economics

Customer experience and the peer-to-peer economy: What traditional retailers can learn from the new kids on the block

Wouldn’t life be easier if, instead of selling stuff, you just let other people do it and then take a cut?

The rise of the peer-to-peer economy in recent years has flipped traditional business wisdom on its head. No longer need you worry about stock levels, store rental prices and fixed term labour contracts- instead create a platform where incentivised parties come together to exchange goods and services, and leave the rest up to the market you’ve created.  Let the eBay buyer and seller, the Uber passenger and driver, the Airbnb guest and host do the hard work and enjoy the spoils of your self-sustaining network.

Yet in this happy (and admittedly severely rose-tinted) world, where your business’ brand ambassadors aren’t even employed by you at all, how do you ensure that your customers have a consistent customer experience that will keep them coming back? In practice, peer-to-peer companies do a reasonable job of this. They control key aspects of the experience, such as the app interface and the customer service department, to ensure in the first instance customers are comfortable using the platform, and in the second instance are reassured that any issues are dealt with professionally and efficiently.

They then leave the bulk of the customer experience in the hands of strangers- your Uber driver, your Airbnb host, your eBay seller. Now what peer-to-peer businesses do which is smart is that they align the incentives of these individuals with their business interest. The Uber driver is incentivised to get on the road when more people need cabs through surge pricing. The Airbnb host is incentivised to offer competitive pricing through a pricing map showing the cost of other Airbnb rooms nearby. The eBay seller is incentivised to accurately describe the products they have on offer through customer feedback ratings. These mechanisms mean it is in the interest of all these individuals to provide a good service to their customers. This is good for the customer, who feels reassured interacting with strangers, and it is all good for the business, since it encourages customers to come back to the platform again and again.

Smart stuff.

It is clear, however, that these mechanisms aren’t perfect. There have been claims that surge pricing by Uber is exploitative. Despite “clear” photos Airbnb rooms aren’t always as fantastic as they claim to be. Customer feedback systems such as eBay’s star ratings can be inaccurate, giving customers a platform to vent problems rather than offer accurate criticism. The next stage for these businesses is to understand the insights behind these pain points and work to rectify them, working to deliver an even better customer experience, either through intervening themselves or fine-tuning their incentive framework.

Regardless, this mix of incentives and direct customer engagement is a potent and arguably less resource-heavy way of ensuring a consistent customer experience. So, traditional retailers, the next time you’re thinking about your customer experience, maybe take a leaf out of the peer to peer economy’s book?

Incentives, rather than investment, could be the solution to your problems.