The impact of the on-demand economy on marketing
The British government has just released its latest housing white paper, aiming to address the chronic shortage of homes across the country. But what caught my ear when listening to the news on the radio was how keen minister Sajid Javid was to avoid focusing solely on getting people onto the property ladder, and how much he wanted to broaden this to include having more homes available to rent. Partly this is down to the enormous cost of buying a first home in most places, which puts it out of the financial reach of many young people, but also I think it reflected a change in how goods and services are bought and consumed. And it is a trend that marketers need to wake up to.
Quite simply, consumers, particularly younger ones, are now renting things that in the past they’d have bought outright. Why buy music or DVDs when you can access a huge library through services such as Spotify, Amazon Prime or Netflix for a monthly charge? Do you need to buy a car outright when you can hail an Uber or sign up to a flexible leasing scheme that means you never actually own the vehicle.
In many ways this reflects two major things that have happened over the past five years or so. The pace of innovation (and the uncertainty in the world) means that many people don’t want to be locked into a big ticket commitment such as buying an expensive TV which could be out of date in less than a year. They want to get things on-demand. You may pay more overall, but the flexibility, ability to change and regular billing rather than a one off lump sum makes up for the additional cost. It also fits with the more demanding expectations that consumers now have – if they don’t like something they can switch to a rival, rather than being locked into an agreement that they can’t get out of.
As I say, this dramatically changes how brands need to market themselves – in three key ways:
1 Build for the long term
We’ve all had the experience of thinking we’re valued by a business and then seeing new customers receive a better deal. Every year I have to point out to the AA that I could just cancel my membership and sign up for less, rather than pay the renewal fee that they want to charge me. With on-demand services companies have to keep the good experience going, day after day, week after week, if they want to retain customers. And that means marketing to them constantly, but without confusing them with complex offers that are designed to dupe them into spending more
2 Be personal
The advantage of on-demand services for marketers is that they are constantly generating data – what you watch, what you download, where you are driven by Uber. This is incredibly powerful knowledge, that needs to be used to personalise services and make the experience special. At a basic level it is recommending other films you’d like to watch, but it is also about offering better ways of using a service that may even save the customer money. That’s how you build real loyalty.
3 Exploit the network effect
The reason tech firms such as Facebook grow so quickly is the network effect – the more of your friends use a service, the more reasons there are for you to join. Keeping customers happy through clever marketing means you retain them, going beyond that by incentivising them to recommend you to their friends helps widen your customer base. Bear in mind the reverse also applies – annoy a customer and they’ll not only leave, but are likely to share their frustrations with friends and the wider world via social media.
The on-demand economy is changing many traditional markets, from consumer goods to automotive and travel. Marketers need to understand that this isn’t a passing fad, but a trend that more and more people are joining. It requires a move away from old-style marketing where the goal is getting someone to sign on the dotted line, to one where you need to keep nurturing customers to make them feel special. Campaigns need to be faster, more personalised, more adaptable and more immediate if you want to succeed in the competitive on-demand economy, whatever industry you are in.
Let me know if there are any areas I’ve missed when it comes to on-demand marketing in the comments section below.
Image courtesy Ryan McGilchrist on Flickr, licensed under Creative Commons https://flic.kr/p/bRt3qV
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