The Most Impactful Retail Technologies
The 9 Highest Impact Retail Technologies
Consumer purchase behaviors are incurring a titanic shift. Consumers are more informed, connected and empowered than ever and they know they have options as alternatives are only a click away.
Unfortunately, too many retailers are sluggish in adopting the automated retail technologies to meet and accommodate consumers. They fail to understand that these needed technologies are not fads, will eventually be adopted if they expect to compete and that every day that passes without adoption contributes to lost sales and customer churn. Using technology to meet consumers where they search, communicate, evaluate and buy, accommodate their communication and purchase preferences, and use data to foster and grow customer relationships is an undeniable mandate for retailers.
However, it's a daunting challenge to understand which technologies offer the biggest payback. It's a multifaceted challenge because none of them are fully exploited autonomously. Research and market leaders clearly show that only when an integrated mix of technologies are orchestrated in an end to end fashion will retailers effectively respond to customer preferences, outperform their competitors, lower their information systems total cost of ownership (TCO) and grow company revenues.
In this post we will share the 9 highest impact and automated retail technologies – which include loyalty, mobility, social, omni-channel, Customer Experience, retail marketing and predictive analytics. When orchestrated in an end to end framework these apps significantly improve the 3 key metrics of customer conversions, RFM and customer lifetime value.
Customer Loyalty Systems
Loyalty systems are a powerful tool to begin the journey of advancing consumers from browsers to buyers to repeat customers to advocates. The downside is that research from Forrester shows that about two-thirds of retail loyalty programs don’t work, which is why we’ve written a lot about how to create loyalty programs that do work. The upside is that if you do the right things, the loyalty program will achieve its revenue objectives and become something you cannot be without.
To maximize the business opportunity, loyalty programs should be offered at many points of consumer engagement, such as on the website, social network or in the store. A high conversion technique is to offer the loyalty program, along with a discount or incentive toward a future purchase, at the POS. Once the consumer joins the loyalty program a number of technology tasks automatically kick-in.
The POS system feeds the CRM (Customer Relationship Management) consumer database and the loyalty application with the consumer profile information, purchase transaction and any loyalty points associated with the purchase. Some retailers try to accumulate consumer data in the ERP system but that later becomes a bottleneck when you need to engage consumers with precision marketing, over social channels, using mobility or when you get into omni-channel retailing. The CRM application is the customer system of record, enables retailers to leverage consumer data over many channels and programs, and over time becomes the consumer intelligence application that improves decision making and performance with virtually every consumer-related campaign or program.
The CRM and/or loyalty application forwards the consumer a thank you email and inserts the consumer into a high level brand email campaign. The email should include a personalized invite to the brands social properties, and possibly incentives or messaging to induce the consumer to participate. This helps track the consumer’s digital footprints in order to better understand the consumer’s persona and preferences. A prerequisite here is to define consumer personas in your CRM software and link your website and social properties with the consumer record in your CRM system.
Loyalty members opt-in to retailer programs and identify themselves when engaging with the retailer over whatever channel. By tracking the consumers digital footprints, loyalty activities, engagement with your brand (digital and physical) properties and additional purchases, the loyalty application advances consumers from broad email marketing campaigns to more highly focused and even contextual nurture campaigns — which results in offer conversions increasing from an average of 3.5-4.5% to about double that.
The Loyalty ROI
Loyalty members are 4 times more likely to be repeat customers than non-loyalty members. But everybody knows that. What you may not know is the financial impact. Returning customers spend on average 67% more than first-time customers (source: Bain and company) and in several retail industries up to 15% of a brands most loyal customers account for 55-70% of the company’s total revenues (source: The Center for Retail Management at Northwestern University).
Successful loyalty programs also increase customer acquisition, retention, Customer Lifetime Value (CLV) and advocacy. For most retailers, improving any one of these four critical success factors by as little as one or two points will deliver a corresponding improvement to top line revenues and an even bigger impact to margins and profits.
Whether they are trying to unlock rewards or engage a brand that they feel connected to, loyalty members incur more visits to retail properties, make more purchases of higher margin goods and promote the brand to their friends and social spheres – and we all know that word of mouth is the most effective form of advertising.
Mobile Retail Programs
Consumers are tethered to their mobile devices and increasingly using them as shopping tools. According to a Goldman Sachs retail research report, mobile-commerce (m-commerce) represents nearly half of all global e-commerce. Purchases made with mobile and tablet devices will have grown fourfold in the last four years. Mobility has passed the tipping point and this trend warrants more than a lukewarm response if you are to capitalize on the revenue opportunity.
Many top retailers are taking a mobile-first approach to engage consumers on their devices.
There’s a plethora of mobile driven use cases for retailers to consider.
Mobile Concierge Services
Brick and mortar retailers are using mobile engagement as a concierge service once consumers enter the stores. Offering WiFi access, inviting shoppers to join the loyalty program with their mobile devices or using beacon technology to detect mobile apps or when a loyalty member or shopper enters the store permits the retailer to offer greetings, incentives or specials on the consumer's mobile device.
They may also offer helpful features such as product search with in-store mapping and quick navigation for quantities on hand. Providing a floor map displaying a bird's eye view of the store footprint, and a product locator for item search and location plotting are methods that are proven to keep buyers in stores longer. Loyalty members can see what resembles a shopper dashboard with links to accumulated point totals, exclusive offers, new products that are related to prior purchases and other loyalty program benefits.
Many retailers are weary of sending push notifications to mobile shoppers. However, consumers are showing interest in those offers as long as they are relevant. In a consumer survey done by mBlox, 73% of consumers who have download mobile apps reported receiving push notifications and 86% of those recipients found them worthwhile. A retail best practice is to use the mobile app for more than just sales offers, such as sending push notifications for shipping alerts or delays.
Before rushing to create a retail mobile app or even mobile browser display for in-store consumers, it’s important to recognize consumer opt-in and adoption are big challenges. Smart retailers begin their mobile design thinking with Voice of the Customer (VoC) analysis. Here’s some VoC analysis we gathered in a prior soft apparel goods retail project.
Interactive Item Engagement
Once merchandise is found or an item is under consideration, the consumer can scan the QR code with their smart phone and be offered supporting links to information, rich media or even entertainment – all of which are effective at improving conversions at the point of purchase. This product engagement also works to reduce retail floor showrooming.
I managed a CRM implementation at a luxury garment retailer where we tested 14 types of content to display from QR codes on the consumers mobile device. We found the top 3 content types which most led to sales conversions were links to product back stories (i.e., how the product was made, where it was made, who made it, etc.), social reviews (primarily curated product reviews on Facebook and Pinterest but also other social networks) and videos showing other consumers using the item.
We also found that placing social sharing buttons on the content under buyer consideration generated a 6% activation, meaning that 6% of the buyers forwarded the content (generally with product images attached) to their social spheres. This was huge. Social sharing and propagation increase reach exponentially and because the messages are coming from within trusted social circles the read rate was exceptional. Other content types which weren’t far behind included access to online product catalogs, related products (this content type ballooned if the related products were included as bundles), price comparison, coupons, contests and other forms of rich media (particularly interactive images and slideshows).
Beyond our own mobile device orchestrated consumer use cases, we found that for garments it was common that buyers would snap a picture and ask their friends for feedback. To aid this process, we provided a number of stock photos that could be appended to the actual picture so the garment could be viewed in different scenarios. This increased the positive feedback to the consumer – normally by several points but the results varied significantly by SKU and product category.
There are many additional product-based immersion techniques. For example, based on the shoppers persona or their in-store location – and using beacons or LED technology – ads or entertaining video can be displayed for the products under consideration on nearby digital signage. So if a consumer places some Fontina cheese in their shopping basket, the retailer can then display a Chianti or other red wine that goes with it on nearby digital signage or send a wine promotion offer to their mobile device. There are real techniques to improve up-sell of higher margin goods.
Clienteling
We don't suggest clienteling is for every retailer, but the revenue benefits are solid for most big box, white goods, electronics, apparel, luxury goods and all forms of full-service and specialty retailers.
Equipping your store associates with tablets and positioning them on the floor to interact with consumers is quite possibly the single best method to merge the benefits of etail and retail shopping. For consumers who are loyalty members, opt-in to the store WiFi, link to the retailer’s social networks or just identify themselves to the sales associate, clienteling tablets connect to the CRM and loyalty systems in order to empower the sales associate with the consumer’s purchase history, personal preferences, lifestyle interests, loyalty program benefits or personal information such as birthday or anniversary.
You can optionally dig further to view the consumer's digital footprints from the website or other online properties to see what items he or she spent a lot of time checking out, but didn't buy. This is powerful consumer information that the sales associate can use to engage in a relevant conversation.
Taking it to the next level, CRM systems can suggest up-sell and cross-sell items based on the consumer's prior purchases and known preferences, or can use Next Best Offer algorithms to suggest the item that is most likely to be positively received by the consumer. Now you are using predictive analytics to know what the consumer wants before he or she knows to ask for it.
Clienteling offers many other capabilities – from virtual customer service (delivered on the store clerks tablet or the consumers mobile device) to self-checkout and mobile payment. The end result is offering the best of the online and offline worlds in a way that engages consumers and significantly improves the consumers shopping experience.
The Retail Mobile ROI
To forecast and measure the payback for retail mobility, you need to start by understanding how consumers use their mobile devices. According to a Deloitte annual survey:
- 67% of consumers use their smartphones to find store locations
- 59% to compare prices
- 51% to obtain product information
- 46% to check product availability
- 45% to read reviews
- 45% to shop online
- 41% to find and use coupons
- 40% to scan bar codes, and
- 35% to access social media and social networks
Aligning mobile concierge services, interactive item engagement and clienteling with consumer use cases will drive five strategic benefits.
- Increased consumer registrations (thereby creating more consumer records and information – for more customer intelligence and improved marketing capabilities)
- Increased consumer (digital and physical) engagement at the point of purchase
- More flexible and even dynamic incentives and offers (unlike printed coupons, displays from smartphone scanning can be changed, rotated or discarded on demand, and further displayed contextually based on consumer behaviors)
- Increased sales conversions, and
- Better information reporting, including product-specific engagement trends, SKU-specific consumer feedback, offer acceptance rates, purchase conversions and more.
Social Media for Retailers
The one big caveat with any retail social media program is to listen before you talk or engage. Each social network and social circle has its own norms and protocols and violating those customs for blatant self-serving interests will turn a retail revenue opportunity into a retail nightmare.
Social Media Advertising
Word of mouth advertising is the most effective form of advertising, and social media offers retailers a scalable opportunity to engage a single consumer online or in-store and see that consumer then advocate the retailer in his or her social circles thereby delivering an immediate, unbiased and exponential reach that could never be matched with paid advertising.
But the sad truth is that most retailers create lackluster social properties that are not integrated with their CRM, marketing and loyalty systems and therefore lack the ability to segment, nurture, engage and capitalize on the tremendous social media business opportunity. Exacerbating the problem, retailers tend to approach social media marketing and advertising with broad spray and pay campaigns. These are proven money losers.
Social ads by themselves deliver disappointing results — generally achieving conversions of .05-1% as compared to 2-3% for search and 3.5-4.5% for email. However, when targeting social ads to known prospects, loyalty members, social networks or anonymous visitors that have previously perused your website, the conversion rates rise exponentially.
For example, by placing a pixel or a cookie on a webpage you can begin tracking how anonymous visitors are checking out various products or other information. If you are using a marketing automation system you can then take these digital footprints from your CRM or marketing system and use a social network API so that your brand or the particular products an anonymous visitor perused show up in that anonymous visitors social media sites.
We recently created a CRM integration to Facebook that delivered a 3.3% social media conversion rate for a fashion retailer. This may not sound particularly high, but when you consider we're working with unknown visitors and turning these anonymous visitors into named customers, and further consider the large volume of website and social network traffic available to work with, even a small conversion rate offers the potential to boost top line revenues in a big way.
In this case, we created the integration to export the anonymous digital footprints to the Facebook Exchange (FBX) custom audiences. This is Facebook's API and it then matches the visitor with their social network account and inserts your messaging, be it your brand or the products the visitor was previously checking out, into the users news/page feed and/or right side ad displays.
When delivering relevant, targeted and contextual ads social media conversion rates rise by a factor of 3.6X. While this is a form of retargeting, don’t confuse it with search engine retargeting. Social media marketing using social network integration does not require Google Adwords, pay per click (PPC) or search engine results tagging. My experience suggests there is definitely a place for PPC retargeting, however, retargeting based on your own website visitors, instead of search retargeting which is based on SERP and dependent upon Google Ads network advertising, delivers a higher conversion and a lower cost per sale.
Omni-Channel Retailing
Consumers expect that a conversation that starts on one channel can be continued on another, with all communication and context preserved across channels.
Omni-channel retailing empowers brands to engage consumers over any channel those consumers want and connect those conversations across channels – without losing data or context.
Omnichannel retailing also allows consumers to navigate among the retailer channels – be it mobile, online or in the store – that are most convenient for them at any given time or for any given activity.
Don't confuse omni-channel with multi-channel. As an example, if the consumer can start a purchase transaction on your e-commerce site, and then finish the transaction in your store, that’s omni-channel. If two channels are not integrated or the consumer cannot begin a dialogue or process on one channel and continue that engagement on another, that's multi-channel. Big difference.
There are a number of sales, marketing, service and other omni-channel scenarios that are increasingly used by consumers and offer retailers more opportunities to engage more consumers — and even improve engagement while shifting activities to lower cost channels.
A common sales example is the ability for the consumer to buy online but pickup merchandise in the store. Or alternatively buy in the store but have the product shipped to their destination. There are a variety of similar sales use cases such as displaying inventory availability across physical locations, moving items between channels for immediate fulfillment or having visibility to incoming products from manufacturers.
From an omni-channel marketing perspective, the primary goal is to deliver a unified brand experience across all channels. If done well, the retailer improves consumer engagement, increases sales conversions and builds loyalty. However, interacting with consumers across channels and in context is a tall order.
For example, a consumer may receive an advertisement or catalogue in the mail, then check out some merchandise on the retailer's website from their PC, then later research the product in online forums or visit the retailers social networks from their tablet, then receive an email offer on their mobile device, then visit the store to see the item and talk with a sales associate, and then return home to complete their purchase using any one of several devices. If at any point the consumer gets conflicting information, their suspicion rises and sales conversions fall.
Omni-channel customer service is often the tipping point in determining whether consumers become advocates (and repeat purchasers) or defectors. However, despite retailers' obvious goals to satisfy consumers at their point of need or frustration, the complexity of omni-channel customer service is a factor of incident types, case volume and the number of channels.
For example, a customer complaint starts with an email to store manager, then becomes a question on the retailer's website chat function, then goes to a phone call to the billing department, then becomes a rant on Twitter, and then escalates to the Call Center. Linking these comments, let alone recognizing they’re the same consumer, so they can be responded to and resolved efficiently requires a central customer system of record (probably the CRM system) and data sharing among ancillary apps that integrate to the CRM system.
According to an Aberdeen report, titled Omni-channel Customer Care, companies with omnichannel customer service capabilities achieve on average an 8.5% year-over-year improvement in first contact resolution, a 7.5% year-over-year decrease in average cost per customer contact and a 9.5% increase in year-over-year revenue.
Consumers don't think in channels. They think in terms of simple interactions that get them want they want quickly. To a consumer, omni-channel looks like a single, channel agnostic communication hub with just different conduits or touch points. Or put another way, you have achieved omnichannel when the consumer doesn't notice any difference in service between channels.
For the retailer, it offers an opportunity to deliver consistent customer experiences across channels – and achieve consumer affinity and the financial payback earned from Customer Experience differentiation. It's a win/win outcome – consumers get better service so they increase their patronage and retailers lower their cost of service when customer service staff are able to engage customers with all relevant and contextual information on demand, and without having to jump between many different siloed applications and incur multiple calls to resolve issues.
The Omni-Channel ROI
Omni-channel retailing is steadily sliding from a point of differentiation to an expected level of service. In the battle for customer affinity, failing to engage consumers in a consistent and contextual dialogue across their preferred channels and devices will clearly alienate an increasing number of consumers and be reflected in the retailers revenues.
The RIS News Omnichannel Readiness Report shares that retailers are missing out on 6.5% of revenue as a result of not being omnichannel retailers.
In a research report titled Satisfying the Omni-channel Consumers Whenever and Wherever They Shop, IDC Retail Insights reported that while multi-channel shoppers spend, on average, 15% to 30% more with a retailer than consumers who use only one channel, omni-channel shoppers will spend 15% to 30% more than multi-channel consumers and exhibit stronger brand loyalty, often swaying others to patronize the brand. The IDC research also found that consumers provided a seamless experience across multiple channels shop more frequently and make more purchases across a relatively broad number of product categories.
Customer Experience for Retailers
Competitive advantages of the past are no longer enough to win and retain customers. Accelerated commoditization coupled with more informed, connected and empowered consumers requires retailers to step up their game. Customer Experience (CX) Management is becoming the go-to strategy to create what may be the most strategic and sustainable competitive differentiation.
Customer Experience technologies facilitate end-to-end consumer engagement journeys over physical, digital, social and mobile channels by applying consumer preferences, personas and purchase histories in a way that delivers relevant, personalized and contextual consumer experiences.
But as consumers are more empowered, more informed and more demanding, delivering consistent and rewarding customer experiences is hard and getting harder. Consumers are increasingly impatient, connect with multiple devices and prefer to communicate on their channels (not yours).
And when brands don't comply, or cannot connect consumer multi-channel communications, or request that they repeat themselves yet again, or put them through a maze of disintegrated connections, or just fail to meet their growing expectations, consumers show a propensity to quickly switch brands.
On the flipside, customer-centric retailers that do meet consumers rising expectations not only benefit from additional sales, but gain advocates who share praises within their social spheres and the public at large. All retailers know word of mouth advertising is the best advertising bar none, and this digital form of word of mouth advertising scales customer advocacy to a never before possible reach.
By using CX technologies to streamline customer facing processes and reduce friction, achieve consistency and deliver rewarding customer experiences, the brand achieves several strategic benefits including increased brand loyalty, spend, customer share and customer lifetime value (CLV).
But how do these Customer Experience benefits translate to hard numbers?
According to a Tempkin Group Insight report titled, The ROI of Customer Experience, the research firm found that CX leaders enjoyed a 18.4% advantage over CX laggards in consumers willingness to buy more, a 19.2% advantage in terms of reluctance to switch brands and a 19.5% increased likelihood to recommend. Ask your CFO to apply those increases to customer share, customer longevity and customer referrals and show the cascading effects to both top line revenues and bottom line profits. You will probably find the revenue impact to be more substantive than any prior company program.
The below chart from the Forrester Research Customer Experience Index shows how CX leaders build more valuable companies than their peers.
It's difficult to rebuke the financial payback of Customer Experience when CX companies outpace the S&P 500 and CX laggards by such substantive values.
So how do you get started?
CX begins with a customer-centric culture and orchestrating customer journeys which lead to positive CX outcomes. As customer experience strategies should be tightly aligned with your CRM strategy, here are three areas to stimulate your customer journey thinking.
Customer experience management begins with expectation setting – and that usually begins with advertising and marketing. Retail marketers have long been focused on brand management, but to consumers brand messaging is pie in the sky and woefully insufficient by itself. Consumers have moved beyond lofty, feel-good messages and seek retailers that are easy to do business with – on the consumer's terms. Fortunately, retailers are now empowered to link customer journeys with rich consumer data and real-time interactions in order to facilitate rewarding pre-sales and post-sales customer experiences.
Sales fulfillment is the next customer experience opportunity. Designing sales and fulfillment experiences which reduce friction and are easy, dependable, timely and personalized will most certainly improve conversions at the point of sale. New research from CFI Group and eBay Enterprise puts this in quantifiable terms. The research report found that a whopping 96% of consumers said guaranteed delivery dates are important when choosing which online retailer to purchase from, and 46% said late delivery will cause them to look elsewhere before making another purchase from the retailer. While promotions will encourage about one-third of consumers to make another purchase after a late delivery, the damage done is enough to push 11% of consumers to completely abandon the brand.
Customer service is often the most critical point in determining whether consumers remain with a brand or switch brands. When consumers seek help, the retailer can facilitate or frustrate the consumer. The call center is often the most common access point for consumers, but research from the CFI Group report found that consumers prefer multiple call center contact methods. 57% of shoppers believe that customer service call center wait times are longer during the holiday season and prefer additional contact methods in order to resolve their inquiries. Shoppers seek tools such as online chat and cite speed (39%) and convenience (30%) as benefits. About half of the surveyed consumers said they would try self-service options, if available, to resolve their issues. This presents retailers the two-fold opportunity to better satisfy consumers and lower customer service support costs with self-service options.
Customer Experience Management Isn't Optional
An Accenture Customer Experience study found that 85% of participants view CX as critical to achieving their strategic growth priorities, and 70% say that CX plays a critical role in the overall corporate strategy. But on the other foot, the Accenture research also found that more than half of all CX investments are ineffective.
Similar research from the most recent CRM/Unified Commerce Benchmark Survey found that two-thirds of retailers ranked improving the customer experience and engagement as their number one goal.
Customer experience is the customer's emotional perception of your brand based on the totality of their interactions. Of course not all customer interactions contribute equally to the customers' experience so an overarching strategy is needed. In my experience I've found it relatively simple to calculate the Customer Experience investment and payback.
However, the CX strategy can get complex when designing positive emotional outcomes for the many customer interactions which may include marketing campaigns, loyalty programs, account management, in store service, store merchandising, POS transactions, online order management, billing, product delivery and fulfillment, warranty management, services delivery, customer support, preventive maintenance, SLA compliance, renewals, and the many forms of omni-channel customer interactions.
Nonetheless, sidestepping CX is not a viable business option. Satisfying consumers and delivering good customer service has become table stakes in today's competitive landscape. Retailers need to step up beyond the minimum and design customer experiences to win customer affinity, turn customers into advocates and maximize profits.
Retail Marketing Technologies
According to Gartner, digital marketing will influence more than 85% of B2C commerce this year.
The highest performing retail marketing methods integrate innovative marketing campaigns with the CRM system in order to understand which consumers will embrace a contextual email promotion, a social network message, an SMS text receipt or any other brand communication, and which will find these interactions annoying.
Here are three examples of retail marketing technologies that offer big potential.
- Proximity Marketing — This isn't a single marketing method as much as it is an integrated blend of mobile messaging and engagement techniques such as QR codes, beacon technology, LED light technology, SMS marketing, mobile marketing and more.
Think about how these mobile marketing techniques can appeal to consumers who are becoming one with their mobile devices. For example, a retailer using proximity technologies such as geo or location based marketing can automatically detect when a loyalty member is within a specified distance to a store and send that member an SMS text describing some new merchandise or an addition to a product line they've purchased previously.
Or consider using geo-fence technology to determine when a loyalty member enters a competitor's store, and automatically send that member an SMS or email with an incentive or offer appealing enough to lure them away from the competitor at their time of purchase.
The results from these types of scenarios are compelling. SMS messages have delivery rates in excess of 99% and on average are read within four minutes, making them highly convertible if deemed relevant by the consumer. Compare this with the average email open rate of about 20%. Further, SMS coupons are redeemed 8 times more often the email offers.
This isn't pie in the sky retail marketing. It's B2C marketing that gets results, increases store revenues and leaves unaware competitors oblivious to what's happening around them.
However, it's also critical to recognize that simply sending mobile marketing messages based on consumer location is not effective. Instead, you need to apply a consumer’s location along with the consumer's profile (from the CRM or loyalty system) and behaviors (from the marketing automation system) in order for proximity-based marketing campaigns to achieve predictable results.
- SoLoMo — While the above proximity marketing techniques offer conversions exceeding most every other traditional channel, they actually take a back seat to the results achieved from the convergence of the three mega trends Social, Local and Mobile (SoLoMo). Some retail marketers are taking this a step further with increased personalization and calling it SoLoMoMe.
For brick and mortar retailers who can benefit from getting nearby shoppers into their stores, appealing to those shoppers' location, mobile devices and social personas can increase foot traffic in a big way. SoLoMo use cases are built upon geo-based mobile search engine marketing and social network check-in services such as FourSquare. For example, if a consumer searches for a product on their mobile phone, a SoLoMo ad can be delivered to inform that consumer that you have the item in stock or on sale at a store very near his location. The ad may further offer buttons to put the product on hold or get directions to the store.
74% of consumers use their mobile devices to find local information like directions and stores. SoLoMo is a mobile marketing technique that responds to the consumer's search engine query with proximity and relevance – by displaying ads for stores in the immediate vicinity, offering one-click directions and promoting product reviews or incentives available on the brand's social networks. The results are an increased volume of consumers joining the retailer's social networks and visiting the stores.
Delivering relevant proximity ads to mobile consumers searching for product information delivers some really big results. Recent research from Monetate shows that just over 66% of consumers searching for local product information responded to the ad by either calling or visiting the store. These types of offer conversions are simply off the charts and will continue to deliver exceptional results for innovative retailers, at least while their retail competitors sit on the sidelines oblivious or unable to execute on these types of marketing opportunities.
- Retail Marketing Automation — Retail marketing leaders are using marketing automation systems to track digital footprints such as what consumers click on, what pop-ups they respond to, what product pages they visit and how much time they spend viewing various types of content. Tabulating every action and inaction aids retailers in designing relevant and personalized content and campaigns.
For example, retailers are designing customer and product lifecycle campaigns that use either elapsed time or online digital footprints to trigger offers for replacement, new releases, up-sell or warranty renewal. Compared to batch and blast email campaigns which generally see conversions of about 2%, intelligent nurture campaigns achieve conversion rates of 4.5%+ and don't incur the opt-out rates which accelerate the deterioration of your email list.
With more consumer intelligence, retailers are also applying improved customer segmentation to step up performance with programs such as win-back campaigns. However, this still remains an under-utilized opportunity for most retailers. It's important to recognize that when properly performed, win-back campaigns generally deliver 18-20% reactivation, which is four times the performance compared to net new consumer acquisition rates of 4-5%.
I'd be remiss if I didn’t acknowledge that almost all marketing automation systems are designed for B2B. However, I've found that with some configuration and relatively simple customization, they can be tailored for retailers. Don't make the mistake discounting this technology because it may not work out of the box.
The convergence of digital marketing and increasingly digital consumers is creating new opportunities for forward looking retailers.
When retail marketers tap into proximity marketing, SoLoMo, retail marketing automation and similar innovative marketing techniques with consumer intelligence and relevant offers they improve offer and sales conversions to levels never before achieved.
Retail Analytics
The most successful retailers are data driven and fact-based decision makers that harness vast amounts of data to better align products with market demand, improve consumer engagement, develop better customer relationships and make better business decisions.
Most retailers have reasonable information reporting in the forms of real-time dashboards and historical reports. However, this information leaves retailers stuck in the past. The future of retail clearly looks forward, and the two tools that most empower retailers to proactively create their futures include predictive analytics and big data.
Predictive Analytics
There are many consumer interactions that if properly depicted with predictive models empower retailers to improve performance. When working with new retail clients I typically recommend beginning with predictive analytics to forecast offer responses, sales conversions and up-sell lift. Here's an example of how one offer-response model may work.
By tracking consumers' offer-response behaviors to varying types of offers across various channels, the CRM system learns what types of offers consumers respond to and then categories consumers into offer-based segmentation – such as:
- Offer-Induced—these are the persuadable consumers and the strategy here is to deliver highly relevant and personalized offers (generally for higher margin goods) in order to increase customer share and incremental sales.
- Offer-Unnecessary—these consumers demonstrate repeat purchase patterns with or without offers so the retail strategy here is to avoid making offers for related products which consumers would purchase anyway and instead only send offers for product categories from which they have not purchased.
- Offer-Denied—these buyers only buy based on explicit needs, so retailers should avoid sending them offers as this results in selling products at reduced margin that would have otherwise been sold at full price.
- Offer-Adverse— these buyers don't like offers, and may respond negatively to being targeted. I often call these buyers the sleeping dogs. You should just leave them alone.
This buyer behavior recognition is one part of a predictive analytics model which increases offer conversions and margins by targeting receptive consumers and not offering discounts where they are not necessary. Adding additional consumer intelligence delivers even more proactive strategy and forecasting accuracy. For example, including RFM (Recency Frequency Monetary) analysis strengthens the model and gives retailers even more predictability.
CRM systems can automatically tabulate consumer purchases from the POS into RFM categories. This is often done as part of a loyalty application but a loyalty system is not required. The RFM analysis displays consumer purchase patterns that when combined with additional data such as customer segment, purchase history or information such as the prior Offer-Response behaviors further shows how retailers can identify the best promotional opportunities. Below is a simple RFM table which illustrates how to align campaigns based on consumer intelligence.
Recency | Frequency | Monetary | Action |
<90 days | 1-2 | High | Nurture campaign promotions of higher margin goods. |
91-180 days | 3-12 | Moderate | Increase promotions of complimentary or bundled goods. |
>180 days | 13+ | Low | Life cycle nurture campaign promotions, including close out and higher discount goods. |
The above actions are overtly simple. Each combination of Recency, Frequency and Monetary values will adjust campaign designs by promotion frequency, items and triggering events.
Expanding the table with additional consumer intelligence shows how that additional information improves the campaign strategy.
Recency | Frequency | Monetary | Offer Response | Action |
<90 days | 1-2 | High | Offer Denied | The RFM analysis alone would have included this consumer in an automated campaign. However, also recognizing the consumers Offer-Response behavior changes that to exclude the consumer from the campaign. |
91-180 days | 3-12 | Moderate | Offer Induced | In this table example, this consumer offers the most predictable upsell and margin lift. This consumer should be placed in a nurture campaign of higher margin up-sell, cross-sell and complimentary products. |
>180 days | 13+ | Low | Offer Unnecessary | This consumer should be placed in a campaign that only offers products from categories which the consumer has not previously purchased. |
Increasing the consumer intelligence with additional consumer behaviors – such as purchase history by product category, customer satisfaction scores (using NPS or CSAT), the loyalty reward rate, the loyalty break rate or Customer Lifetime Value (CLV) to name only a few — will continue to improve customer segmentation, behavioral forecasting and campaign performance.
Retailers have long struggled with the Right Product / Right Price / Right Channel / Right Time objective. IMHO, with the volume of products, fluid market conditions and fleeting consumer behaviors, attempting to achieve this all important objective in real-time without automated technology is an uphill slog that will never realize the timeliness, accuracy and results of predictive models.
Big Data for Retail
Retail big data offers some big payback potential. The McKinsey Global Institute estimates that big data can grow profits in the retail industry by a whopping 60%.
Big data in retail is all about mining the volume, variety and velocity of consumer data streams in order to generate insights which lead to quick recognition of shopping patterns and demand trends, more personalized marketing, more successful product launches, optimized assortment and merchandising, improved shopping experiences and better consumer relationships.
Or you can go further and leverage big data such as social media trending and customer sentiment to influence demand planning, determine price elasticity or recommend merchandising and inventory optimization by channel. The point here is that big data use cases are as varied as the consumer data itself.
Most retail executives recognize the transformational impact Big Data can bring to their businesses. But they sometimes struggle in identifying the use cases and supporting processes that can convert untapped data into improved decision making. Here are some examples that may stimulate that thinking.
- Marketing Advancements: Big data can be leveraged to develop micro customer segmentation, geo or proximity based marketing, real-time relevant offers, high propensity cross-sell recommendations and sentiment analysis by store, product, geography and channel. For example, sentiment analysis can inform retailers how consumers perceive their actions, offers and products—extremely valuable information for improving sales and marketing performance.
By cross-analyzing store and online interactions and conversions, and further cross-referencing the results by consumer demographical and geographical data, retailers will discover with far greater accuracy how to pinpoint the ideal customers for select products, deliver messaging for improved engagement and create offers for improved conversions.
- Merchandising Enhancements: Harnessing big data from social channels or in-store behaviors can improve product assortment, placement and pricing which results in smarter shopping experiences and positively influences purchase decisions. Uncovering patterns which may include pop culture events, online buzz or weather data can be shown to improve merchandise placement, bundling opportunities, promotions and pricing.
Going further, correlating buyer interactions across channels, such as in-store merchandising placement with e-commerce product categorization or placement can deliver far more empirical data to show how product placement, product bundles or product cross sell promotions are optimally positioned.
- Supply Chain Optimization: Applying big data to demand planning can aid just-in-time inventory distribution and improved logistics to help get the right products to the right destinations at the right times – and reduce both overstocks and stockouts. For example, with improved market demand models which go beyond looking at seasonal fluctuations and historical purchase patterns and further consider fluid market conditions and real-time customer demand gathered from online and social channels, retailers can optimize product shipments of top-selling merchandise, reallocate inventory to locations incurring higher demand, know exactly when to mark up or mark down item prices (by channel and location) and get advanced notice of when product demand will recede.
- Customer Experiences: The analysis of what is being said by consumers online can provide retailers with valuable insights to enhance customer service and customer experiences by store or across mobile and online channels. Using a retail CRM system with social listening tools and integration to consumer social profiles can combine the consumer's demographics, firmographics and purchase history with far more revealing personal information gathered from social media, mobile app utilization, online and offline browsing patterns, and loyalty program interactions. The result is a far better understanding of the consumer’s persona and preferences along with what it takes to satisfy and delight the consumer.
In a recent retail big data project that I'm pretty proud of, we developed a big data model to perform product pricing elasticity by customer sentiment, segment, region, timeframe and competitors.
The client's consumer, inventory, pricing and POS data was spread across multiple systems and different formats. We aggregated the data to the retail CRM system so that it could be appended with consumer social data, used with workflow rules and displayed in dashboards, reports and a data warehouse. The data was revealing on many fronts, however, the biggest payback came when applying the price elasticity model with various consumer dimensions.
In one scenario, the pricing data was combined with a digital marketing campaign segmented by combinations of consumer profiles. The campaign yielded a 4.5% increase in conversion rate, and more importantly a 7.6% sales uplift with a 13% rise in gross margin. We later used the data to improve our Next Best Offer (NBO) algorithm which has increased cross-sell conversions from high single digits to low double digits and continues to grow sales uplift.
For more big data examples that deliver big paybacks, refer to my prior post of 5 Retail Big Data Examples.
The Retail Big Data ROI
Collating unstructured online data from sources such as social media trending, web browsing patterns, online communities, niche forums and digital media along with more structured data from POS systems, the loyalty system and the CRM application identifies hidden patterns, enables more specific business decision making and facilitates predictive models which give retailers advance notice of product demand and optimal methods to satisfy that demand.
Interrogating and subdividing the data by store, region, demographics, behaviors and customer segment brings more specificity to promotions, merchandising strategies, bundling opportunities, price optimization models, supply chain planning and the many factors needed to get the right products to the right places at the right time.
In Store Immersion Technologies
In-Store Social Media Immersion
Social media isn't just for online consumption and can be used in ways to bridge the consumers digital and physical shopping experience. For example, one really simple technique I've found that gets more garments in the hands of more shoppers is the use of smart hangers.
The digital hanger scans the garment and then links to that garment's social media page (or curated pages) and displays the number of Likes or similar accolades.
It's an easy, cost effective and eye catching technique to get garments noticed and off of hangers and into the consumers hands. It's also useful for analyzing inventory movement and turnover metrics. For example, garments that either don't get picked up by consumers or get picked up but don't sell may need to be retired sooner rather than later.
You can take this technology further by integrating smart hanger movement with beacons to track what consumers picked up but didn't buy – for future email marketing or other campaigns.
Some leading retailers are using social media trending topics to promote in-store merchandise sales. For example, Nordstrom tabulates which items on its Pinterest page get the most pins, a concept it calls Pinspiration, and then marks those items in the store with red tags. It not only gets those shoppers looking for the latest trend to take notice, but when the shopper then uses their smartphone to scan the UPC label or view the product online, the overwhelming social media buzz delivers a "got to have it" message.
Nordstrom also tabulates the products most being shared on social networks such as Wanelo and displays those products on in-store video monitors. According to Nordstrom’s social media director, Bryan Galipeau, "We take a snapshot of a trending category once every week, and we will then match that up against our inventory and what's available in those stores so we're providing a good customer experience." This is a concept that can also be applied to digital signage. And where you don't have the exact product that is trending online, you can still match by category to apply what you do have and tap into the social media buzz for sales uplift.
There are many retail use cases where social media doesn’t drive e-commerce sales directly but instead influences in-store shoppers near the point of purchase by helping them discover new products or what's trending.
In-Store Video Immersion
According to Gartner, retailers that use targeted messaging in combination with internal positioning systems will see a 20 percent increase in customer visits.
Entertainment also contributes to the in-store shopping experience and digital signage is increasingly contributing to an integrated mix of targeted messaging and entertainment value. Digital signage is being effectively used for giant screen displays broadcasting high adrenalin video or social settings most consumers would like to find themselves. Similarly, displaying video use cases for products or curated social media content to isle monitors for nearby merchandise will most assuredly increase product engagement.
Integrating digital signage with branded social networks, entertainment channels, online communities or even better, with individual shoppers based on their loyalty ID or check-in can personalize the display content, show how new merchandise compliments prior purchases, raise the endorphin level and deliver a more rewarding and memorable shopping experience.
Apparel retailers are using digital signage so that shoppers can mix and match outfits on touch screen monitors or with virtual motion gestures (with technology such as with Microsoft Kinect). In these contexts, the virtual wardrobe displays can substitute for store associates, provide answers to product questions and help consumers discover additional merchandise that compliments products under consideration.
Smart Mirrors
Smart mirrors equipped with sensors, cameras and displays are applying machine learning algorithms to estimate a shopper's gender, age and garment choices and make intelligent suggestions for apparel styles, color choices and accessories. Some smart mirrors use cameras to identify garments while others read an RFID tag on the garment.
Smart mirrors allow the consumer to take an image of themselves wearing the clothes and upload it to their social network, adjust the lighting on the mirror to see how they look at different times of the day and in different weather conditions, summon a clerk to bring the next available size to the dressing room, and display relevant ads when not being used. When shoppers carry a branded loyalty card or engage with the retailer's mobile app, their purchase history can be used to deliver suggestions based on products they already own.
According to a study in the Pertanika Journal of Science and Technology, smart mirrors that offer suggestions for what to try on in the fitting room accelerate the shopping process and increase sales. In the near term, facial, speech and emotional recognition will further engage consumers and improve the consumer experience.
In-Store Audio Immersion
A European Journal of Scientific Research study found that when retailers play music in stores customers stay longer and spend marginally more than when no music is broadcast. A subsequent study from the University of Leicester in the U.K. focused more on targeted audio and found that playing French music in the wine section would result in the sale of more French wines while playing German music would similarly result in the sale of more German wines.
Taking it a step further, the University of Stockholm found that when playing sounds of farm animals in the dairy section, supplemented with a narrator talking about the benefits of organic products, consumers stayed 15 seconds longer (55 seconds compared to 40 seconds) than those not exposed to the directional messaging and organic product sales increased almost 10%.
These research results are not surprising but the lessons learned remain under-utilized by most retailers. The biggest revenue opportunity stems from combining directional audio with other in-store visual immersion techniques and segmenting these combinations to specific areas, zones or products within the store.
Near Field Communications
Brick and mortar retailers are using billboards and pop-up stand displays with near field communication (NFC) to transmit messaging or promotions to consumers' mobile phones when those mobile devices are within a few feet of the chip.
The consumers may receive product information such as back stories or motion media such as video for the product they're considering, while at the same time the retailer increases engagement which as we all know increases sales conversions. Additionally, the retailer gathers valuable information such as how consumers engaged with goods by display type, store location, product placement and similar variables that can optimize store design. This concept can also take planograms to a whole new level.
The Future of Retail is This
The common thread among all these retai technologies is the customer relationship – or more specifically catering to each consumer’s preferences in order to engage, foster the relationship and achieve strategic goals such as sales, loyalty and customer lifetime value.
It's important to recognize that while each of these 7 retail technologies are often discussed individually, they are actually quite intertwined and symbiotic. For example, mobility is both a consumer strategy and a channel. Planning any individual retail strategy or technology without consideration for the holistic customer relationship will most likely disappoint. That said, it may make business sense to get started with a single retail application that then leads to a stepping stone journey.
These retail strategies and technologies are the business mandate for the retailer of the future; and the future is now.
Cyberspace and real space have morphed. Consumers have taken control of their purchase decisions. Retail has irreversibly changed. Retailers must adapt to these consumer driven changes or risk becoming irrelevant. Yesterday’s retail practices of products, pricing and promotion have been commoditized and irrevocably replaced by retail strategies designed to meet customers where they reside, communicate with customers where they converse and overall, satisfy their growing demands in a way that also grows revenues and profits for the retailer.
In the most recent PWC Annual Global CEO Survey, 86% of US CEOs said that advancing technologies are going to transform their businesses over the next five years. In the words of one CEO, Ken Hicks of Foot Locker, new technologies will be the "game changers in what we do and how we do it."
As stated by Forrester Research analyst Laura Ramos, "If you’re not focusing on the ultimate user, you're going to be disintermediated by someone else." She goes on to advise, "Knowing customers better, serving them better and engaging them better is going to be what creates competitive advantage in the next 20 years. The competitive advantage will come from customer relationships."