boston. Kindle books often sell for the same price as paperbacks of the same title — especially surprising given the far lower distribution costs of digital products versus physical ones.4 Additionally, new ways that celebrities and performers engaged with customers during lockdowns and social distancing — such as Taylor Swift’s TV specials in lieu of live concerts, or rapidly organized fundraising campaigns by the casts of Hamilton and Star Trek — may persist as models for digital engagement into the post-pandemic world.5
Questions to consider:
What is the real value to the customer of the product or service you provide?
What need is it serving (that is, what job is it doing) for your customers?6
Can a digital approach actually be more valuable for your customers, or a value-added extension of your existing value proposition?
Customer Assumption 4:
Pandemic-era service restrictions are only temporary.
In a recent hotel stay, I was told that, because of COVID-19 restrictions, maids would clean my room only every third day. For the other days, I was on my own. This harked back to years ago, when hotels announced that they would refresh towels only every second or third day, gaining tremendous cost benefits ostensibly in the interest of global sustainability. Regardless of the real reason for reducing housekeeping services, I didn’t really miss it, and some hotels would still provide it if I asked early enough in the day.
I felt somewhat differently about hotels canceling free breakfasts and concierge lounges for their best customers last year, but I didn’t have much choice. Will hotels restore these services when COVID-19-related worries dissipate?
Because of restrictions on indoor dining, many cities allowed restaurants to build outdoor seating on roads and sidewalks. Others used lower commuter volumes as an opportunity to convert traffic lanes into bike or bus lanes on busy roads. These moves restricted traffic and parking but did not cause much uproar when people were not driving much. As people return to work, school, and entertainment venues, and traffic increases, will cities rescind these allowances to make room for pre-pandemic levels of traffic and parking?
While some people would argue that temporary restrictions should go away when life returns to “normal,” others could argue the opposite. Now that the public is more accustomed to restrictions and alternative ways of operating, expectations for what is required are no longer clear. Furthermore, as providers frame these restrictions in terms of a greater good, such as environmental sustainability or quality of life in neighborhoods, it becomes even more difficult for customers to unequivocally demand that they return to pre-pandemic norms. Hotels reducing daily room cleaning means less laundry and thus less damage to the environment. Traffic restrictions can motivate drivers to choose different commuting methods, or lead to quieter neighborhoods that are more pedestrian-friendly.
It’s much more difficult to remove services than to resist adding services. And it’s easier to resist adding services when vocal customer segments argue that adding the services runs counter to their values. Before restoring prior services and bearing the costs and other implications of that choice, consider whether the move is really necessary. Will your best customers flee your brand if the restrictions stay? Will other customers like your brand better because of what the restrictions represent to them?
Questions to consider:
Should those “temporary” service cuts become permanent after all?
Who will be affected — customers, employees, other stakeholders — if restrictions remain in place?
Should you reinstate the services only for certain time periods or high-value customers?
What would be the real value of removing the restrictions? Would everyone agree?
If you choose to make the restrictions permanent, how will you “sell” the idea? Do you need to?
Customer Assumption 5:
The old way was the right way.
Family businesses often encounter conflict as younger family members challenge the assumptions of older founders: “I’ve known our customers for 40 years. I know what they want” — except when you don’t. It also happens in startups and even large public companies, when entrenched leaders limit the amount of attention given to new ways of doing business. While far from optimal, breaking an entrenched management deadlock often comes only through a major upheaval — such as massive customer defections, the death of the founder, or a board intervention to change leaders.
COVID-19 has been a major upheaval. It spurred big changes. If and when conditions return to normal, it’s essential not to assume that “normal” is still correct. The pandemic caused huge changes in consumer behavior. While some changes were COVID-19 specific, many simply accelerated trends that were already underway.7 Yes, your customer may welcome an in-person visit to close a new deal or to maintain the relationship. But is it worth the cost and inconvenience — for both of you?
Customers may welcome the convenience of shorter virtual visits rather than long, in-person events. Or they might still want in-person meetings but fewer of them. Or some may want them, while others don’t. Similarly, customers may or may not want to pay the extra cost for onsite consulting teams.
What’s critical is to rethink the selling and service proposition for today’s environment, not yesterday’s. Present customers with new options, and they may reveal new preferences — or old ones that were not previously satisfied.
Questions to consider:
How do your customers want to work with you?
If two customers had the same preferences before COVID-19, do they have the same preferences now?
What is the right combination of in person and virtual, or of custom and commodity, or of high and low service levels, for your customers and for you?
Common among these assumptions is the need to reexamine the leadership mindset before making serious decisions about how the organization will work in the future. A key thought process for making this shift is to identify deeply embedded assumptions and assess whether they are still true. Not every pre-pandemic assumption needs to be rejected. But, using lessons from the past two years and considering what’s to come, now is the right time to think carefully about the assumptions that rule your decision-making processes.
Originally published on MIT Sloan Management Review