On-demand in small business: Four ideas for growth

Where is your place in the on-demand economy? Many workers and small businesses, including retailers, see the encroachment of Amazon, WalMart, and myriad other services as destructive. Yet media-enabled global brands are consistently challenged when engaging home- and office-based customers. The future of your business, whether a physical location or as an independent contractor, depends upon finding new niches where human expertise overwhelms online-only engagement.

Non-manufacturing businesses account for about 80 percent of the U.S. economy and are reported by the Institute for Supply Management as growing strongly for 97 consecutive months. Amazon, Uber, Lyft, TaskRabbit, Instacart and other services seem poised to steal business from local experts, but we think that by studying their approaches, small business and independent businesspeople will find greater revenue opportunities and a foundation for maintaining a trusted relationship with consumers. There are many new niches in the ever-specializing economy.

Last week, Uber announced beauty salon network bgX had become the first “business that has fully integrated with Uber for Business.” If you are seeking styling or a blow-out before an important meeting, “The platform will provide the convenience of having premium salon styling delivered directly to women at home, work or at a hotel.” The stylist comes to the customer if they happen to be in London, Paris, or Dubai. It’s a small footprint, but bgX could build geographic presence with time and marketing, adding cities with high concentrations of luxury styling customers.

Services consistently add greater value than other sectors of the U.S. economy

Uber’s head of Uber for Business in Europe told the Evening Standard that 65,000 businesses have begun to integrate Uber services. Health services and elder care home companies pioneered the gig-sourcing local drivers to bring patients to appointments and ferrying retirees to an from shopping, events, and around town. Westfield Malls set up Uber transit centers in 33 of its malls last Fall. Yet, a survey last year showed that the majority — 73 percent — of small businesses used no gig services.

Likewise, Amazon extended its Whole Foods home delivery service last week. Adding San Francisco and Atlanta, as well as adding a Prime discount of five percent on Whole Foods purchase, the once virtual giant is developing a physical footprint in local markets. With Amazon Go stores prepped to serve walk-in-walk-out shoppers, potentially as ubiquitously as 7-Eleven does today, the Bezos machine is targeting the consumer on the go while catering to their home and office needs with Prime and Prime for Business memberships.

As a small business or an independent worker thinking about how to compete against these global brands, focus on where the human-to-human gap has opened as a consequence of automation. Logistics have been improved dramatically, but feedback, recycling, and recirculation of products all remain stubbornly local in nature. A salesperson is still the best way to capture feedback because they bring the ability to ask questions and report back non-verbal signals. This is where a massive opportunity remains for individuals in the gig economy.

Scale, surprisingly, is the reason the Small Business opportunity is growing. The delivery of services and products-as-a-service require deep personalization. Mass personalization will remain a matter of demographic or psychographic templates that must be tuned in the last-mile to engage the specific customer’s values. 

The Minte, an apartment cleaning service in Chicago, demonstrates how small businesses can find and fill gaps by selecting a target market to serve better than national brands can today. The company identified apartment buildings as a market where it could rapidly lower the cost of service by increasing customer penetration in a single location. 

“Once you’re in one building, all the others start coming to you,” The Minte CEO Kathleen Wilson told BuiltInChicago. “It really just exploded.” Call it “share of locality” thinking. Instead of simply thinking of gaining more of a consumer’s wallet, look to expand a business’ relationship with customers’ neighbors.

Word-of-mouth and local selling of these services don’t happen entirely online. People make the sale and pass customers along based on their satisfaction with a service. The focus on increasing Share of Locality inverts the marketing challenge. Small promotional and direct-sales engagements can kickstart a local on-demand business. If you are looking at the on-demand economy as a looming threat that will wipe out your local services market, study the gaps opening between big brands and local buyers to find a new niche. 

  1. SMBs should position themselves as a local connector between global brands and customers. Uber, for example, has a massive local targeting investment that relies on its teams localizing and distributing marketing offers based on geotagging and artificial intelligence.SMBs have extensive insight into local demand and can tap into, for example, mobility services such as Lyft, Maven, and Uber, providing deeply contextualized local offers.One small business may offer Lyft rides to customers who want to shop at their location while another may choose to offer in-home delivery. Both, however, bring a local customer to the relationship with a mobility provider that can be mined for additional service opportunities. If a customer likes dinner delivered every evening, would they also like a housecleaner to come tidy up after the meal? Assembling these local services, consolidating them into a single point of contact and feedback for global brands, is a defensible position in the market.
  2.  Shopping destinations should consider aggregating delivery opportunities. Amazon has begun installing Amazon Lockers in Whole Foods stores, allowing shoppers to pick up online orders while at the store. Groups of retailers and service providers need to look at the businesses near them to understand where they can consolidate the delivery of goods and services. With improved logistics and retail management systems, a local store could become the destination for picking up a new product and receiving hands-on support and training for the consumer. Expertise is the rarest commodity. Small business is the most distributed approach to expertise delivery, which has been the foundation of consumer trust for generations. If your small business is isolated from others but draws regular customer traffic, can you use Uber or Lyft to “do the shopping” for a customer while they have their hair cut, their car serviced, or while they learn a new skill in a small training center attached to a local mall?
  3. SMBs and workers should focus on excellent service and enduring customer relationships. Today, gig work is treated as a commodity, and it results in lower wages as more workers join. However, consumers prefer trusted providers, especially for personal services. As the on-demand approach to work expands, small business and labor both need to leverage the trust they develop with local consumers in order to build their pricing power.Differentiation based on service level and trust will increase earnings. At the very least, a highly regarded local source of service or product expertise — the person who sold the customer their last three lawn and yard tools or the regular provider of the perfect massage — can earn more based on increased demand. Going further, the local expert service provider can follow the “breakage model” adopted by many companies, such as DropBox. They charge a little more for a lot more service on the bet that most of the services will not be consumed. A local SMB service provider, for example, could offer priority callback and service visits to “members” who pay a small monthly fee to jump to the front of the line when they need help. 
  4. Tie into the on-demand economy and push the limits. Uber for Business, for instance, has extensive information about the routes and timing for deliveries but does not have a personal relationship with local consumers outside the Uber app. Like salon company bgX, look at what your business, or you as a service provider, can deliver and seek to be the local partner for on-demand product manufacturers and local mobility providers. You will find that there is no local sales interface to collect feedback from potential customers and expertise is unevenly distributed.Your ability to use multiple on-demand services is critical to success, so mix and match aggressively. Attack the problem of how to get a product from point A to point B, to onboard a customer to a new service, such as home security DIY installers who need to train customers to manage their security systems, or the need to efficiently deliver for hands-on expertise, whether a doctor, lawyer, auto mechanic, or any other person-to-person service. Small business and individual workers can take a robust part in extending services revenue, by tying expertise to products, fulfilling delivery, service, and post-purchase support locally, and thinking systematically about where value can be added in the on-demand economy.

GoDaddy doubles down on SMB social commerce

GoDaddy has acquired Main Street Hub, a social marketing tools and services company, for $125 million in cash with $50 million in  performance incentives, according to TechCrunch. This is interesting for several reasons:

  • SMB marketing must evolve to support on-demand and in-home engagement.
  • SMBs generally favor Do-It-With-Me and Do-It-For-Me (DIFM) models over Do-It-Yourself marketing services. Only 22.5 percent of respondents to the latest BIA/Kelsey survey of SMBs preferred DIFM services.
  • Scale in services is difficult to achieve, and at 10,000 SMB customers Main Street is at a tipping point that will determine if it can grow.

GoDaddy’s 17 million U.S. small business customers must appear a ripe target for Main Street. GoDaddy, too, has searched for additional revenue from SMB customers. At some point in the negotiations, someone at the table must have said “Pitch [Main Street} to the 28 million SMBs in the United States, and we’re sure to generate a billion dollars or more in fees.” In fact, it would take 333,000 customers at Main Street’s current entry price to make that goal.

However, scaling up a services-centric business is much more complicated than automated services, such as website hosting or email marketing delivery. The cost of delivering marketing services rises with each client as that client adds services, scaling linearly, at best, or producing lower margins in many circumstances. When I worked on web hosting at hibu a few years back, the only viable way to deliver web sites was outsourcing to the Philippines, and even that was challenging.

The other factor to consider is SMBs’ tendency to bring services in-house once they feel they have a process they can reproduce. Main Street’s best customers are likely to migrate to automation and in-house resources if they succeed.

The next phase of marketing requires local familiarity, not simply marketing competence. This means people must be familiar with the culture they are marketing into, and that points to lots of U.S.-based consultants. That is not cheap, yet TechCrunch calls this acquisition a “perfect match.”

Main Street assigns an account manager to each small business client, with pricing starting in the $250/mo. range, or $3,000 a year. That’s a small market, representing a few million U.S. businesses, at most. Meanwhile, Salesforce, Oracle, Amazon, and others continue to move their services down-market, into direct competition for these companies.

GoDaddy is taking a big bet in an intensely competitive sector. It isn’t a sure thing, and requires additional features and local expertise that will be hard to scale.

In-Home Smart Speakers: A War of the Big Three

Smart speakers represent a new interface in the customer relationship. Holiday shopping in 2017 established clear battle lines in the home AI market. Amazon, with its Alexa service, Google Home speakers, and Apple’s Siri-enabled services and delayed HomePod speaker are way out in front of the rest of the pack in terms of installed base. Indeed, one columnist says this year’s Consumer Electronics Show is the Microsoft Cortana assistant’s funeral.

Analyst firm Canalys projects 42.8 million or more smart speakers will be sold in 2018 in the U.S. and China.

Voice UX is usually portrayed as a silver bullet for customer engagement, and it may become so over time. For now, however, accuracy and contextual understanding of speakers’ words is lacking. Fixed command phrases that must be memorized and delivered in specific sequences are problematic for people.

Bots, being the shiniest of the new tech playthings, get plenty of praise, but the expectations for voice interaction are over-hyped right now. Until speech interaction approaches human conversational speed and efficiency, which requires more semantic understanding than bots currently provide, intimacy will be hard to achieve.  Voice UX may be good for instigating repeat orders, e.g., “Alexa, order another box of Tide,” are practical, but complex selling will have to wait for further evolution. It is likely that AI bots will support human connections, bringing humans onto a call with a user when the bot’s responses are insufficiently engaging, for many years to come.

Humans, we believe, are essential to trust relationships. Speakers can help make connections, but will not be able to handle simple objections for years to come. Think of the smart speaker like the new switchboard for consumers to connect with companies rather than as an unstaffed sales interface.

Where do the voice service leaders rank in units sold during 2017?

Google used heavy discounting during the holidays to sell 6.8 million Google Home speakers between October and Christmas. Consumer Intelligence Research Partners, a research firm, reported that Google had sold seven million Google Home units before the fourth quarter. Hence, Google Home sold approximately 13.8 million units through December 31st.

By contrast, Apple did not have its $349 HomePod speaker ready for the holidays, and we can count only Siri-enabled phones and Macs sold, for a total of 211.88 million iPhones and 19.25 million Mac computers, or 231.05 million Siri-capable devices in 2017. This is a considerable number, but currently has no speaker complement to these devices, nor the tens of millions of Apple TV devices its sold.

Apple’s ability to meld voice interfaces to a wide range of services through HomePod, iPhone, Apple TV, Macintosh and in-car systems is the company’s residual opportunity. The Siri strategy remains too fragmented, as it is missing an ambient listening post in most homes. The HomePod story and user experience is a critical test for Apple in 2018.

Amazon is the leader with real-world tools and services in consumer homes. By the end of Q3, 2017, 20.5 million Alexa devices had been sold, according to voicebot.ai. Jeff Bezos, Amazon CEO, founder, and richest person in the world said Amazon sold “tens of millions” of Alexa devices over the holidays. Assuming Bezos is using the phrase accurately, there are at least 45 million Alexa devices boasting the largest variety of “skills” of any platform.

Is Cortana out of the picture for good? Microsoft has continued its increasingly open approach to partnering, announcing it will integrate Cortana and Alexa for Windows users. While the PC market is slowly declining compared to mobile devices, it still accounts for more than 200 million units shipped annually. That’s a beachhead of a different kind; one Microsoft must leverage to compete in its cognitive services business. Cortana may not be the voice speaking from PCs, but Microsoft could become the master integrator of voice services.

Ultimately, smart speakers will extend the voice and P2P aspects of on-demand services in the home. People in local markets will deliver the personalization promised by intelligent speaker hype by tying into and using voice UX to connect with customers when appropriate.

 

Talking Cures: Home speakers, audio ads, and the contest for engagement

Amazon will reportedly monetize its site and Alexa channels in 2018 using advertising. Global Web Index, a London-based research company, reports that grocery shoppers seem to love voice speakers. Of 78,000 respondents to a survey, 56 percent are using or plan to buy a speaker in the next six months. But will those consumers love advertising? That’s the important question for marketers considering how to deploy budget effectively.

Advertising isn’t the only customer interface in local. Human relationships, storefronts, out-of-home media, and many other investments are necessary. Adding advertising to an Alexa skill may backfire. As The Economist points out,  there is an uncanny valley problem with voice. When a smart speaker acts too human, the user can become uncomfortable. In short, consumer expectations are tightly linked to what they will tolerate comfortably when dealing with bots.

Adding advertising experience in a bot may violate the consumer’s expectations. Like streaming users, who feel they have paid for media out of their pocket and, consequently, do not welcome advertising, Alexa users are likely to object to the insertion of advertising. IBM Cloud Video found that 72.3 percent of streaming users “felt any type of ad reduced the viewing experience.” Alexa buyers have paid for a channel that promises to do tasks. Advertising remains an interruption to the consumer; it may be a mistake to impose in the smart speaker environment.

Marketers have seen an explosion of channels, in addition to myriad new sales tools to use to distribute experience to the edge of the network. Why revert to advertising, except to create more revenue for the smart speaker vendor? It does not necessarily add to the customer experience. In the local market, in particular, voice ads fail to replace the human connection consumers expect from a device/service they purchased. Perhaps the better move is to augment local salespeople using AI, instead.

The smartest speaker will know when to connect a potential customer to the human who can close the deal and build trust.

Experiential marketing will reach the home

AdWeek’s Sarah Priestman offers this assessment of experiential marketing:

The experience economy is booming, brands are seeking real-world impact, the creative industries are putting dollars behind new capabilities—really, what more do we need to do but let the good times roll?

Priestman goes on to emphasize the experimental and artistic qualities of experiential marketing, urging marketers not to think of this new style as a channel. “For lack of a better definition,” she writes, “experiential is the art of ‘expressing a brand’s purpose and proposition through a form of real-world consumer interaction.'”

Several trends are converging that raise the experiential challenge to the level of a revolution: Mass marketing is dying, turning to highly segmented experience that increases interaction and data gathering that produce better product design, improved inventory management, and a “pull” relationship with customers; On-demand business is driving experience down to Main Street and the consumer’s home; Communication technology is fragmenting as new channels open, each supporting a different experiential engagement.

Priestman rightly focuses on the roles of the brand strategist and producers in current experiential work, but this is a prelude to the delivery of experience in the home. Where experiential marketing today tends to happen at parties and events, such as a Bonnaroo or extreme sports event and brand events presented in urban cores, the future of marketing is personal and in-home. We need an interface at the local level to support this potential form of customer intimacy, and it is made of people.

Teens and Commitment: It’s an Exclusive Thing

Piper Jaffray surveyed 1,100 teens about their spending habits and the results reinforce the importance of relationships with young buyers, according to MediaPost. As noted yesterday, Gen Z is more deliberative, less prone to impulse buying, and already saving for their future. The Piper Jaffray study also found that young consumers look for exclusive offers, which are based on an exchange of information that creates loyalty: 

Teen shoppers are savvier shoppers than you might think. Budget conscious, they look for low prices. They want to protect their investments by buying quality products, but if you want to gain their loyalty, they are looking for exclusives and membership benefits. The older the teen, the more important this value exchange becomes.

The exclusive offer/price as basis for commitment is important to understand and use when establishing customer relationships.

Handy CEO polishes up ‘on-demand’ image, prefers ‘flexible economy’ (PODCAST) – New York Business Journal

Mitch’s take: Naming debates miss the real challenges of on-demand.

Handy CEO Oisin Hanrahan recently sat down for the inaugural episode of our new podcast, Wantonomics, to talk about how his startup fits into the on-demand economy.

Source: Handy CEO polishes up ‘on-demand’ image, prefers ‘flexible economy’ (PODCAST) – New York Business Journal