Wharton@Work

June 2022 | Strategy

Sustaining an Advantage: Four Strategies that Deliver

Want to make your current customers happier, developing a relationship that continues well past a single transaction? Want to retain them in an era of hyper-competition, where competitors seem to come from anywhere and are just a click away? When you’re thinking about how to achieve these goals — sustaining an advantage over time — you might be tempted to consider only the two most obvious choices: lowering prices and/or providing superior service. But both come with serious financial tradeoffs: price wars rarely end well, and the expense of providing a better customer experience isn’t always balanced by improved customer relationships.

The good news, according to Nicolaj Siggelkow and Christian Terwiesch, Wharton professors and co-directors of the Mack Institute for Innovation Management, is that there is another way. Those two choices are built on a “buy what we have” strategy, in which you figure out what consumers might want, and then make and market it. Siggelkow and Terwiesch say that strategy is “over. If you want to achieve sustainable competitive advantage in the years ahead, connected strategies need to be a fundamental part of your business.”

As they explain in the Strategy and Management for Competitive Advantage program, connected strategies are ones that harness technology to address customer needs instantly, or even before they realize they have them. Sound too good to be true? Consider Disney, Nike, Amazon, Netflix, and other companies that are already using connected strategies to develop deeper relationships with their customers.

In their book Connected Strategies: Building Continuous Customer Relationships for Competitive Advantage, Siggelkow and Terwiesch bypass the thousands of possibilities for connecting with customers, providing a framework that includes four powerful connected customer experiences, along with worksheets to help readers think through what it would mean if their company competed using each one. The book also dispels a common misconception. “Connected strategy is not primarily about technology,” the authors write. “Clearly, it plays an important role, and you will have to adopt new technologies. But you may also have to change whom you interact with, how you charge for products and services, and how you structure your company internally. By reconfiguring these key elements, you are not blinded by the latest technology hype but can create real opportunities.”

Four Connected Strategies

Respond to desire starts with a customer who knows exactly what they want. The company responds by making it as easy (and fast) as possible to order, pay for, and receive it. “Speed is critical in a lot of respond-to-desire situations,” say Siggelkow and Terwiesch. Amazon Prime’s 1-click and Alexa ordering are good examples. Subscriptions like DoorDash’s DashPass and Uber Eats’ Eats Pass also make it easier and faster for customers who order frequently by offering a subscription model and storing a list of options based on previous orders.

Curated offering helps the customer who knows what they want by guiding them toward the products and services you already provide. Meal-kit provider Blue Apron’s latest marketing strategy highlights an enhanced ability to provide tailored menu options and selections based on your previous orders and stated preferences.

Coach behavior raises the customer’s awareness of their own needs and nudges them into action. It depends on deep insights based on information customers have previously shared or observations of customer behavior. It also requires an ability to collect, analyze, and interpret data. That constant flow of information is made easier by technologies, including those that the customer chooses to engage with. Nike’s wearable device works with its Nike+ Run Club app to perform like a personal trainer, providing individualized workouts and encouraging activity when the customer slows down.

Automatic execution proactively solves the customer’s need before they are even aware of it. This strategy requires a high level of trust that you will protect their privacy and safeguard the information they provide. As helpful as it might be to receive a new printer cartridge just as your current cartridge is about to run out of ink, it won’t appeal to everyone, say Siggelkow and Terwiesch. “We’re excited about this strategy, but we don’t see it as the best solution to all problems — or for all customers. People differ in the degree to which they feel comfortable sharing data and in having the companies serving them act on that data.”