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    Knowledge creation on China, from proven China experts.

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  • Faculty & Research

    Knowledge creation on China, from proven China experts.

    386
  • Faculty & Research

    Knowledge creation on China, from proven China experts.

    386
Tuesday, August 13, 2019

How Can Businesses Create Customers in Today's Digital Economy?

By Fang Yue

 

Why is it Shanghai, instead of any US city, that is home to the largest number of Starbucks stores? Why is the century-old brand Coca-Cola still vibrant? According to Fang Yue, Professor of Economics and Decision Sciences at CEIBS, the answers to these questions have a lot to do with creating customers and generating value for them. How can businesses create customers by leveraging the power of technology? How can they tap and meet customers’ real needs? Professor Fang Yue offered his insights.

Technology can help create customers

Peter F. Drucker, father of modern management, famously said that, “The purpose of business is to create a customer.” In other words, it is the customer who decides what a business is. Only when customers start to pay for goods or services, can a business turn economic resources into goods and wealth. In the process of creating customers, technology has a pivotal role to play.

During the First Industrial Revolution, the widespread use of steam locomotives laid the foundation for the creation of goods and services. The Second Industrial Revolution brought the world into the electrical age. Electricity led to the emergence of production lines that made large-scale standardized production possible, greatly improving productivity. The Third Industrial Revolution, characterized by the widespread use of computer and network communication technologies, has fueled the generation of information and turned information into a valuable asset.

Overall, the three industrial revolutions gave birth to industrialized products and services, standardized mass production, and widespread information exchange, respectively. Thanks to standardized mass production, businesses are able to play a leading role in the market, with a focus on cutting costs and improving profitability. From a customer’s perspective, businesses are there to meet their basic needs for products and services. On the whole, however, personalized service is in short supply. Though personalized services are now provided by some companies, technical constraints have limited the widespread availability of cost-effective customized services.

Today’s customer base differs in many ways from the past. Simply put, customers expect better shopping experience, and their needs are growing increasingly diverse and complex as the economy grows and new trends keep emerging. In this context, to create customers, businesses must provide the value that customers really need.

Digital technologies in a digital age

In this digital age, businesses are making every effort to stay relevant, experimenting with digital transformation in different ways. Accenture argues, for example, that the role of digital technologies is shifting from increasing businesses’ marginal efficiency to driving fundamental innovation and disruption. Gartner believes that digitalization is about using digital technologies to transform existing business models, making business digital, and creating value in new business areas. Microsoft emphasizes that digital transformation is about rethinking how people, data, and processes can be best combined. While businesses view digitalization differently, they are on the same page about its ultimate goal: putting customers first.

Even though businesses have become smart enough aided by smart technologies, it is customers who make the final call as to which technologies are better and which need scaling up.

Take Coca-Cola. What strategy did the century-old brand use to innovate and go digital, in order to retain its customers? Coca-Cola has done a very good job of connecting with local cultures across the world. For example, during the Chinese New Year, it always produces jovial commercials that link its brands to the messages of cultural transmission and happiness. Instead of improving its products, it invests all its efforts in enhancing customer interaction and participation. Even though its recipe has remained the same for a century, the ability to connect with customers is expected to keep it relevant for another century.

In short, whether a company’s business model is 2B or 2C, its ultimate goal should be to create customers - to retain old customers and attract new ones. As well as keeping up to date with market trends, businesses need to choose the right way to apply technology, and develop new value propositions to meet customers’ needs, in order to be successful in this fast-paced business world.