Why has the consumer gone missing from our business conversation?

Brands find themselves in a constant struggle to retain customers, who are more likely than ever to switch to rivals at the drop of a hat. So, what’s wrong? If Indian businesses continue to overlook the importance of truly understanding and valuing customers, the much storied consumption economy could face significant setbacks.

The rush for profits in a capitalist economy and the race for valuations among startups often risk missing the most critical factor for long-term success: consumer satisfaction. Many companies treat consumers as mere data points, rather than as individuals with unique needs and preferences.

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The growing number of entities holding public share offers, along with increasing private investments in Indian ventures, is making CEOs and founders more accountable. 

Together with data-centric monitoring of results, this is transforming two key aspects of how Indian companies are run: people costs and marketing expenditures. Layoffs, once considered a last resort, have become a primary lever to pull whenever profitability is under pressure.

A constant barrage of marketing messages has made consumers sceptical and more discerning. They are no longer swayed by flashy advertisements or superficial loyalty schemes. Conversely, marketing spends, or “investments" as prudent decision-makers may term them, are often the first to be cut. 

This reduction has led to a disproportionate emphasis on performance marketing, which prioritizes short-term variables like cost of acquisition, cost of conversion, app installations and products bought and moved off shelves, apart from metrics like reach, likes and re-shares.

The relentless focus on short-term profits also means that many businesses lose sight of the need to create genuine value for their customers. Instead of how much they can extract from consumers, they should focus on enhancing the customer experience.

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In the age of big data and analytics, businesses have become adept at segmenting consumers into various cohorts based on demographics and psychographics. This allows finely targeted messages, tailored products and personalized experiences. However, in our quest to classify and categorize, are we missing the big picture? Are we losing sight of individual needs and stimuli that can drive authentic loyalty?

On the surface, segmenting consumers seems logical. It enables companies to examine broad trends, preferences and behaviours within specific groups, allowing for more efficient resource allocation and strategic planning. 

However, the danger lies in over-reliance on these segments, leading to a homogenized view of consumers that misses the nuances and complexities of individual experiences.

A reductionist view filtered through data can obscure the fact that behind every number lies a person with distinct preferences and motivations that cannot be fully captured by demographic or psychographic segmentation alone. To truly connect with and serve customers, businesses must look beyond the data to understand the human stories that drive purchase decisions. 

This involves recognizing and addressing individual needs, fostering genuine relationships and delivering personalized experiences that resonate on a deeper level. Only by doing so can companies transform a number in a database into a satisfied and loyal customer.

Consumers are often defined by their age, gender, income or lifestyle choices. When businesses focus too narrowly on such cohorts, they risk missing subtleties that matter. This can result in ad messages and product offerings falling flat. Moreover, the emphasis on segmentation can lead to a kind of confirmation bias. 

Companies might prioritize data that supports their pre-existing notions of certain consumer groups, while ignoring outliers and unique cases that don’t fit neatly into any category. This can stifle innovation and prevent businesses from discovering new ways to serve customers. 

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The solution lies in a balance between leveraging cohort data and recognizing individual needs. Companies must use data-driven insights as a starting point, not an endpoint. It’s essential to remain open to feedback and be willing to adapt strategies based on real-world interactions with customers.

Advances in artificial intelligence enable companies to analyse individual consumer behaviour in real-time, which allows dynamic and tailored interactions. AI-led personalization goes beyond making simple recommendations. 

But coming up with new means of engagement means investing in qualitative research methods, such as depth interviews and focus groups, to gain a deeper understanding of people.

Indian companies must recognize that consumer needs and stimuli keep evolving. What works today may not work tomorrow, and they must remain responsive to these changes. This requires a commitment to continuous learning and adaptation, as well as a willingness to challenge past assumptions and experiment with new approaches.