Digital technologies are transforming every aspect of our lives – at home and at work – and how we interact with others. As customers, we are now empowered as never before. These technologies have put enormous power in our hands, and our expectations from companies are skyrocketing. What does this mean for businesses? Simply this: They need to keep the customer at the center of everything that they do and offer a superior experience. Customers will choose companies that offer them hyper-personalized and differentiated experiences, says Seeta Hariharan, general manager and group head at the digital software and solutions group at Tata Consultancy Services. In a conversation with Knowledge@Wharton, Hariharan explains why it is imperative that companies understand their customers’ needs and offer them the right products and services at the right time and in the right context.
An edited transcript of the conversation follows.
Knowledge@Wharton: We hear a lot about digital transformation these days. What are your thoughts on the state of the digital economy globally?
Seeta Hariharan: Digital tools, technologies and platforms have seen an unprecedented rate and pace of adoption in the last three years. They have changed how we live, how we work, and how we interact with each other, and most importantly, how we interact with companies that we do business with.
Let’s look at some statistics. The world population is approximately 7.6 billion. We have around 4 billion active internet users, 5.1 billion unique mobile users and 3.2 billion social media accounts. What is even more interesting is that we added nearly a billion to 1.5 billion users in each of these categories in just the last three years, between 2015 and 2018. Now add Internet of Things (IoT) to this mix. In 2018, we will have nearly 28 billion Internet of Things [devices]. Think about it — 28 billion. Everything from cars to doorbells to bracelets to cameras to appliances at home, and even garbage cans [will be connected]. My car today can accurately predict where I am headed based on the time of day and day of the week. My vacuum machine informs me when my house is clean, and my garbage can tells me when I need to clear it.
This is an exciting time both for customers and businesses. Businesses need to figure out how to interact with their customers, how to deliver superior customer experiences.
Knowledge@Wharton: What are some of the implications for which companies go on defining their customer’s experience or the customer’s journey? And even more interestingly, what do you think this means for the kinds of expectations that customers have of the way in which they will relate to companies that they deal with?
Hariharan: Even just a couple of years ago, companies said that they need to be online if they have to survive in the digital world. They said, people are spending about a billion years on the internet every year and therefore they need to be able to provide their customers online access to their business. But that isn’t enough anymore because every business, even the mom-and-pop stores, have an online presence. So what more can businesses do? How do they ensure that the experiences that they provide to their customers are consistent across all of the channels? How do they differentiate between the experiences that they offer versus what some of their competitors are offering? These are some of the challenges that businesses across industries are grappling with today.
“In this age of digital transformation, there is one thing that is constant, and that is the customer.”
Knowledge@Wharton: How do you think companies should relate to their customers? More importantly, what has changed about the relationships between companies and the customers, and what has not changed?
Hariharan: In this age of digital transformation, there is one thing that is constant, and that is the customer. Who could have described customer experience better than some of the entrepreneurs here in the U.S., as well as in Britain, right? Some of the names that come to mind are John Wanamaker, Marshall Field, Harry Gordon Selfridge. The catchy phrases that these guys came up with ring true even today. “Give the woman what she wants.” “The customer is king.” “The customer is always right.” What has changed with the digital technologies is that it has put more power in the hands of the customers. And businesses need to figure out how to interact with their customers better.
Knowledge@Wharton: Could you give some specific examples?
Hariharan: Let’s look at two insurance companies. The mission statement of the first insurance company is to offer health insurance policies to its customers. In the digital world, this company says that I am going to make sure that my service and products are accessible to my customers both online and in the physical world. They can interact with me any way they choose to, including on their mobile devices. The second insurance company, on the other hand, says my mission statement is to be a partner to my customers on their wellness journey. Consistent with its mission, this company not only sells health insurance policies, it also cares for its customers’ well-being. For instance, it connects its customers to the local gym. It encourages them to exercise regularly. It motivates them using gamification. It reminds its customers to get their annual physicals. This is an example of a company that cares for its customers. And healthy customers means that fewer insurance claims will be submitted. It also means that their insurance premiums could go down over a period of time. In this example, the first company has a transactional relationship with its customers. The second one, based on its stated mission as well as its behavior, is able to deliver connected customer experiences, thereby owning the journey of its customer.
Knowledge@Wharton: Could you drill down a bit deeper into what you just said? What do you mean by a connected customer experience, or connected customer journey?
Hariharan: Let’s take the example of a grocery store. I have always thought of grocery stores as someone that does mass marketing, or at best, demographic-based marketing. I have been frustrated that my grocery store just doesn’t understand me even though I have shopped with them for the last 20 years and I have their loyalty card. They still send me coupons by snail mail for products that I have never bought from them. Like meat, for example. I am a vegetarian. So I got really excited when a couple of months ago one of my customers, a grocery store, came to us and said they wanted to understand their customers better. They wanted to do behavior-based segmentation. They wanted to understand the personas of each and every one of their customers. What this means is that the store wants to understand where their customers live, where they work, what is their education level, what they consume, how they shop, why they shop, what motivates them to shop, what motivates them to come into this store, and so on. And based on all of this information, which is the persona of an individual, they wanted to drive customized campaigns.
“Persona-based segmentation is the key to understanding the customer and to delivering customized campaigns.”
But what I explained to them got them even more excited. I painted a vision for them on how they can own the journey of their customer. Let us assume that you are one of their customers and they know that you are affluent, you work here at Knowledge@Wharton, you are highly educated, you shop with them regularly, and you shop on Saturdays with your wife. One Saturday, you walk into their store and you pick up a bottle of champagne because you have guests coming to your place. And as you are walking down the aisle, the store sends you a short video notification. You are curious and you open the video. You see people enjoying that bottle of champagne that you just picked up, along with some beet and cumin soup, and bread and cheese. As you are watching the video, the store sends you another notification asking you if you want to purchase some beetroot. You say yes. To your further surprise, a store attendant comes to you and hands over some beetroot and bread and cheese. This is a very simple example of connected customer experiences.
Knowledge@Wharton: That is a great example. But to do something like this for a customer, at this level of elaboration and intricacy, would be quite an expensive exercise. So do you do it for every customer or only for some selective customers? If it is the latter, how do you choose whom to target with this level of service?
Hariharan: This is where the persona-based segmentation comes into play. Personas help retailers understand what sort of a customer they are dealing with. For instance, some customers shop at a particular store based on sales, while other customers shop there on a regular basis and are extremely loyal. For these loyal customers, the store can offer differentiated experience such as the one we just spoke about. So persona-based segmentation is the key to understanding the customer and to delivering customized campaigns. What makes this easier today is that we have technologies to do this.
Knowledge@Wharton: One example that came to mind as you were speaking about the grocery stores was Amazon’s recent acquisition of Whole Foods. When you go to any Whole Foods store they ask you if you are an Amazon Prime member. And if you are, then you immediately get some discounts. What I found very clever about this is that Amazon Prime already has very detailed information about customers and it would make it fairly easy for them to build such customer personas as you were describing by combining the online and offline experiences.
Hariharan: Absolutely.
Knowledge@Wharton: How can companies deal with a giant like Amazon? What should other retailers be doing to react to this?
Hariharan: Like Google has become the de facto standard for searches, Amazon has become a de facto standard for product searches and product purchases. I believe that customers will do business with companies that offer them differentiated experiences, memorable experiences. I was talking recently to a friend who has four dogs and he buys a lot of dog food from Amazon. I asked him what would make him go into a neighborhood pet store. He said Alexa reminds him when he needs to order dog food and the prices on Amazon are quite competitive. He simply orders them from the convenience of his home. He didn’t see any reason why he would change that behavior, why he would go into a neighborhood pet store. So I asked him whether he would go into that store if they offered to shampoo his dog. He immediately said yes. He added that he would go to the neighborhood pet store even if they offered to brush his dog’s teeth. So that is the motivation for him to change the behavior to go into a pet store.
In order to change the behavior of a customer, businesses need to understand what motivates them. For this, they need to understand their customers as individuals. They need to understand the personas of the customers. Once the customer goes into the pet store, they can understand more about him. For instance, they can understand if he travels a lot and therefore if he needs pet sitters. They could then offer even those services and figure out how to secure his loyalty.
“Customers will do business with companies that offer them differentiated experiences, memorable experiences.”
Take my own example. I prefer to buy my appliances from Bed Bath & Beyond because when the appliances don’t work, even if it is beyond the warranty period, I can take them back to the store with no questions asked. And they give me a refund even if I don’t have the receipts. That is a differentiated experience that motivates me to buy products from Bed Bath & Beyond. So, in this age of Amazon, what is important is how do you understand your customer and how do you deliver memorable and differentiated experiences for them.
Knowledge@Wharton: For companies to understand customer behavior at a deep level and work with not just their own business enterprises but across a network of companies to deliver unique experiences would require a tremendous understanding of data. And one of the biggest issues with data is privacy. What are your thoughts on some of the implications for companies and customers regarding how this is going to play out?
Hariharan: The GDPR [General Data Protection Regulation], which is a European regulation for privacy, came into effect on May 25th this year. Companies have been working towards complying with those regulations. I am 100% certain that we will see some form of those regulations here in the U.S. as well. My view has always been that the privacy regulations, the data regulations, are a good thing for customers as well as for businesses. In the case of the customers, it makes it clear that customers own their data. Companies need to get explicit permission from the customers to use their data. They need to be transparent and explain to customers in a simple language that they can understand, instead of pages of legal documents, about how they plan to use the data. GDPR even goes a step further. It says that if there is a breach, you need to inform your customers within 72 hours, along with a timeline for action. So it is a good thing for customers.
Your other question was what does it mean for businesses. I sincerely believe it is a good thing for businesses. If you go into an enterprise today and look at where the data is stored, you will see it is stored across various silos within the organization. The customer data exists within IT, within CRM [customer relationship management]systems, within operations, in marketing. And each of these silos has its own data strategy as well as its own data governance strategy. So enterprises are struggling to figure out how to get a handle on their customer data. I think any kind of privacy data regulation will force businesses to rethink their data strategy and their data governance strategy. The first step that they would need to take is to get a handle on their customer data. As we know, getting a handle on the data allows you to understand your customer, and that is key to delivering superior customer experiences. So there is a silver lining even for businesses when it comes to these regulations.
Knowledge@Wharton: A part of the challenge around data is that people are concerned about who has access to what data, and even more importantly, how that data is used. There have been some recent moves towards technology companies and social media companies wanting access, for example, to financial information. This is already going on in other parts of the world. What are your views on how this is likely to play out?
Hariharan: Yes, we recently read about Facebook reaching out to many of the financial companies to see if they can get access to customers’ financial information, checking account information, saving accounts, their credit card transactions. In my opinion, delivering customer experiences start with transparency and understanding that customers own their data. As companies, we need to be transparent with our customers in how we plan to use the data.
“The key to solving digital transformation is to keep the customer in the middle of everything that you do.”
Knowledge@Wharton: In your role at TCS, you must be coming across a number of companies that are trying to figure out the best way to use technology and their systems to engage more deeply with their customers and build relationships rather than transactions. What are some of the challenges or mistakes that companies make and what could others learn from their experiences?
Hariharan: One of the things I have seen in the last few years is that enterprises think that they must bring people who are focused on data or digital. So they fill their C-suite with chief data officers, chief digital officers, chief strategy officers. But while people are important to any organization, they aren’t going to solve the problem. What I have also seen, which is a little disappointing for me, is that there have been departures of these high level execs from the organizations. Another challenge with digital transformation is that the business teams have to work hand in hand with the IT teams. Traditionally, IT has made decisions on technology while the businesses have worked to attract customers or increase the basket size of revenue per customer. Now, IT and businesses are forced to work together.
The key to solving digital transformation is to keep the customer in the middle of everything that you do. Have this unfailing commitment to listen to your customers, what they want, how they want to interact with you, and provide memorable and differentiated experiences to them. That, in my opinion, is key to solving the problem and challenges that enterprises face. Technology will certainly follow.
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This article first appeared in www.knowledge.wharton.upenn.edu
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