How Digital is Creating an Experience Economy (Part One of a Two-Part Series)
Digital is reshaping how consumer-facing organizations approach customer engagement. Buckle up as we navigate three industries to see how key players are applying digital to outperform in the experience economy.
A look at this list of billion-dollar companies that didn’t exist 10 years ago reveals a couple of important things: these companies are all enabled by digital, and central to their offering is the idea of creating a great experience.
Today, Spotify can create personalized playlists based on listening behavior, and Instagram and Twitter suggest tweets and pictures for millions of users based on their likes. And following Netflix’s lead, Hulu and Amazon Prime now curate shows based on a deep understanding of user preferences and viewer behavior. This, in a nutshell, is the experience economy; and going by how eagerly players from incumbent industries such as banking and insurance have jumped on to the bandwagon, it is here to stay.
Consumers are prioritizing leisure and time with family and friends, and millennials are willing to spend more on experiences. So much so that customer experience is expected to overtake price and product as a key brand differentiator by 2020. By 2028, global expenditure on the experience economy is expected to reach $8.2 trillion, according to Euromonitor.
Consumers seek positive emotions and memorable interactions with their preferred brands. Businesses will do well to pay heed, because those that are committed to creating exceptional customer experiences are nearly twice as likely to have exceeded their top business goals. On the other side, companies lose more than $62 billion due to poor customer service. However, it is equally important to get it right in the experience economy. The fact is that businesses are walking a thin line when it comes to the experience economy. They not only need to develop a deep understanding of their customers, but also execute their plans in the right way to stay ahead of the competition.
Part one of this multi-part series explores how companies in three major industries – media & entertainment, banking, and healthcare – are approaching the experience economy.
CX is Driving Business Strategies
Media & Entertainment
Digital is redefining the future of media consumption, and incumbents as well as newcomers are locked in a race to grab a bigger share of the pie. It can be argued that the media and entertainment industry is synonymous with the experience economy. But like all major industries, this too has been disrupted by technological and demographic forces. The rise of mobile as a key platform for consuming entertainment is everywhere to be seen; millennials have little to no interest in sitting glued to their television screens, choosing instead to focus on acquiring memorable experiences that they can live and share.
A survey by Eventbrite found that Americans consider two things essential to promoting positive change in the future: namely, connecting with one another in real life, and the resulting expansion of perspective. Consequently, four out of five Americans have attended live events — from concerts and beer fests to marches and rallies.
Meanwhile, digital is making it possible for people who cannot experience an event live to experience it from their living rooms using virtual reality (VR) headsets. Super Bowl 2017 was the first Super Bowl to be broadcast live in VR; this year it was broadcast live to VR headsets via 5G networks. VR content, in the meantime, is booming, and is expected to reach $41 billion by 2024 with gaming leading the way.
Taking the VR game a step further, Oculus launched Oculus TV this year, which allows users to watch 2-D video in virtual reality. These developments are happening in the backdrop of unprecedented struggles by old media companies to stay relevant through mega mergers and acquisitions such as Disney’s acquisition of 20th Century Fox. The fear of irrelevance experienced by these companies even has a name: FAANG (or Facebook, Amazon, Apple, Netflix, and Google). Who will emerge as the leader in this race remains to be seen. However, thanks to digital, the way content is created, delivered and consumed will continue to evolve and lead to further disruption and innovation.
Banking & Financial Services Firms
Banks have come a long way over the past decade in offering personalized banking experiences. From SMS-based services to banking apps designed for the Apple Watch, the banking sector has witnessed a tidal wave of change in the way players interact with their customers. This is despite traditionally being slower in embracing new technologies. This change in attitude towards technology has come to define the new avatar of banks as entities that strive to provide an experience that is familiar for users of services such as Facebook and Amazon.
This is just as well because 97% of millennials now have smartphones, and expect banks to provide an easy-to-use interface, according to Nielsen. If their bank fails to do this, they won’t shy away from switching to one of the many non-traditional providers that have sprung up in the digital age. Innovation has emerged as the top priority for banks of late, and banks are looking to create user experience (UX) that increases customer satisfaction. They have employed new approaches to innovation, including innovation labs, crowdsourcing and executive engagement.
The European Union’s Revised Payment Service Directive (PSD2) is expected to enable innovations on the user experience front by allowing banks to share customer data. Banks are also working with firms specializing in design thinking in order to understand their customers’ needs better.
Nevertheless, banks realize that the physical aspects of customer experience are as important as the digital ones. To this end, some banks have tried to combine physical networks and digital touchpoints to create a “phygital” distribution model. This allows banks to supplement their digital efforts by providing in-person advice — thus offering their customers the best of both worlds. India’s Fino Payments Banks, for example, combines branches and Android-based mobile points of service (mPoS) touchpoints to reach its 400,000 customers.
For an industry so heavily reliant on in-person interactions between care givers and patients, healthcare’s move to improve patient experience is, relatively speaking, very recent. Two reports from the Institute of Medicine (IoM) — “To Err is Human” (1999), and “Crossing the Quality Chasm” (2001) — set in motion a deep introspection of how hospitals treated their patients. The reports’ impact was wide-ranging and not limited to the U.S. alone.
Healthcare providers responded by focusing on measuring and improving key aspects of clinical quality. Things have come a long way since then. Between 2010 and 2014, for example, there was a 17% reduction in adverse events at U.S. hospitals according to the Agency for Healthcare Research and Quality (AHRQ). The Affordable Care Act (ACA) further incentivized hospitals to improve patient outcomes instead of paying hospitals based on amount of healthcare services delivered through value-based care.
Quality of care is directly linked to patient experience. Nevertheless, healthcare organizations are also incorporating technology to directly address the issue. Improving patient experience is a top priority of hospitals and the industry is more consumer-focused than ever. Eighty percent of healthcare CIOs consider digital health and patient experience as their organization’s top priority, according to a survey by Impact Advisors and the Scottsdale Institute.
Patient- and provider-facing tools are making care delivery easier and timelier. Wearables, care management apps and self-service tools are empowering patients to improve their quality of life. Evidence-based hospital design is another approach that hospitals have employed to improve the experience of patients and their families during their stay at the hospital. Improving patient experience is crucial for one more reason: much like their counterparts in the media and banking industries, the emergence of non-traditional players has made it imperative for healthcare organizations to stay competitive or risk irrelevance.
Meanwhile, the U.S. government has launched initiatives such as MyHealthEData and Medicare’s Blue Button 2.0 that aim to improve patients’ access and control over their personal health data and improve the overall patient experience.
Part two of this series will explore the challenges faced by organizations trying to improve their customer experience and how to overcome them.