Restricted cash will make customers more value conscious

Demonetisation has clearly dampened consumer spending. Since a big proportion of daily spending still relies on cash for most people in India, people have been forced to cut back on purchases. However, recognising the short-term nature of the pain and hoping for wider gain for the country, people are largely supporting the government. Therefore, the cutback in consumer spending is temporary. As cash becomes available easily and more people adopt various electronic payment methods, their regular consumption habits would return. But this can take a few months and companies are already feeling the pain of lost sales. What can marketers do to tide over this challenge and engage customers?
 
Irrespective of the challenges, customer engagement is critical for maintaining and enhancing profits. It is important to recognise that the process of marketing and the objectives remain the same as before. However, the context today makes achieving success more challenging and therefore companies have to be more innovative in their marketing activities to achieve the same goals. To minimise the impact of demonetisation and grow their business, among other things, companies can use three related methods to increase customer engagement and loyalty:
 
Create superior value: Customers choose a product (or service) that offers superior value. The role of marketing is to create value for customers and extract value for the company via pricing. The elements of the marketing mix are deployed for this exchange. Value creation depends upon the needs, behaviour and unique challenges faced by customers in each segment. For example, rural customers are finding both access to cash and electronic payment more difficult than their urban counterparts. Therefore, creating value for rural customers might require a different set of marketing activities. Overall, restricted cash availability has forced most customers to become more value-conscious. Therefore, companies must respond by creating superior value keeping the challenges faced by customers in mind. For example, companies can use innovative pricing to reduce sticker shock and make payments easier; they can educate customers about digital payments and make the purchase process simpler to reduce the cost of purchase faced by customers other than the price paid.
 
Offer wider range of solutions: Companies can provide a wider set of solutions to engage consumers across multiple related needs. For example, Amazon provides subscription-based entertainment along with other products. In the US, it has launched its Echo range of products that provide information and entertainment services over the internet through voice commands, making it easier and pleasant for customers to satisfy their relevant needs. Since most customers prefer a one-stop shop to reduce their cost of search and purchase, Amazon becomes more attractive to them. In the process, customer engagement with the company has increased as well. Similarly, Paytm offers purchase service across a wide range of products through its wallet app to increase customer engagement. As customers use a company to satisfy more of their needs, they engage more with the company and become more loyal if their expectations are met or exceeded.
 
Use analytics to improve marketing effectiveness: Customers are flooded with promotions and getting their attention has become a challenge. Companies can use analytics to identify valuable customers and target them with the right set of products and promotions at the right time, to improve promotion redemption, customer engagement and loyalty.
 
Customer engagement and loyalty are critical to achieve sustainable competitive advantage. And this has become more challenging over time due to increased competition and a deluge of information targeted at consumers. Demonetisation has compounded the challenge of engaging consumers, and although temporary, the effects would be felt for a few months. Therefore, companies have to be more innovative in value creation. They must deploy analytics to engage customers more and become more effective marketers overall.

Associate professor of marketing, Indian School of Business