In the first part of this article series, we looked at some key characteristics of transactional and relational experiences. We also examined how companies are striving to give their customers a better end-to-end experience to foster a long-term relationship with them. In this second part, we will discuss this shift from an applications perspective.
Traditional technology adoption models tend to classify adopters in a bell curve distribution divided into Innovators, Early Majority, and Laggards. This model was based on adopters’ psychological characteristics but failed to take into consideration the experience and emotional aspects of the adoption, especially if there were no network effects.
We believe successful companies focus on their customers, not their competitors. Generation Z, the first true digital generation and firm believers in the experience economy, has fundamentally shifted businesses’ attitudes about how to provide services.
Let’s look at a few specific examples where companies have leveraged technology advancements to shift their transactional applications to provide a relational consumer experience.
Amazon Prime is a classic example that many of us relate to. An Amazon shopper doesn’t gain additional benefits by subscribing to Prime because their friends subscribe to it. Prime subscribers sign up for the service because they recognize they will save on shipping charges over time. They continue their Prime subscription both because of the tangible benefits like Prime Video, Prime Books, and Prime Music, and also for non-tangible ones like trusting Amazon – on the quality of goods, transaction management, and ease of returning unwanted items, including Amazon Marketplace purchases.
Amazon Prime has shifted consumer behavior from one-off transactional interactions to a relational experience with Amazon. This has worked in favor of both; Prime members receive various perks and services and Amazon achieves higher average spending by consumers. Amazon Prime has over 100 million paid subscribers worldwide and over a 12-month period, these relational customers spend 4.6 times more than non-Prime customers (see chart below). We expect a low churn rate in Prime membership, provided Amazon continues to offer services that enhance subscribers’ experience.
Figure 1: Weighted average spend per shopper. Source: Company Data, Morgan Stanley Research, AlphaWise Survey
If you do not already own a voice-based technology assistant (e.g., Alexa, Siri, Cortana, Google Assistant), you’ve probably tried conversing with one of them at some point in time. The most common commands people make to their voice assistants are “play music,” “what’s the time?” or “tell a joke.” Making these trivial interactions successful will boost users’ confidence in having deeper, relational interactions with voice assistants for advanced activities like shopping or controlling other smart-home devices.
Increased adoption depends on users feeling the usefulness of their assistants and forming a bond with them. Adoption benefits if the user can name the assistant, and Google may have missed an opportunity by not giving its assistant a name. Research on human sociology and psychology suggests users are more more likely to build a helpful, supportive, and trustworthy relationship with a female-named voice assistant.
To move users from transactional to relational interactions, businesses need to delve deeper into this space to reduce friction and make voice assistants a more trustworthy and essential part of people’s lives. Trust is what makes people decide to connect their home smart locks to a voice assistant. Amazon launched its Amazon Key service in the hope of building enough trust to get people to welcome Amazon into their homes and realize its vision of the future. Potentially life–saving benefits of the technologies take the relational experience with applications to a whole new level.
We can classify Amazon Prime as somewhere between the Adopt and Advocacy phases of customer experience, while personal assistants can be classified in the Acclimate phase. Let’s discuss one last example where the overall maturity of the application is in a more Nascent stage.
There is an old saying that “Necessity is the mother of invention.” In the late 19th century, many countries reached “peak horse” usage and were suffering from inordinate amounts of horse manure on the streets every day. At the same time, Siegfried Marcus, Karl Benz, and others were working on internal combustion engine automobiles, which were hailed as a savior for reducing horse congestion and keeping the streets clean.
Fast-forward a century, and we are at a similar conundrum, expecting the next phase of automotive technology innovation to further ease our life. Imagine if you had a choice between buying a human-driven car and an autonomous car. If you love driving or only drive short distances, you probably wouldn’t bother giving up your regular car. On the other hand, if you hate driving or regularly drive long, boring distances, you are probably waiting with bated breath for a real autonomous car. A 2018 Australian Automobile Association report estimated the country’s traffic congestion cost to exceed Australian $16 billion. Autonomous vehicles should play the same savior role for traffic congestion as human-driven cars did for the horse problem.
Over time, convenience and increased trust will win over drivers, and there will be widespread adoption of autonomous cars. While we wait for that to happen, many people who use cars as transactional experiences are moving to Uber. This is why Uber is seeking funding to invest and revamp its autonomous car division: to safeguard its core base. Not so long ago, there was a similar situation for hybrid and electric vehicle manufacturers. If you had to choose between a gasoline-powered car and a hybrid/electric-powered car, you might compare them on fuel, range, performance, etc. But these criteria don’t matter if have only a transactional experience with the car. It doesn’t matter if the Uber is a hybrid car or a gas-guzzler or if a truck delivering an Amazon package is autonomous or not.
These transactional experiences are ripe for alternate models, whether in fuelling or driving. There are situations, such as driving on a freeway, where consumers are more likely to adopt autonomous cars. But we are many years away from autonomous cars becoming mainstream. Consumers will not only have to trust the businesses building the technology, but also will need to have faith in the autonomous car and its artificial intelligence technology. This will require a higher level of relational interaction between people and technology. Only then will the consumer and the autonomous car have a shared view of the world around them, forming a relationship where the autonomous cars communicate emphatically with the consumers and increasing the likelihood of adoption.
In closing, product owners, experience makers, and marketers need to start creating successful transactional experiences and nudging users to trust their interactions with technology. In the transactional interaction phase, almost all relational experiences are likely to fail. In the transactional phase, performance metrics are more important, while overall experience matters more in the relational phase. When technology makes an empathetic connection with a user, has gained the user’s trust, and enables multiple transactional experiences in a day, that’s a step in the right direction for relational experiences.
In the third and last part of this series, we will discuss why is it important for businesses to provide more meaningful relational experiences to their consumers. We will also look at some of the key characteristics of how businesses can fundamentally change their operating model so they are successful in the relational experience economy.
For more on the differences between transactional and relational experiences, go back and read Experience Matters: Make It Relational (Part 1).