The low-touch business model is one where there is little human interaction between the buyer and seller from the customer acquisition process to product or service delivery. Under the low-touch business model, there is little to no direct interaction between the buyer and the seller.
Aspect
Explanation
Definition
A Low-Touch Business Model is a business approach designed to minimize human intervention in customer interactions and operations while delivering products or services. It relies heavily on automation, self-service, and digital tools to serve customers efficiently.
Key Concepts
– Automation: The use of technology and algorithms to perform tasks traditionally done by humans. – Self-Service: Customers are empowered to perform actions and access information independently. – Digital Tools: The use of software and digital platforms for customer interactions and operations. – Scalability: Low-touch models can often scale rapidly without proportionate increases in labor costs. – Efficiency: Focus on streamlining processes and reducing human error.
Characteristics
– Minimal Human Interaction: Customer interactions are primarily digital or self-service. – Highly Automated: Core processes and tasks are automated. – Digital Channels: Predominantly rely on online and digital channels for sales and customer support. – Efficiency-Focused: Emphasis on efficiency and cost reduction. – Scalability: Designed to scale easily with increased demand.
Examples
– Online Retail: E-commerce platforms that rely on automated order processing and chatbots for customer inquiries. – Digital Banking: Online banks that offer self-service account management and digital customer support. – SaaS Companies: Software as a Service (SaaS) providers that offer software solutions through online platforms with minimal human intervention. – Streaming Services: Subscription-based streaming platforms that provide content through automated systems. – Telemedicine: Digital healthcare services that allow patients to consult with healthcare providers remotely.
Advantages
– Cost Efficiency: Lower operational costs due to reduced labor expenses. – Scalability: Easily scale to accommodate growing customer bases. – 24/7 Availability: Services can be available to customers round the clock. – Consistency: Reduced chances of human error, leading to more consistent service. – Convenience: Provides convenience to customers who prefer self-service.
Challenges
– Customer Experience: May lack the personal touch of high-touch models, affecting customer experience. – Technical Issues: Dependence on technology can lead to disruptions in case of technical glitches. – Customer Support: Handling complex or unique customer queries can be challenging in a low-touch model. – Trust: Building trust with customers solely through digital channels can be difficult. – Competitive Landscape: In some industries, competition in the low-touch space can be fierce.
Adoption Trends
The adoption of low-touch business models has accelerated in recent years, driven by technological advancements, changing consumer preferences for online interactions, and the need for cost-efficiency. The COVID-19 pandemic also accelerated the shift towards low-touch models due to safety concerns and lockdowns.
Conclusion
The Low-Touch Business Model leverages automation, self-service, and digital tools to minimize human intervention in customer interactions and operations. While it offers cost-efficiency and scalability advantages, it must balance these benefits with maintaining a positive customer experience and trust in an increasingly competitive landscape. The adoption of low-touch models is expected to continue growing in various industries.
Since automation and digital sales are important components of the business model, it is popular with eCommerce platforms where products are offered with a direct checkout option. When there is interaction on an eCommerce site, it commonly occurs via live digital assistants or chatbots. Indeed, most buyers are not motivated to interact with a company unless they have a pressing issue such as a warranty claim or customer complaint, which makes this business model low-touch as opposed to “no-touch”.
The automated nature of the low-touch business model can also be seen in situations that pre-date the internet, such as withdrawing cash from an automatic teller machine (ATM) and filling the car with gas from a self-service pump.
The three stages of the low-touch business model
Every application of the low-touch business model will be different, but most incorporate three general stages.
1 – Customer awareness
Modern low-touch businesses utilize digital and content marketing strategies delivered via the company website, blog, or email address. Some others may use videos, webinars, or any other automated solution that minimizes costs.
Email marketing is considered particularly advantageous because of the way it can be used across multiple customer touchpoints.
Whatever the strategy chosen, the primary focus during this stage is to get ultra-specific on a target audience or buyer persona and focus on adding value to the channels where these individuals spend their time. Ultimately, the automated communication of the low-touch business model is only successful if it is backed by a deep understanding of the ideal prospect.
2 – Customer evaluation and qualifying
For products with low profit margins, a buyer may peruse the item description or consumer reviews before making a direct purchase. Sellers of premium products or those offering software-as-a-service (SaaS) may entice buyers with an automated free trial or access to a freemium version.
In either case, the in-product experience should be maximized to encourage the prospect to purchase after the free period has ended. This means delivering value as quickly as possible to reduce customer churn rate and increase customer retention.
3 – Purchase and after-sales
Consumers now expect the eCommerce business to handle payment, invoicing, and product delivery by default. However, the low-touch business model should also automate the return, repair, exchange, and warranty claim process wherever possible.
eCommerce Platforms: Online retail businesses like Amazon, eBay, and Shopify often operate with a low-touch model. Customers can browse, select, and purchase products online with minimal human interaction, and digital tools like chatbots assist with customer inquiries.
Software-as-a-Service (SaaS) Companies: Many SaaS providers, such as Dropbox, Slack, and Zoom, offer free trials or freemium versions of their software. Customers can sign up, evaluate the software, and make purchases online without direct interaction with sales representatives.
Streaming Services: Streaming platforms like Netflix, Spotify, and Disney+ allow users to subscribe and access content digitally. While customer support is available, users can sign up and manage their subscriptions online with minimal human interaction.
Online Banking: Online banking services provided by banks and fintech companies enable customers to perform various banking tasks, from transferring funds to paying bills, through digital platforms. Customer support is available, but most transactions occur without direct interaction.
ATMs (Automated Teller Machines): ATMs allow customers to withdraw cash, check balances, and perform other banking transactions without entering a physical bank branch. While not a traditional business, ATMs exemplify the low-touch model for financial transactions.
Self-service Gas Stations: Gas stations with self-service pumps enable customers to fill their vehicles with fuel and make payments without assistance from attendants. Payment processing and fuel dispensing are automated.
Online Travel Agencies: Companies like Expedia and Booking.com allow travelers to book flights, accommodations, and travel packages online. Customers can compare options, make reservations, and receive booking confirmations digitally.
Digital Marketplaces: Platforms like Etsy, Airbnb, and Upwork connect buyers and sellers online. Users can browse listings, make bookings, and conduct transactions with minimal human intervention.
Subscription Box Services: Businesses that offer subscription boxes, such as Birchbox (beauty products) and Blue Apron (meal kits), provide automated subscription management and delivery systems. Customers can sign up, customize preferences, and receive regular shipments without talking to sales representatives.
Online Learning Platforms: EdTech companies like Coursera and Udemy offer courses and educational content online. Learners can enroll, access course materials, and complete assignments digitally, often with automated grading.
Key takeaways:
Under the low-touch business model, there is little to no direct interaction between the buyer and the seller.
Automation and digital sales are important components of the low-touch business model, so it is a natural fit for eCommerce platforms where products are offered with a direct checkout option.
There are three general stages to the low-touch business model: customer awareness, customer evaluation and qualifying, and purchase and after-sales. There is an emphasis on email marketing and its ability to connect with prospects across various touchpoints. It is also important to develop a specific and accurate buyer persona as a foundation for the stages that follow.
Key Highlights
Minimal Human Interaction: The low-touch business model involves minimal to no direct interaction between buyers and sellers throughout the customer journey, from customer acquisition to product or service delivery.
Automation and Digital Sales: Automation and digital sales processes are fundamental components of this model. It is often utilized by eCommerce platforms where customers can make purchases directly online. Any interactions that do occur typically involve digital tools such as chatbots or digital assistants.
Customer Awareness: The low-touch model follows a three-stage approach. The first stage is “customer awareness,” where businesses use digital and content marketing strategies to reach and engage specific target audiences or buyer personas. Email marketing is often a key tool in this stage.
Customer Evaluation and Qualifying: In the second stage, “customer evaluation and qualifying,” buyers may review product descriptions or customer reviews. For premium products or Software-as-a-Service (SaaS) offerings, businesses may offer free trials to entice potential customers. The goal is to provide value quickly to retain customers.
Purchase and After-sales: The final stage, “purchase and after-sales,” involves automating payment processing, invoicing, product delivery, and even handling returns, repairs, exchanges, and warranty claims whenever possible. Encouraging customers to leave reviews is also essential, as positive reviews can influence others during the customer awareness stage.
An effective business model has to focus on two dimensions: the people dimension and the financial dimension. The people dimension will allow you to build a product or service that is 10X better than existing ones and a solid brand. The financial dimension will help you develop proper distribution channels by identifying the people that are willing to pay for your product or service and make it financially sustainable in the long run.
Business model innovation is about increasing the success of an organization with existing products and technologies by crafting a compelling value proposition able to propel a new business model to scale up customers and create a lasting competitive advantage. And it all starts by mastering the key customers.
Digital and tech business models can be classified according to four levels of transformation into digitally-enabled, digitally-enhanced, tech or platform business models, and business platforms/ecosystems.
A digital business model might be defined as a model that leverages digital technologies to improve several aspects of an organization. From how the company acquires customers, to what product/service it provides. A digital business model is such when digital technology helps enhance its value proposition.
A tech business model is made of four main components: value model (value propositions, mission, vision), technological model (R&D management), distribution model (sales and marketing organizational structure), and financial model (revenue modeling, cost structure, profitability and cash generation/management). Those elements coming together can serve as the basis to build a solid tech business model.
A platform business model generates value by enabling interactions between people, groups, and users by leveraging network effects. Platform business models usually comprise two sides: supply and demand. Kicking off the interactions between those two sides is one of the crucial elements for a platform business model success.
A Blockchain Business Model is made of four main components: Value Model (Core Philosophy, Core Value and Value Propositions for the key stakeholders), Blockchain Model (Protocol Rules, Network Shape and Applications Layer/Ecosystem), Distribution Model (the key channels amplifying the protocol and its communities), and the Economic Model (the dynamics through which protocol players make money). Those elements coming together can serve as the basis to build and analyze a solid Blockchain Business Model.
In an asymmetric businessmodel, the organization doesn’t monetize the user directly, but it leverages the data users provide coupled with technology, thus have a key customer pay to sustain the core asset. For example, Google makes money by leveraging users’ data, combined with its algorithms sold to advertisers for visibility.
In an asymmetric businessmodel, the organization doesn’t monetize the user directly, but it leverages the data users provide coupled with technology, thus having a key customer pay to sustain the core asset. For example, Google makes money by leveraging users’ data, combined with its algorithms sold to advertisers for visibility. This is how attention merchants make monetize their business models.
While the term has been coined by Andrew Lampitt, open-core is an evolution of open-source. Where a core part of the software/platform is offered for free, while on top of it are built premium features or add-ons, which get monetized by the corporation who developed the software/platform. An example of the GitLab open core model, where the hosted service is free and open, while the software is closed.
Cloud business models are all built on top of cloud computing, a concept that took over around 2006 when former Google’s CEO Eric Schmit mentioned it. Most cloud-based business models can be classified as IaaS (Infrastructure as a Service), PaaS (Platform as a Service), or SaaS (Software as a Service). While those models are primarily monetized via subscriptions, they are monetized via pay-as-you-go revenue models and hybrid models (subscriptions + pay-as-you-go).
Open source is licensed and usually developed and maintained by a community of independent developers. While the freemium is developed in-house. Thus the freemium give the company that developed it, full control over its distribution. In an open-source model, the for-profit company has to distribute its premium version per its open-source licensing model.
The freemium – unless the whole organization is aligned around it – is a growth strategy rather than a business model. A free service is provided to a majority of users, while a small percentage of those users convert into paying customers through the sales funnel. Free users will help spread the brand through word of mouth.
A freeterprise is a combination of free and enterprise where free professional accounts are driven into the funnel through the free product. As the opportunity is identified the company assigns the free account to a salesperson within the organization (inside sales or fields sales) to convert that into a B2B/enterprise account.
A marketplace is a platform where buyers and sellers interact and transact. The platform acts as a marketplace that will generate revenues in fees from one or all the parties involved in the transaction. Usually, marketplaces can be classified in several ways, like those selling services vs. products or those connecting buyers and sellers at B2B, B2C, or C2C level. And those marketplaces connecting two core players, or more.
B2B, which stands for business-to-business, is a process for selling products or services to other businesses. On the other hand, a B2C sells directly to its consumers.
A B2B2C is a particular kind of business model where a company, rather than accessing the consumer market directly, it does that via another business. Yet the final consumers will recognize the brand or the service provided by the B2B2C. The company offering the service might gain direct access to consumers over time.
Direct-to-consumer (D2C) is a business model where companies sell their products directly to the consumer without the assistance of a third-party wholesaler or retailer. In this way, the company can cut through intermediaries and increase its margins. However, to be successful the direct-to-consumers company needs to build its own distribution, which in the short term can be more expensive. Yet in the long-term creates a competitive advantage.
The C2C business model describes a market environment where one customer purchases from another on a third-party platform that may also handle the transaction. Under the C2C model, both the seller and the buyer are considered consumers. Customer to customer (C2C) is, therefore, a business model where consumers buy and sell directly between themselves. Consumer-to-consumer has become a prevalent business model especially as the web helped disintermediate various industries.
A retail business model follows a direct-to-consumer approach, also called B2C, where the company sells directly to final customers a processed/finished product. This implies a business model that is mostly local-based, it carries higher margins, but also higher costs and distribution risks.
The wholesale model is a selling model where wholesalers sell their products in bulk to a retailer at a discounted price. The retailer then on-sells the products to consumers at a higher price. In the wholesale model, a wholesaler sells products in bulk to retail outlets for onward sale. Occasionally, the wholesaler sells direct to the consumer, with supermarket giant Costco the most obvious example.
The term “crowdsourcing” was first coined by Wired Magazine editor Jeff Howe in a 2006 article titled Rise of Crowdsourcing. Though the practice has existed in some form or another for centuries, it rose to prominence when eCommerce, social media, and smartphone culture began to emerge. Crowdsourcing is the act of obtaining knowledge, goods, services, or opinions from a group of people. These people submit information via social media, smartphone apps, or dedicated crowdsourcing platforms.
In a franchained business model (a short-term chain, long-term franchise) model, the company deliberately launched its operations by keeping tight ownership on the main assets, while those are established, thus choosing a chain model. Once operations are running and established, the company divests its ownership and opts instead for a franchising model.
Businesses employing the brokerage business model make money via brokerage services. This means they are involved with the facilitation, negotiation, or arbitration of a transaction between a buyer and a seller. The brokerage business model involves a business connecting buyers with sellers to collect a commission on the resultant transaction. Therefore, acting as a middleman within a transaction.
Dropshipping is a retail business model where the dropshipper externalizes the manufacturing and logistics and focuses only on distribution and customer acquisition. Therefore, the dropshipper collects final customers’ sales orders, sending them over to third-party suppliers, who ship directly to those customers. In this way, through dropshipping, it is possible to run a business without operational costs and logistics management.
Under the low-touch business model, there is little to no direct interaction between the buyer and the seller. Therefore, most of the interactions that lead to the business transaction between customer and seller are automated or at least require little effort or competence. Therefore, the product and service might be either highly standardized. Or they might be customized via digital/tech features at scale.
What is low touch customer service?
In low-touch customer service, customer support is mostly automated. Think of the case of a vending machine, which runs mostly on autopilot, as the customer can proceed with ha self-service procedure in picking up the product.
Gennaro is the creator of FourWeekMBA, which reached about four million business people, comprising C-level executives, investors, analysts, product managers, and aspiring digital entrepreneurs in 2022 alone | He is also Director of Sales for a high-tech scaleup in the AI Industry | In 2012, Gennaro earned an International MBA with emphasis on Corporate Finance and Business Strategy.
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