How a technology fueled self-service world can erode customer loyalty

Change can occur in dramatic ways that grab our attention and compel us into action. It can also creep into our lives in nearly imperceptible increments that accumulate over time to create significant differences in how we live.

I am aware that the examples which follow may be news to Gen Alpha and Gen Z but hear me when I say these examples are simply illustrations of “how” change takes place. The process of change will impact every generation, only the specific components of change will vary for each group of people.

Over the past decade or so, the way we make purchases has been altered – gradually but significantly. Most of the changes have impacted the “last mile” of the purchase experience, where customers have been forced to accept responsibility for aspects of the purchase experience previously executed by the seller.

The last mile of delivery for goods and service is the most valuable in many industries. In telco, for example, the party which owns the cable or fiber that connects into a point of service holds a strategic advantage. The theory holds that if you own the pipeline, secondary providers must pay to piggyback on your asset.

Why is it that retailers have chosen to ignore the inherent value of the last mile in a purchase experience, allowing operational concerns to overshadow customer needs? Maybe it’s time for brands to consider the value they are missing and retake the highest ground of the customer experience. It might be a powerful strategy to maintain strong connections with customers.

Four examples of where the last mile of the purchase experience has been abdicated by retailers includes:

• Payments
• Self-Checkout
• Self-Assembly
• Bag and Carts

Driven by a desire to reduce costs and create operational efficiency, each of these seemingly innocent elements of the purchase experience has been kicked from retailers to customers. Retailers did achieve the efficiency they hoped for, but they surely did not anticipate the risk to customer loyalty created in the process. When important parts of the customer experience are handed off to the customer, retailers miss opportunities for communication, customer service, and reinforcement of brand values.

Payments

• People under a certain age will not remember a time when you handed your debit or credit card to a restaurant server or store associate to complete a purchase. My first experience with remote payment was in Mexico City about 20 years ago. Credit card fraud was rampant, and the banks made the decision to deploy wireless remote payment terminals. Servers brought the device to the customer and for the first time, people learned the process of using a payment terminal to pay for their meal.
• Remote payment is the standard today and while it has served the financial industry well to reduce fraud, the payment experience has been impacted through lack of personal service and more recently, “tipping fatigue”.

Self-checkout

• Love it or hate it, self-checkout seems here to stay. It’s not just in grocery, but other retailers and even the banks. Walk into a newly constructed bank branch and you will see a line-up of sophisticated ATMs, but few people. It seems being a branch banker these days means that you are focused on babysitting technology, only speaking to the customer when the machine reaches its limits.
• Self-checkout has delivered benefits of time savings and convenience enjoyed by some customers, while retailers have been able to reduce staff and operational costs. However, the trend may be reversing. In the past year, Walmart, ShopRite, Wegmans, Costco and Five Below are among a growing list of retailers announcing changes in their self-checkout practices. Wegmans has been removing self-checkout lanes from its stores attributed to losses from shoplifting and in response to customer complaints.

Self-Assembly

• I’m not sure at what point the consumer not only had to pay for furniture, but also assemble it, but quick research tells me that Amazon and IKEA led the way on this trend. Certainly, most retailers today have adopted the practice of treating product assembly as a premium service. This applies to furniture, mowers, grills, and other products you purchase from DIY stores and hardware chains.
• The practicalities of online retail made shifting assembly to the point of delivery a necessity. Shipping costs for assembled items would make online purchase of hard goods too expensive. Consumers have been easily convinced that the benefits of finding something cheap and getting it immediately outweighs having to sit on the floor with a handful of tools for 90 minutes to build a desk or a set of shelves.

Bags and Carts

• To reduce plastic waste and protect our planet, bags are becoming obsolete. Most people now carry a small inventory of reusable bags in their vehicles and either use them or reluctantly pay for a disposable bag.
• Aldi has an interesting model where you must not only bring your own bags but are also responsible for your shopping cart. If you are a digital native and don’t carry cash, you will find yourself dependent on the willingness of fellow shoppers to lend you a quarter or hope that someone “paid it forward” by leaving a quarter in their returned cart.

What is the impact of this genre of changes? A recent research report from Drexel University published in the Journal of Business Research found that reduction of self-checkout may create an unexpected increase in customer loyalty for retailers. The survey found that “regular checkout” – the kind featuring a human cashier – makes customers more loyal to a store and more likely to revisit in the future.

Many factors were involved in the findings and you can read the full report here, but the topline theory tested showed that when customers are subjected to self-checkout, their loyalty declines. Only when customers are primed to think of the self-checkout experience as rewarding and accomplishing, do those who use self-checkout demonstrate the same level of customer loyalty as those who use regular checkout.

Does this sound familiar? When customers feel that they have been treated valuably by the brands they patronize, they exhibit increased loyalty to that brand.

The purchase experience has many steps including awareness of a need, search for options, selection, payment and delivery. It’s at the point of delivery that the unboxing experience occurs and, hopefully, is followed by delight. The shifts we have seen mean that retailers in many cases have ceased to attribute importance to the late stages of the purchase experience, the so-called last mile.

Rather than walking with the customer through that last mile, they allow the customer to walk alone. In doing so, they sterilize a key part of the purchase experience and forfeit the opportunity to listen to customers and address their concerns.

The opportunity exists today for retailers to reinsert themselves into all steps of the purchase process and differentiate their brand by providing more personalized and added value services. Organizations are not going to discard their investments in technology or go back to the dark ages of payments, but there are certainly customer segments who will reward your brand by taking part in the last mile of the purchase experience with them.

Are you ready to start walking?