COVID-19 has disrupted lives on an unprecedented scale and has traumatised millions. It has impacted the way we live, the way we perceive our environment, the way we work, but most importantly the way we engage with others. Customer attitudes, behaviours and purchasing habits are changing fast and it is in the best interest of all customer centric businesses to be conscious of this change. We shall discuss what is driving customers to behave differently and how they are changing the way they interact. Further some of these evolving trends will be a part of the new normal and will continue to stay. This white paper also outlines strategies and data driven measures that organisations should take to stay afloat for the long haul.
Drivers of consumer behaviour
Given the impact COVID has had, it has now become more important for businesses to understand what is playing within the minds of the customers they cater to. A consumer of the pandemic era is driven by thoughts of:
- Health and well-being: 18% people have a family or friend impacted by C-19, leading to anxiety1. Wellness is now gaining priority for increasing number of consumers.
- Disposable income: The lockdown has left many businesses struggling to tread water all over the globe. While governments announce swift help, it has left customers anxious and many consumers are looking to curb their more discretionary spend. Disposable income earned by UK households, has decreased by 17% in Q2 2020, equivalent to £14.2bn per month, i.e. a monthly fall of £515 per household as workers lose their jobs, accept reduced pay or hours, or are placed on furlough.2
- Job Security: Office of Budget Responsibility’s reference scenario had predicted 10% unemployment by end of Q2 in the UK and 5.5% in 20213. The world fears a ghastly depression and increasing dole queues.
- Increasing Debt: Customers might have to dip into their savings for the shorter term, however, they are looking for more support from their utilities, banks, landowners, etc. An average British customer has high debts and little savings – A Jan 2020 report says 29% consumers have <£500 in savings, 49% have <£50004.
- The State of Economy: According to a global survey net consumer optimism around country’s economic revival is decreasing and most consumers continue to expect a long-lasting impact of covid-195.
The mark COVID leaves on people would be unexampled. Customers want to be dealt with differently without having to compromise on value derived.
3 Office for Budget Responsibility (2020a), “OBR coronavirus reference scenario”, 14 April
4 Mintel, UK consumers and savings market report, January2020
5 McKinsey & Company, Consumer sentiment is evolving as countries around the world begin to reopen-June 5,2020
Changes in Consumer Behaviour
This pandemic has hit basic human tendency of physical interactions. One is hesitant to visit crowded places and avail public transport. Consumers are directly or indirectly letting organisations understand their pandemic induced needs with their altered behaviours. Of the many changes in customer behaviour, a few include:
- Online to be the new dominant channel for all: With ‘Stay Home, Stay Safe’ being every government’s advice, customers are restricted to indoor alternatives for every outdoor activity. This in turn would lead to customers resorting to safer ways of doing daily tasks
- Shopping online is the new normal as 30% plan to shop more online in the future, even 28.3% of those 65+ say so6.
- Greater media consumption, especially online video content, is predicted to have staying power post-pandemic; Tiktok downloads hit 315m in Q17, Disney+ had 5m+ downloads within a day of Europe launch (Mar 24)8. With home becoming the sole venue of people’s lives, it is triggering increase in use of video conferencing apps like Zoom - whose maximum daily meeting participants increased from 10m in Dec 2019 to 200m by Mar 2020. Virtual dinner parties on the rise through House party app – in the week of 15 March, the app saw 735x growth in global downloads. There has also been an increase in on-demand video - Netflix, amazon prime in 1/3rd of every UK home9
- Increase in home delivery for food & grocery items - Research from kantar says that on the week of Mar 22 (when lockdown begun) food delivery saw 57% Year on Year increase – clearly benefiting from restaurant closures.
- Work from home as the new way of working - Global Workplace analytics estimates that by end of 2021, 25-30% of workforce will work from home multiple days a week10; TCS declares 75% of its 450k employees would permanently work from home by 202511.
- Home tutoring for children and consciousness towards health draws forth demand for meditation, yoga and online education apps. Worldwide there are currently more than 1.2 billion children in 186 countries affected by school closures due to the pandemic12- whether it is language apps, virtual tutoring, video conferencing tools or online learning software, there has been a significant surge in usage since COVID-19. EdTech start-ups across the world have increased their reach – for example Byju’s, India’s fastest growing ed-tech start-up, saw 7.5 million new users on its platform since it started offering free access to content. In April alone, the Bengaluru-based firm grossed ~£36million in revenue13. Meditation apps like Headspace and mental health apps like Unmind are being used widely
- Value maximisation: Every penny spent is now more valuable for a cautious consumer. Rise in price sensitivity and category switching has placed pressure on premium categories to include ecoethical offerings. Luxury purchases likely to decline significantly as consumers continue to reduce their discretionary spending. Perspective on luxury is also changing. For example, In India when domestic helps were unable to come for work, working families were struggling to balance work from home and office work. So, any appliance/offering that offer help was starting to be treated as a luxury. In US, Google Trends data shows increased searches for ‘coupon code’ as customers are looking to stretch their dollars.
- Customer as a stakeholder - Brands are now empowering customers and treating them as an active stakeholder by trying to seek their input and approval to create a sense of shared ownership over brand’s evolving response. Eg: UK grocer Sainsbury’s reserved the first hour of trading for healthcare workers and carers after receiving suggestions from customers and store staff.
- The phenomenon called ‘WE’ - with the global pandemic came a dawn of unity whereby people are now more conscious of each other’s suffering leading to rise in virtual volunteering for social causes. Customers want betterment for everyone and expect brands to facilitate this now and going forward, acting authentically and with care for the greater community. Supermarket chain Co-op announced the launch of an online community platform called Co-operate in May, which aims to connect individuals to local and national organisations who need and can support, during the crisis.
- Stockpiling and Self Reliance: As the fear of coronavirus spreads, consumers have been flocking to stores to stockpile emergency supplies. However, depending on supply readiness, stockpiling can soon lead to retailers selling out, with shortages persisting for several order cycles. As customers stockpile essential products, consumers exhibit another interesting behaviour. They tend to purchase from national retailers with extensive retail networks. According to research 59% of UK consumers have shopped in more stores of national origin during lockdown, in order to help support them. 57% of those surveyed said that they were more likely to buy from a brand that sells domestically produced products14.
- Power of data: Governments have stepped up digital surveillance of citizens for limiting the spread of Covid -19, voluntarily or involuntarily. Citizens are sacrificing personal data for a greater good. This way social attitudes around privacy are changing to the extent where not sharing data is regarded as selfish, citizens are happy to make private information available, if it’s for the good of society. As per EY research 53% of consumers would make their personal data available if it helped to monitor and track an infection cluster.
Consumer behaviour is changing at a pace no one could have predicted. Understanding this change in behaviour would be the first step for every organisation to provide a second to none customer experience in the future.
6 Prosper Insights & Analytics
7 Sensor tower store intelligence
9 Zoom, A message to our users, April 1, 2020
10 https://globalworkplaceanalytics.com/work-at-home-after-covid-19-our-forecast#:~:text=Our%20best%20estimate%20is%20that%2025%2D30%25%20of%20the%20 workforce,by%20the%20end%20of%202021.&text=The%20demand%20for%20flexibility%20in,has%20been%20building%20for%20decades.
12 UNESCO, Covid 19 impact on education
Trends to stay
Conventional aspects of business and commerce have been altered by the coronavirus pandemic. A “New Normal” has emerged for businesses of all sizes across all industries. Certainly, customers regard health and safety as their topmost concern now and moving forward would continue to demand for contactless, technologically equipped and safe experience. A few plausible facets of the post-coronavirus world are:
- Digital adoption: With the virus comes one of the biggest digital waves. Be it entertainment, commerce or social interaction, everything is moving online. This is one of the things that has massively accelerated and is likely to continue as world recovers from Covid. Businesses are trying to incorporate technology into their operations in every possible way. ASDA for example launched virtual queues using their app that will allow users to book a place and log into a virtual queue with their phones. Also, often the impetus for change in education has had to come from outside the school establishment. This pandemic has given rise to a need of seamless integration of classroom learning and distance education with education more accessible via digital channels. Applications like MS Teams, Zoom & google classrooms will enable this move easily.
- Healthcare systems underwent little change after world war II. The need to be prepared for a pandemic is now more important than ever. Policies, approaches and preparedness to meet a surging patient volume in a highly interconnected world is necessary to be able to respond timely to such exogenous shocks.
- Increase in network usage - As millions of people start working from home, learn online, take to video conferencing, gaming and stream online content, demand for data from households is on the rise. Hence, there will be increased focus on network reliability. Many companies are looking at long term investments in their networks and are even pulling forward 5G upgrade due to its reliability and speeds. 40%+ increase in fixed IP traffic is driven by video games, 4x and 5x increase in traffic from remote work platforms and instant messaging platforms respectively15.
- Health & safety - People all around the world are more health conscious and are willing to adopt measures that will reduce their vulnerability to the disease. Hence the highest priority for businesses should be to ensure safety for customers, mental and physical. Hospitality and travel businesses will have to assure their customers with a healthy and clean experience.
Pioneer brands would be the ones that would embrace these changes and trends. For them this crisis can be truly liberating if they are agile enough.
What should be the strategy?
It becomes imperative for businesses across the globe to adopt new measures by making necessary amends so that they can better serve the changing needs of a customer.
With customer at the heart of decision making, businesses need to understand the current consumer mindset and be conscious of the changes to their behaviour. Whoever manages to respond swiftly at this time will not only be able to survive but also outlive the slowdown as a result of Covid-19. Eg: A recent survey concluded that 32% Brits expect social distancing to remain until next year. Some brands reacted early to this by implementing smart changes adapting to the new behaviour – like Supermarket chain Aldi has installed an automated system (“automated traffic light system”) that can track the number of customers that can safely be in a store to ensure the protection of both shoppers and employees. Such steps amidst the chaos and uncertainty that a pandemic brings reinstates customer centricity, adaptability and agility of businesses.
Key strategies that businesses should focus on
Let’s take a closer look at each of them.
1. Investing in digital/online and touchless ways of doing business will help turn adversity to advantage. COVID-19 has pushed companies to reduce dependency on mobility for uninterrupted functioning of the business. There will be a shift of focus from cost-saving & productivity to continuity, accelerating innovation leveraging host of new technologies such as IOT, AI & Robotics (RPA – Robotics process automation) and cloud computing. It is estimated that the RPA market will grow at CAGR 37% to become a USD 7-8 Bn market by 202217. With such technologies, companies would be able to act rather than react in the future. Eg: Deployment of AI and cloud technologies is helping Cairn India, the energy firm, maintain its operations without disruption via automation of a well-logged splicing process and a geocloud approach that will reduce the seismic processing time and expedite prospect generation18.
However, companies should be mindful of their digital presence and existing strategy when they look at revamping customer journeys – the degree of redesign required will be different across industries:
- Traditionally offline (Brick & mortar) businesses will have to revisit their strategy and make digital investments – i.e. designing new digital customer journeys; being agile and enabling quick digital transformation is the key
- Create quick online versions – tutoring, physical training and even church services -which are now available online
- Eg: Lidl has launched an online chatbot which informs customers of the quietest time to shop, through WhatsApp utilisation within six weeks of the lockdown as an attempt to provide a solution for the snaking queues19
- Purely online businesses will have to continue efforts to provide a seamless digital experience with minor tweaks to be more agile to customer needs and rising competition. Some companies are monitoring social media feeds more religiously to understand customer trends real time and using the same for digital marketing. Eg: Uber’s ride business went down by 80% globally in April 2020. But Uber tweaked it’s business model to stay relevant, by quickly launching two services: Uber Direct –built up on Uber Eats’ where shoppers can now place orders from select retailers and get their items delivered right to their doorstep without contact and Uber Connect – where users in select cities can log into the Uber app and send packages to family and friends. It’s a cost effective same-day, no-contact delivery solution that keeps people feeling close20.
- Partly online businesses will have to revisit customer journeys and focus on omni-channel fulfilment while keeping in mind empathy for customers & digital acceleration. Retailers that can redesign click and collect system in which employees put groceries ordered directly in the trunk of a customers’ car and pay online will earn goodwill amongst customers. Eg: amazon opened additional grocery store in California as online-only store to increase grocery delivery21.
Leveraging the fact that customers now wish to be online, companies should increase digital self-service and make smarter operational trade-offs to improve customer experience and efficiency at the same time. With advanced digital techniques, companies can also create an optimised hybrid human/machine model that show empathy and care in customer interactions thus building trust and positive relationships for the future.
2. Reassess customer journeys and re-align operations: Operational gaps bringing down customer experience are being highlighted by the current circumstances. Some 55% of marketers questioned say the consumer shift to online during the UK lockdown has exposed gaps in the customer experience22. It is essential for companies to analyse how effective and attractive different channels are at performing certain tasks and/or generating positive outcomes. Tracking customers’ behaviour at various touchpoints can indicate how service providers might improve experience by use of data and technology to help understand the new levers for continuous and dynamic optimisation. For example, there is a need to identify key customer journeys to prioritise for digitisation and also make necessary arrangements to manage other journeys offline. Analytics offer a plethora of techniques/tools to help business take such informed decisions.
- Understand customer sentiments - Understanding customers and their inherent value is at the core of managing customer experience and what better way to do so than by keeping an eye out for what they say.
Utilising text & sentiment analytics, companies can be informed about the delights and frustrations of customers by digging into the repositories of textual data to detect customer needs and emotions. This would help companies prioritise issues for redressal and strategise accordingly to meet evolving demands. For instance, using sentiment/text analytics on customer comments, companies can pinpoint the reason for poor journey experience and prioritise fixes to eliminate the same.
- Reimagine journeys by developing omni channel capabilities - Customers expect service providers to be available anytime and anywhere and offer consistent experience across all channels and touchpoints. In fact, many customers use several channels during the customer journey and are often simultaneously present in the physical and the digital. For instance, customers often use their smartphones to gather additional information before making a purchase decision, which is why retailers such as H&M have started to provide free Wi-Fi in their physical stores. Other customers buy products online and then expect to be able to pick them up in physical stores. Consequently, businesses are not only trying to add new digital channels and touchpoints to their channel mix, but also to integrate all of them as online and offline is not a scenario of mutual exclusivity but rather an interdependent means for achieving success and ensuring seamless customer experience.
- Understand differences in elasticity of demand between consumer groups to provide calibrated best next actions, tailor made products and services to cater to needs of different customer segments. For instance, to avoid churn, businesses might want to offer better compensation like additional discounts, covers at zero premium etc to its high value customers in case they have experienced a broken journey. For e.g.: customers with overdue service visits during the lockdown could be compensated differently based on their lifetime value.
Although these changes are a good to have, it is challenging to cater to these needs whilst there is an internal push for companies to maintain and increase cash flow. All organisations are working to balance their cash flows with increasing customer debts. Thus, there is a need to prioritise use of companies limited resources in the most efficient manner by aligning operations. Eg: Companies could make use of various optimisation algorithms in order to optimise customer support staff and work timings (i.e., operating hours) which would have with least effect on customers while ‘driving customers to digital’ during non-functional hours.
3. Talent Strategy - Often when we speak about strategy, we don’t stress enough on people. Now is a test for every companies’ preparation to manage the wellbeing and productivity of their employees. Companies need to be cautious about maintaining work life balance to ensure employee satisfaction. The Penn State study uncovered a startling fact that telecommuting does not blur boundaries between work and family23. In fact, it reduces the conflicts that typically occur between work and family life. Those achieving this balance will be ahead of the curve.
Work from home will pave the way for a global hiring model because it ensures employee safety with an added cost benefit of less capital investment. This model seems to be much more effective than what it was expected to be. Execs are now more amenable to the idea of not working from a physical office. Eg: A recent Gartner CFO survey revealed that almost three in four CFOs plan to “shift at least 5 percent of previously on-site employees to permanently remote positions post-COVID-19”24. Facebook said that it would eventually begin allowing most of its employees to request a permanent change in their jobs to let them work remotely. The company will begin by making most of its US job openings eligible for remote hires and begin taking applications for permanent remotework among its workforce later this year25.
Also, with use of behavioural data, businesses can identify the positives and negatives of a remote workforce model and help employees accordingly. Data can give us an ongoing, real-time information that can be used to influence the next course of action in order to make this model successful and employee friendly. An analysis by Microsoft highlighted some key impacts of a work from home situation on employees at all levels within the business using ‘Workplace Analytics’, which measures everyday work in Microsoft 36526.
4. Data Governance and Risk Management: The information universe is fast evolving from relatively high-latency batch processing to low-latency real time analytics. This places a new emphasis on the need for updated data management architecture that move from batch to real time operations. Data governance ensures that data can be trusted, and companies are made accountable for the same. But with increased data flow, there is also a need to ensure data protection from a GDPR perspective. COVID-19 has heightened cyber security risk as customers are willing to share personal data to a) aid governments financially by means of donation and also by sharing personal health information to help track the infection better and b) transact/pay online for purchase of daily need goods. Both require sharing personal information and other sensitive information like credit card details etc. Companies should invest in concepts of data protection and prevention of fraudulent activities, thus making it safer for customers to use and trust digital channels
- By evaluating data risk and impact assessment
- Ensuring proper measures to guarantee security via encryption, stricter compliance policies etc
- Design quick and efficient response system to any threats of cyber security
- Optimise backup and recovery
- Organise awareness modules for employees on fraud detection and prevention
An example of how EXL leveraged the 4 pillars to help a Big-6 utility client reduce cost and increase operational efficiency:
On an average, around 90 per cent of all energy related problems in the UK relate to billing and meter reads27. Hence, energy providers rely a lot on third party meter reading companies to make sure they get accurate and regular reads in order to bill customers.
With a more cautious customer today, sending meter reading agents to customer properties is more difficult now and one of the challenges of a lockdown. Additionally, customers are now more averse to field visits owing to safety reasons. This heightened risks of:
- Bill shocks for customers as they may be billed on estimated reads based on previous consumption wherein actual consumption would be much higher with everyone staying at home
- Increase in failure demand as customers would need explanations for the amount charged on the bill
- Impaired cashflow for the business in the already minimal margin industry as customers could be consuming more but paying less
Bearing the above in mind, the approach designed by EXL focussed on:
- Strengthening alternative online and self-serve portals where customers can submit their meter reads using AI – chatbots, natural language etc
- Designing optimal contact strategy that helps identify channel to contact a customer for a meter read based on their propensity to use an online/offline channel
- Optimising operational strategy for agents to contact customers at the most appropriate time of day to ensure maximum response.
23 The Penn state study
24 Gartner, April 3, 2020, gartner.com
This approach helped the organisation have customers reassured about safety and satisfied about getting a correct bill. Moreover, the business saved operational cost that would have been incurred in a face to face visit while maintaining cash flow by preventing customers running into debt – the pilot was carried out for 6k customers, EXL recovered £50k+ by sending an accurate bill ensuring customers are happy over a call and realising £150k+ CLV benefits by avoiding customer churn arising from estimated bills.
COVID-19 will teach us a great deal about the true nature of interaction and collaboration. It will lead to a deeper appreciation of putting customers first and resonating to their needs by redefining the essence of customer experience.
Our mantra to stay afloat and be truly resilient in these difficult times include:
Senior Consultant, EXL
Consultant II, EXL
Consultant I, EXL
Engagement Manager, EXL