Insights
Customer Experience
Companies that make the right investments now could gain a lasting advantage in serving customers. Three priorities will be critical.
To win in the next normal, companies need to identify the current behaviors that will drive the customer experience in the near future. Then, they must ensure that these opportunities are aligned with their business strategies and capabilities. We believe three priorities will drive customer experience in the post-pandemic era: digital excellence, secure and contactless engagement, and dynamic customer insights. Each company will pursue these priorities differently depending on its industry, starting point and competitive landscape. Many companies are already demonstrating that they know what matters to customers and have found innovative ways to meet customers' old and new expectations. These trailblazers offer a valuable point of reference for how to proceed.
In anticipation of tougher times, customers are significantly curtailing their spending in almost all categories. This trend is likely to continue. As the crisis in Western economies reached its peak, more than one-third of Europeans and Americans said their income had been negatively impacted by COVID -19. In fact, half said they had reduced their spending in the past two weeks, and 40 percent of Americans and 44 percent of Europeans expect to spend less in the next two weeks as well. Overall spending is expected to drop 50 percent across all consumer categories, but certain items necessary for shelter will increase: Food (up 14 percent), entertainment (up 13 percent) and household goods (up 3 percent).
In China, which is a few weeks ahead of the other countries in the COVID-19 crisis, consumer spending has not yet returned to normal. Consumer surveys have found that discretionary spending has declined by 30 to 60 percent and retail transactions by 20 to 50 percent. These trends are accompanied by a decline in foot traffic to retail stores and an increasing reliance on digital channels focused on convenience.
While financial space may be increasingly limited, many clients now have an overabundance of time. On-site protection requirements have triggered record-breaking engagement with online and digital platforms, and customers are rapidly replacing or supplementing physical and in-person activities with digital equivalents. Customers are spending significantly more time online: Nearly half of consumers have started or increased online streaming since the outbreak of the pandemic. At the same time, demand for data and bandwidth has skyrocketed; a recent review of web analytics shows a four-fold increase in Google searches for "data plan upgrade."
Across the globe, businesses have been quick to adapt to the massive shift to digital channels. There is now a digital or online equivalent for all sorts of activities - from meals and grocery shopping to finance, education and fitness - many of which are seeing a rapid increase in users. Almost all organizations, whether traditional businesses or start-ups, are realigning their business models to become more digitally oriented. It is highly likely that consumers will prefer to use many of these digital offerings post-crisis. The Chinese market, for example, expects online penetration to permanently increase by three to six percentage points due to embedded COVID-19 behavior.
These concerns have prompted customers to rapidly change the way they want to connect with the world, with secure and contactless operations a top priority. In immediate response to the pandemic, some businesses have taken steps to protect customers. Grocery stores have set specific hours for elderly customers. Urgent care clinics have set up drive-through services that allow passengers to get tested quickly and safely COVID-19 without having to enter a health care facility. In many cities, customers can now get their cars repaired through a mobile service or a pick-up service. Businesses that have made these adjustments have clearly shown that they know what matters to customers and are willing to adapt. Consumers who have become accustomed to this new touchless world may not return to high-touch stores and crowded shops—even if health authorities deem it safe.
The changes in customer behavior that COVID-19 reflect the acceleration of expected trends, the emergence of new preferences, and a complete reversal of some long-standing routines. Taken together, this mix will continue to evolve and form the basis for the next normal. The good news is that companies have the potential to not only guide future customer behavior through "nudging" - proactively encouraging behaviors that are likely to endure post-pandemic—but also to be at the forefront of shaping the customer experience in the next normal.
The most successful companies to date have been able to understand which behaviors and experiences are here to stay and invest in them specifically. This approach is easier said than done: companies must simultaneously monitor consumer trends, adapt their business models, plan for business continuity, and ensure the health and safety of their employees-all while managing the chaos and ambiguity of the crisis. In this environment, leaders must be able to prioritize and resist the temptation to just chase the latest news or get distracted by shiny objects. The wave of products and apps designed to meet coronavirus-specific demand may soon oversaturate the market, and we are likely to see standout offerings rise to the top while others fail to gain significant traction.
In the next phase of normalcy, successful companies will seize the opportunity to adapt to changing customer behavior, achieve short-term business success, and strengthen their long-term strategic position. This effort will require leaders to reimagine and reform the customer experience through thoughtful, targeted investments, starting with three priorities. Companies that laid the groundwork before the crisis will be at an advantage, but all organizations can make significant progress with careful decision making.
Digital channels will help businesses meet changing customer needs and expectations and prepare for future industry changes. The bar for digital excellence, already high before the pandemic, has become even higher.
Many companies, from mobile operators to food delivery services, have made targeted investments in building or enhancing their digital capabilities. Several themes have emerged. Successful companies have used an agile, iterative approach and design thinking to identify new digital opportunities beyond their comfort zone. These companies also emphasize digital opportunities that strengthen core businesses and lay the groundwork for broader digital transformation. Some companies have expanded their digital capabilities by evolving their portfolio through mergers and acquisitions or divesting lower-potential holdings.
Tesla's sustained commitment to reinventing the car-buying process through digitization has proven particularly prescient. Its state-of-the-art digital showroom and virtual user experience provide customers with a comprehensive online experience, and its touchless vehicle delivery is tailored to the current environment. An active online community of car owners complements Tesla's customer service. To expand its online reach in China, the automaker has partnered with Alibaba for a Tmall online store. From December 2019 to March 2020, Tesla doubled its sales in China, while other automakers saw a 50 percent decline during the same period.
In Singapore, DBS designed the first remote bank teller service. Customers are served in a sterile room with video-conferencing equipment to speak with remote bank tellers about their normal over-the-counter banking services. This saved significant operating costs that a traditional bank branch would incur during pre-COVID times.
Companies that accelerate their digital offerings can be more engaged now—digitization forces simplification, which customers love—and be prepared for more cost-effective operations in the years ahead. They should focus on creating a virtual, digital experience that is on par with - or even better than - the in-person experience. Success in digital channels also has the potential to lower the cost of in-person sales and increase reach: By making virtual experiences more widely available, satisfied customers can become advocates. To grow their virtual presence, businesses need to assess their capabilities and then decide how best to expand them. Even retailers without a strong digital presence could partner with online marketplaces or delivery services, for example.
With public health fears and excitement about innovations in contactless transactions, secure approaches to offering products and services will be critical. Customers will continue to recalibrate their expectations for security during the pandemic, so businesses will need to respond accordingly. Simple adaptations, such as methods to facilitate physical distancing in stores, have already become ubiquitous, if not mandatory. However, companies that offer creative alternatives to in-person visits can improve the customer experience and increase return on investment.
To figure out where to invest, companies should first identify the in-person interactions in their value chain that may need to be addressed. By developing and prioritizing risks based on security, operational and financial risks, companies can develop a roadmap and implement immediate and longer-term solutions. The environment and customer preferences will continue to evolve, so companies should be prepared to adapt, iterate, and implement changes across the enterprise.
Companies across all industries have redesigned their processes to improve security and demonstrate their commitment to customers and employees. Delivery companies have adopted touchless packaging and shipping methods, as well as text notifications, to eliminate face-to-face contact. Leading retailers have moved quickly to offer online ordering with delivery or secure pickup.
Companies that want to prioritize safety should focus on designing an end-to-end touchless journey, but with thoughtful human touches. For example, a meal delivery service names the person delivering the meal, conveying that the company cares about the well-being of employees and customers. By simplifying access and use across digital and physical channels, companies can improve both safety and customer satisfaction.
Increasing digitization also means that more dynamic data will be available to businesses. Now is the time to invest in the data, technology and systems needed to deliver exceptional experiences in a rapidly changing environment. These investments should be aimed at anticipating and predicting customer sentiment and value. This often means being more proactive and responding in real time. To do this, companies must leverage data and analytics tools that provide immediate insights into the customer experience and overcome the myopic and reactive nature of surveys.
For example, one airline has developed a data-driven system that uses machine learning to predict and respond to customer satisfaction and revenue trends. The system's predictive insights enable a wide range of use cases, from real-time performance measurement to strategic planning to proactive engagement strategies such as personalization and "surprise and delight" programs. Early adoption enabled the team to respond more effectively to delays and cancelations. By acting on predicted customer sentiment and outcomes, the airline was able to more effectively focus its efforts on customers most at risk of churn, achieving an 800 percent increase in customer satisfaction and a nearly 60 percent decrease in churn intent.
Investing in these types of comprehensive, predictive, data-driven systems could allow companies to gain insights and respond more quickly to customer needs in times of crisis. Companies that capture all customer data, not just that of survey respondents, gain more accurate insight into their customers' needs and expectations. With these insights, they can take more meaningful actions to maintain and build customer trust while increasing customer value and reducing service costs.
The next normal will be anything but static. The landscape of customer experience continues to evolve from week to week, so companies can not take a "set it and forget it" approach and expect to still stand out. Instead, executives should consistently monitor business trends-growth, stagnation, and decline-against their current business strategies to identify new opportunities in the "fast accelerator" and "potential to hold on" quadrants. To respond quickly to an ever-changing environment, companies must have a broad base of employees who know how to empathize with customers, apply customer insights, and reshape the customer experience through digital excellence and contactless engagement. Now more than ever, it's time for companies to invest in building these skills and take advantage of all the digital learning tools now available to us.
Companies that review their digital portfolio, define the key interactions in the value chain, and focus on the most important aspects of the customer experience will be well positioned to satisfy customers, regardless of how expectations and preferences evolve.
The impact of COVID-19 on customer behavior has been far-reaching and immediate. Spending in most industries is down, purchases have shifted from in-person to digital channels, and public safety has become a top priority for businesses and consumers alike. Executives who had carefully crafted omnichannel strategies to create unique, compelling customer experiences have had to throw their playbooks out the window and improvise to keep up.As companies prepare for the long haul - what we call the "next normal" - the path forward is anything but clear. The situation changes from week to week and can vary dramatically by region. One of the biggest challenges is figuring out which customer behaviors and trends will last and which will eventually regress. Companies that invest in the wrong capabilities could find themselves as underdogs as competitors that can provide exemplary customer experiences cement their advantage.