Alexander Zeh, former Global Lead Financial Services at GfK, talks about the international consumer markets, rapidly changing consumer behavior, and the efforts companies need to make to keep up with their customers’ wishes.
Customer behavior is changing very quickly. Is market research able to keep up with this pace?
It’s true that in the past, trends in consumer behavior used to become apparent more slowly than they do now. Today, digital communication technologies, particularly mobile ones, mean fast and sometimes spontaneous changes in behavior. People consume around the clock and have many more points of contact with brands. Their consumer experiences are becoming more complex, their consumer behavior less clear and predictable. These things are tending to make it more difficult for companies to build satisfaction and loyalty. And yes, the new consumers are a challenge for market research, too.
What developments do you observe on the international stage?
First, we should bear in mind that there are naturally large regional differences depending on the economic maturity of the country or area. But in general, two basic phenomena should be considered. First, the extremely fast penetration of the markets with digital and mobile communications technology is leading to a situation in which economic areas such as Southeast Asia, Africa and Latin America are simply skipping certain phases of technological development that we experienced here in Western Europe. Classic examples include landline telephones or the stationary consumption of media. And consumer behavior in these regions is changing similarly by leaps and bounds.
And the second development?
The second is urbanization. Every hour, 32 new residents arrive in Shanghai, 39 in Jakarta and 42 in Mumbai. Even given all the social upheaval that will be caused by this trend in the short term, the bottom line is that the middle classes and the volume of consumption are both growing. And for these people, the workplace and their ability to consume have an extremely high value: they need to catch up, they are striving at all levels for consumer experiences. Labels and brand-name goods enjoy the highest level of trust.
Is there anything new in Western Europe?
Western Europe is also experiencing a rural exodus, but it’s comparatively moderate, and naturally the motivation for it is completely different. But it’s clear that the “new urbanites” have new priorities for their consumption, and this influences developments in the individual market segments. The distribution of income and wealth in western countries also has noticeable repercussions on patterns of consumption, because the middle class is declining in size. But here as well, digital and mobile technologies are having a much more profound effect on patterns of consumption. I’m convinced that e-commerce, the consumption of mobile media and digital services of all kinds have just begun their conquest of the markets.
What implications do these trends have for companies such as retail banks?
The financial services industry spent a long time believing that its online banking service would ensure its central importance in the new world. Meanwhile, banks are noticing that visits to branches are dropping in frequency and that they’re losing contact with their customers. They’re also realizing that they no longer have a monopoly on financial services, such as payment transactions. So now they’re investing enormous amounts of money to create new points of contact and new customer experiences.
Are they investing in the wrong things?
Western financial institutions need to figure out what their customers want and find the right balance between stationary self-service, digital services and areas where personal consulting is necessary. And they need to link their services across channels. If they do that, their chances of prevailing against new market players and Internet giants are good. Things are significantly more difficult, however, for banks in Africa, for example, where a lot of people are still either unbanked or underbanked. These people are very open for new, flexible and inexpensive providers, especially for payment transactions, and newcomers in these areas will make things much harder for the old-school banks.
Are retailers affected to the same degree by the developments you’re describing?
They face the same challenge banks do: finding their balance, continuing to develop into integrated omnichannel retailers and not underestimating the pace of change in consumer habits. Do I really need to inspect or touch a washing machine before I buy it? Do I have to haul crates of beverages up to my fourth-floor apartment myself? These things are subject to the “pool effect”: someone who now buys books online will buy other products online too, sooner or later.
We’d like to end by having you gaze in a crystal ball for us: What will the consumer markets look like in 2020?
Consumer behavior is changing constantly. Consumers are already “always on” through their mobile devices, and the ongoing pace of digitalization means that in the future, too, more and more points of contact with individual brands will be created. Topics such as mobile payments and omnichannel retailing – that is, a retail offer that is integrated across every channel – will become increasingly important, but what’s more, at a certain point consumers will simply come to expect them.
How is your organization adapting to changes in consumer behavior? We can help you map out a strategic roadmap that takes into account your unique priorities. Let’s start a conversation today.
Alexander Zeh was Global Financial Services Lead and Managing Director of GfK Austria until April 2016. At GfK, Zeh concentrated initially on the financial services industry and played a core role in the set-up and development of financial market research in Central and Eastern Europe. Afterward, he held a variety of management positions both in Austria and in Central and Eastern Europe.
This interview was first published in “Planet Wincor” issue 1, 2016.