Friction and reward: the two most important forces in retail

We are living in the age of total consumer choice. Technology and the visibility of alternatives means customers can choose you, and they can just easily choose away from you.

Customers are continually, often subconsciously, balancing how much effort they need to put in against how much they gain. We call these two forces friction and reward.

Effort input = friction

Frictions are anything a customer must do to complete a shopper mission. They are the input a customer makes, the “arse-ache” involved in buying something.

Examples:

• Remembering the password for the app
• Driving to the store
• Finding a product on the shelf
• Navigating the website

Gain output = reward

Rewards are everything the customer gets back from choosing a certain retailer to shop. Rewards are the customer outputs or gains.

Rewards in this context don’t mean reward schemes, or reward points, although those would come under the reward side of this equation. Rewards are more broadly anything a customer gets out of the interaction.

Examples:

• Good customer service
• Local store locations
• High product quality
• Good unboxing experience

Why does it matter?

Understanding customer choice is about understanding the push and pull factors that influence that choice. These opposing forces of friction and reward are present in every vendor interaction.

And in a choice economy, where choosing where to shop is trivially easy, even tiny frictions and rewards can have a big influence on how a customer chooses.

Friction, reward and Relative Attractiveness

It’s crucial for retailers to understand the specific relationship between Friction and Reward in their business because this is the key to understanding what makes them more, or less, Relatively Attractive than their competitors.

CX performance is always relative. How successfully you attract customers is relative to how successfully your competitors do the same.

Relative Attractiveness (RA) is a measure of how attractive your proposition is to a competitor, relative to other market players, across a range of customer stories – what the customer is trying to achieve, in what needstate and mindset.

Measuring friction and reward for a particular customer story gives you an understanding of your Relative Attractiveness compared to your competitors, across multiple CX variables.

Reducing shopping friction and delivering rewarding experiences

To be more relatively attractive to customers than the other options, retailers must reduce the friction required to buy at the same time as increasing the reward to be gained from buying.

All modern retail success stories, from Amazon and Ryanair to DollarShaveClub and Walmart have been built using variations on this rule.

Customers can easily choose away from you. But if you reduce friction and offer more reward than your competitors you can become more Relatively Attractive and steal customers away from them.

1. Make it easy to buy from you – REDUCE FRICTION

2. Make it amazing to buy from you – INCREASE REWARD

3. Do both – REDUCE FRICTION AND INCREASE REWARD

When friction can work in your favour

There are some rare instances in which the rule of “reduce friction, increase reward” may not apply.

For example, friction can occasionally work in a retailer’s favour when it’s balanced by a genuine reward. Limiting product availability is an example of this; Pappy Van Winkle’s Family Reserve, the bourbon that’s famous for being impossible to buy, or US skateboarding brand Supreme who engineer long queues outside their store for their drops of limited collections. Such deliberate frictions can create publicity, exclusivity and prestige.

But deliberately engineering friction is a risky approach in a choice economy. If you don’t get it right (and it’s easy to go wrong), customers can simply go elsewhere.

When reward is risky

Strategies for increasing buyer reward should be carefully thought through. For example, reward schemes that offer discounts can be powerful, making customers feel part of a club. But successful reward schemes require intelligent personalisation and generous incentives, which require substantial budgets which not all retailers have.

Offering a poorly thought-through points scheme does little to change customer behaviour and can eat away at margins or trap a company into an endless outlay on perks that customers come to expect, but that don’t incentivise them to shop with you more often.

Reward should never be offered without an understanding of how it makes you relatively more attractive than your rivals.

How to identify friction points and reward opportunities

Some friction reductions involve major structural changes to a business. For example:

• Home delivery
• Increased availability
• Website UI

Similarly, reward variables can be large-scale:

• Experiential retailing
• Real-time engagement
• Loyalty programmes

But it’s not all about big changes. Friction includes everything that a customer goes through to buy from you, and reward is everything they get from buying from you. Tweaking these can often involve small changes that have a substantial impact on customer behaviour.

Small friction-busters

• Better store signage
• Coinless trolleys
• Contactless payment

Small reward boosters

• Smile from cashier
• Reusable bags
• Product demos

Even small tweaks to your friction / reward balance can have an impact on your bottom line. But friction points aren’t always obvious. Rewards that customers value aren’t always obvious either. Often, even customers aren't aware of the complex web of frictions and rewards that are influencing their behaviour when they shop.

So how do we identify them?

What you can do right now

Start thinking in terms of friction vs. reward. Just thinking about these two competing metrics can help you make changes to your business that can increase sales.

As a practical exercise, try listing all the frictions customers go through to buy from you, and all the rewards they get. Can you bust some small frictions now? Can you boost some simple rewards?

Link friction and reward to your most common Customer Stories

Individual frictions and rewards can have different impacts on different Customer Stories, the combination of the mission a customer is on and the mindstate they are in while they shop.

It’s a useful exercise to identify your most common and commercially useful customer stories, and then list frictions and rewards for these particular stories. Which changes will have most impact on these specific stories?