People behind personas

Published on April 21, 2019 and updated on November 16, 2021.

It is nothing new that today’s customers are infinitely more demanding and powerful than those from previous decades. If back in the day customers could choose any color for their cars, as long as it was black, now customers won’t even buy depending on how the company position itself when facing controversial topics. Companies, on the other hand, aren’t being able to match customer expectations within reasonable time. I’ll write about who I believe is this customer, how customer behavior changed throughout decades and what I believe that is missing in order to match the expectation of this generation of customers.

Consumer empowerment

It is interesting to think that professionals from areas based on technology use tools and processes that did not exist twenty years prior, created to work with business models that also didn’t exist few years prior. Bank Credit Suisse estimated that the average lifespan of companies listed at Fortune 500 dropped from 60 years on the 50s to less than 20 years in 2012. The main cause of death according to the report is automation. In a nutshell: new players are entering the market with technologies and processes that enable significant improvement to production and distribution of what they do, flooding markets with competitive prices and better quality, removing those that can’t adapt to the new way of doing business. Between the 50s and 80s, the average lifespan of big companies had already dropped 35 years due to automation.

Consumer behavior nowadays is a direct consequence of these changes. With access to products with better quality, cheaper prices and faster, customers understood that they could choose. I believe that this process was phased:

• In phase 1, customers could change colors, sizes and experiment new options;
• In phase 2, customers could compare prices, brands, models and experiment different choices altogether;
• In phase 3, customers could personalize products that were previously generic and, with this, choose products suited for their very specific needs. This goes from hiring a health plan to choose the hardware pieces for a new computer, from anywhere and using whichever device he or she wants;
• In phase 4 – and where I believe we are – customers only deal with companies that they trust.

From customers to subscribers

I don’t know about you, but I’m the type of person that only changes the hairdresser if its shop closed or for some reason the person that cuts my hair is not attending anymore. If I try to guess why is that, I would say that this is because I feel I’m in a comfort zone by entering a place where people already know me and I already know them, they already know my hair style and feel good to talk while cutting my hair. One year prior to the writing of this post the price got higher, which made other places have better prices. For me, paying more but keeping on going to the same place and seeing the same people is worth the extra price. Is there something like this for the digital environment?

Update 16/11/2021: The pandemic made me learn how to cut my own hair. I never thought on doing this when this post was published.

In his book Subscribed: Why the Subscription Model Will Be Your Company’s Future – And What to Do About It, author Tien Tzuo argue that selling things to people and then losing contact with them will make no sense anymore. He states that people are changing their mindsets from having things to accessing them to obtain their benefit once it is needed when they need it. In this context, companies should be capable to offer value at the moment people need it, and, for that, it is necessary to change the way how relationships are built between companies and people. Tzuo says that this generates competitive advantage as the relationship gets stronger, because companies will have exclusive access to volumes of data about each person, and this will enable deliveries that are close from something handmade, not unlike what is delivered by Spotify and Netfix. Customers become subscribers, and companies must figure out ways to deliver constant value on different contexts. One example of this is when using ride sharing apps such as Uber (categorized by Tzuo as being a subscription service), which transports hurried people to work, friends to a show, visits to a mother’s home or food delivery, to cite some possible use cases. It can be the same person, the same product, the same usage, but with different contexts, what generate different perceptions of value. Independent from context and moment, the company is ready to serve their needs at the right time for them.

The first step to trust: a safe infrastructure

Considering that Uber can be defined as a subscription service, what exactly is that kind of service? According to Tien Tzuo, it is a type of service in which there’s an ongoing relationship with its subscribers. Periodic payments are very important on Tzuo’s concept, but something equally or more important is the ability to observe and learn what customers are doing with the product. This is what allows for maintaining a good relationship and preserving the trust. This may not look like something new or a big deal, but the infrastructure that allowed this way of doing business is quite recent, at least in Brazil.

The milestone for the digital recurring payment solutions ecosystem in Brazil was in 2010, when Brazilian government allowed to dissolve the monopoly of access to card flags. The approval of the legislation attracted new competitors. The government passed a new law in 2013 establishing the creation of a standard infrastructure by which all payment networks operate. It was just then that recurring payment solutions gained traction in Brazil: gateways and sub-acquirers that intermediate payments between acquirers and the remaining actors of financial ecosystems for accessible prices. This solutions allowed the formation of complex automatic financial systems, establishing roots for the construction of recurrent business models. In 2017, the Central Bank of Brazil (or BACEN), financial legislator, determined that all credit card transactions should be done only by authorized financial institutions, which made these companies comply with law requirements.

The most important thing to notice in the previous paragraph is the time: note that we’re talking on 2010 forward. In less than a decade companies from many different segments and based on subscription business models were born in Brazil. To show an example, access the website of Brazilian sub-acquirers and browse on their customer pages. Now, access the websites of some of their customers and check the dates in which they were founded. New companies are born in Brazil already looking to create ongoing relationships with its customers on recurrent business models.

Great, we have the infrastructure to create businesses that are premised on the ongoing relationship with customers. The only thing missing is the post sales strategy.

The second step to trust: don’t stop after the sale

Quoting Tzuo’s book again, the author argues that we’re doing business the same way for more than 120 years: mass producing products, sending those products on what we believe are strategic channels and evaluating the return in order to redistribute the budget on the more promising ones. The cycle repeats and companies are satisfied once sales are made. On subscription business models sales are just the beginning of the relationship, and this forces companies to rethink their strategies to deliver value when customers need.

In the perspective of digital subscriptions, delivery channels are all connected. People interact with companies on several fronts and expect a consistent experience. Value is delivered on all these channels. Several things change inside a company to make such model work:

• There isn’t a single marketing channel to make sales anymore. There are many;
• Several payments are done by the same people and a recurring payment management model should be in place;
• If sales are just the beginning of relationships that can easily be broken, it is necessary to think on retention strategies;
• Relationships can change at any momento: customers may want to add more features on top of what they already have, cancel some or the entire subscription or buy standalone features. A system should be in place to allow customers to adjust their plan as needed.

Customers are starting to expect companies of any nature to behave like subscription services. Companies taken as good examples of subscription models, like the ones cited in this post, aren’t remembered for being subscription based companies. They’re remembered due to having long lasting relationships with its customers. They are “digital hairdressers” that bring convenience at a cost evaluated as good for those who subscribe to them. They demonstrate to know their customers to deliver personalized value and provide humanized support, also personalized, for any issues that arise during the relationship. This is how to strengthen trust. Is by cultivating trust that a company built its brand.

Brand: from synonym of quality to synonym of value sharing

A legion of customers, or subscribers, that trust in the relation that they have with companies from which they shop is what strengthen a company’s brand, a vector that represents perceptions and ideas defended by a company and valued by its customers. A brand is what a company represents for its customers and for the community which it is a part of. It has the power to spread trust once the company have cultivated it and carry specific values, or attributes, on everything that it does. It is the delivery of personalized products and services under the banner of a trusted brand that creates a lasting relationship and spontaneous recommendations. This is important if we consider that 92% of customers around the world trust more on spontaneous referral than any other publicity form.

It should be remembered that a brand is not something exclusive from subscription models. What is important to note is that the brand, and what it represents, is what will bring trust if first this trust is cultivated by the company, which is valid for digital subscriptions business models. If a brand is the public representation of everything that a company does and why it does what it does, then companies should take very good care of them. Even a established brand, if doesn’t act on its values, risks being target for boycotts.

We’re watching the birth of a new business generation

Once I read somewhere that companies born on the 19th century, employing people educated with business practices from the 20th century, deal with customers from the 21st century. Mass producing products and flooding many channels is something that allude to this phrase. It happens that we’re fed up from offers and distribution channels are quite full. Browse so many options of products and services that apparently offer the same things with competitive prices, quality and agility becomes something really hard to do. Customers demand products and services personalized for their needs, but only listen to companies from which they feel safe to buy from.

Let’s create trustworthy brands!