If you haven’t been on top of your business economics news reading, the concept of switching economies may be news to you. However, we hope to explain this phenomenon which was born from the insights in Accenture’s in-depth consumer behaviour research and analysis; unpacking what the ‘switching economy’ entails. Essentially the switching economy refers to the percentage of consumers that are switching between companies in search of a better customer experience. We’ll be discussing how the expansion of this gap in the market place has come to be; focusing on how South Africa’s Switching Economy is fundamentally different from other emerging markets.
The cost to SA companies
Our switching economy is costing companies a pretty penny. Pennies would be a bit of an understatement as the research shows that the estimated revenue lost by companies’ tallies up to 5.9 trillion rand in SA alone.
With the wealth of information online - consumers now have more of an upper hand than ever. They’re able to shop around quite easily when they find themselves unhappy with a particular customer journey or experience. At the first hint of inefficiency, dishonesty or infringements of privacy they’ll be starting their own market research, reviewing competitor brands and companies which receive better reviews - lining up the options for their next switch.
In which sectors are consumers switching more?
Switches between service providers and brands were most prevalent in the following sectors in SA:
What’s leading to the switch?
Accenture’s research suggested that SA consumers are frustrated by:
Are the days of brand loyalty over?
Loyalty is a scarce commodity these days and yes big brands will find their devoted customers cheating on them from time to time. It was noted in South Africa especially, that regardless the number of rewards or loyalty campaigns rolled out by companies, consumers were still making the switch.
Accenture’s research reported that 76% of SA consumers switched between service providers in the last year if they were unhappy with a service or a product- due to poor customer service.
Marked as being especially doubtful of digital communications and marketing; SA consumers still appear to prefer person to person modes of communication and rely on word of mouth referrals from friends and family when making their purchase decisions. Bad customer support experiences and negative reviews from friends and family appears to be the main contributing factor to why consumers to make the switch.
The following elements from Accenture’s research were highlighted as what the new digital consumer really wants:
Relationships at Scale:
What the Expert had to say?
We were lucky enough to get some insights from Chris Becker Lead Economist and Strategist at African Alliance.
He pointed out that the views towards the growth in consumer switching (the switching economy) should be more positive. The growth in this sector, economically speaking, actually amounts to a “net gain” for both the consumer switching as well as the companies that they are switching to.
Yes, a loss exists for the companies that consumers are switching from, but the reality is that “two parties are gaining and one is losing”.
This market process is ultimately one of “winners vs losers”, he says - which forces companies to continually reinvest, improve and lower the cost of their products or services. These are the principles upon which the “developed world has progressed and reached the levels of wealth that it has”.
He makes mention of the fact that without constant growth in the market place the opportunities would not have existed to roll out and produce the many modern goods that are in existence and that we make use of today. Yes, “there would be no cars, cellphones, computers” and very little technological advancement.
“The only constant in a growing, advancing economy, is change”. His view on the matter is is that the switching (changing) economy is “crucial to the continued advancement of economies and the improvement of living standards”.
With this change in the market place, “the opportunities for new start-up businesses seem obvious”, says Chris and if the market leaders don't reinvest and adapt to the changing market, the opportunity for new businesses exists to do so.
Adapt or lose out:
Accenture’s Consumer Driven Innovation Survey demonstrates that if companies act now, listen to their customers and make the necessary changes, providing their clientele with a more satisfying user experience, they’re likely to retain their loyalty for longer. This is especially true for insurers who often experience a substantial amount of negative attention, because of the way in which this sector is perceived by the consumer.
Though Hippo is not an insurance provider, we do offer insurance comparison quotes. The actual goal of our aggregator is to ensure that consumers are provided with an array of tailor made comparative service offerings. We’ve tried to take a leaf out of the consumer behaviour book to make our potential and existing customer experience as personalised as possible. All efforts in personalising our customers’ journey works towards assisting them to make smarter financial decisions, by providing them with options.
We’ll end off by asking you: What are your current service providers doing that’s turning you away? We’ve told you all about what the research says, but what do you have to say on the matter? Are you part of the switching economy?