In March this year, the IHS Markit/CIPS UK Services Purchasing Managers’ Index revealed that growth in the services sector had just hit a four-month high. This was primarily driven by B2B sales, with stretched household budgets slowing consumer demand.
But whether it’s times of consumer hardship or brighter financial periods, airlines, hotels, retailers, banks and other businesses in this sector are constantly fighting for recognition in a crowded marketplace.
It’s a sector that has seen both established brands and challengers reimagining norms to try and differentiate. From the arrival of no-frills budget airlines Ryanair and EasyJet in the 80s and 90s respectively to ‘the bank of the future’ Monzo, with its digital, mobile-only operations, service brands are constantly innovating in an attempt to capture market share.
Here are five ways in which service sector brands can think ahead to reimagine the current norms and stand out in a crowded market in ten years’ time.
1. Non-invasive personalisation
While brand loyalty is high in the financial services sector, it’s a different story in retail (particularly in the grocery business) and air travel. This represents a huge opportunity to capture a significant slice of the market, if shoppers can be targeted at the right moment, with the right message.
Brands have long believed that consumers want them to know what they want and deliver it to them. This thinking is why Facebook’s Dynamic Ads for Travel and their flight-specific offering were launched in 2017. The services targeted visitors to travel websites with tailored offerings that suit their travel needs.
In theory, it’s a great idea. In reality, it’s one fraught with problems. Consumers and marketers alike believe retargeting is “broken”, and with global ad blocker use rising and the advent of GDPR giving consumers more control over where, when and how their personal data is used, could listening and retargeting be on the way out? In 2018 and beyond, this hyper-personalised communication is out, non-invasive personalisation is in.
It’s likely that, post-GDPR, there will still be a small segment of the population who allow their personal data to be used for ad targeting, but with a reduced audience, service sector brands will need to work harder and smarter to get results.
AI could well be the future here, with intelligent systems using deep learning to serve online ads that are truly personalised to individual consumers’ tastes, preferences and purchase history. With the consumer’s permission, naturally.
2. Ultra convenience
Accessibility, design, customer experience...all aspects of a service sector brand should be centred around what is most convenient for the customer. Everything from bricks and mortar stores to apps, websites and telephone services should be easy to use, easy to navigate and transparent to ensure the best possible customer experience.
In the hotel industry, for example, convenience is key. Guests want to be able to book easily with transparent pricing no matter the channel they use, check out without queuing for hours at reception, book in-hotel services with minimal effort, access the WiFi without lengthy codes or registration and more. In the age of TripAdvisor, any inconvenience could lead to negative reviews, and a loss of future business.
Such ultra convenience can be achieved without the need for extensive refurbs. Hilton Honors members can take advantage of digital check-in and room selection from their mobile devices, while frequent visitors to any Scandic Hotel can create a WiFi account that allows them to login at any of the chain’s hotels across Scandinavia with one click.
At hotels across the world, in-room tablets are acting as an electronic concierge, allowing guests to control lighting and temperature, make dinner reservations, contact housekeeping and more. With technology evolving at such a rapid rate, service sector brands should think ahead to how such developments can be harnessed to resolve known customer service issues even further.
It’s not just convenience that is important, though - it’s simplicity too. If researching, browsing, ordering or buying isn’t simple, it’s a series of firsts ers will look elsewhere - no matter how convenient the process is. Skift’s 2018 Megatrends report suggests that mobile devices could well switch from being used reactively to assisting customers proactively, anticipating needs in advance to make travel arrangements easier and hassle-free - and convenient too.
3. Relevance
While it’s easy for service sector brands to focus on increasing customer numbers and profits, this can often mean losing sight of the basics - the things that make them relevant to their target audience.
In the UK, one airline brand made the top 50 in Prophet’s 2017 Brand Relevance Index: Virgin Atlantic (#49). The index is calculated based on consumer views of brands’ performance in four metrics - “customer obsessed”, “ruthlessly pragmatic”, “distinctively inspired” and “pervasively innovative”, with Virgin Atlantic included because “consumers rate it as modern, in touch with their travel needs and trustworthy”, as well as being “a longtime leader for its innovations in cabins and customer service.”
For Virgin Atlantic - and many of the other brands on the list - the key to relevance is disruptive innovation. The airline has introduced a series of firsts over the years, including the longest fully flat bed, the ‘Freedom’ meal service (eat what you want, when you want), and being the first airline to offer seat-back TVs to all economy passengers. To this day, the innovations continue, and now include in-flight entertainment for visually impaired travellers.
Service sector brands must listen to their customers and employees and know what they stand for in order to innovate successfully, and to ensure relevance in the long term.
4. Becoming experience platforms
In recent years, brand offerings have undergone a great deal of change. From bricks and mortar retailers of products and services to omnichannel offerings that cater to today’s consumer, service sector brands looking to cement their future success are increasingly reinventing themselves as experience platforms.
In the future, simply sticking with an established core offering may not be enough to stand out from the competition. A number of service sector brands have already started to go above and beyond competitor offerings in a bid to capture a higher share of an increasingly saturated market.
In late 2016, peer-to-peer accommodation letting service Airbnb increased their offering to include tours and experiences hosted by local experts, while since May 2017, Ryanair customers have been able to book Air Europa flights for certain long haul routes via the Ryanair website.
The plan, says Ryanair CEO Michael O’Leary, is to become “the Amazon of travel”: a one-stop shop serving the customer’s every travel need. In an era where convenience is king, it is likely that we will continue to see such developments from service sector brands. In the future, invitations from banks to exclusive events tailored to a customer’s spending habits, retailer partnerships with like-minded brands and large hotel chains becoming aggregators and selling competitor hotel bookings via their website could well be the norm.
5. Single-mindedness
Single-mindedness, in this sense, refers to being something to somebody - rather than nothing to everybody: carving out a niche for more targeted appeal.
It’s an approach used by big hotel chains, who carve up their portfolios into brands aimed at different market niches. A prime example is the ibis brand, part of the AccorHotels group. The classic ibis brand, ibis styles and ibis budget all share similar brand guidelines but with different colour palettes, and all three offer something different.
For ibis, it’s ‘well-being at the best price’, while it’s ‘essential comfort at a budget price’ from ibis budget. ibis styles, on the other hand, aims to offer ‘multiple styles for a designer experience at an all-inclusive price’. By tweaking existing design cues, ibis have created three brands aimed at different audiences, while still being recognisable as part of the same established company.
While multiple brands under the same umbrella may not seem single-minded, the ibis approach keeps their core brand visible, creating sub-brands within the same family, rather than totally new brands that don’t have existing consumer recognition.
It’s this latter approach that is being adopted by fashion retailer H&M. In a bid to reverse its sales growth woes, the brand has announced a number of new sub-brand launches: discount site Afound, luxury brand Nyden and premium basics label Arket, among others. None of these sub-brands have any clear link to H&M that the consumer will spot - is it distracting the brand from getting the basics right?
For some service sector brands, the attempt to stand out in a crowded market can prove problematic, as they try to make wholesale changes while retaining store numbers, huge director salaries and other business as normal.
Instead of reinventing themselves completely, innovative service brands who succeed instead reimagine current norms by iterating changes to existing structures, harnessing the benefits of a soft power approach to meet their goals.