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Customer Experience, Mobile Ads, Ecosystems and Dwindling Retail Margins - 2013 will be a Watershed

December 28, 2012

One of the great things about TMC is that our CEO, Rich Tehrani, is not only is a wealth of industry insights that he shares on his blog and through videos and Tweets; he encourages us to comment on his views even when we have a different view. 

In that vein, I was keenly interested in his recent blog, “How Mobile Will Destroy Retail Margins.” I urge you to read this in its entirety, to say it is simply thought provoking does not do it justice. 

Rich and I have had a spirited discussion on the subject. I thought it was worth sharing some thoughts since I believe the impact of mobile ads becoming more pervasive has profound consequences on how businesses need to think about “E”verything — from contact center transformations to ecosystem business models to protecting and creating long-term sustainable profits.

I also believe that 2013 is going to be a pivotal year that will set the tone for many markets for years to come.

Consumers win but so can businesses

The best place to start is with the last item on Rich’s prediction list, “Consumers Will Win!” We happen to violently agree. His take is that winning will come with a cost. It is one he believes will be shouldered by businesses in the form of dwindling margins. I think this is all part of important long-term trends regarding perfect information, speed and the changed nature of buyer/seller relationships (see below).

It also has to do with the “creative destruction” of markets where rewards go to those who take risks and find ways (innovate) other than merely on price and hence can command a premium for their products and services. 

As many have observed, this creative destruction is a natural and good thing. It’s one of the reasons people think the United States will remain a beacon of invention and a dominant force in global markets. Interestingly, the case can be made that it is also why the term “customer experience’ has come to dominant so much C-level attention around the world. In fact, some variation of the position chief customer experience officer (CCE) had been identified as the fastest growing management position in enterprise small as well as big. 

What this translates into is that attention must be paid (and as implied above is starting to be) to making the customer experience compelling. This means not just through incentives, but by investing in technologies that make interactions pleasurable rather than a pain. Things like better online self-service, multichannel interactions, breaking down internal information silos so the right people have the right information at the right time to resolve problems and answer question (i.e., using “big data tactically and strategically), and leveraging the power of social networking and personal device ubiquity, are all important. 

I’ve argued in the past that we live in “The Age of Acceleration” where “E”verything is speeding up, and success will come to those who adapt to a world where even real time is becoming too slow.

2013 will be the year where getting around to investing in state-of-the-art technology that improves business process optimization and enhances customer engagement moves from being “something to do” to “something to do now!”

The context for all of this consists of the trends to which I alluded above. The first is that we are moving close to the aptly named “Market of One” predicted years ago by futurist Alvin Toffler becoming reality instead of a vision. Thanks to the Internet, customers have more perfect knowledge about what they wish to consumer and whom they can and should trust to provide it. As we are well aware, they’re exercising those options with alacrity.

On the flip side, advertisers now have access to a trove of demographic and psychographic information that is increasing exponentially (what some view as “creeping big brotherism”) that enables them to do targeting that is truly personal.

A corollary trend is that the Internet really did change the world profoundly when it comes to transactions because it disrupted permanently the historic buyer/seller relationship. The days of sellers presenting their wares as “take it, or leave it” are over. In tech, for example, proprietary solutions are out, and ecosystems are in.

Today, if you can’t give me with what I want, the way I want it, in the time frame I expect it, within my zone of perceived value, someone who can and will is only a click away. And, consumers increaslingly take a holistic view about transactions taking into consideration not just the price, but convenience, post-sales support, warranties, loyalty programs, etc. The customer is now King and or Queen, and this is not just a profound and permanent change that must be accommodated, but social media has made it so that if you do not provide satisfaction you can and will be harshly punished.

Back to where I disagree     

With the above a prolog, where Rich and I disagree is about mobile killing retail margins. I think that will only be true if businesses let it. Yes, there is a market that is price sensitive that will always be. However, Apple has proven, and the question that Rich raises about whether they will continue to do so is a great one, that things like design, ease of use, ecosystems and marketing matter.

Case in point is that Samsung currently is causing Apple heartburn because it is now seen by many of those in the younger generation as “cool” and the iPhone has been forced to fight back against the perception that it is now looked upon as something mom and dad like. 

This brings me back to that customer experience thing. Rich had several predictions about where technology will be going and industry trends to watch this year. I think the biggest one to watch is the one about user acceptance or diffidence to mobile advertising. I may be showing my age here, but I believe we have already reached the state where we are getting too much info on our personal devices from advertisers, and more useless junk takes time to delete and helps drain my battery.

The big trend I’m hoping for, with the emphasis on “hope,” is that not only do we move to a more permission-based approach where I only get what I agree to receive, but that the further evolution of the transformation of the buyer/seller relationship starts to manifest itself with vendors, particularly social media companies, paying me for the use of my personal information. 

Now that’s a customer experience I can relate to. 

It is likely to have ripple effects on whose margins get adjusted in ecosystems and value chains, but I think in the long run, retailers would benefit from the value of increasing trust, which can be leveraged into charging a premium.

As the Billy Joel hit song says, “You may be right, I may be crazy, but I just may be the lunatic you’re looking for.” 2013 is certainly shaping up as a critical year, and I’m sure Rich and I will have plenty more to say about all of this with each other and with you.

Happy New Year from all of us at TMC.  

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Edited by Braden Becker