listen closely: customers are trying to text you - ey.com

Listen Closelyyour customers are tryingto text you something

By David Nichols, Geetika Casmon,Matthew Solomon, Larissa Plagge,John Higginson and Nima Novin

“We have reached a tipping pointin the expectations ofconsumers and how they wantto interact with brands. Brandsthat adapt the soonest willhave an advantage in buildingand strengthening relationshipswith consumers, particularlyup-and-coming digital nativesand millennials. That’s why weare moving quickly to lead theway in helping clients connectwith their customers in newand exciting ways.”— David Nichols, Principal, Ernst & Young LLP,

and Americas Innovation and Alliance Leader

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Listen Closely — your customers are trying to text you something

1 The upside of disruption: megatrends shaping 2016 and beyond, EYGM Limited, 2016.2 “2016 will be the year of conversational commerce,” Medium website, medium.com/chris-messina/2016-will-be-the-year-of-conversational-commerce-

1586e85e3991#.p1x44oxnm, accessed July 2016.3 “45 Texting Statistics That Prove Businesses Need to Take SMS Seriously,” OneReach website, onereach.com/blog/45-texting-statistics-that-prove-

businesses-need-to-start-taking-sms-seriously, accessed July 2016.4 “Why businesses can’t ignore SMS (Hint: 90% of people read a text message within the first 3 minutes),” VentureBeat, 27 March 2015.5 “Wingstop Launches First-Ever Dynamic Social Ordering Platform,” GlobeNewswire, 7 June 2016, ©2016 GlobeNewswire, Inc.

What does this mean?Conversational commerce is quickly gaining traction in almost every industry that consumers consider an “operationalnecessity.” When purchasing food, booking transportation, seeking medical consultation and consuming content,people have demonstrated that they want to be seamlessly interconnected with the brands they love on the devicesthey use the most. Over the last decade, companies have tried to guide, incentivize and sometimes force consumers toutilize their mobile applications. During this evolution — or even explosion — of the “app” world, a 2015 study showedmore than 1,000 apps being added every day to a single popular app store. As a result, the once enjoyed convenienceand intrigue of the app platform has morphed into a feeling of “app overload” or “app fatigue.”

These trends also show individuals increasingly rejecting the addition of new applications into their daily smartphonerepertoire, making it increasingly difficult for businesses to decide where to invest their resources. The reality is thatthe consumers have changed the rules of engagement, and businesses that aren’t paying attention risk losingcustomers.

Within EY’s Americas Advisory Innovation Team, our research has pointed us to a paradigm shift in how customersprefer to access content, engage in commerce and obtain services from businesses. This movement is occurring inhomes, schools and industries across the globe — and it all points to a big change that is set to disrupt traditional B2Cinteractions as we know them today. This movement is called conversational commerce, and is reinforced by one ofEY’s six 2016 global megatrends1 — the empowered customer — which points to growing consumer trends that areforcing businesses to provide interaction, transactions and service to customers in more personalized terms. The goodnews is that there is hope; savvy business people will see that customers are desperately trying to “text” the new path.

What is conversational commerce?Conversational commerce is most widely defined as “utilizing chat, messaging, or other natural language interfaces(i.e., voice) to interact with people, brands, or services.”2 Attempts to more fluidly fit into the lives of consumersthrough conversational commerce are growing in popularity for good business reasons.

Statistical studies indicate that today’s consumers are becoming much more savvy to marketing efforts such as pushnotifications, reserving their time and attention for much more personalized messages, such as texts. Text messagescurrently have a 98% open rate, nearly five times that of email.3 If a business is looking to reach customers with apromotion, piece of critical information or some other message, this is a big difference in the amount of customersactually “hearing” the message. On top of this, 90% of those text messages are read in the first three minutes,although this percentage will likely change as text marketing becomes more mainstream.4

Consider the following examples highlighting typical use cases of conversational commerce: a business person lands onthe runway in another city and resumes a conversation with a former colleague via their favorite messaging app tomake plans to meet for a cup of coffee. After a few exchanged messages, plans are set and ground transportation isneeded. How does this happen?

In the past, one might copy the address their colleague sent, open the Uber app, paste it in and order a ride. In 2015,Uber and Facebook partnered to create a conversational commerce solution to streamline this process — users can nowsimply click the address provided to them by their colleague and seamlessly book a car through Uber without everleaving the Messenger platform.

Similarly, in early June of this year, with digital orders experiencing rapid growth at more than 900 locationsworldwide, Wingstop Inc. teamed with Conversable Inc., a leading SaaS platform in the conversational commercespace, to offer “first-of-its-kind, dual-platform conversational technology. Customers can start an order, customize itto include multiple flavors and sides from Wingstop’s full menu, and enjoy easy check-out without ever leaving theirpreferred social media channel”5


The example interactions point to a large reason why we believe conversational commerce is part of a larger paradigmshift that will grow rapidly in the years to come; it empowers customers to dictate the terms of the interaction theyhave with brands vs. being bombarded with information, and its success shows that customers love having that senseof control.

Why do we think there is a paradigm shift?In recent years, there has been a growing change in mediums individuals use to connect and communicate — movingaway from more traditional means of communication (phone or social media) and toward more text-centric and social-messaging-based platforms. To exemplify this shift in behavior, a study in the early part of 2015 combined the userbase of the top chat apps (including, WeChat and Viber) and noted that these applications surpassed the user base ofthe top four social media platforms with roughly 2.125 billion users.6

At the end of 2015, data shows that this gap continued to widen with roughly 2.5 billion social media users and 3billion chat app users, respectively.7 Similar to the rising messaging app usage, consumer demand for convenienceand personalization has taken off exponentially.

As noted in the 2016 EY Megatrend report, “Customers expect to be understood and appealed to in their fullcomplexity … in this culture of the niche, all interactions, products and services need to be personalized. Spotifypersonalizes your music, Netflix customizes your entertainment, and Coca-Cola displays your name on billboards asyou drive by.”8

These discernible market trends point our team at EY toward conversational commerce as a more seamless option forbusinesses to integrate and personalize the entire B2C user experience — from technology enhancements and tailoredcontent to the commerce experience and overall customer service.

6 “Messaging apps are overtaking social networks to become the dominant platforms on phones,” Business Insider website,www.businessinsider.com/messaging-apps-have-completely-overtaken-social-networks-to-become-the-dominant-platforms-on-phones-2015-4,accessed July 2016.

7 “Messaging apps are now bigger than social networks,” Business Insider website, www.businessinsider.com/the-messaging-app-report-2015-11?IR=T,accessed July 2016.

8 The upside of disruption: megatrends shaping 2016 and beyond, EYGM Limited, 2016.


9 “Start the conversation with Facebook Messenger,” Shopify website, www.shopify.com/messenger.10 “Where mobile commerce is going in 2016,” Digiday website, digiday.com/brands/mobile-commerce-going-2016, accessed July 2016.11 “7 Mobile Commerce Trends to Watch in 2016,” Retail TouchPoints, www.retailtouchpoints.com/topics/mobile/7-mobile-commerce-trends-to-watch-

in-2016, accessed July 2016.12 “33 Cart Abandonment Rate Statistics,” Baymard Institute website, baymard.com/lists/cart-abandonment-rate, accessed July 2016.13 “Why do online shoppers leave without paying?” Statista website, www.statista.com/statistics/232285/reasons-for-online-shopping-cart-

abandonment, accessed July 2016.

How will it affect business?Technology enhancements and tailored content

With the growing trend in robotic process automation (RPA), the conversational commerce space will be enabled in thenear term through advancements in “bot” technology. In spring 2016, Microsoft, Twitter, Kik and Slack all announcednew bot development services including development tools, bot stores and bot user guides.

With a low barrier to entry and proven success, bot technology is poised to play a large role in enabling conversationalcommerce solutions to flourish — outpacing the higher cost of human touch and unpredictable responses of artificialintelligence.

At EY we foresee many companies leveraging a combination of bot technologies, coupled with decision-tree logic, toanswer and respond to common customer inquiries. Business is constantly changing, which means these decision treesmust be updated regularly; the effort to do so is minimal in comparison to alternatives of pushing an app update or re-training customer service representatives on approved company responses. In similar fashion, the combination of bottechnology and advanced analytics will be powerful in allowing companies to learn each specific customer’spreferences in order to further personalize customer related experiences.

Conversational commerce solutions utilizing chat apps with already large customer bases help brands connect with abroader customer base very easily — social media alone gives businesses access to more than hundreds of millions ofmonthly users. As evidenced by the e-commerce giant Shopify’s recent partnership with Messenger, messagingservices are quickly becoming their own ecosystems.9 The opportunity for brands to broaden customer reach andenhance loyalty with the use of conversational commerce is only compounded with the improvements being made indata, analytics and mobile tech that allow businesses to provide tailored, real-time customer service content toconsumers immediately in the palm of their hand.

Commerce experience

When a customer engages with a company, there is generally a purpose in mind: to request information, conduct atransaction or solve a problem. A recent BI Intelligence report estimates that by the year 2020, mobile commerce willmake up 45% of total e-commerce worldwide, equaling $284 billion in sales. That’s more than three times what’sexpected for 2016.10 Similarly, eMarketer predicts that mobile payments are expected to rise 210% in 2016 and thatmobile commerce as a whole will grow 300% faster than traditional e-commerce channels.11

At EY we see conversational commerce solutions continuing to grow as brands look for ways to recapture the directattention of their customer base. We believe trends in the conversational commerce space will further spawn growth inmobile transactions as many more companies provide consumers the ability to make new and repeat transactions,seamlessly and with minimal effort beyond messaging “@Pizza Company XYZ - #order 2 large pizzas.”

According to statistical studies, roughly 69% of online transactions are abandoned in the checkout cart.12 Threedynamic forces impact customer engagement: accessibility, efficiency and personal touch. Examples of how theseforces could have a negative rather than positive impact can be seen when websites crash, online navigation is toocomplicated, or the process takes too long — all among the top reasons customers abandon purchase efforts online.13


In the near future conversational commerce will change the way many companies engage with their customers, andhow the dynamic forces are managed will determine which companies make the connection and gain and retaincustomers from those who are deleted or disabled from online relevancy.

Accessibility Efficiency Personal touch

Why

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Today much of the content andinformation about brandscustomer want (e.g., store hours,deals and promotions, eventschedules, FAQs) is scatteredacross numerous websites, appsand news articles.

This is frustrating to manyconsumers to the point they lookfor answers not directly throughthe company, but default tosearch engines to find theanswer.

Companies are continuouslylooking to connect moreseamlessly with customersfrom initial inquiry throughsale and payment whilereducing potential lost salesdue to purchasing complexity.

A solution that could helpaccomplish this sounds like asales and marketingdepartment’s dream; thisdream could become reality.

It’s a simple and undeniable truth —customers are more loyal tobrands that provide them withhigher levels of satisfaction.

In the future, businesses willcontinue to be stretched to providemore agile and economicalcustomer service — keepingcustomers’ attention and loyalty inpart through their ability toprovide personalized notifications,quicker answers and enhancedconvenience.

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An alternative business solution,providing customers directinteraction with brands (no needto engage a contentbroker/search engine) would letthem find the content they needinstantly without having to leavetheir preferred mediums ofcommunication (e.g., chat apps).

A new solution to an age-oldproblem companies have hadsince e-commerce came toexist: millions of dollars insales are lost every year fromtransactions abandoned byconsumers before checkout.

Flexibility for consumers to get theinformation and help they needwithout being put on hold;communication via messaging canbe quick if needed, or put on pauseat the discretion of the customershould they need to step awayfrom the exchange to tend tocompeting priorities.


Customer service

For years, customers have voiced frustration about customer call centers and poor customer service online.Businesses are also consistently trying to balance ever-increasing demands to keep operating costs down in back-officefunctions (such as customer service) and at the same time increase service levels. Customers may be forced to dial atoll-free number, choose from option after option, talk to three-four people to get to the right department, and thenjust when they think they have connected to the person that can help them, be disconnected. Research hasconsistently proved the high correlation between customer satisfaction and loyalty (see below figure).14

Customer service via conversational commerce offers benefits to both consumers and businesses. It happens oncustomer terms, meaning it can be instant or a drawn-out process if need be. Customers will be able to send amessage, businesses can respond right away, and if at any point a customer needs to step away from the conversation,the request can pick up where it started the next time. Whether it is being able to provide relevant self-service options,send product notifications based on consumer preferences, respond with quicker answers, or offer enhancedconvenience, businesses will be forced to provide more agile customer service options to keep customers’ business. Itis clearly time to start thinking about customer service more innovatively.

Where is this applicable?The vast majority of commerce occurs at the “simple commerce” level, typically within a small subset of scenarios withlimited levels of complexity and parameters as opposed to “complex commerce,” which requires the consumer tosearch, filter and process a substantial amount of information.

Source: CTMA industry-specific research


Examples of conversation commerce in the real world

Area ofpurchase

Simple commerce Complex commerce

Air travel “Is there a window seat available on myupcoming flight?” [via text]“Is there an earlier flight option available?”[via text]

Getting airfare options on a trip from NewYork to Sydney with various prices, routes,and airlines (e.g., Kayak)

Food “Send two large pizzas with pepperoni to myhome at 7:00pm” [via text]“What specials do you have availabletoday?” [via text]

Looking for general dining options with ratingswithin a defined radius of a selected location(e.g., Yelp)

Rental carservice

“I need a compact rental at 1:30pm at JFK.”[via text]“Is my rental equipped with a GPS system?”[via text]

Using corporate travel to search withincompany approved travel guidelines. (e.g.,Concur)

Entertainment “What movies are available to see between10:00pm and 11:00pm on Friday?” [via text]“Are there seats available for the evening 3Dshowing?” [via text]

Viewing an interactive seating chart to selectideal seats for a concert (e.g., Ticketmaster)

Let’s look at an example of an interaction using conversational commerce:

14 “Cost of poor service — the economic truths,” CTMA World website, ctmaworld.com/economictruths.htm, accessed July 2016.


While companies try to increase loyalty through enhancing their social media presence and providing applicationplatforms for engagement and purchasing, some items are just simply done more efficiently at the conversational(simple) commerce level. It is important that businesses recognize how their customers want to interact and worktoward providing customers their preferred medium to increase the likelihood of a sale or transaction. Forging apositive relationship at a simple commerce level, often with customers who may be in their first engagement with theproduct or service, could lead to conversion of the customers from passive to loyal. At this point they may decide ontheir own to increase their interaction beyond a level of simple commerce or bot technology.

ConclusionConversation commerce is already being adopted by global businesses to provide a myriad of services: shopping,payments, transportation, travel, news, games and more — and we anticipate its popularity only to grow in theforeseeable future. The empowered customer is increasingly demanding smarter, faster and more convenient ways tointeract with brands of their choice, in ways that naturally fit into their everyday lives.

The growing trends driving conversational commerce — mobile, text and use of messaging platforms — is drivingindustry agnostic disruption. Take a moment to pause and think about your own world: how do you interact withfamily, friends and coworkers? Your own behaviors show clear direction on how interactions and exchanges areevolving; for example, texting is no longer just a trend of millennials — in 2015, 97% of the US population sent at leastone text message a day.15

Conversational commerce is one piece of business’s response to rapidly evolving customer behaviors and has thepotential to drastically impact the simple commerce transactions that contribute to approximately 80% of mobilecommerce. Companies’ ability to recognize the benefits of and implement conversational commerce accelerators willbe crucial for their business’ survival in the ever-present fight to stay relevant in the minds of consumers. EYrecognizes this tipping point and is moving quickly to help our clients be a player in the dynamic conversationalexchange with their customers and avoid being relegated to the “app” graveyard.

To learn more about Conversational Commerce, EmpoweredCustomer and other EY Megatrends, or how EY can help youand your company build a better working world, pleasecontact the EY Americas Advisory Innovation team.

15 “U.S. Smartphone Use in 2015,” Pew Research Center website, www.pewinternet.org/2015/04/01/us-smartphone-use-in-2015, accessed July 2016.

Listen Closely — your customers are trying to text you somethingEY | Assurance | Tax | Transactions | Advisory

About EYEY is a global leader in assurance, tax, transaction andadvisory services. The insights and quality services wedeliver help build trust and confidence in the capitalmarkets and in economies the world over. We developoutstanding leaders who team to deliver on ourpromises to all of our stakeholders. In so doing, we playa critical role in building a better working world for ourpeople, for our clients and for our communities.

EY refers to the global organization, and may refer toone or more, of the member firms of Ernst & YoungGlobal Limited, each of which is a separate legal entity.Ernst & Young Global Limited, a UK company limited byguarantee, does not provide services to clients. For moreinformation about our organization, please visit ey.com.

Ernst & Young LLP is a client-serving member firm ofErnst & Young Global Limited operating in the US.

© 2016 Ernst & Young LLP.All Rights Reserved.

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This material has been prepared for general informational purposesonly and is not intended to be relied upon as accounting, tax or otherprofessional advice. Please refer to your advisors for specific advice.

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