How to succeed in the captive economy with international retail expert Ken Hughes?

With the festive season just around the corner, advertisers are looking for ways to connect with their clients. But with new lockdowns in Europe and changed consumer behaviors, it’s hard to predict what this period will look like exactly. International shopping behavioralist by profession, Ken Hughes shares his thoughts and insights in the below interview. 

About the captive economy

The pandemic has changed both online and consumer behaviors. In previous interviews Ken Hughes spoke of the captive economy. What is this captive economy exactly?

“Consumer behaviors are changing rapidly and values shift. Some of those values are new or emerging, others have been accelerated. And instead of seeing a gradual recovery, like a V-shape, it’s been more like a roller coaster going up and down. I called it the spaghetti recovery, which means it’s all over the place. And I’m referring to our current economy as the captive economy. For retail advertisers it’s now more important than ever to be relevant with your customer.”

“I started looking at the psychology of captivity which brought me into reading about kidnappings and slavery, where freedoms are taken away. My interest was focused on how that impacts the human mind and behaviors. What we saw in the pandemic for instance was that people attached themselves to digital platforms like Microsoft Teams, as they needed to communicate and socialize. We saw them attach in negative ways, like gambling or domestic violence. One positive thing was the attachment to retail. People bought things to make themselves feel better.” 

Tribalism and building communities

But certainly retailers don’t want to be seen as profiteering or jumping on the bandwagon of the pandemic, do they?

“That’s correct. It’s about being compassionate with your customers. The days of shouting through a megaphone are long gone. We have these amazing digital tools these days that allow us to talk to our customers. People are re-evaluating their lives and the things they do. And related to sustainability, people question whether they should buy at a big global player or support their local shop. We are still the ‘instant generation’ that want everything with a single click and immediate delivery, but we also want brands or businesses to resonate with how I’m feeling.”

“You’ll likely be familiar with Maslow’s hierarchy of needs, with basic needs at the bottom and then you go up to safety and eventually love and belonging, which is a core need for us as humans. Humans are tribal people. We want to belong to communities or tribes, which would now be our family, friends or sports teams. Online you’ll also have those communities, and those digital communities are still there for us. And especially now during the pandemic, people are yearning to love and belong.”

“A great example of a tribal brand is Harley-Davidson. People tattoo the Harley-Davidson logo on their arm. Do you have a Microsoft logo on your arm? Maybe you do! People will feel they belong to something, and if you can get to that type of belonging you have what we call customer lifetime value.” 

Compassion before commerce in customer service

“Brands need to make sure that people feel something, because then they will tell your story on your behalf. One of my favorite stories is from Virgin, which is about an immigrating couple. Their little boy wants to bring his fish, but of course the checkout lady needs to decline. When the child starts to cry, she realizes that she made a mistake and says ‘you can’t bring your fish, because he’s flying in the VIP section with the other fish’. The boy accepts, hands over the fish and they leave for the plane. The checkout lady then rings her colleagues in the US, who buy another fish and hand it back to the boy when the family arrives safely in the US. Now, I’m telling you this story, but imagine how many times this story has been told already to many other people. It’s warm and it resonates with the brand. And the best thing is, that the checkout lady didn’t need to ask for approval. She just knew what she had to do.” 

Beating digital fatigue

With everything happening online now, is there any risk of digital fatigue?

“Good question. We can basically split this year in two. During the first lockdown everything turned digital, and we saw social nights, poker nights or wine nights on Microsoft Teams and people were trying to get creative. That turned people digitally fatigued. Then summer came and we all became human again. Now, we’re in the second wave going back to our digital platforms with some element of fatigue. However, we now live in a very ‘digital first’ world, and I think what’s happened at the beginning of this year was the final breakthrough for digital transformation that we’ve been on. Now everyone, globally, is part of the digital community. For brands this means that they need to be even more relevant than before, because the wallpaper challenge – being less like anyone else – has gone up a level.”

“And that’s what I’m finding with businesses – that the pandemic has pushed them against the wall. And they needed to be pushed against that wall to start doing things differently, going in the digital direction.” 

The 3 retail trends everyone should know

View video: https://www.microsoft.com/en-US/videoplayer/embed/RE4IQ5p

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Retail Hub

What are the 3 key tips that you would give to brands who are navigating the current situation? What will help them sustain or grow in the future?

“I think the first trend is local online. E-commerce has been owned by large businesses, and I think we’re going to see more local or smaller SME (small and medium enterprises) move into e-commerce. The second trend is "phygital" collision, which is the merge of the physical and the digital. In other words, physical stores will need to have a strong digital presence, but also online brands will need to connect with their clients offline. I think click and collect will become the store of the future. A third trend I see is the death of cash, which will also be a result of the click and collect culture.”

“To sum up; it’s first about owning the digital space, then you need to invest in the digital space and be visible, and lastly you’ll need to keep your message fresh because people will always want new stories and new reasons to interact with your brand.”
 

Other episodes

Microsoft Advertising Insights series: 
Episode 1: In brands we trust | Episode 2: Covid-19 recovery trends | Episode 3: Client trust | Episode 4: Value of partnership in retail | Episode 5: eCommerce insights from Wunderman | Episode 6: Reimagining Retail - Sustainability
 
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