Virtually every retailer is product-centric and ‘good customer service’ generally means treating all customers well. However, some customers are better than others and fall into a truly valuable category. So, how does a retailer become consumer-centric and sort out and retain the better customers?
NZRetail approached three retail specialists with the above question. They are Steven Foster, product manager of Dynamics CRM at Intergen, Kelly Brown, the CEO of Triquestra International and Anya Anderson who is the managing director of RedSeed Limited. All the comments from our specialists come from the same perspective that today’s customers shop in a very different manner to the one most retailers are accustomed to and this requires a shift in retailing operations – to put the customer centre-front in everything.
Kelly Brown
The way customers shop has fundamentally changed. Today’s customers want retailers to be omnipresent – not just physical locations – and able to interact with you on their terms. According to recent research from IBM, three out of four consumers use websites for shopping and nearly half of all consumers use two or more devices to shop and/or complete a purchase. But the physical store is still important, with 85 per cent of purchase decisions made in-store.
The first step to sorting out your most valuable customers is to understand what data is important in determining value for your specific operation – and to have systems in place to collect and analyse it. To derive the best information from this data, create a single view of the customer, regardless of purchase channel. This will not only show you the complete picture, but will also allow you to access more than just transactional data to incorporate into your value equation.
Analyse all the data available, to understand your customers’ preferences – not just what or how much they buy, but how they shop so that your communication to high-value customers can be targeted and effective. In addition to cross-channel purchasing, the change in how customers shop extends to the entire process. It is the customer who is shaping the channels they use to research purchases: they use social networks to seek advice and recommendations, increasingly expect flexibility in how they take possession of your products and use the internet and smartphones to advocate your services when pleased.
Once you have identified your most valuable customers, create experiences and interactions to keep them coming back and recommending you to their friends. Personalise promotions – based on customer preferences – and recognise them consistently in-store or on-line.
Make it easy for them to access information, such as stock availability, loyalty balances or their recent purchases on-line. Allow them to transact across channels. Customers expect to be able to engage with you in one channel and continue or complete the process in another; for example, they may wish to buy on-line and collect in-store, receive a promotion on their phone to redeem in-store, or join a loyalty programme in-store and manage their account on-line.
An integrated technology platform is the basis not only for collating and leveraging a holistic and meaningful view of customer value, but also one on which to execute an omni-channel strategy seamlessly.
Anya Anderson
Customer relationship management systems (CRMS) have the power to increase revenue, reduce costs and enhance customer loyalty. But many retailers fail to achieve these benefits for one over-riding reason. They forget to place customers at the centre of everything they do.
The new reality is that retailers must learn much more about their customers and prospects than they ever did before. It’s now essential. Building a relationship with the customer creates loyalty and gives your business a point-of-difference and a reason for the customer to keep shopping with you.
This requires a shift from CRMS that focus on products to ones that place the spotlight on the customer. For example, lots of retailers send out direct mail with their latest offerings and specials to their entire database of people who have purchased products at the store. But 90 per cent of those receiving the material are unlikely to show any interest in the products. A woman who walks into a hardware store to buy some spray for her garden will not be interested in the special on power tools. So why send it to her?
What the retailer needs to do is collect information from everyone who walks through the door. This could include their age, interests and what they purchase. Many retailers have none of this information.
But with such detail, they could cater entirely to the needs of the lady we mentioned. She would then be taken off the database for power tool specials and placed on one that targets her needs and interests. She will then be more interested when she does receive material from the retailer and be satisfied that they understand her needs and she’s not just another customer. It’s about encouraging her to come to your store.
So, instead of just marketing products, it’s about marketing the benefits of those products such as lifestyle or a sense of achievement. There is another element to this. If a relationship is formed and the focus is on the customer’s needs – and benefits that can be enjoyed, buying decisions become less about price and more about individual preferences.
This also cuts marketing expenses. By targeting people’s needs, they will only receive material they are interested in, rather than everything that goes out.
Anyone who has bought a book through the Amazon.com website knows that selections of similar books are presented to them on their next visit. This is because the company has recorded their buying information and predicted what they may like to purchase next time.
The point is that, in 2012, consumers no longer fit into neat segments. They display different types of behavior, depending on the type of goods being sourced.
This is why the forming of a customer relationship is important. Without understanding a customer, little can be achieved by either party. Targeted marketing to meet the needs of the customer is one way to grow the relationship, but effective customer service is the other vital element.
This customer-centric approach should apply across the board, not just when targeting customers into different segments of a CRMS. To gain any loyalty in the first place, customer service must play a major role when the prospect first enters the retail outlet.
The point here is that, without effective customer service from day one, a relationship will never develop past that first interaction.
A common problem with CRMS is that the information that does exist about customers is often held by individual departments – not shared throughout the company. For example, the marketing department may want to tailor messages more effectively, but needs more information about he customers. That information may be held by the sales department. Often vital details are hidden in back-office applications – like inventory or financial information.
This leads to the whole concept of a customer centric culture. This is where everyone in a business is focused on the customer, not just those at the point-of-sale. With everyone eating and breathing sales, they work together for the good of the customer rather than being focused on their narrow job description. When this approach is taken, CRMS are always customer-centric because that is the essence of the company’s culture. Everyone helps each other to offer the best experience they can to the customer, whether it be within or across departments.
In these tough economic times, with people tightening their belts, many retailers are finding it difficult to maintain their margins. At the same time, customers are becoming fussier about how and where they spend their money.
This makes it the perfect time for retailers to up their game and start focusing on the needs of their customers and prospects. Gathering data may seem like a mundane task for some, but the payoff is huge. If you go to the effort of narrowing down your customers and prospects into small groups, and target their needs and interests, they will remain loyal to you. By going this extra distance, they will often buy from you even if your prices are higher than your competition down the road.
As already mentioned, the key here is the introduction of a sales culture. That means everything is focused on the customer, including the CRMS. This will see all departments working together for the common goal, sharing information and creating the best experience for the customer. This includes the relationship both inside and outside the store.
Research shows that a CRMS can work well. But, if it is not focused on the customer, it will fail to increase revenues, to cut costs or create a better experience for the customer. On the other hand, a customer-centric approach will create loyalty and grow the bottom line.
Steven Foster
Being product-centric no longer provides retailers with a differentiator amongst its competitors and good service in general is not, on its own, a way to encourage your customers to stay with you. In today’s competitive landscape – with social media emerging as a means to learn more about the products and services you offer – it is even more important to build strong relationships with your customers. They now have access to a very large megaphone through which they can announce messages – both positive and negative – about your brand.
Profitable relationships are hard to develop and keep. Retailers frequently see new customers leave before these relationships generate the value required to offset the cost of acquiring them. So, how do retailers tackle this problem?
I believe there are three key principles to driving a consumer-centric approach to retail – and ensuring that you know what your profitable and valuable customers look like – these being:
- Recognising loyalty;
- Creating a tailored customer experience; and
- Constructing a technology platform geared to managing customer value.
Recognising loyalty
Understanding loyalty enables a retailer to define how to tailor customer experiences to match the different loyalty types. So how do you define loyalty for your business? The following loyalty principles will help you, as a retailer, to define loyalty for your individual business:
- What drives a consumer at the acquisition stage? The factors that create loyalty before a consumer becomes a customer are the key to understanding of what influences brand recognition and influences customer value and retention.
- Recognising all kinds of loyalty: Loyalty is not singular; there are many kinds of loyalty from evangelists to conditional, emotional and passive loyalty. So, as a retailer you need to understand how these influence your different consumers.
- Know what to look for and how to measure it: Often, retailers don’t lack information on their customers and what they are buying – but they often do not always know what influences acquisition and retention. The difficulty is in understanding what factors to measure and what factors define the loyalty segment.
- View the entire value chain: Third-party channels affect consumer loyalty. Understanding the consumer experience across these channels and their impact on loyalty is crucial. A bad experience from a third-party warranty standpoint may see you lose a valuable consumer.
- Understand your business complexity and how it influences your consumers: Products, services, bundles and channels make for a complex environment for your consumers. Understanding this from a consumer’s standpoint helps to drive what is important from a loyalty perspective.
Tailored customer experience
A defining factor in highly successful retailing is the ability to deliver different customer experiences – tailored to specific consumer values, needs and intentions. Delivering a tailored customer experience relies on the retailer being able to understand and control the following three facets of customer experience:
- Know who your customers are: It is critical to understand changing behaviours and to react appropriately. Being able to define segments of your customers will help you to spot changing behaviours and to react in an appropriate way to meet changing needs. It is vital to understand the values that make up a valued customer and stay close to them. Investment in business intelligence tools to will help you with loyalty analytics, define the main drivers and recognise the different loyalty types. Knowing your customers helps drive targets and action segmentation that can be incorporated into campaigns across the different channels.
- Understand how to reach your customer: Increasingly, in our world of social media, it is the consumer who drives what messages they are willing to receive and interact with. It is important to have a developed customer dialogue strategy in place to achieve the right level of interaction. Using tools built within CRM tools – to monitor web traffic, referrer sources and what pages a particular consumer is viewing – will help you build up a picture of the influences and dialogues that are taking place.
- Delivering the expected experience: It is important to be consistent and maintain visibility of that experience and the impact it is having on consumer loyalty. In delivering an experience you need to consider the following factors: service, price, features, channels, relationships and dialogues.
Technology platform
The technology platform helps you to deliver a consistent customer experience and drive profitable and valuable customer relationships, but is not the only factor as previously determined. Having a well-defined customer centric strategy is crucial to maintaining a customer focused approach. So, what should be in your technology kitbag to support customer-centric strategy?
- CRM solution: The CRM system will need to be able to capture segment and loyalty indicators. Ideally, it needs to capture complex connections between products, channels and people – and collate information from the social and web media where consumers are interacting. The solution should also be able to drive all forms of marketing via e-mail tracking, web, social media and other communications.
- Loyalty-enabled POS system: The POS system should be able to capture customer information and transform it into a database that can be analysed.
- Business intelligence: The business intelligence system needs to be role-based-driven and, ideally, three-dimensional - looking at factors such as time, value and demographical information. The solution needs to be user-driven and easy to drive.
- Enterprise resource planning system: The ERP needs to collate and pull together the transaction value of consumers while managing the logistics and financials of the business. Ideally, the CRM and ERP solutions are integrated allowing indicators to be automated against customers within the CRM tool.
In summary, having a customer-centric strategy and approach to provide customer value by understanding what drives loyalty and value will help you to retain your existing profitable customers – while opening up new opportunities for existing or new customers through tailored customer experiences.