I often read and hear about the impact or concern of digital disruption on companies. It appears nobody has the all-in-one answer to confront and abate the threat. Business models such as Porter’s Five Force, SWOT Analysis, or BCG’s Growth-Share Matrix do not provide the insights and solutions. Business theories such as the Value Chain only define internal activities within an organization—input, process, output. The model Theory of Constraints has merit in the supply chain, but is this problem-solving method enough to demystify and predict the potential effects of digital disruption on your business? It doesn't appear so.
Businesses of all kinds are built on a Business Model, which is a structure that defines how a company creates, delivers, and captures value—some are simple and easy to deploy, while others are very complex. In fact, some have taken decades to perfect, investing $billions to protect and maintain its market share. So, when infant, start-up companies appear in numbers and begin to take-away share of the customer in a specific market segment, you can bet mature companies are very concerned, but also perplexed because executives find it difficult to devise and deploy an effective counter-solution.
For example, there were 1,521 craft breweries in the U.S. in 2008. In 2018, there are 7,346 and represent 24.1% of the total US beer market of $114.2 billion. In fact, U.S. beer volume sales were down 1% in 2018, whereas craft brewer sales continued to grow at a rate of 4% by volume (Source: Brewers Association).
Preference, Not Perception
Consumer perception theory creates an emotional link between the consumer and a brand, with trust at the core. It's argued that perception marketing methods can influence the consumer to choose one brand over many brands in the same product category—the theory centers at the point of purchase decision. The following model depicts this process:
The promise of perception marketing is that if a consumers' trust-level for Brand A exceeds all other competing Brands, it is foreseen that Brand A will be chosen. However, with the advent of the Internet and mobile phones, this theory is changing rapidly. The craft brewery market is an excellent example of changing consumer preferences that is based on quality verses quantity. Some say, "I would rather have one high-quality, tasteful craft brew than three domestic beers." The selection for a craft brew over a domestic beer has nothing to do with Branding.
Consumers Disrupt Markets, not Technologies
For example, prior to the digital marketing era, direct mail catalogs were the main tool to reach a target audience. A consumer would fill-out a lengthy order form, place it inside the envelope, along with a check, and wait 4-6 weeks for product delivery. How ridicules you say! From today's standards, yes it was. But, direct-to-consumer choices and product selection were very limited to a few channels—direct mail, a local store, or a local mall.
It wasn't until the adoption of online shopping that consumers began to see a much better way to select, purchase, and receive products. I highlighted adoption for a reason because it took years for consumers to trust the Internet with credit card payments. In other words, the Internet was available, but it was consumers who chose to change their behavior and adopt to make it a shopping channel. Again, it had nothing to do with product branding, but a change in lifestyle—preferences. Interestingly, today's consumer still has the option to order by direct-mail, but the prefered method for many is digital.
Consumer Adoption Defines Success
Prior to online selling, the purchase of disposable razors were an inconvenience. The sale process consist of, first, drive to a store. Then, locate a store member to unlock the case where the razors where stored. Then, the buyer had to pay a small fortune for a product that would be thrown away in one-week. What a waste of time and money!
Fortunately, several entrepreneurs experienced this process, and from frustration, formed a new business model that uses direct-to-consumer eCommerce platforms. Coupled with the popularity of online shopping and optimizing the value chain, consumers soon realized the benefits and adapted the new business model—and sales grew rapidly. Again, product branding had little influence; the value to consumers was how the buying process was delivered.
By creating value-add steps that were tailored to consumers' changing preferences and lifestyles, online razor companies provide a hassle-free buying experience. Incidentally, and in the same like fashion, there are many markets that are ripe for this type of change. The key? Focus on: how products and services are advertised and delivered through the Customer Value Stream (CVS).
Research other industries and discover how and where consumer behavior patterns and trends are changing. Think in terms of shifting priorities. Identify mundane activities and tasks that are considered a waste-of-time.
Look at the CVS and see if there is a step in the process that could be eliminated; thereby, creating a new business model that offers a specific consumer audience an improved hassle-free buying experience. The following questions and model explains the process:
(Note: Target Audience means prospects, customers, and consumers)
The Customer Journey
What does your target audience experience at each step when they engage in that particular activity?
Is that activity difficult to perform as compared to the competition?
What is the value-received by your target-audience when they engage in each activity?
What activity is the most important? The least? Do you know from your target-audiences' viewpoint?
Can you improve any activity that excels above and beyond any competitor can offer or duplicate?
Can you add or delete an activity that reduces costs for your target-audience?
Today's consumer is looking to eliminate non-value-add activities from their schedules. They prefer to spend time with family and less time mowing the lawn or cleaning the house or maintaining the car. Consumers would rather spend their time at the gym or walking their dog along a lake, rather than being at home preparing supper and watching TV. They seek meaningful experiences that are easy to enjoy, fun to share, convenient and budget friendly. Literally, they optimize and lean-out their schedules, as to have time to experience and engage in activities that offer a high-quality-of-life.
As discussed, consumer lifestyles, behaviors, and preferences continue to evolve and change. This creates opportunity, and by analyzing The Customer Journey, there are new value-add offerings that can be discovered and marketed.