There’s no question that the global customer base is ageing. With more people living longer, healthier lives, the proportion of older adults is increasing steadily. At the same time, with the COVID-19 pandemic, adoption of digital technologies has been progressively accelerating over the years.
As demographics shift, and services transform, how are businesses meeting the needs of their customers? Do they feel better off? As Chen Yongchang, SMU PhD candidate in Business (General Management) discovered, seniors are less satisfied than younger customers, and going digital is not always ideal for keeping customers satisfied and loyal.
Yongchang, who is currently head of Customer Experience Performance, Insights and Voice-of-Customers at GXS bank, recently defended his dissertation, “Two studies exploring the effects of ageing cohorts and channel usage on the antecedents and consequence of customer satisfaction”.
The crux of his research? Investigating whether older customers are happier than their younger counterparts, and how digital services affect the level of satisfaction and loyalty of customers.
In particular, the first study looked at how ageing cohorts “affect the established antecedents of customer satisfaction, namely customer expectations, perceived quality, and perceived value”. The second then examined how “different channel user types moderated the established relationships between perceived quality and customer satisfaction, and customer satisfaction and loyalty”.
“So expensive, so complicated”
There are a few reasons as to why older customers are generally less satisfied than younger ones. One may be that older people are less likely to be comfortable with new technology and may feel left out or even overlooked by companies that focus too much on seemingly more lucrative younger customer segments. Another reason is inflation – as prices go up, older people tend to feel that the cost of living has skyrocketed.
The study found Singapore’s older cohorts to be less satisfied compared to their younger counterparts, and this was driven by poorer customer expectations, perceived quality, and perceived value. Yongchang has also found evidence for a systemic neglect of the older consumers – whether because marketers think elders lack spending power, to an inability of younger marketers to understand or react to customers from generations before their own. A large group of older adults (especially Pioneer and Merdeka generation elders) might also be less informed on the latest and greatest services and tech – and so, they expect less.
There is also the effect of nostalgia, of “things were cheaper back then” and “food doesn’t taste like it did in the past when mum cooked it”. This phenomenon sees older consumers compare current situations with prices/standards of their youth, during which “perceived value” was “anchored”.
Going all digital – or not?
Self-service technology (SST) has become a ubiquitous part of the customer experience. It includes technologies like in-store kiosks and online chatbots that allow customers to handle transactions and get help without ever having to speak to a human representative.
However, Yongchang notes: “Companies operating in a complex service environment should be mindful that a digital strategy may not always be the best strategy to drive satisfaction and loyalty.”
Existing research from the retail sector demonstrates that those who mainly used digital self-service technology had greater accessibility 24/7 and increased information. However, as much as digital SST offers greater accessibility and convenience to retail consumers, its impact on customer satisfaction and loyalty in non-retail multichannel settings, where the service interactions tend to be more complex, may not necessarily be positive, especially in a post-Covid world.
Today’s customers have access to a wealth of information about competitors, which means they can comparison shop and simply switch to a different supplier if they’re not satisfied. Such increased knowledge of competitors’ products and services may also weaken customer loyalty. Furthermore, website interactions can be deemed less satisfying, compared to offline services that allow customers to touch, feel, smell and even taste products in person.
Digitalising banking and telecom services
Companies tend to work on improving service quality and satisfaction to drive up their business performance. To dive into how digital SST affects satisfaction and loyalty levels, Yongchang studied the banking and telecommunications industries.
In the case of banking, going purely digital can result in potentially weaker outcomes. While digital customers were more satisfied than other customers when banks could only offer a lower quality of service, this pattern was reversed when banks could offer a high quality of service, with customers who used both online and offline channels outperforming digital customers. Customers were likely using digital services to circumvent poor offline services like long waiting times. However, when banks could offer a high quality of service across channels, complementary effects from the use of different channels would improve customer outcomes. For example, a well-design app may have helped better inform customers about a service when interacting with staff. Coupled with excellent customer service, the positive interactions would have further driven up customer satisfaction and loyalty levels.
The findings however were less clear for the telecommunications industry. There did not appear to be any differences in satisfaction and loyalty levels for both types of customers, and offline customers were generally more loyal than digital customers.
Yongchang postulated that this could be because telecommunication services are highly commodified and it’s easy to switch providers while maintaining your phone number — nullifying any loyalty-related benefits from digital services. And telecom customers usually prefer contacting the service provider to lodge a complaint or request for help to troubleshoot a problem that is not easily solved by simply surfing a telco’s website or an email. Either way, they would seem to prefer a more human-based interaction for assistance.
What are companies to do?
Many companies are now embarking on digital transformation to be more customer-centric and cater to the ever-changing needs of their target markets. While this is a commendable goal, it’s important to keep in mind that not all customer groups are created equal, and not all services can be easily shifted online. Older customers often have different needs than younger ones, and complex services tend to be harder for customers to grasp on a digital platform.
For example, digital SSTs may be appropriate for simple, easy transactions in banking, but for complex services, in-person interactions may be more appropriate to meet their needs. The fact that banking customers who use both online and offline channels can outperform purely digital customers, suggests that companies should avoid going fully digital or simply sticking to providing offline-only services, and instead opt for a blend of touchpoints.
Companies should also consider how ageing affects consumer perceptions. In particular, when considering pricing for older customers, they should not only think about their recent strategies and that of competitors, but also inflationary fluctuations over past decades.
As the pandemic hastens the rate of digital transformation and changes the way customers are served, Yongchang notes that apart from better understanding how these shifts affect customers, more research should be done to better understand the needs of seniors – something we must undoubtedly do in the face of the impending silver tsunami.
