Archive: November, 2017

Consumer choice

A recent report by KPMG called Me, My Life, My Wallet provides insight into changes in customer behaviour which procurement professionals will find interesting.

Procurement has two customers: the end customer who consumes the products that their organisation provides and internal stakeholders responsible for budgets. In my experience the end customer leads on new trends with organisations trailing behind. This is based largely on technology adoption – compare the experience of Amazon to SAP or Oracle; or smart watches to spend analytics.

Perhaps unsurprisingly, KPMG found that technology is the biggest single driver of change. Demographics and geography play a part but mostly in the context of technology adoption.

In its relatively young lifespan, the smartphone has grown at a staggering pace, with China becoming a distant leader. The first smart phones appeared in 1995. Today there are more than two billion active devices around the world.  Almost 90% of smartphone users say their device never leaves their side. And more that 70% of Chinese would rather lose their wallets than their mobile phones (probably because their phone is their wallet). The message is clear – if you want your consumer to do something then you have to ensure that it’s mobile enabled.

Homer Simpson once observed that “Every time I learn something new, it pushes old stuff out of my brain.” 4 out of 10 consumers surveyed feel totally overwhelmed with information and avoid it if they can. So if you want to avoid alienating a significant proportion of your customers then think hard about how you engage them and what you say to them.

The report says that “Most businesses have built their operating model based on life event norms, and those are primarily based on the boomer generation that created the mould.” These norms do not apply to generation X or millennials who, for example, don’t regard their first car as a milestone in the way that boomers did. On average, KPMG estimate, millennials are 10 years older than boomers when they buy their first home – and 10 years older than boomers when they have their first child. Even boomers are affected – although they are the first generation to retire on defined contribution pension plans and are living longer, they are haunted by what KPMG calls FROOM (Fear of Running Out Of Money). Millennials are putting an unexpected strain on family finances: 22% identify their parents as a source of income. Is your operating model fit for an era when millennials have the most spending power?

Very few procurement professionals will have been told that their buying process is simple and easy to use. Far more familiar is the compliant that it’s difficult to find the right vendors, that items are wrongly categorised and payment takes too long. Most consumer experiences are no better: over two out of three online shopping carts are abandoned before purchases are completed. Procurement organisations and organisation that can make their ordering process frictionless stand will be favoured by their internal stakeholders and customers.