From sustainability to loyalty: How design thinking unearths deep connections between fashion brands' changing priorities to unlock 'magical' revenue growth.

This year's Future of Fashion event took place against the backdrop of hugely challenging market conditions and an industry undergoing a period of profound change. Brands like Net-a-Porter and Mulberry are wrestling with challenges ranging from the European Commission's looming Extended Producer Responsibility regulations (EPR) to changing consumer behaviours as Generation Z rises to prominence.

It was fascinating to see how brands at the vanguard are responding, with new priorities and new thinking - and, make no mistake, customer experience innovation is front and centre.

Emerging priorities

Three key themes emerged time and again:

• Sustainability: EPR essentially makes fashion brands responsible for the whole life impact of products, including making them more durable, repairable, reusable and recyclable. Far from seeing extended producer responsibility as a threat, brands like Mulberry are already embracing it because they see the circular economy as an important source of growth.
• Rethinking loyalty: Clearly loyalty schemes are nothing new, but is loyalty secured through discounting really loyalty? Brands like Decathlon are already moving away from this artificial, transactional approach, seeking to earn loyalty by connecting with customers on a deeper, more human level.
• From acquisition to customer lifetime value (CLTV): Attracting new customers is a route to growth is losing its shine - it's expensive, uncertain and transient. Instead, brands like Net-a Porter are taking a leaf from the book of subscription economy giants like Netflix, who already know that acquisition alone can only ever deliver diminishing returns. The focus instead is turning to CLTV - targeting the 'lower funnel' in an effort to retain and maximise revenue from existing customers.

All eminently sensible, but how do you actually deliver on these ambitions in a way that drives revenue when adding Gen Z as the unknown variable, with its new behaviours, needs and motivations?

The answer is in design thinking, which can be applied to any customer experience problem or opportunity. The solutions are often surprising or unexpected, but the outcomes in terms of almost any KPI are often transformative.

Design thinking: Unexpected solutions, predictable results

For the uninitiated, design thinking - also known as human-centred design is a process for solving problems by prioritising customer needs above all else. At its heart it relies on observing, with empathy, how people interact with an environment or service, then using that insight to guide an iterative, test-and-learn approach to continuous innovation and improvement.

Crucially, putting a deep understanding of, and empathy with customers at the heart of innovation can be incredibly powerful. It can drive novel thinking by unearthing previously hidden connections between problems and opportunities - and unlock commercially transformative innovations that might otherwise have been overlooked.

That allows us to think differently:

• Sustainability: The circular economy is already deeply embedded in Gen Z culture through resale brands like Vinted and Depop - 90% of their users are under 26. Embracing that culture, as Mulberry and others are doing, is like pushing on an open door - where design thinking comes in is in the how. How do we embed our brand in that culture in a way that is not just genuinely useful for customers, but also feels authentic and meaningful?
• Rethinking loyalty: Brands like Palace, Supreme and M+RC Noir inspired an almost fanatical, tribal loyalty among Gen Z consumers (and a thriving resale market - connections). But not with discounts, quite the opposite. They pioneered 'Drop culture' - limited stock, short notice collection 'Drops', that sold out in minutes despite sky high prices. Brands like Net-a-Porter are now starting to use similar tactics to drive loyalty, but are also employing design thinking to ensure they truly resonate with customers.
• Customer lifetime value: Subscription giants like Netflix and Disney+ have long understood that the starting point for optimised CLTV is to reduce customer churn. Everything from how interfaces are organised to the content they surface is designed to promote loyalty (there's that connection again) and a sense of familiarity. What's more, they use predictive analytics to identify customers likely to cancel based on a range of behavioural metrics, then take proactive steps to retain them. There is no reason why these same principles could not be applied to brands' D2C channels, using design thinking to innovate every aspect of the customer journey in order to promote loyalty.

Show me the money

Clearly, the above is not based on detailed customer insight and is intended only to illustrate the point. In a way, that is part of the point of design thinking. It takes the guesswork out of customer experience innovation - both in terms of specific innovations and their commercial outcomes.

First, every design decision is driven by customer insight, and shaped to satisfy real customer needs. But secondly every solution candidate will be prototyped and live tested to understand its impact on KPIs - from customer sentiment to revenue.

Ultimately, every iterative innovation is rolled out not in hope, but in expectation, because potential revenue uplifts are already known, the business case is solid, and the risks have been assessed and mitigated. It's a little bit of certainty in an uncertain world.

...and finally, the magic

The benefits of design thinking don't end with problem solving. That is, the starting point for design thinking - gathering customer insight - must always be broader than the problem or opportunity at hand, because empathy is impossible without context.

As a result, more often than not, unexpected opportunities and hidden problems emerge. Often, they open the door to transformative innovation - we call them million dollar tests and they happen more often than you might think.

In some ways, these hidden gems are akin to finding a million dollars down the back of the sofa - you'll never know if you don't look - and that's the kind of magic we would also welcome with open arms.

If you want to know more about design thinking and how to apply it to customer experience innovation, get in touch with us today info@biglight.co.uk