Recession is a good cure for complacency

On the outside it’s surprising how many businesses rely on the continuing buying habits of their customers when times are hard. For many the assumption is that inertia will prevail despite the economic gloom. On the inside it’s understandable. After all many business models are based on our inertia – our reticence to change.

The one inertia selling model that breaches the Distance Selling Regulations is the demand for payment for goods or services supplied when you haven’t asked for them. There are, however, many forms of inertia selling that are not illegal. One model known as negative-option selling is easily implemented online. There are numerous examples where you have to consciously change the default setting to avoid buying or committing to something you don’t want. For example, when something you don't want is bundled in with something you do, unless you unbundle it yourself you end up buying it without realising. On the Ryanair website the insurance box comes ready-ticked, so unless you specifically untick the box, the airline automatically includes it and charges you £11.50 for travel insurance.

One fundamental reason why banks are so keen to win student accounts is because they know that a significant percentage will stay with them for life – despite the opportunity to switch more easily online. Last year the Office of Fair Trading's damning report into personal current accounts in the UK says that, as a result of customer inertia,  just 6% of bank customers switched accounts in the past 12 months and 47% of those customers asked in a survey had not even considered switching at all.

There are businesses that depend on our inertia as the basis for a substantial proportion of their sales, for example, any business that requires past customers to take positive action to discontinue the continuing supply or to return the unwanted products. Classic examples are any subscription or ‘member’ products delivered to your door, from book clubs, magazine publishers or wine merchants, for example. In fact any direct debit agreements require a significant conscious effort to change them.

Can businesses, including member organisations, continue to rely on inertia in a recession?

The combination of a recession and widespread adoption of the Internet to support our purchasing decisions and run our finances challenges any business’s reliance on inertia. We now readily evaluate our decisions based on the descriptions of others’ experiences. When we are forced by circumstances – losing a job or increased worry about keeping a job – to review our expenditure we will take time out to look at those direct debits and consider whether the outgoings are really justified. At this point we ask ourselves are the benefits justifiable when times are hard and what do others think? 

This applies as much to member organisations – organisations dependent on members continuing to keep up their subscriptions. Working with a range of member organisations we at SiftGroups are very aware of the member benefits and just how vulnerable they can be. Here are four typical member benefits and how their value is being challenged.

Post-nominals

Having letters after your name could be the ticket to independent practice in a profession. The certifying body, often a Chartered Institute, requires continuing membership for you to retain the letters, so for many such organisations, especially where it’s a legal requirement,  providing professional certification is all that’s required to retain your membership. However, given the growing political imperative to separate out regulatory bodies from professional bodies, it is likely in the future that the only legal requirement will be to be listed by the regulatory body. Also from the professionals point-of-view there is often a choice of qualifications from competing organisations and for younger professionals there is the increasing recognition that the corporation you work for can carry far more weight in the job market than the letters after your name.

Continuing professional development (CPD)

Updating of professional knowledge and the improvement of professional competence might be considered the domain of professional bodies. The reality is that suppliers, equipment manufacturers, specialist service firms, information providers and training organisations are all potentially certified CPD providers. Again for the younger professional especially, the in-house corporate training and development programmes are often the preferred option.

Products and services

For many professional bodies it is their commercial arm, the wholly owned subsidiary, which is the principle source of revenue. At CIPD (Chartered Institute of Personnel and Development) it provides two-thirds of the £39.4 million income. At CILIP (Chartered Institute of Library and Information Professionals) employment services, training, events and conferences and publications generate more than double the membership subscriptions. For many members, discounts on products and services, such as events and insurance, was the original reason for joining their professional body. It’s exactly this type of expenditure that is scrutinised when times are hard.

Member magazine

The member magazine is the traditional organ of communication between the organisation and its members. At a minimum unit cost of around 50 pence it can represent one of the largest costs to the organisation. Often these costs are balanced out by advertising revenue, especially job adverts – exactly the revenue stream to be hardest hit in a recession and the activity that has all but fully migrated online. More importantly just how effective is the magazine as a communication tool? Like controlled circulation publishers, member organisations have very little idea just how useful the magazine is and how many of their members don’t even remove the wrapping. Again there is likely to be a distinct difference in response between the younger and older professional.

Why not focus on building relationships?

Many Institutes started out as Associations often founded off the back of a meeting of like-minded professionals. These people were doing what comes naturally – 'associating' with others with similar interests and needs. As the organisation grew and became more sophisticated and ambitious this simple reason for being was ‘institutionalised’ into a formal relationship between the organisation and the individual member with the paid ‘official’ as the intermediary. It was only with the adoption of the Internet as a two-way communications channel that the natural way of associating could be re-discovered among, potentially, many thousands of individuals.

The key is that word ‘individual’. In the commercial world there is a growing realisation that to survive in a recession businesses need to be thinking more about me as a customer not me as a contributing statistic to a consumer survey (see Treat me like a customer not a consumer). Equally member organisations need to distinguish me as an individual member from a member management statistic – in other words, a relationship based on conversations not transactions (see Why member organisations need to adapt to suceed in an online world).

If member organisations do not grasp the sea-change in the way we associate with one another they will be seen to be increasingly irrelevant. It’s all about getting back to your roots and recognising the parallels in how our lives our changing in the commercial world.

You can see me talk about this at our last breakfast-time event.

And finally …

Here’s a reminder of just how powerful well nurtured conversations can be from a recent participant in the CIPD community (rated as one of the top three CIPD member benefits):

“Although I’m not a regular poster I am an avid lurker and learn so much from the communities. I find reading about the applications of employment law and knowledge 10x more useful than sitting with a textbook or magazine article and the communities are the main way in which I develop my knowledge. The Communities are invaluable to me and the primary reason I renew my CIPD membership each year.”

Picture: http://www.michaeltotten.com/archives/2008/01/a-plan-to-kill.php. The Marines [in Iraq] are reminded of this fact every day”