When starting a business, entrepreneurs need to decide how they want to run their business. This includes things like which products they want to sell, how they want to position their brand, and what type of customers they want to target. They will also need to decide how they want to interact and engage with those customers.
When it comes to interactions and engagement, there are two primary models that leaders can adopt; the low touch business model and the high touch business model. Choosing the right business but applying the wrong model may wind up hurting an enterprise in the long run. Let’s take a look at the differences between the high-touch and low touch business models.
What is the High Touch Business Model?
The high touch business model is characterized by significant levels of human interaction and personalized service throughout the customer journey. This approach prioritizes building strong relationships with customers, understanding their specific needs, and delivering tailored solutions. It’s often associated with luxury brands, bespoke services, and industries where customer service is a critical differentiator.
In a high-touch model, the emphasis is on quality interactions. Customer support, personalized marketing, and sales strategies that focus on creating an exceptional customer experience are the focus for businesses that utilize this engagement strategy. The goal is to make customers feel valued and understood. As a result, businesses hope that their efforts will translate into loyalty and repeat business from the customers.
Typically, however, such business offerings will fall within a high price bracket. This level of interaction begins from the time you market your offering and continues post-sales to ensure customer satisfaction and recurring business.
Another characteristic of a high touch business model is offering after-sales support. This is done by regularly checking in with the client to uncover gaps between their expectations and what your company has provided. One way to do this is to solicit customer feedback to identify areas of improvement and discover room for growth.
Read: The High Touch Business Model and How it Works
What is the Low Touch Business Model?
Contrastingly, the low touch business model minimizes direct human interaction. Low touch refers to the amount of interaction between a seller and a buyer. A low touch business model provides the least amount of human interaction while still providing a great customer experience. This business model relies heavily on technology to drive customer sales, engagement, and delivery of products or services.
This model is designed for efficiency and scalability, often seen in e-commerce platforms, SaaS (Software as a Service) companies, and other digital-first businesses. The low-touch approach leverages online tools, AI, and self-service options to streamline operations and reduce costs associated with human labor. Many low touch business models also utilize the self-service model of engagement.
While it may lack the personalized touch of its high-touch counterpart, it compensates by offering convenience, speed, and often lower prices. The focus is on delivering a seamless, user-friendly experience that allows customers to fulfill their needs with minimal assistance.
Read: Understanding the Low Touch Business Model
Differences Between the High Touch and Low Touch Business Models
1. Customer Interaction
The main difference between these two business models is customer interaction. As we mentioned before, high touch businesses prioritize personalized service. When done correctly, this personalized service is frequent and considered critical to the business’s success.
The focus is on building relationships, understanding individual customer needs, and providing tailored solutions. In contrast, low touch models minimize direct customer interaction. Low touch business models see efficiency and automation as a definition of good customer interaction.
2. Customer Experience
One survey found that 73 percent of all individuals value customer experience when making purchasing decisions. Although similar to customer interaction, customer experience is also a major difference between these two models. Customer interaction has more to do with how the business engages with the customer while customer experience views the connection from the customer’s perception. High touch businesses strive to create a unique, personalized experience for each customer.
However, low touch models focus on providing a seamless, efficient experience. The definition of a good experience with a business from the customer’s perception revolves around convenience and speed.
The emphasis is on ease of use, quick service, and the ability to cater to a wide audience without personalization. While this might not create the same depth of customer relationship as the high touch models, it meets the needs of consumers who value efficiency and simplicity.
3. Scalability
One of the areas where these two business models are also very different is in their scalability. Low Touch businesses are inherently more scalable. These businesses are designed to automate and streamline operations to handle a large volume of transactions or users with minimal increases in cost.
This scalability is facilitated by leveraging technology. When done correctly, this makes rapid expansion easier. All without the need for large increases in staff or physical infrastructure.
On the other hand, High Touch models are much different. Since they emphasize personalized service and direct customer interaction, scalability can be challenging. As these businesses grow, maintaining the same level of personalized service requires significant increases in skilled staff and resources. 77% of employers globally report difficulty finding the skilled talent they need. The time and resources needed to find and train the staff can limit the pace of expansion and increase operational costs.
4. Cost Structure
The cost structure of high touch versus low touch businesses also significantly differs. High touch models often incur higher operational costs. This is, of course, because of the need for skilled labor, training, and infrastructure. All of these are needed to support personalized services. These businesses invest heavily in customer service and relationship management. When a business reinvests into this part of a business, it increases per-customer costs. However, this could potentially lead to higher customer loyalty and lifetime value.
On the other hand, low touch models benefit from a cost structure optimized for efficiency and automation. Reduced labor costs, thanks to automated processes and self-service options, allow these businesses to operate with lower overhead. The savings can then be passed on to customers in the form of lower prices or reinvested into the company for growth and innovation.
5. Market Targeting
The way a business targets its customers is another clear distinction between high touch and low touch business models. High touch businesses typically target niche markets or customer segments that value and are willing to pay a premium for personalized service and attention to detail. These businesses focus on creating a high-value proposition for a relatively small, specific customer base.
Low touch models, however, aim to reach a broad market. These businesses target customers looking for standardized products” for conciseness and active voice
Conclusion
The choice between high touch and low touch business models depends on a company’s strategic priorities, target market, and the nature of its products or services. Each model has its advantages and challenges. Understanding these differences enables businesses to better align their operations with their overall strategy and market positioning.
Also read:
The Customer-Centric Business Model Explained
What is a Business Model? Types, Examples, and Components
How to Successfully Change Business Models
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