Why complex offers will soon form the basis of retail
- Transfer
In order to improve the quality of customer service and provide consumers with a wide choice, retailers break up large commercial offers into narrowly focused services. The author of the article discusses how effective such strategies are, and why well-thought-out integrated solutions may turn out to be more profitable.
The implementation of the open banking concept began with the release of the PSD2 legislation . According to the concept, licensed third parties can access the banking infrastructure to make their services more convenient for bank account holders.
With such changes, regulators sought to equalize the rules of the game for innovators in the financial sector and to offer clients a greater number of specialized solutions that would differ from those offered by banks.
The stores have been using installment schemes for several decades now, but now innovators in the segment of store loans offer to make purchases in offline and online stores using branded loan products. Thus, the decision to issue a loan is made depending on the consumer’s ability to pay $ 349 a month for a handbag bought at Tradesy for six months, and not based on whether his credit rating is enough to get a $ 2,500 loan from a traditional bank.
Etc.
Experts believe that the practice of separation into individual elements or small products will reach its apogee in the near future. So consumers will get a wide selection that suits their individual needs and preferences. The division into options will become the new norm, and those companies will come to success that will allow customers to make decisions on their own terms.
All the tools for finding alternatives for modern consumers are literally at their fingertips - right in smartphones.
A study published last year by the University of Southern California School of Journalism reported that consumers spend 24 hours a week on the World Wide Web. 82% of this figure falls to the share of mobile devices - they communicate with friends, play, send SMS, make purchases and look for leisure options.
Imagine this is 24 hours of pure time, when people are constantly “googling, svapayut and tap” in search of all sorts of things that they would like to purchase. Note that of the twenty-four, only 3 hours users are at home. The other ten hours of online surfing are in business hours, and, of course, they are not being spent on office tasks. As a result, there are still 11 hours a week, and if you spend them behind mobile devices, then during the search for "all sorts of things" between the online and offline erased the line.
The use of these observations seems to be a recipe for creating the ideal world of individual special offers.
But there is one thing: most consumers do not really like to live in a world where all offers are divided into small segments. And successful modern businesses they try to select the best complexes and packages for their clients, and not “anti-packages” of offers.
Twelve years ago, together with David Evans, I co-authored a study on the approaches to the development of product offerings. A year later, it was published in the MIT Technology Review .
We introduced the concept of “product offer architecture” (ATP) - a framework based on an analysis of approaches to the creation of complex offers in various industries and their impact on overall efficiency in terms of profits, not sales.
ATP divides the design of a package of goods or services into four key strategies for creating optimal integrated offers, based on how you can combine the characteristics of goods, determine the price of a package and present it to the client:
Even today, we adhere to the same point of view, which was voiced at the time of the publication of our research: any product is a complex solution that contains the functions necessary for the majority of consumers and at the same time simplifies the process of their purchase. It is the correct selection of options that gives the manufacturer maximum profit.
Entrepreneurial developers understand that it is possible to check consumer demand by strategically including certain options in the delivery package. This reveals what functions need to be added to the default product to make the proposal breakthrough.
After all, the main metric of success - the size of the profits, and not sales.
However, over the past twelve years, another has emerged, perhaps even more relevant factor - the need to appreciate the time of the consumer.
Consumers love complex solutions, because choosing too much between individual opportunities takes them time and creates uncertainty about the results.
And time and uncertainty can cost the sales business, because buyers usually lean toward well-known and proven options, especially if you choose between them and unfamiliar, highly specialized offers.
The American psychologist Barry Schwartz in his classic book The Paradox of Choice spoke about the shortcomings of the world without complex sentences with his imaginary unlimited choice. As an example, he took a trip to the store for a new pair of Levi's jeans.
After informing the seller of his measurements, the author was faced with clarifying questions about which jeans he would like to buy: boiled, worn or torn? On the zipper or buttons? Straight or flared? To which Schwartz replied that he needed the most ordinary - those that were always called jeans.
Well, in any case, he at least initially decided on the brand.
Modern people who came to the store for jeans, are faced with a difficult choice of both offline and online. Dozens or even hundreds of proposals from various brands appear in front of them, that is, almost endless variations of styles and production techniques.
This creates a problem not only for consumers, but also for manufacturers of denim products, as well as for retail stores.
It is risky to propose too many alternatives, since it takes time for the consumer and requires him to process a large amount of information during the comparison of possible options. All this forces the client to doubt his choice.
What shade of bleached jeans to consider normal, if these shades today already five? How different are the measurements for the same size of the pants of another brand? Shabby look implies visible holes, patches or small scuffs? Will there be ragged leg in fashion? How to combine all these details with other elements of the wardrobe?
All these thoughts will lead to the fact that instead of any experiments I personally would prefer to take the same pair that I wear now.
The endless rows of specialized styles certainly provide more choice. But this is hardly conducive to saving the resource that consumers value today more than ever.
For example, let's consider the situation with digital neo-banks that have broken their complex services into separate services .
Bike about millenialov hate to traditional banks, popular among investors, does not really correspond to the real development of events in the market. In fact, even the largest and oldest digital banks were able to lure only a few million customers.
It turns out that consumers of banking services, including millennials, want their banking service to give them more than just a prepaid card that works like debit cards of ordinary banks. Why? Because there are many other valuable options for the consumer, tied to the debit products. Direct money transfers, bill payments, notifications are just some of the examples. Moreover, they are available in conjunction with current accounts of ordinary banks, but are often offered separately from the base product in digital banks.
Therefore, traditional banking organizations like Chase launch their own mobile or digital “banks”, whose services are similar, including the time-tested offers of the parent bank. But at the same time they are focused on active users of mobile devices, and among them can be attributed almost all modern consumers.
Digital neo-banks, in turn, have come to understand that combining services into complex products is the only way to optimize profits. They are already exploring the possibility of transition to more traditional banking models. Despite the fact that most consumers have several channels of interaction with their financial institution, such as accounts, cards and loans, too many of these services require a lot of time from the client to track all such interactions. If, of course, these products are not placed in some kind of unified control panel.
As history has shown Schwartz, consumers often stop at a proven option or decide not to change the status quo. Either they buy an offer in which a set of options is selected qualitatively, eliminates uncertainty and saves time.
In vain, these complex offers are often not considered packages:
Credit cards combined into one offer with reward programs are a vivid example of the effectiveness of complex offers. Consumers began to abandon the use of loyalty programs in favor of those that go to their favorite cards. Even the oldest Millennial representatives who are constantly online reportedthat the merchant reward programs have long been seriously outdated. It is not by chance that this item took one of the last places in the list of items that representatives of the specified age group value most of all when it comes to shopping in stores.
Recommended products are Amazon or "Together with this product are also buying . " This element allows consumers to replenish the cart with related goods quickly and without having to search for other complementary offers. And the ability to add some of these kits to the Amazon autocompletion system ensures that purchases are made regularly.
PayPal has launched a quick checkout feature using the smart payment button., expanding the possibilities of payment in the case when the consumer makes purchases abroad. In turn, using the button merchants easier to comply with the requirements of the integration of such payments. The button also allows customers to use local payment methods, eliminating the need to choose from a long line of logos.
No matter how cool the idea of the world sounds without complex sentences in theory, in practice it is hardly feasible. The idea goes against the fact that consumers attach the most importance, and businesses will not be able to extract tangible profits from its use.
Consumers value their time. They also appreciate the choice, but only to a certain extent. Too wide - binds, and too small - limits. Businesses that consider it their duty to offer an endless assortment of specialized options risk losing customers who prefer more standard and familiar solutions instead of spending time exploring many unfamiliar alternatives.
In an era of unlimited options, platforms play the role of a natural driving force in creating complex offers that are interesting for consumers.
Platform ecosystems provide buyers with the opportunity to study the offers of new proven suppliers in the context of their individual needs, build their own sets based on such offers and make a purchase. Suppliers, in turn, can understand what consumers value most and adjust their products and strategies.
Platforms will use different technologies to streamline the process of exploring these options and simplify the procedure for completing a purchase. Inside the existing platforms, new or vertical ecosystems will emerge, or rather, have already appeared, skillfully using the critical mass of consumers and the services of suppliers studying consumer needs. Voice platforms will take care of eliminating the complexities of online search for complex offers at the expense of Alexa and Google smart assistants. Predictive analytics will allow you to more accurately determine which products and offers will be in demand in the future. And the ability to automatically re-order will eliminate the need to search and create new complex offers.
Consumers will get the best from both approaches - the ability to choose without wasting time, uncertainty and risk. Businesses will be able to extract the maximum profit from the "chips" that they offer to those who are really ready to buy.
The platforms that will make this experience safe and eliminate the difficulties of finding and buying will benefit greatly by combining the things that innovators have tried to separate from each other over the past five years.
The only difference is that no one will talk about complex offers. It will simply be called a success.
Banking services are divided into separate segments.
The implementation of the open banking concept began with the release of the PSD2 legislation . According to the concept, licensed third parties can access the banking infrastructure to make their services more convenient for bank account holders.
With such changes, regulators sought to equalize the rules of the game for innovators in the financial sector and to offer clients a greater number of specialized solutions that would differ from those offered by banks.
Lending extends from traditional credit lines and card products
The stores have been using installment schemes for several decades now, but now innovators in the segment of store loans offer to make purchases in offline and online stores using branded loan products. Thus, the decision to issue a loan is made depending on the consumer’s ability to pay $ 349 a month for a handbag bought at Tradesy for six months, and not based on whether his credit rating is enough to get a $ 2,500 loan from a traditional bank.
Etc.
Experts believe that the practice of separation into individual elements or small products will reach its apogee in the near future. So consumers will get a wide selection that suits their individual needs and preferences. The division into options will become the new norm, and those companies will come to success that will allow customers to make decisions on their own terms.
All the tools for finding alternatives for modern consumers are literally at their fingertips - right in smartphones.
A study published last year by the University of Southern California School of Journalism reported that consumers spend 24 hours a week on the World Wide Web. 82% of this figure falls to the share of mobile devices - they communicate with friends, play, send SMS, make purchases and look for leisure options.
Imagine this is 24 hours of pure time, when people are constantly “googling, svapayut and tap” in search of all sorts of things that they would like to purchase. Note that of the twenty-four, only 3 hours users are at home. The other ten hours of online surfing are in business hours, and, of course, they are not being spent on office tasks. As a result, there are still 11 hours a week, and if you spend them behind mobile devices, then during the search for "all sorts of things" between the online and offline erased the line.
The use of these observations seems to be a recipe for creating the ideal world of individual special offers.
But there is one thing: most consumers do not really like to live in a world where all offers are divided into small segments. And successful modern businesses they try to select the best complexes and packages for their clients, and not “anti-packages” of offers.
The package offers its own beauty.
Twelve years ago, together with David Evans, I co-authored a study on the approaches to the development of product offerings. A year later, it was published in the MIT Technology Review .
We introduced the concept of “product offer architecture” (ATP) - a framework based on an analysis of approaches to the creation of complex offers in various industries and their impact on overall efficiency in terms of profits, not sales.
ATP divides the design of a package of goods or services into four key strategies for creating optimal integrated offers, based on how you can combine the characteristics of goods, determine the price of a package and present it to the client:
- A la carte strategy provides consumers with the opportunity to create their own packages from a set of available characteristics. For example, Alexa and Echo originally come with a set of basic options. Adding options from the Alexa skills library allows customers to optimize this service to suit their needs and cases.
- The strategy of "specialization" offers a product with only one feature. For other opportunities, the consumer will have to purchase functional add-ons from third-party companies or expand the offer independently. LinkedIn is a networking site for solving professional issues, but for personal communication, members of this network need to use social networks, for example, Facebook, Instagram or Snapchat.
- The All Inclusive Strategy offers a full range of functionality, regardless of whether the customer will use them. Buying a digital subscription The Economist automatically gives the consumer access to all materials of the publication, and not just to the section of the quarterly technology reviews.
- The "And / or" strategy offers a standard combination of options plus one or more options to choose from. It is common among cable TV providers or software developers. The latter often collect a certain set of functions in the basic package, but some options like improved protection or premium elements are offered for an additional fee.
Even today, we adhere to the same point of view, which was voiced at the time of the publication of our research: any product is a complex solution that contains the functions necessary for the majority of consumers and at the same time simplifies the process of their purchase. It is the correct selection of options that gives the manufacturer maximum profit.
Entrepreneurial developers understand that it is possible to check consumer demand by strategically including certain options in the delivery package. This reveals what functions need to be added to the default product to make the proposal breakthrough.
After all, the main metric of success - the size of the profits, and not sales.
However, over the past twelve years, another has emerged, perhaps even more relevant factor - the need to appreciate the time of the consumer.
Consumers love complex solutions, because choosing too much between individual opportunities takes them time and creates uncertainty about the results.
And time and uncertainty can cost the sales business, because buyers usually lean toward well-known and proven options, especially if you choose between them and unfamiliar, highly specialized offers.
Familiar solutions increase sales.
The American psychologist Barry Schwartz in his classic book The Paradox of Choice spoke about the shortcomings of the world without complex sentences with his imaginary unlimited choice. As an example, he took a trip to the store for a new pair of Levi's jeans.
After informing the seller of his measurements, the author was faced with clarifying questions about which jeans he would like to buy: boiled, worn or torn? On the zipper or buttons? Straight or flared? To which Schwartz replied that he needed the most ordinary - those that were always called jeans.
Well, in any case, he at least initially decided on the brand.
Modern people who came to the store for jeans, are faced with a difficult choice of both offline and online. Dozens or even hundreds of proposals from various brands appear in front of them, that is, almost endless variations of styles and production techniques.
This creates a problem not only for consumers, but also for manufacturers of denim products, as well as for retail stores.
It is risky to propose too many alternatives, since it takes time for the consumer and requires him to process a large amount of information during the comparison of possible options. All this forces the client to doubt his choice.
What shade of bleached jeans to consider normal, if these shades today already five? How different are the measurements for the same size of the pants of another brand? Shabby look implies visible holes, patches or small scuffs? Will there be ragged leg in fashion? How to combine all these details with other elements of the wardrobe?
All these thoughts will lead to the fact that instead of any experiments I personally would prefer to take the same pair that I wear now.
The endless rows of specialized styles certainly provide more choice. But this is hardly conducive to saving the resource that consumers value today more than ever.
For example, let's consider the situation with digital neo-banks that have broken their complex services into separate services .
Bike about millenialov hate to traditional banks, popular among investors, does not really correspond to the real development of events in the market. In fact, even the largest and oldest digital banks were able to lure only a few million customers.
It turns out that consumers of banking services, including millennials, want their banking service to give them more than just a prepaid card that works like debit cards of ordinary banks. Why? Because there are many other valuable options for the consumer, tied to the debit products. Direct money transfers, bill payments, notifications are just some of the examples. Moreover, they are available in conjunction with current accounts of ordinary banks, but are often offered separately from the base product in digital banks.
Therefore, traditional banking organizations like Chase launch their own mobile or digital “banks”, whose services are similar, including the time-tested offers of the parent bank. But at the same time they are focused on active users of mobile devices, and among them can be attributed almost all modern consumers.
Digital neo-banks, in turn, have come to understand that combining services into complex products is the only way to optimize profits. They are already exploring the possibility of transition to more traditional banking models. Despite the fact that most consumers have several channels of interaction with their financial institution, such as accounts, cards and loans, too many of these services require a lot of time from the client to track all such interactions. If, of course, these products are not placed in some kind of unified control panel.
As history has shown Schwartz, consumers often stop at a proven option or decide not to change the status quo. Either they buy an offer in which a set of options is selected qualitatively, eliminates uncertainty and saves time.
In vain, these complex offers are often not considered packages:
Credit cards combined into one offer with reward programs are a vivid example of the effectiveness of complex offers. Consumers began to abandon the use of loyalty programs in favor of those that go to their favorite cards. Even the oldest Millennial representatives who are constantly online reportedthat the merchant reward programs have long been seriously outdated. It is not by chance that this item took one of the last places in the list of items that representatives of the specified age group value most of all when it comes to shopping in stores.
Recommended products are Amazon or "Together with this product are also buying . " This element allows consumers to replenish the cart with related goods quickly and without having to search for other complementary offers. And the ability to add some of these kits to the Amazon autocompletion system ensures that purchases are made regularly.
PayPal has launched a quick checkout feature using the smart payment button., expanding the possibilities of payment in the case when the consumer makes purchases abroad. In turn, using the button merchants easier to comply with the requirements of the integration of such payments. The button also allows customers to use local payment methods, eliminating the need to choose from a long line of logos.
Platforms as the driving force behind complex offers
No matter how cool the idea of the world sounds without complex sentences in theory, in practice it is hardly feasible. The idea goes against the fact that consumers attach the most importance, and businesses will not be able to extract tangible profits from its use.
Consumers value their time. They also appreciate the choice, but only to a certain extent. Too wide - binds, and too small - limits. Businesses that consider it their duty to offer an endless assortment of specialized options risk losing customers who prefer more standard and familiar solutions instead of spending time exploring many unfamiliar alternatives.
In an era of unlimited options, platforms play the role of a natural driving force in creating complex offers that are interesting for consumers.
Platform ecosystems provide buyers with the opportunity to study the offers of new proven suppliers in the context of their individual needs, build their own sets based on such offers and make a purchase. Suppliers, in turn, can understand what consumers value most and adjust their products and strategies.
Platforms will use different technologies to streamline the process of exploring these options and simplify the procedure for completing a purchase. Inside the existing platforms, new or vertical ecosystems will emerge, or rather, have already appeared, skillfully using the critical mass of consumers and the services of suppliers studying consumer needs. Voice platforms will take care of eliminating the complexities of online search for complex offers at the expense of Alexa and Google smart assistants. Predictive analytics will allow you to more accurately determine which products and offers will be in demand in the future. And the ability to automatically re-order will eliminate the need to search and create new complex offers.
Consumers will get the best from both approaches - the ability to choose without wasting time, uncertainty and risk. Businesses will be able to extract the maximum profit from the "chips" that they offer to those who are really ready to buy.
The platforms that will make this experience safe and eliminate the difficulties of finding and buying will benefit greatly by combining the things that innovators have tried to separate from each other over the past five years.
The only difference is that no one will talk about complex offers. It will simply be called a success.