What the modern gig economy is doing to customer experience

Dr Chris Baumann

Dr Chris Baumann is an associate professor at Macquarie University in Sydney, researching competitiveness, education, East Asia and customer loyalty. He has authored more than 50 refereed journal articles and conference papers with more than 350 citations. He has been awarded for his research and teaching, including from the Australian government for enthusiastic approach to education. Dr Baumann is also visiting professor at Seoul National University (SNU) in Korea and at Aarhus University, Denmark. He introduced ground breaking concepts: Competitive Productivity, Latecomer Brand, Premium Generic Brand (PGB) and the ‘country of origin of service staff (COSS)’ effect. He has a long-standing relationship with Simon Fraser University (SFU), Canada, as MBA Alumni and research collaborator.

Most marketing theory was established in the context of stable employment relationships. From front-line staff to marketing strategists and brand managers, employees generally enjoyed job security with classic benefits such as superannuation plans, stable income streams, employment rights, training, sabbaticals and long-service leave.

Such stable environments were associated with a high level of employee loyalty to the firm. Staff saw themselves as family members and ‘felt’ attached to the brand. Employees demonstrated a sense of belonging by providing services beyond the call of duty to create a pleasant experience for customers that satisfied them and kept them loyal to the firm.

Over the past decade, we have seen a dramatic decline in stable employment contracts and the rise of the gig economy, complete with self-employment, temporary work/contracts, rolling fix term contracts, and getting jobs via platforms such as Uber. Upwards of 50 per cent of young workers in their 20s and 30s in Western economies now work on ‘gigs’ as opposed to full-time employment, where there is no time limit to the contract.

Their dream is no longer to get into a large corporation and work their way up. Instead, they aspire to establish their own service firms and become micro entrepreneurs, short-term consultants, short-term teachers, and secure gigs from Uber or delivery firms. Many work in myriad types of transient service contracts.

The gig economy offers (mostly younger) employees flexibility, allows them to be more creative, and gives them a sense of empowerment. To many, the gig economy offers opportunities to be involved with startups, incubators and involves getting gig after gig. Sometimes they’re lucrative ones, but often these individuals are just ‘survival’ mode types, not knowing where the next pay cheque will come from.

However, the attachment these ‘gig’ individuals have to the brands they work for is vastly different to the direct employee loyalty established over many years of service. There is evidence in the opposite direction as well, such as a decline in loyalty from employers to reward employees and ‘look after’ them over time, with long-serving staff members often disappointed in how they are treated at work. This too may ‘push’ workers – young and more senior – into short-term positions.

It is already clear the gig economy is changing national economies, with an entire de facto generation lacking a stable and permanent employment situation. These changes have implications for taxation, pension planning and social welfare, to name the most prominent.

However, what is less clear is how the gig economy will change and challenge traditional marketing theory and wisdom that focuses on customer experience, satisfaction, loyalty, and so on to hold a competitive edge. 

Short-term impact

Managers may appreciate the positive short-term impact of the gig economy in the form of decreasing total costs of operation. However, the negative side of failing to meet customer expectations due to a lack of employee buy-in could have significant long-term implications on a firm’s performance.

In services firms, employees are the face of the company and act as brand ambassadors. A lack of employees’ commitment and sense of belonging can directly impact the level of service provided on the front-line. Yet a gig worker’s attitude towards caring about customers and responsively responding to their needs and preferences may be affected by the short-term nature of their engagement with the brand.

This potential lack of responsiveness can directly negatively impact customer experience with the brand. After all, from a customer’s perspective, it is not transparent whether a front-line staff member is a contractor. In some cases, large corporations apply a hybrid of full-time and contract workers in the same uniform. In other words, having gig workers less subscribed to the company and brand values could detrimentally affect front-line engagement and the organisation’s CX overall.

Current figures about customer experience in Australia are not promising. The lack of great CX is causing firms to lose around $40 billion annually. In addition, four in 10 Australians believe businesses do not care about them and fail to meet their expectations, a recent study shows. The American Express Global Customer Service Barometer also reveals Australian customers would happily spend 12 per cent extra if they have pleasant experiences, while two-thirds abandon the service provider if they experience poor customer service.

Interestingly, disgruntled customers may not share their unsavoury experience with the company. However, digitally connected customers who are socially engaged with networks easily share their experiences on social media and cast negative sentiment about the company and its brand. These figures should warn managers about the importance of customer experience and the negative effect the gig economy may potentially have on them.

Potential positives

Naturally, there could also be positive effects of the gig economy on marketing. For example, when a contractor gets a new gig and is very excited to work for the brand and represents the brand values well. We see the jury still out on the degree to which the gig economy has positive and/or negative effects.

The concept of the experience economy, where customers not only seek products and services, but often expect a true experience across everything from a first/business class flight or hotel stay, theme parks or even education, has encouraged some Australian companies to invest heavily in improving customer experience and customer experience innovation to build a competitive edge in the market.

A recent study by KPMG shows integrity, personalisation and differentiation are the main determinants of excellent customer experience. If companies aspire to survive – and compete – on customer experience and at the same time also participate in the gig economy, then there are a number of burning questions to answer:

1.            Can companies achieve sufficient return on their investment (ROI) on customer experience, while employees are not committed to the firm, or at least not to the same extent as traditionally?

2.            How can employees who wish to be free and ‘fly’ from one job to another act as brand ambassadors and in accordance with customer experience initiatives?

3.            How trustworthy are employees when the firm has less control over them? How can employees personalise the service to customers when they do not know customers and their personal preferences because there is not a long-term relationship?

4.            In service business, where to a great extent differentiation comes from employees’ performance, can employees who may work for several firms at the same time differentiate the brand in customers’ (and their own) minds?

5.            Can service firms replace these employees with technology-driven methods of service delivery (such as smart connected products, robots or drones), while customers prefer to have more personal interaction?

These questions should be addressed in future via cutting-edge research, exploring how established marketing theory and wisdom ‘tangoes’, or not, with the gig economy.

Moving forward, the way we practice, theorise, research and teach marketing will have to adjust for these massive economic and societal changes associated with the gig economy. 

- This piece was produced with Vida Siathiri of Macquarie University. Vida is a senior lecturer whose area of expertise is managing business-to-business knowledge intensive service firms. In her research, she focuses on front-line interaction, service branding, employees brand building behaviours, employees creative behaviours, leadership, innovation in service firms, and knowledge management. Her work appears in business-to-business, innovation and service management journals.

 

Tags: marketing strategy, brand strategy, gig economy

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