How to Stop Losing Customers and Create Added Value for Them With Digital Ecosystems

Customers are not interested in a company if it offers no value.

By value, we mean any useful service or product that a user thinks worthy of paying for. A 2022 Wunderman Thompson report on consumer shopping behavior suggests that the value bar is rising as customers are expecting instant and environmentally-friendly delivery, easy returns, shopping ideas, and a more entertaining user experience.

An ecosystem model means aggregating a wide range of sellers and services on one digital platform and uniting them through one user profile. Marketplaces successfully implement this approach to create more value for digital shoppers. As a result, they don’t experience customer churn, keep their status as market leaders, and effortlessly expand to new audiences. Other companies across industries can do the same.

In 2021, Gartner asked its respondents to name their most pressing sales, marketing and channel initiatives. An absolute majority, 24%, named acquiring new customers.

This task is getting tougher as the customer acquisition costs (CAC) are rising: from 2014 to 2019 the average CAC grew 60%. According to FirstPageSage, the average CAC for business-to-consumer companies in E-commerce is $64, in Entertainment it’s $82, and in Financial Services—$146.

Alongside the soaring CAC, the ubiquitous technological advancement and broad accessibility of marketing and development tools causes commoditization, a process when multiple companies offer similar. products and lose their competitive advantage. Competing with a series of alike players with a heightened acquisition cost makes it more difficult to win new customers. Being unable to stand out, businesses slow down and inevitably reach their growth plateau, which might be a tough spot to get out of.

Another challenge posed by the global e-commerce market is retaining customers and forging a strong customer loyalty. Ecosystems solve this task by offering users a convenient digital environment where all their needs are met with no extra effort on their side. Users get access to multiple services through a single profile, and use a shared bonus program or premium features across all the participant companies of the ecosystem. Such elements comprise a smooth and uninterrupted user experience, which customers are less likely to leave.

A PYMNTS study found out that 72% of consumers are interested in an integrated digital space, particularly for its convenience and security. A McKinsey report also suggests that for traditional companies, an ecosystem can be a way to keep its competitive advantage and secure its client base. And companies should use this knowledge to their advantage.

Example. Sportmaster is the largest sporting goods retail chain in Eastern Europe. They started losing clients to marketplaces and had to restructure their business so that it would offer more value and bring the customers back.

We analyzed their case and suggested implementing the ecosystem strategies. Marketplaces offer a wide range of services without targeting any particular user category. To compete with them, we decided to take an opposite approach and develop a one-stop service that would cater to the specific needs of athletes.

First, we created an uninterrupted sales channel by uniting the offline and online sales. Then, we diversified the core business with subsidiary services such as online workouts, medical check-ups, equipment rent and repairs, sports media, and event calendar.

The recent COVID-19 pandemic proved that one can never be sure of what the future holds. During the quarantine, many businesses suffered shutdowns and major financial losses, being unable to adapt to the new, rapidly changing economic climate. In such cases, diversification with partners or subsidiary services can serve as a safety net and help keep the whole business afloat even when one of its elements is going through tough times.

Example. Uber is a mobility ecosystem that branched out its ride-hailing business into food and package delivery, booking, couriers, and freight transportation. The services grow from mutual promotion and a shared client base. As of 2022, Uber holds 72% of the U.S. ride-hailing market, and 24% of shares for food delivery.

Major tech companies are responding to users‘ demand for digital privacy. Google is determined to phase out cookies by 2024, and Apple released iOS 14.5 that obliges apps to ask users’ permission for tracking. Users are opting for sharing less data, which translates to companies losing a crucial instrument for learning and serving their audience with personalized offers.

Such regulations do not affect ecosystems. They offer a more secure and private digital environment. As users only need to enter their data once, instead of sharing it with multiple services across the Internet. The data is saved only within the members of the ecosystem, creating a win-win situation: users keep their privacy from outside third parties, and the selected companies get precise insights into the customer sentiment and emerging trends.

Example. A Colombian super app Rappi hosts a digital ecosystem of food, finance, travel, and on-demand grocery and goods delivery. To promote merchants on its platform, Rappi launched a custom marketing tool, Brands by Rappi. It collects the data of the registered users and sells it to the companies that participate in the ecosystem. This way, user data does not leak out to third parties, and the brands get highly specific insights about their audiences.

A digital ecosystem is just the thing for the companies that aim to scale and grow as fast as possible. The more partners or services the ecosystem has, the easier it attracts more new partners and clients, thus experiencing rapid growth and yielding more benefits to its participants. This is the principle of a “Flywheel Effect”: small wins accumulated over time create a massive momentum that powers a business to new heights.

Example. The world’s fifth-largest ecommerce company, Alibaba started out in 1999 as a business-to-business marketplace in China. In 2003, it launched a consumer-to-consumer marketplace Taobao and a digital payment platform Alipay. It went on to launch an online retail, a comparison shopping website, international marketplace for small businesses, logistics company, travel marketplace, and a supermarket chain.

Digital ecosystems offer great opportunities for business development. That’s why the world’s leading companies leverage ecosystem strategies to create more value and boost growth. Ecosystems help lower customer acquisition costs, grow LTV and customer loyalty, create a better customer experience, and bolster businesses in times of crises.

Of course, it’s not a slam dunk. There are cases when other approaches are more suitable for solving business challenges. To find the perfect solution, one must carefully study the market, consider customer needs and business resources, and plan out a strategy for further growth. We describe the whole process in our guide, and if you would like to discuss the specifics of your case, drop us a line. We will gladly research and work out the most optimal solution for your business.