Customers are turning their backs on traditional business models and demanding higher standards from brands according to research from Oracle.
The dramatic split in attitudes between those born before 1980 and those born after has posed a difficult challenge to marketers for decades.
Brands are now being forced to transform their business models in order to stay relevant and competitive in a marketplace where consumers expect a fundamentally different relationship with the companies they purchase from.
A survey of over 1,100 US adults conducted by Oracle in partnership with Jeanne Bliss has been released with the aim of shedding light on the changing values, expectations, and experiences of a younger demographic.
Customers are flatly disappointed
The study found that an overwhelming majority (82%) of consumers have had a disappointing or upsetting experience with a brand in the past, and over half that number (43%) say they blacklist brands that fail to meet their expectations, and that a lack of trust in brands is making it increasingly difficult to influence purchasing behavior.
“True customer experience today is not a one-size-fits-all model, and as this study shows, brands are increasingly having to operate in a world where consumer trust is at a premium and there is virtually no tolerance for mistakes,” says Rob Tarkoff, executive vice president and general manager, Oracle.
“Brands are in a race against time to meet these ever-changing customer expectations and will need to take a data-driven approach to ensure they can make every customer interaction matter.”
Can any brand be trusted anymore?
In addition to losing faith in brands, consumers are showing signs of withdrawing their trust from traditional marketing channels including influencers, celebrities, politicians, social media, mobile advertising, and voice-activated services.
Instead, customers are turning towards their inner circles, with about 75% going to friends and family for product recommendations and little more than one quarter doing the same for any other source.
Couple that with the nearly 60% of consumers who confide in loved ones about bad experiences with brands, and marketers are in trouble.
“We know from the survey that consumer trust in shopping recommendations from technology sources is limited,” says Des Cahill, vice president, Oracle.
“For example, 89% of consumers do not trust shopping recommendations from voice-activated services like Alexa or Siri, and 81% do not trust ads on mobile devices.
No matter the age, consumers today are looking for integrity and authenticity from brands.”
Regaining customer loyalty with personalized products
One way brands can appear more authentic is to offer more curated, less generalized products.
“As this study shows, consumers are attracted to brands that go the extra mile to deliver personalized experiences, and are willing to take decisive action when their expectations are not met,” explains Jeanne Bliss.
“The key takeaway here is that one size doesn’t fit all, and if you invest in customer experience, your customers will invest in you.”
In fact, Oracle’s data suggests that a shift towards such a business model would be surprisingly profitable.
Almost half of millennials are willing to pay 20% more for impressive customer experience, and 42% of all consumers are more likely to purchase from a company that offers novel ways to experience its goods and services, with even larger majorities of Gen-Z and millennials saying the same.
Could Direct to Customer (DTC) be the future?
Although most companies are falling behind their customer’s evolving expectations, DTC brands are picking up the slack, and successfully disrupting markets in the process.
Recent Forrester research estimates that enthusiast spending on DTC products will precipitate at an 18% compound annual growth rate through 2022, and unsurprisingly, those shoppers are disproportionately
young. Over half of US online adults who have bought from a DTC brand are between the ages of 18 and 34, according to the data.
“There definitely is something to the younger generations being attracted to DTC brands,” Cahill said. “If you think about it, a majority of millennials and Gen-Z are digitally native and DTC brands are digitally native. So millennials and Gen-Z consumers have always lived within the direct-to-consumer experience. It is natural for them to buy something directly from the manufacturer online instead of through a middleman. It’s their first impulse.”
Flexibility and freedom of choice
Different DTC brands take different approaches to personalizing their products and making the purchasing experience smoother. Dollar Shave Club, for example, offers a subscription service that sends automatic shipments to its customers.
Clearly, it has worked, like Dollar Shave Club stole 16% of the market from traditional brands like Gillette and Schick in 2011. Oracle’s research indicates that this wasn’t a coincidence, either. 75% of consumers have a subscription, and
97% say their number of subscriptions will increase or stay the same in the next few years.
The study also finds that about 65% of consumers expect to have the flexibility to return a product free of charge and get a refund when it does not meet their expectations.
Warby Parker is a DTC brand leading the charge in this field; it sends customers several different sets of glasses in the mail, let’s them pick the ones they like, and promises a 100% refund if the glasses get scratched within a year of purchase.
Consumer preferences are changing, and when companies wake up to that fact, those who fail to meet the unique expectations of millennials and Gen-Z could be left in the dust.
Some 68% of consumers think it is important for a store to tailor its experience based on their tastes and preferences, and yet, only 15% expect brands to actually carry through.
The message is clear, and only time will tell if brands can adapt quickly enough to secure a spot in the scramble for a slice of the emerging consumer cake.