Reviving High-Touch Business Models for the Social Distancing Era
Complementing older high-touch business models with today’s technologies can help companies thrive amid pandemic-driven changes in consumer behavior.
The demand for many products and services has evaporated over the past several months as consumers have altered their typical patterns while adhering to stay-at-home orders and social distancing practices. But a unique set of businesses that may evoke feelings of nostalgia for some — including milk and frozen-food delivery services, and drive-in theaters — are attracting renewed interest. Such business models were quite prominent in the past but fell out of favor due to excessive costs, inconvenient distribution, or changes in consumer behavior. In the current era of social distancing, however, their high-touch, high-contact features are very desirable.
This article documents the resurgence of interest in high-touch businesses, provides specific “old made new” questions to help professionals illuminate creative value propositions their companies can pursue, and describes how technology can enhance a full-service approach.
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Older Business Models With New Interest
Several business models that were considerably more common in the 1950s and 1960s are either being reintroduced or receiving a significant surge in interest from consumers. Consider, for instance, the storied “milkman.” In the 1960s, 30% of milk was delivered directly to homes, but this figure had dropped below 0.5% by 2005. As people around the U.S. began to observe stay-at-home orders, online searches for “milk delivery” surged. Google Trends data indicates that these searches spiked during the last week of March and the first week in April to a level more than four times higher than in the past five years. And the searches have translated into purchases: Smaller farms and service providers in states across the country have reported an influx of first-time customers and a doubling of home deliveries over the course of weeks.
Similarly, searches for “Schwan’s” spiked in March to a level more than twice that of any other week in the past five years, as customers considered ordering from Schwan’s Home Delivery, a 68-year-old ice cream and frozen food company with its own door-to-door delivery trucks. The family-owned company has uncharacteristically had items listed as out of stock because of the heightened demand.
Social distancing has also led to a resurgence of interest in drive-in movie theaters, which date back to the 1930s. Popular from the 1950s through the 1970s, these venues are far fewer in number now than they were in the past but will likely be more attractive to pandemic-era moviegoers than indoor movie theaters. In addition, churches in multiple U.S. states, restricted from congregating in person, elected to use drive-in movie theaters to host their religious gatherings.
Rethinking Value Propositions
Companies have the opportunity right now to actively consider high-touch business models in redesigning or creating new value propositions. In my past research, I documented how organizational life spans are shorter than ever before; even U.S. companies that successfully complete an initial public offering have at best a 50-50 shot of still being listed 10 years later. Sadly, the current crisis will result in the demise and consolidation of many more — making it all the more important that organizations use this crisis as an impetus to refocus their value propositions and introduce new ones. Three key questions can help organizations adapt.
1. What value propositions become attractive when customers are willing to pay more for full-service transactions?
In March, stories circulated online that the coronavirus could be spread via gas pumps because they are touched by many people. In light of lingering fears of such health risks and a general shift toward retail curbside service, full-service gas stations — previously eliminated primarily because of their high cost — are a clear example of service and product delivery that could be profitably reintroduced. Anecdotal reports suggest that a number of gas stations are testing this option.
The demand for full service extends beyond no-touch purchasing. Interviews with travel executives suggest that those few travel bookings that do occur are increasingly being facilitated through call centers rather than via self-service booking. Customers now want a higher degree of hand-holding from people with current and direct knowledge of whether particular locations and lodging and transportation options are open for business and safe to visit. Those booking travel also want help in scrutinizing and understanding cancellation policies. This fraught moment for travel creates opportunities for a new incarnation of travel agents.
Similarly, uncertainty in the markets has driven high stock-trading volumes and an uptick in retail investors’ monitoring of their investment portfolios. While the overall industry shift has been toward self-service, including granting investors more tools and support to check balances and complete trades themselves, today’s worried customers have placed an increasing number of calls to their advisers; Fidelity and Charles Schwab have both reported strains on their call centers. Substantial divergence in the performance of major companies included in index funds has also led to renewed interest in active portfolio management and individual stock selection.
Companies should evaluate how they can be among the first in their industries to adopt a full-service model. While self-service and cost reduction have recently prevailed as markets have raced to achieve the lowest-cost delivery options, under the current circumstances full-service products may once again be competitive and profitable, despite their higher costs.
2. What new products or services could you introduce to meet customers’ preferences for home-based and contactless transactions?
Pandemic-spurred preferences for home-based and contactless transactions are likely to linger. While conferences, sporting events, and concerts have been canceled, organizations have the opportunity to reenvision what professional networking and entertainment look like in a virtual space. Emerging models recognize the importance of simultaneously shared experiences, such as the Netflix Party extension. Artists and musicians are experimenting with personalized performances, including recording singing telegrams and providing a window into their creative spaces, directly to fans and supporters through the dominant video-streaming sites but also through platforms such as Bandcamp, Encore (in the U.K.), and Patreon. In the absence of live concerts as the primary means of revenue and publicity generation, this communication-rich, personalized approach harkens back to a patronage-type model.
3. What markets can you now reach by freeing yourself from your company’s physical location?
As many homebound consumers work, shop, and socialize remotely, organizations have an opportunity to identify new opportunities that transcend their physical locations, such as offering home-based hairstyling, pet grooming, and car detailing services — and perhaps even old-fashioned bedside medical care.
Given that telehealth has boomed during the pandemic, health organizations may consider revisiting “house calls” or offering a hybrid model in which health providers visit patients at their homes to complement their telehealth capacity. Some insurance companies and states have temporarily waived or begun to reexamine policies limiting the use of telehealth or requiring state-specific licensing, so a wide range of medical providers may soon be able to redefine their geographic markets. A mental health counselor who previously focused on a particular city may now be able to follow up with previous clients who have moved elsewhere. Specialists based in cities could meet the diverse needs of patients in more rural areas who would normally rely on local general practitioners to provide all of their medical care.
Tech’s Role in Successful Reintroductions
While some throwback and old-made-new businesses appear to be essentially unchanged decades later, like drive-in theaters, technology will play a key role in successful reintroductions of high-touch models and in enhancing the desirability and viability of seemingly familiar models. Today’s milk delivery service sends the customer a digital notification when the product has arrived. Amazon has long been classified as a “mail-order service” and supplanted the previous Sears catalog model, but the company’s tech-enabled ability to adjust product offerings instantaneously, draw on customer data, and facilitate rapid ordering and delivery make the mail-order designation seem far-fetched.
Logistics and human capital support are two specific areas in which technology can support a company’s enhanced offerings. Organizations should first consider how the behind-the-scenes logistics of their “Full Service 2.0” offering will be best facilitated by advances in technology. Ride-sharing services could provide a chauffeur-like experience by modifying their algorithms to allow a user to request trips with the same driver instead of the first available car. Hotels may accelerate the introduction of robots to handle room deliveries or other in-room services in a socially distant manner. Technology gives organizations new options to address the previously high costs of high-touch, full-service models or the uncertainties around service and delivery times that turned away consumers from these services.
Organizations should also consider how technology can support the people directly interacting with customers and other stakeholders. Knowledge bases and artificial intelligence can play a key role in supporting on-demand interactions. Customers who chat with or call a company expecting full service will experience a significantly higher level of satisfaction if the organization can immediately connect them to an agent with the most relevant information. While calls and chat inquiries could otherwise inundate an organization and drive up costs, a robust AI tool can provide valuable support for a new era of sales representatives, travel agents, and financial advisers.
Thriving During Crisis Recovery
In the past, an organization’s revenues, assets, employees, and market value were all tightly interlinked. Today the links between these metrics have eroded. The good news is that a company no longer needs the most assets or the most people to compete. Instead, today’s competition requires businesses to prioritize swift adaptation to current conditions, even in the midst of significant resource constraints.
Companies that wish to thrive during recovery from this unprecedented crisis should take inspiration from the high-touch models of the past. By investing in and deploying existing and emerging technologies to support Full Service 2.0 objectives, innovative organizations can meet the logistical challenges of adaptation while simultaneously uncovering ways to enhance the customer experience and expand their offerings to new markets.