Order Fulfillment in Omni-Channel Retail – the “Last Mile Delivery” most Retailers Fail to Complete

Shoppers expect a seamless shopping experience — no matter where they are, what device they are using, or how they choose to shop. Order Fulfillment in Omni-Channel Retail – taking the right product, putting it in the right box, shipping it, and gaining the customer’s approval – is a demanding task.

It is a demanding task, because customers in the retail omni-channel demand near perfect delivery of their products. Kirby Prickett speaks of the “last mile delivery” of eCommerce: “The last mile delivery is a metaphor used to describe the movement of goods from a fulfillment center to their final destination.”

The last mile delivery is the place where business success or failure for omni-channel retailers is mostly decided. Thirumalai and Sinha 1, (2005) suggest that “it is here – in the down-and-dirty details of consumer direct order fulfillment – that the epic battles for domination of the e-commerce marketplace will ultimately be won or lost.”

Success with order fulfillment in omni-channel retail may give a retailer a sustainable competitive advantage – take the dominance of Amazon.com as an example. However, to compete with Amazon, the average retailer needs bags of money and the greatest employees in the industry.

A more realistic approach for retailers is to have a critical look at their own order fulfillment processes, the last mile delivery, and fix what is not working.

The challenge of Order Fulfillment in Omni-Channel Retail

Indeed, Order Fulfillment in Omni-Channel Retail is a huge challenge for retailers. Results from a recent survey done by Radial with the help of EKN Research showed that 37 percent of CEOs questioned cited that their inventory order and supply chain operations are not properly aligned.

Retailers with physical shops or “Bricks and Mortar” (BM) retailers that added the online channel to their business becoming “Bricks and Clicks” (BC) retailers, have additional challenges. One of the challenges is to align their traditional store-based distribution processes with the requirements of the online channel 2.

Tony Evans from GLOMACS Training & Consulting highlighted the differences in logistic processes between Bricks and Mortar retailers and online retailers (OR):

  • Order size – BM retailer’s orders are counted in cases, picking is run per shipment and picked goods are ready for dispatch without additional handling. In contrast, OR’s orders are rather small including just a few items per line.
  • Warehousing operations – the picking system suitable for BM is not efficient for OR. A common characteristic for both channels is the high labor costs.  Therefore companies need to decide whether to keep the stock for all channels in one regional distribution center (RDC) or to keep them separated to avoid confusions and inefficiencies.
  • Technology – modern retail companies (e.g. BC retailers) are investing in new technologies to optimize logistics operations to give them a competitive advantage. Warehouse Management Systems integrated with Enterprise Resource Planning Systems and Transport Management System are essential for e-commerce operations. These systems provide real time information about the inventory level and estimated delivery time that may help customers during their purchase process.
  • Order fulfillment – BM shopping gives customers the opportunity to verify the products that they have purchase before they put them into a shopping basket. In OR operations any error in order fulfillment results in returns and problems in customer retention.  Potential errors are related to wrong item picked and packed, quality issue or late delivery.
  • Transport planning – orders that OR receive are mostly small in size. Therefore one truck typically delivers parcels in a wide area to various customers. These fragmented deliveries require retailers to plan their dispatching and delivery scheduling efficiently.
  • Network design – BM retailers choose the location of regional distribution centers (RDCs) to serve as a ‘center of gravity’ for the region and for heavy vehicles to have easy access. Hence the RDCs are usually located outside urban areas.  On the other hand, having picking centers close to urban areas work better for OR retailers. That is to do timely next-day or even same-day order fulfillment.

What cause the problems in the last mile of Order Fulfillment in Omni-Channel Retail?

Arsh Sing posting on the TOOKEN site, list a number of possible causes for problems in the last mile of Order Fulfillment in Omni-Channel Retail:

  • Poor infrastructure – especially in developing countries, poor transportation infrastructure inevitably means long journeys, inefficient routes, inefficient transportation technology, etc. All of these compound and translate into woeful costs and time lags, which may be otherwise circumscribed.
  • B2B vs B2C deliveries – now if you’re transporting a huge B2B delivery, the extra costs and wasted time may still be worth it. However, as is often the case in urban areas, especially with B2C deliveries, the costs of fuel and time wastage must be borne for just one package.
  • Types of goods – occasionally, even the type of goods can make add to the challenges of last mile delivery. For instance, toxic, fragile, perishable or flammable items call for more planning.
  • Customer nuances – phenomena like incorrect address, remote locations, cramped locations, absence of the customer to receive the package, whimsical cancellations of orders, returning orders, etc. These nuances ensure that the factors affecting potential costs of the last-mile cannot be accurately anticipated.

How can retailers improve the last mile of Order Fulfillment?

According to Jim Tompkins, Chief Executive Officer, Tompkins International, the correct approach for retailers to get the last mile of delivery right is to focus first on strategy, then on structure, followed up by implementing the systems you need. However, Melicia Morris and Dan Rottenberg writing for Retail Law Advisor have a pragmatic approach to help solve challenges in last mile of delivery:

  1. Creating a fulfillment center – a fulfillment center allows customers, who place online orders, the ability to pick up their items at a nearby physical location. Along with decreasing the shipping costs, the benefits include faster delivery of merchandise and the leveraging of existing store personnel.
  2. Constructing brick-and-mortar buildings – where customers familiar with their products and service can both shop and receive their deliveries.
  3. Implement automated locker systems – to address customer deliveries.
  4. Using drones – to deliver packages via parachute, though the method presents issues of both safety and efficiency.

Concluding

Online shoppers want to receive their goods as soon as possible. Parcel delivery has become a very powerful marketing leverage for your e-commerce. According to Mélanie Vaast from ECN about 37% of online shoppers who face a poor delivery experience blame the online seller itself and never shop again on its website. The concept of last kilometer represents a daily challenge for online stores owner in a very competitive market.

Notes

1 Thirumalai, S. and Sinha, K.K. 2005. Customer satisfaction with order fulfillment in retail supply chains: implications of product type in electronic B2C transactions, Journal of Operations Management, 23(3):291-303.

2 Ishfaq, R. and Raja, U. 2017. Evaluation of Order Fulfillment Options in Retail Supply Chains, Decision Sciences.

Image

Pixabay

 

3D Printing Technology for Retailers – An Opportunity or a Waste of Money?

3D printing technology for retailers is now emerging as an outcome for small localized retailers that are facing closure. However, as it is with most disruptive technologies, the advantages that 3D printing offer for retailers should be weighed against its potential pitfalls.

Although the 3D printing technology has been used for a number of years, it has been mostly on an industrial scale. Meanwhile, the price of desktop 3D printers has started to come down resulting in an average annually growth rate of 170% since 2008 1. The door is now starting to open for innovative retailers to include 3D printing technology into their business models. As a result, brave small retail store owners have already started using in store 3D printing.

3D printing is a game changer in retailing, according to Richard Kestenbaum, contributing for Forbes. Richard writes: “Last week Ministry of Supply installed a machine in its Boston store that can make a garment on demand in 90 minutes (with finishing done offline after the garment is created). The machine can be set to make garments all day and night or it can be instructed to make a garment to a specific customer’s design, allowing customers to customize the colors they want in the garment.”

Let’s have a look how 3D printing works…

How does 3D printing works?

3D printing, also known as additive manufacturing (AM), refers to processes used to create a three-dimensional object in which layers of material are formed under computer control  (Wikipedia). According to Berman (2012), 3D printers work in a manner similar to traditional laser or inkjet printers. Rather than using multi-colored inks, the 3D printer uses powder that is slowly built into an image on a layer-by-layer basis. All 3D printers also use 3D CAD software that measures thousands of cross-sections of each product to determine exactly how each layer is to be constructed 2.

3D printing uses such raw materials as plastics; resins; super alloys, such as nickel-based chromium and cobalt chromium; stainless steel; titanium; polymers; and ceramics. Examples of products that are manufactured by 3D printing includes artwork, automotive parts, ductwork for a mobile hospital, sand cores for automotive engine block castings, architectural models, dental bridges, jewellery, ball bearing assemblies, and gear assemblies 4. But how can retailers use 3D printers to their advantage?

3D Printing technology for retailers – a 3D-printed product out of a desktop printer

What are the opportunities of 3D printing technology for retailers?

Cremona, et al. (2016) identified the following points on how 3D printing may influence a firm’s strategy:

  • Process innovation:
    • Delivery time of the product: the time to market is extremely reduced, to the extreme that it might become real time.
    • Product development process: is optimized because adjustments are made in a faster and less costly way.
    • Quality and flexibility: is under the control of the retailer with 3D printing.
    • Satisfaction of the single customer demand: personalized products are added to the platform.
  • Customer’s value:
    • Brand awareness: a close collaborative relationship is established between the retailer and the customers thanks to usability testing.
    • Customer’s loyalty: offering customized, personalized products may help clients to feel special.
  • Product platform enhancement:
    • Pushing the limits of traditional manufacturing machines: now new products can be developed also in a different approach and materials are added instead of subtracted.
    • Personalized modules: products can be designed and delivered exactly how the customers want them.
  • Sustainable competitive advantage:
    • Differentiation strategy: carrying out projects on demand makes the retailer to perform a differentiation strategy. It aims at delivering the most technologically advanced product, which is a unique solution with a unique design for each customer.
    • High specialized production know-how: allow companies to actually integrate 3D printing in the product life cycle. In doing so, an additional service is provided.

The most important strategic advantages that 3D printing offer small local retailers are customization, personalization and control over the supply chain. But what are the pitfalls of 3D printing?

What are the pitfalls of 3D printing technology for retailers?

3D printing is in the introduction phase of its life-cycle in the retail industry. Subsequently there will be a lot of surprises (good and bad) as the technology gets adopted more widely.

Shaleen recently blogged in inkjetwholesale.com.au the following of disadvantages of 3D printing:

  1. Scale and size limitations – you can’t print multiple objects of the same type at the same time.
  2. The absence of economies of scale – because every object or product is printed individually.
  3. Cost of buying and setting up a 3D printer – the initial cost still remains something of a roadblock for most businesses and individuals.
  4. 3D printed objects may require heavy duty post processing – it isn’t only the lack of polish that is the problem but also the possible dimensional inaccuracy.
  5. Large scale adoption of 3D printing will result in significant job losses – every new invention ends up taking away jobs amongst the masses.

According to Beck and Jacobson (2017), legal implications may include what is exactly a product, who is the manufacturer, what is the marketplace, and who should be potentially liable for a defective 3D-printed product (once “product” is defined).

At the end of the day, the most important aspect of 3D Printing technology for retailers is whether the customers will accept or reject it.

What do customers think of 3D printing technology in retail stores?

Retail Customer Experience recently reported results of a survey by self-service solutions company Interactions on what shoppers want from retail technology. The study, “What Shoppers Want from Retail Technology,” surveyed more than 1,000 adult shoppers. Of those polled, 84 percent expect retailers to successfully use tech features and functionality to boost the shopping experience and 62 percent are motivated to shop after an initial human greeting when entering a store. Importantly is what the respondents said about 3D printing in shops…

“According to the survey, 95% of shoppers said they were eager to buy products that were 3D printed, and 79% said that they would even spend more money at a store that offered product customization through 3D printing.”

Wow, really? I think we should end (or start) here…

Concluding

Lastly, 3D printing technology for retailers is a genuine disruptive digital technology that may (or will) turn the retail industry upside down. There are many recent examples of disruptive technologies that changed the rules of the retail game. As the costs of buying and setting up 3D printing technology are getting less, more retailers will adopt the technology. Indeed, if you invest now in the technology, you’ll be an early adopter and enjoy (localized) market leadership. Consequently, you’ll have to battle through the growing pains of the technology. On the other hand, by waiting a bit longer, laggard retailers my get 3D printers for a bargain, but at that time, probably, the customers will already be with the pioneers.

Video: The 3D printing process

Notes

1 Li, Y., Linke, B.S., Voet, H., Falk, B., Schmitt, R. and Lam, M. 2017. Cost, sustainability and surface roughness quality – A comprehensive analysis of products made with personal 3D printers, CIRP Journal of Manufacturing Science and Technology, 16:1-11.

2 Berman, B. 2012. 3-D printing: The new industrial revolution, Business horizons, 55(2):155-162.

3 Cremona, L., Mezzenzana, M., Ravarini, A. and Buonanno, G. 2016. How additive manufacturing adoption would influence a company strategy and business model, MIBES Transactions, 10(2):23-34.

4 Conner, B.P., Manogharan, G.P., Martof, A.N., Rodomsky, L.M., Rodomsky, C.M., Jordan, D.C. and Limperos, J.W. 2014. Making sense of 3-D printing: Creating a map of additive manufacturing products and services, Additive Manufacturing, 1:64-76.

5 Beck, J.M. and Jacobson, M.D. 2017. 3D Printing: What Could Happen to Products Liability When Users (and Everyone Else in Between) Become Manufacturers, Minn. JL Sci. & Tech., 18:143.

Images and video

  1. Commons.wikimedia.com; https://commons.wikimedia.org/wiki/File:3D_print_in_process_(9437659715).jpg
  2. Proto3000

Demise of Loyal Retail Customers in the Digital Age

Loyal retail customers have for long now given Bricks and Mortar (BM) retailers an advantage over their competitors. However, the advent of the internet and the subsequent development of the online shopping channel have changed the shopping behaviour of retail customers.

Although BM retailers have invested millions of dollars in customer loyalty programs, the convenience, speed and assortment of products customers enjoy online lured many loyal customers away. This is apparent with the closedown of thousands of retail stores, and the vanishing of well-known retail brands over the last couple of years.

The big challenge for BM retailers is to the get customers back to their stores. Thereafter, the retailers should have a strategy in place to keep them coming back. In other words, making their customers loyal again…

What are loyal retail customers?

Customer loyalty is according to PR Loyalty Marketing both an attitudinal and behavioral tendency to favor one brand over all others. This may be due to satisfaction with the product or service, its convenience or performance, or simply familiarity and comfort with the brand.

Loyalty is formed in four stages 1 – cognitive, affective, conative, and action.

  1. Cognitive loyalty – in the first loyalty stage, consumers develop value expectations and preference for one brand relative to other available alternatives.
  2. Affective loyalty – here the consumers begins to develop a liking or attitude towards the brand based on an increasingly satisfying experience with the brand.
  3. Connotative loyalty – the third stage, which is confined to consumer’s behavioral intention. The consumer has deeply held commitment to buy the brand.
  4. Action loyalty – is where the desire and intention in the previous loyalty state has translated into realistic loyalty actions or behaviour.

It takes time, money and commitment from retailers to get loyal retail customers. This process, mostly took place at the BM retailer’s store in the local shopping center. However, retail customers in the digital age can shop anywhere, at any time, at the best price.

So, BM retailers need to rethink their customer loyalty programs. They need to find out what “delights” their customers. How has the internet and the online retail channel affected their shopping behaviour in the retail stores?

Loyal retail customers in multi-channel retail

Retailers can nowadays rely only on more than one channel to do business with. As a result, most BM retailers adopted eCommerce to become Bricks and Clicks retailers. Online retailers, on the other hand, started to open physical stores to serve as showrooms for their products. Indeed, loyal retail customers need to be found outside the traditional retail channels.

“In the digital age, your customers have apps that let them search for products, compare products, review products, check prices, compare prices, and even buy the product without ever stepping foot in your store “says Tiffany Marshall. So what must retailers do to get their loyal retail customers back?

Media Genesis suggests that retailers do the following to get back loyal retail customers:

  • Build an emotional connection – whether it’s through exclusive content or rewards, making your consumer feel special is an important part of brand loyalty.
  • Personalize – you have your customer’s data; use it to your advantage! Make your content relevant and engaging by making sure that it is (almost) custom-made for your consumer.
  • Use your data – use data, analytics, and your digital business capabilities to go beyond just rewards. Use the information you’ve gathered to really analyse how your consumers want to engage with your brand and build a strategy to do it.
  • Create an active online presence – forgoing a good website and a strong online presence is essentially a death sentence in today’s digital marketplace. Most consumers prefer to shop online and not having an easy to use website is like excluding your brand from the conversation. It’s not enough to just post on social media. Create conversations, respond to customers, and help make customer service a 360° experience.
  • Merge your worlds – make the online to offline experience completely complimentary by identifying all of the crucial touch points you may have with your consumers. You might even see a return in foot traffic if the consumer consistently sees your brand attached to good prices online. When they need something in a pinch, your brand will be at the top of their mind.
  • Make it easy – as a business, you now have to prioritize delivering quality, enjoyable interactions with your consumers. This is the best way to build a lasting customer relationship in the digital age. If your web presence does some of the heavy lifting for your consumer, making it easier for them to reach their end goal, the quality of the experience will resonate and they’ll be back for more.

Concluding

Online shopping caters to the busy lifestyle of modern people, and its prevalence manifests the rise of the stay-at-home economy 2. Also, the internet, big data, the internet of things and social media has revolutionized the way customers interact with their retailers. I wonder, however, how loyal retail customers can be towards a chatbot?

Lastly, has the demise of the loyal retail customer started?

Read also: Personalization of Marketing Communication – not just for your Customer’s sake

Have look at this video: “The role of customer loyalty in the small business”

Notes

1 Kursunluoglu, E. 2014. Shopping centre customer service: creating customer satisfaction and loyalty, Marketing Intelligence & Planning, 32(4):528-548.

2 Wu, M.Y. and Tseng, L.H. 2015. Customer satisfaction and loyalty in an online shop: an experiential marketing perspective, International Journal of Business and Management, 10(1):104.

Image and video

Flickr.comlynda.com

Drop Shipping in 2017 – Opportunities and Turbulence for Retailers

Drop shipping in 2017: Is drop shipping the ‘holy grail’ for struggling Bricks Mortar retailers? Or is it a retail business model that goes against what online customers demand: An easy, consistent and seamless experience.

According to Joel Padi writing in The Market Mogal, the young people in the UK choose increasingly to become entrepreneurs. This is because of the unpredictable economy, high study fees and a fiercely competitive job market. Joel says that some of the young entrepreneurs consider drop shipping as a “risk-free, low start-up cost, and profitable business venture”.

Josh Wexler, CEO and Founder of RevCascade, posting in the MULTICHANNELMERCHANT says that “Thanks to its inherent flexibility and low-risk nature, drop shipping has the potential to be your ultimate tool for merchandising and product curation”. However, Ed Kennedy cautions that with drop shipping, a retailer may put his/her good reputation in another’s hands. A real concern…

The drop shipping in 2017 will be discussed – does it offers opportunities for retailers, or is it too troublesome?

The drop shipping distribution model

The drop shipping distribution model is usually contrasted with the traditional retail distribution model. Comparing the two models is not without a good reason. Traditional retail distribution models require the retailer to buy inventory, and to store and manage it. This practice needs a monetary investment that serves as an important entry barrier to the industry.

There is no need for a retailer to buy inventory, or to handle it when using drop shipping.  Since the capital requirements starting a drop ship retail business is small, the barrier to enter the industry is low. Therefore, starting a drop ship business seems easy, but how easy is it to keep it open?

The pros and cons of drop shipping in 2017

Drop shipping, as with any other retail business model, has its advantages and disadvantages:

The advantages of using drop shipping for existing retailers are according to Josh Wexler as follows:

  • Increasing volume with existing brands – launching a drop ship program largely takes the responsibility of shipping and fulfillment off your shoulders;
  • Selling new products from new (and existing) brands – your product mix and brand offerings can be drastically expanded and diversified with virtually no risk;
  • Testing new verticals – drop shipping can mitigate risk to the point where retailers can test out merchandising with entirely new verticals, not just products and brands;

The disadvantages for retailers using a drop shipping system are according to Strategy Plus:

  • Processing your orders can become difficult. The time between selling a product and getting it shipped can take long. Also, there are many conversations and actions that need to take place before it gets sent off;
  • Not having all of the product information is problematic. As you never actually handle the products that you are selling, you have no realistic idea of what they are like;
  • Customer service issues. Drop shipping removes the responsibility of shipping but, sadly, it also removes a large part of the customer experience from your control;
  • A vast amount of competition is everywhere. Finding great drop shipping products means they generally will come with competition from other retailers in your sector.

How should retailers practice drop shipping in 2017

In a time where many Bricks and Mortar retailers are closing shops because changes in the buying behaviour of their customers, a drop shipping distribution model may provide an outcome. Indeed, drop shipping has the power to build a retailer’s eCommerce site and increase product offerings with little capital investment.

However, Peter Zaballos, Chief Marketing Officer at SPS (quoted in the MULTICHANNELMERCHANT) suggests that before retailers decide to add drop shipping capabilities, they should consider the following six questions:

  1. Do I have the infrastructure needed to support it? Drop shipping involves many moving parts and requires flawless orchestration between retailers and suppliers. Communication, collaboration and efficiency are key to meeting the promise made to consumers.
  2. Do I have the right internal resources in place? Managing the increased document flow drop shipping requires may tax your internal teams. It’s critical that you have systems and processes that can support increased volume.
  3. Which of my suppliers have drop shipping capabilities? While having a relationship with a supplier that offers drop shipping makes it easier to add this component to your merchandising strategy, it is not a necessity.
  4. How will I receive reliable, accurate product information? Today’s digital consumers rely on detailed product information when making purchasing decisions. To ensure you provide such information, gather item attributes from your suppliers.
  5. How will I maintain service levels? Drop ship agreements require collaboration and trust in order to ensure customer expectations are met. From the start, foster and encourage open dialogue and set expectations, requirements and goals.
  6. In what way will I manage returns? Even with accurate product information and a good shopping experience, returns are inevitable and must be planned for. First, determine what to do with merchandise that is returned. Will it go back to the warehouse or the supplier, be discounted and sent to store shelves or sold elsewhere?

Concluding

Although the start-up costs are low with a drop shipping business, it’s not so easy to run it. Websites such as Dropship.com and Shopify as well as other applications run by the wholesale suppliers will mostly give entrepreneurs a seamless start. However, what happens there after will require all the ‘guts’ and determination to keep going.

Then there is the ‘the paradox of choice’. Jeremy Hanks, CEO of Dsco said recently in Practical Ecommerce that “customers overwhelmed by product variety end up just window shopping.” Joel Padi writing in The Market Mogal advises that when starting with drop shipping, specialization in a niche market could prove to be the key to a profitable start-up. By reducing their focus, first-time entrepreneurs can narrow the target market, reducing advertising and marketing costs.

Finally, to do successful drop shipping in 2017, the retailer must maintain control over the entire customer experience, including how transactions and communications take place, says Adrien Nussenbaum, co-founder of Mirakl (Internet Retailing).

Image: Pixabay

Read also:  Drop shipping retail in 2016

 

 

Predictive Analytics helps Retailers to make sense of Big Data

“The most successful retail companies are utilizing data science and predictive analytics (PA) to improve efficiency, improve marketing campaigns, and gain significant customer insight for a competitive advantage” says Christine Kern, contributing for Innovative Retail Technology. But what about the “not so successful” retailers? How can they share in the advantages that Big Data and PA offer? Retailers can – by using predictive analytics.

What is Predictive Analytics?

Predictive analytics is a set of business intelligence technologies that uncovers relationships and patterns within large volumes of data that can be used to predict behaviour and events, according to Eckerson (2007) 1. Or, as Eckerson states it more bluntly “Predictive Analytics is like an “intelligent” robot that rummages through all your data until it finds something interesting to show you.”

Also, forecasting is about predicting the future, and predictive analytics adds questions regarding what would have happened in the past, given different conditions. Therefore, PA attempts to quickly and inexpensively approximate relationships between variables while still using deductive mathematical methods to draw conclusions 2.

Gregg Brunnick, Director of Product Management & Technical Services, Business Systems Division, Epson America explains the usefulness of PA: “If you know how many cheeseburgers John sold during last Tuesday’s lunch hour, for instance, you can improve the efficiency of your food ordering, preparation, labor, and marketing operations.”

The value of Predictive Analytics for retailers

Deon Abott of Smarter HQ writing in Inside Big Data, suggests that data science and predictive modeling have become the holy grail for the retail industry. For this reason retailers built reports summarizing customer behavior using metrics such as conversion rate, average order value, recency of purchase and total amount spent in recent transactions.

These measurements provided general insight into the behavioral tendencies of customers. However, says Deon “In order for retailers to create a meaningful dialogue with customers that honors the shopper’s preferred level and mode of engagement, it takes more than summarized reports, which is why customer intelligence and predictive analytics provide the opportunity to significantly change the retail marketing industry.”

Generic uses of Predictive Analytics are according SAS the following:

  • Detecting fraud. Combining multiple analytics methods can improve pattern detection and prevent criminal behavior. As cyber-security becomes a growing concern, high-performance behavioral analytics examines all actions on a network in real time to spot abnormalities that may indicate fraud.
  • Optimizing marketing campaigns. Predictive analytics are used to determine customer responses or purchases, as well as promote cross-sell opportunities. Predictive models help businesses attract, retain and grow their most profitable customers.
  • Improving operations. Many companies use predictive models to forecast inventory and manage resources. Predictive analytics enables organizations to function more efficiently.
  • Reducing risk. Credit scores are used to assess a buyer’s likelihood of default for purchases and are a well-known example of predictive analytics. A credit score is a number generated by a predictive model that incorporates all data relevant to a person’s creditworthiness.

Erick Siegel of Big Think suggests that predictive analytics allows for a keen assessment of the probability that any one person will buy, sell, click, lie, die, etc. PA doesn’t just predict the future; it can influence it as well.

The challenges of using Predictive Analytics

The big challenge for retailers is to use PA correctly. Not using PA appropriately can cause loss of brand equity and market share with astonishing speed. The key is in understanding the customer’s “digital body language”, suggests Earley (2014) 3. Retailers need to understand customer data – the attributes, needs, characteristics, life stage, behaviour, demographics, and psycho-graphics. The information coming from the data may be used to help customers behave in a way that satisfies their needs 3.

Unfortunately, the use of PA by some retailers has been reported as controversial. Not only are most companies not informing their customers of when and what data they are collecting, but they are not letting them know about their analysis policies, according to Corrigan et al (2014) 4.

According to Arliss Coates from EConsultancy retailers should note the following when using PA:

  • Is automation driving out your innovation and originality?
  • Do you have people that know how to interpret the results of PA?
  • Scenario planning – humans cannot prepare the machines to anticipate every possible nuance or scenario.
  • An over-reliance on data to substantiate decision-making may hampers innovation.
  • The “garbage in, garbage out” principle – bad data will render bad results.

Concluding

The explosion of data is here to stay. At this moment it seems that the availability and use of big data and predictive analytics will grow exponentially. In spite of some controversy and challenges, PA couldn’t have come at a better time for retailers. Predictive analytics may help retailers to integrate their channels more smoothly and thereby keeping in pace with their competitors.

Read also: Big Data for Small Retailers – Is it Doable?

Have a look at this practical demonstration of PA from IBM “”Predictive Analytics for Retail – Introduction”:


Notes

1 Eckerson, W.W. 2007. Predictive Analytics. Extending the Value of Your Data Warehousing Investment, TDWI Best Practices Report, Q1.

2 Waller, M.A. and Fawcett, S.E. 2013. Data science, predictive analytics, and big data: a revolution that will transform supply chain design and management, Journal of Business Logistics, 34(2):77-84.

3 Earley, S. 2014. Big Data and Predictive Analytics: What’s New? IT Professional, 16(1):13-15.

4 Corrigan, H.B., Craciun, G. and Powell, A.M. 2014. How does target know so much about its customers? Utilizing customer analytics to make marketing decisions, Marketing Education Review, 24(2):159-166.

Image

Pixabay

Video

IBM

Big Data for Small Retailers – Is it Doable?

Do Big Data (BD) for small retailers offer an opportunity to compete with the big retailers or is it too much trouble? One of the fall outs of the digitization of business is the massive amount of data that are everywhere. Every time a customer makes a purchase online or registers online, data is generated. The data can potentially tell you almost everything about consumers. Retailers that sort, analyse and interpret BD can add value for customers and so increase their shopping experience.

Surely retailers should take advantage of BD since it contains captured detailed information that probably was overlooked in the past. However, to get the most out of BD, retailers need to be innovative. The promise of new revenues, customers, and new businesses with BD will require development and investment in teams and technology 1. But first let’s have a look at what BD is all about…

What is big data?

Big data is a term that primarily describes data sets that are so large, unstructured, and complex that it requires advanced and unique technologies to store, manage, analyse, and visualize 2. Therefore, big data represents the data sets that cannot be perceived, acquired, managed, and processed by traditional IT and software/hardware tools within a tolerable time 3. Compared with traditional data sets (small data), big data typically includes masses of unstructured data that need more real-time analysis, according to Chen, Mao, and Liu, (2014).

Where can retailers find Big Data? Rajdeep Nair responds as follows on Quora: “Data is everywhere… it can be purchase data or images uploaded by you on the social media site or data sent by mission sent to Mars by NASA. Everything that is there on the internet and company or an organisation’s confidential data stored on the server. Mostly  data is stored on the server, the technology of which is improving and evolving rapidly.”

However, a good place for small retailers to find “Big Data” is on their own systems. Have you ever analysed your own data sets before?

What retailers can do with Big Data

According to Russell Walker 1, firms that are first movers in leveraging BD have great advantages because they develop innovative insights about customers and markets. These insights can transform services, and even business models. Bernard Marr, contributing to Forbes declared Big Data as “A game changer in the retail sector”.

Bernard notes that Big Data analytics is now being applied at every stage of the retail process. Says Bernard: “BD is used to understand what the popular products will be by predicting trends, forecasting where the demand will be for those products, and optimizing pricing for a competitive edge.”  Moreover helps BD retailers to identify the customers that are likely to be interested in their products and works out the best way to approach them. It also to help them making the sale and working out what next to sell them.

Alex Woodie writing a piece in Datanami.com suggests there are 9 ways retailers are using big data technology to create an advantage in the retail sector.

The advantages of Big Data to retailers

  1. Recommendation Engines – by training machine learning models on historical data, the savvy retailer can generate accurate recommendations before the customer leaves the Web page.
  2. Customer 360 – customers expect companies to anticipate their needs, to have the products they want on-hand. Also to communicate with them in real time (via social media), and to adapt to their needs as they change. In the cutthroat world of retail, developing a customer 360 system using Big Data may be a matter of survival.
  3. Market Basket Analysis – is a standard technique used by merchandisers to figure out which groups, or baskets, or products customers are more likely to purchase together. It’s a well-understood business processes, but now it’s being automated with the help of BD.
  4. Path to Purchase – analyzing how a customer came to make a purchase, or the path to purchase, is another way big data technology is making a mark in retail.
  5. Social Listening for Trend Forecasting – platforms like Hadoop were designed to facilitate the handling and analysis of large amounts of unstructured data, such as Facebook posts.
  6. Price Optimization – setting the right price requires knowing what your competitors are charging. Data can be collected electronically using daemons that crawl competitors’ website to get detailed info about product pricing.
  7. Workforce and Energy Optimization – big data technology can deliver benefits on the marketing and merchandising side. As a result it can help big retailers optimize their spending on human capital.
  8. Inventory Optimization – by analysing BD, retailers can plan their seasonality in the shipping algorithms better.
  9. Fraud Detection – retail fraud is a huge problem, accounting for hundreds of billions of lost dollars every year. Retailers have tried every trick in the book to stop fraud, and now they’re turning to big data technology to give them an edge.

Concluding

The narrative about Big Data is more with ‘Big Retailers’ at this moment. However, with smaller retailers adding the online channel to their business, there are ample opportunities for them to use their own data to great effect. Everything else will cost retailers a lot of money. Maybe to start with small data is better for smaller retailers.

Have a look at this video by Tera data corporation more more on Big Data for retailers:

Notes

1 Walker, R., 2015. From big data to big profits: Success with data and analytics, Oxford University Press.

2 Xu, Z., Frankwick, G.L. and Ramirez, E. 2016. Effects of big data analytics and traditional marketing analytics on new product success: A knowledge fusion perspective. Journal of Business Research69(5):1562-1566.

3 Chen, M., Mao, S. and Liu, Y. 2014. Big data: A survey, Mobile Networks and Applications, 19(2):171-209.

Image and video

Pixabay

Tera Data Corporation

Augmented Reality in Retail – a Useful Customer Experience

Not so long from now. There is an eerie quietness in the retail store.  Almost all the customers are wearing identical glasses and head sets, slowly walking through the aisles like humanoid robots. No, it’s not a new episode of Star Trek in the making – this is Augmented Reality (AR) in action.   Retailers are now experimenting with AR to get customers back in the stores.

What is Augmented Reality?

Augmented reality is the practice of augmenting a real-time direct or indirect view of the physical world with virtual information 1. Scholz and Smith (2016) describe the practice of AR as: “Marketers layering digital information (e.g., text, pictures, and videos) over objects and spaces in the physical world (e.g., product packaging, advertisements, or street scenes). And consumers experiencing these hybridized realities via digital screens (e.g., smart phones or video installations) or projections (e.g., holograms)”.

AR can also be explained as the co-existence of virtual and real in the same space, as well as the interactive alignment and mutual registration of computer generated sources with physical reality 2.

Scholz and Smith (2016) have identified the five ingredients of AR:

  1. AR content – is virtual information that is often perceived by consumers through digital devices (e.g., smart phones, large-screen AR installations);
  2. Users – are the people who directly experience an AR layer. Users can share the same physical space. For example, if a screen displays an augmented view of the street behind a bus stop (e.g., bogus window paradigm). Or they may view the same AR layer while dispersed across different locations – for example, when readers of a magazine access the AR content of an active print;
  3. Bystanders – are people who do not experience an augmentation themselves but instead observe a user’s actions either directly – by sharing the same physical space – or indirectly – by viewing content (e.g., images) that a user has generated during his or her augmented experience. Bystanders can affect users’ willingness to engage in AR experiences because they form the social context of the experience;
  4. Targets – are entities in the physical world that are augmented with digital information. In many cases, targets are objects; for example, a marketer might digitally overlay a brand narrative or ingredient information on product packing. Targets may also be people – for example magic mirrors in fitting rooms that superimpose digital images of their merchandise over live images of customers;
  5. Background – those objects and ambient conditions that share the same physical space as the target, but that are not augmented in this particular AR layer.

AR has the potential to be a life-changing technology application. In a recent interview by Bloomberg, CEO Tim Cook of Apple said: “We’ll all have AR experiences every day, almost like eating three meals a day. It will become that much a part of you.” What is the value of AR for the retailer?

Augmented Reality in retail

AR can help Bricks and Mortar retailers to let their customers enjoy their shopping experience and come back for more. Shauna Heller writing in Media Leaders propose that retailers offer headsets for people to wear while in their stores, to guide people through the store with pop-up characters, animations, or even a virtual assistant right through the visor popping up as people walk around. According to Augment.com, AR helps in the following ways to stop buyer uncertainty:

  • Proximity, presence, and interaction – a customer who is shopping for home furnishings can launch models of a bed or lamp to see how the item would actually look and fit (to scale), rather than playing a guessing game. AR advocates for purchases with more certainty and satisfaction.
  • Modify or customize selections – Augmented Reality makes it easy for consumers to explore their options and make personalized modifications.
  • Visualize or understand products and features – a customer must be able to understand and visualize how a product works and functions. AR augment sophisticated demonstrations that make it easier for customers to visualize and understand the intricate features of a product before they purchase.

AR marketing campaigns open new possibilities for brands to engage and interact with consumers, especially those from social media generations. Yaoyuneyong 3, et al found that AR is “immersive, persuasive and powerful” and the two benefits of AR marketing that they’d identified are:

  1. Enhancing communication by engaging and increasing consumers’ level of immersion and
  2. Improving sales strategy and sales processes.

Also, augmented reality can make a difference to the shopping experience for both online and offline retail customers.

Concluding

After all, it took a game like Pokémon GO and millions of people with smartphones a couple of years ago to bring Augmented Reality under the spotlight. However, the real value of AR is not just for the entertainment of its users, but also as a dynamic marketing tool for retailers.

Remember Pokémon GO?

Further reading

  1. How successful are Retailers in the Omnichannel?
  2. Bricks and Clicks Retail – Shopping Experience makes the Difference

Notes

1 Scholz, J. and Smith, A.N. 2016. Augmented reality: Designing immersive experiences that maximize consumer engagement, Business Horizons, 59(2):149-161.

2 Javornik, A. 2016. Augmented reality: Research agenda for studying the impact of its media characteristics on consumer behaviour, Journal of Retailing and Consumer Services, 30:252-261.

3 Yaoyuneyong, G., Foster, J., Johnson, E. and Johnson, D. 2016. Augmented Reality Marketing: Consumer Preferences and Attitudes Toward Hypermedia Print Ads, Journal of Interactive Advertising, 16(1):16-30.

Image and video

  1. shortfilmwindow.com
  2. Pokémon GO

Personalization of Marketing Communication – not just for your Customer’s sake

Personalization of marketing communication is not just a good practice for retailers, but also a way to help their businesses survive. The advent of the internet has rendered retailers the opportunity to offer their customers products specifically customized for them. This is in direct contrast with mass marketing where the objective is to broadcast product offerings to reach the largest number of people possible.

Personalization of marketing communications is to treat each person as a unique individual with distinctive needs and to provide them with customized solutions 1. To be able to personalize marketing communications, retailers need to learn about the customer’s individual needs and preferences in terms of the types of content that the customer is willing to receive and other person-specific characteristics.

The strategic use of data collected during the online buying process and social media sites may be a good starting point for retailers to know their customers better.

Data – the foundation for the personalization of marketing communication

The digitalization of the entire advertising industry is generating ever increasing amounts of data that must be collected, analysed and interpreted 2.  Lying hidden in all this data is information, potentially useful information that is rarely made explicit or taken advantage of. We must just find the data.

The data we need is right before our eyes. Says Woopra: “Social media interactions, email marketing, landing pages, surveys, customer relationship management (CRM) tools, and re-targeted ads are all customer touch points that can tell you about your customer’s needs and interests”.

Once the data are sorted and tabled, retailers can segment and target their customers and also position their products accordingly. However, here the process is done for each customer specifically according the individual’s unique needs, desires and behaviors (customization). So, once customization has been achieved, it makes personalization of marketing communication possible.

Personalized marketing communications used by online retailers

Online shopping has become an important channel for retailers. Unfortunately, it does not afford facile development of an interpersonal relationship or facilitate easy interactions between buyers and sellers 3.  Even worse, many retailers use the online channel to send generic marketing messages via email or text, to the annoyance of their customers. This, however, is not personalized marketing communication.

Retailers need to collect and analyse data about the buying behaviour of individual customers. The profile of the customer will provide guidelines for the retailer how to personalize his/her marketing communication message. Daniel Newman, CEO of Broadsuite Media Group suggests the following ways brands can use data to build personalized marketing tactics:

  • Capture complete data – are you collecting every piece of data that you possibly can? Brands today have more consumer information at their fingertips than ever before, and they can use that data to get to know their customers in depth.
  • Social data – social cues and signals are excellent ways to figure out more about customers than traditional sources like email, demographics, or purchase records.
  • Segmentation – you need to segment your audience into smaller groups for more accurate targeting.

What does a personalized marketing message looks like?

You’ve done all the hard work by sourcing and sorting your customer data. Now it is time to create a personalized marketing message for your customer. Below is an image from GIGYA, a customer identity management agency. The ad shows beauty products that are specifically recommended for a customer with a unique skin type and facial features.

Note that the narrative is in the second person – thus the ad is addressing the individual personally.

The advantages of personalized marketing communications

Retailers that personalize their marketing communication may enjoy the following advantages says Infor Marketing Management:

  1. Improved Return on Investment (ROI) – one study found that personalized website experiences resulted in an average 19% increase in sales. For email, personalization is even more powerful, generating transaction rates and revenue six times higher per email than non-personalized emails.
  2. Outflanking the competition – with personalization, retailers can increase the impact of each interaction to get consumers’ attention and time online – at the cost of the competitors.
  3. Customers expect it – most consumers said it’s important to receive relevant offers when shopping online. And, almost a third wants more personalization during their online shopping experiences, reports Infor Marketing Management.

Concluding

“Personalization is retail’s future; especially as more advanced technologies allow marketers to handle personalization more effectively”, suggests Infor Marketing Management. However, retailers have to invest in the right technology, including marketing automation, CRM, social media management and data analytics tools, as well as more advanced e-commerce platforms.

Bringing the person back into the marketing message may help soften the total onslaught of marketing atomization by means of the internet of things, big data and bots.

Have a peek at this short video from Evergage re personalized marketing communication.

Notes

1 Järvinen, J. and Karjaluoto, H. 2015. The use of Web analytics for digital marketing performance measurement, Industrial Marketing Management, 50:117-127.

2 Grether, M. 2016. Using Big Data for Online Advertising Without Wastage: Wishful Dream, Nightmare or Reality? GfK Marketing Intelligence Review, 8(2):38-43.

3 Lee, Y.J., and Dubinsky, A.J. 2017. Consumers’ desire to interact with a salesperson during e-shopping: development of a scale, International Journal of Retail & Distribution Management, 45(1):20-39.

Read also:

  1.  Chatbots in Retailing – a Fact or a Fad?
  2.  Retail and the Internet of Things

Images and video

  1. Pixabay
  2. GIGYA,
  3. Evergage

Success in the Digital Age Requires Extraordinary Retail Leaders

The carnage intensified last year. “There were 15 shop closures a day across the UK in the first half of 2016 and the number of new openings has fallen to the lowest level for five years” writes Graham Ruddick, senior business reporter at The Guardian. And the carnage is continuing this year. “Brick and mortar stores are suffering due to competition from online sales and the closures just keep coming” according to Daniel Kline in MotleyFool. What is happening? Where are the retail leaders?

The advent of eCommerce, mobile shopping, interactive social media and marketing automation caused a ‘digital disruption’ in the retail industry. However, many established retail brands failed to adapt to the fast changing behaviors and high demands of their consumers. The digital age has come for them and moved on. As a result, retail leaders that couldn’t cope with the disruption have capitulated. But what type of retail leaders does the sector need during these turbulent times?

Retail leaders in the digital age

Leadership is a process whereby an individual influences a group of individuals to achieve a common goal 1. But how can retailers lead and influence their staff during this digital disruption? Maybe it’s time to challenge retail leadership says Ken Silay, Partner, Innovator’s Equation. Ken suggests writing for Innovative Retail Technologies that “The truth is retail is run by old thinking and old metrics” and “difference between the old and new thinking in business creates a gap in retail leadership that will continue to get wider”.

Dr Ganesh Shermon, Managing Partner for “R for C Talent Management Solutions” (North America) recently highlighted the challenges retailers face. He said that retailers are confronted with dramatic managerial changes, given the convergence of the human mind, (Intellect), behavioral psychology (Cognitive), smart machines, and deep learning science and knowledge (Neural networks) as the basis for management actions. That’s really a mouth full!

The truth is that the old way of leading a retail business does not work anymore. But what should retailers do to get their businesses on par with the digital age?

Strategies that leaders should consider in the Digital Age

Prof Kamal Kishor Jain, Head of HR and Business Psychology Department at IIM Indore, recently said digital age leaders need to acknowledge the limits of their expertise. Additionally, the leaders should build a reliable network of knowledgeable experts to help them navigate through their choices. Prof Jain suggests the following:

  • Speed – is the most distinguishing characteristic of the digital age. No matter how fast you are moving to transform your business; the depressing reality is that you still probably aren’t moving fast enough.
  • Knowledge creation – we need to become more right brained to compete and survive. Leadership is not a noun, it’s a verb. The real charismatic leader is one who disseminates knowledge into his subordinates.
  • Primarily leadership qualities – leaders should be daring, caring and sharing. ‘Failing fast’ and ‘falling forward’ are critical precursors to success in the digital era. Such disruptive change requires leaders to be caring about people are affected by such changes. It is only by caring that a leader can elicit support from followers.

The Global Center for Digital Business Transformation, an initiative of IMD business school and Cisco, and HR consultancy metaBeratung, have identified four competencies (HAVE) that business leaders need in order to excel in the era of digital disruption:

  • Humble – in an age of rapid change, knowing what you don’t know can be as valuable in a business context as knowing what you do. Therefore, digital leaders need a measure of humility, and a willingness to seek diverse inputs both from within and outside their organisations.
  • Adaptable – in a complex and changing environment, an ability to adapt is critical. The global reach of digital technologies has opened up new frontiers for organizations, shrinking once insurmountable continental divides and erasing traditional boundaries between territories. Dealing with the cultural and business impacts of this requires adaptability.
  • Visionary – in times of profound disruption, clear-eyed and rational direction finding is needed. Therefore a clear vision, even in the absence of detailed plans, is a core competency for digital leaders.
  • Engaged – painting visions for the future, successfully communicating these visions and being adaptable enough to change them, requires constant engagement with stakeholders. This broad-based desire to explore, discover, learn and discuss with others is as much a mind-set, as it is a definable set of business-focused activities or behaviors.

How can leaders change their retail business to digital?

It is impossible for retailers to change overnight from doing their things the old way to embracing the digital economy. Indeed, the process must get started and in quick time. Therefore, the ability to digitally re-imagine the business is determined in large part by a clear digital strategy supported by leaders who foster a culture able to change and invent the new 3.  Kane et al proposed the following strategies for retailers to use getting their business to the digital age:

  1. Create a strategy that transforms – when developing a more advanced digital strategy; the best approach may be to turn the traditional strategy development process on its head.
  2. Get the right people for job – just as important as developing talent is reducing the risk of losing it.
  3. Take risks – to boost risk taking in their companies, executives need to change their mind-sets.
  4. Sparking new ideas – many new ideas arise through collaborative efforts among people of different backgrounds.
  5. Telling the story – storytelling is becoming a popular means of gaining employee buy-in and organizational traction for digital transformation.

After all, it will probably require an extraordinary retail leaders to facilitate the move of their businesses from analogue to digital.

Watch this video: “A successful leader must be a global leader, says Marshall Goldsmith.”

Concluding

“If something isn’t working within your organization, challenge it. And if your leadership steps on your challenge, find someone to work for who isn’t afraid of a challenge. An organization that doesn’t try to define their future isn’t moving forward anyway” advises Ken Silay. Therefore, if you are one of the retail leaders raising your hand to lead your company into the digital age, make sure that you have the right qualities.

Read also:

Crossing the digital threshold – adding Clicks to Bricks for sustainable retail outcomes

Notes

1 Saint, S., Kowalski, C.P., Banaszak-Holl, J., Forman, J., Damschroder, L. and Krein, S.L. 2010. The importance of leadership in preventing healthcare-associated infection: results of a multisite qualitative study, Infection Control & Hospital Epidemiology, 31(09):901-907.

2 Shermon, G, 2017. Bringing disruptions into the workplace, Human Capital, p44. March, 2017.

3 Kane, G.C., Palmer, D., Phillips, A.N., Kiron, D. and Buckley, N., 2015. Strategy, not technology, drives digital transformation. MIT Sloan Management Review and Deloitte University Press, 14.

Image and video

wikimedia.org; Big Think

 

Word of Mouth Marketing for Better or for Worse

Word of mouth (WOM) is one of the most important communication channels that customers use to discuss retail shops and brands. WOM is informal, frequent and important and the outcomes can be beneficial or disastrous for a brand or a retailer.

Word of mouth has a huge impact on consumer behaviour. Social talk generates over 3.3 billion brand impressions each day and shapes everything from the movies consumers watch to the websites they visit 1. A study by Bughin, Doogan, and Vetvik (2010) 2 suggest that “word of mouth is the primary factor behind 20 to 50% of all purchasing decisions and generates more than twice the sales of paid advertising”.

However, negative WOM can quickly cause havoc with a brand or a retail shop. The advent of the internet, together with social media platforms has changed how peers communicate their experience with brands and shops.  A single bad experience shared by a customer on a social media website, may hurt your brand or business badly.

For retailers to use WOM strategically as a marketing tool, they must first understand why customers discuss your business. Why do they praise or criticize your brand?

Customer conversations aka ‘word of mouth’

Customers love to talk about their shopping experiences because they need to share and receive information, have social interactions, or express emotions 3.

Lu-Shien, living in San Francisco, USA had this to say on the Yelp review site about a new restaurant in their neighborhood: “The vibe, the serving ware, the food. All of it is presented in a modern fresh bistro style. A simple menu with a few headliner items – just the way I like it.” Maybe Lu-Shien has said enough to fill the restaurant to capacity because WOM is perceived by consumers as more credible than, and free from the bias of, firm-to –consumer communications 4.

Sometimes, however, customer reviews aren’t that positive. Said Ali D, from New Orleans, USA also on Yelp about a clothing store “You know, I’ve bought and sold here a few times over the course of a few years, but today’s experience means I will not be going back. I had questions but could not – really – get the attention of the sales girls, because they were having the ultimate bitchy conversation at full volume in front of several customers.”

Nevertheless, according to Ken Davenport writing in The Producers Perspective, only 8% of brand-related word of mouth conversations are “mostly negative”. Hence, the average online review is 4.3 stars out of 5. But what about the customers saying nothing online, and just walk away from your business? Ken suggests that 9 in 10 word of mouth conversations about brands are offline.

Therefore, there is no respite for retailers keeping their customers happy.

Word of mouth marketing – the retailer’s response

Retailers need to take word of mouth marketing seriously, especially now that is taking place in the cyber space. Silverman (2010) 5 identified the following properties that make word of mouth a powerful marketing tool:

  • Credibility – its independence makes it the most powerful, influential, and persuasive force in the marketplace;
  • It is an experience-delivery mechanism;
  • It becomes part of the product itself;
  • WOM is custom-tailored, more relevant, and complete;
  • It is self-generating, self-breeding, and grows exponentially, sometimes explosively;
  • Because it is virtually unlimited, word of mouth happens fast and big;
  • WOM can originate from a single source, or a relatively small number of sources;
  • It is extremely dependent on the nature of the source;
  • Word of mouth can be very inexpensive to stimulate, amplify, and sustain.

If word of mouth has such a big influence on image and profits, then surely retailers should make it part of the marketing strategy.

Silverman suggests taking advantage of these properties, retailers should look at:

  • What is the content of the word of mouth?
  • Who is originating the word of mouth (its sources)?
  • Who is receiving it?
  • What are the channels through which it travels?

“When we understand the answers to these questions, we’ll be ready to look at how to trigger a chain reaction leading to an explosion: how to get it started, how to amplify it, how to channel it, and how to cause it to go in our direction”, proposes Silverman.

Have a look at this video from The Word of Mouth Marketing Association:

Concluding

Getting people to talk about your brand and shop is the way to go. The most important rule of WOM marketing is to “be interesting” and that “nobody talks about boring companies, boring products, or boring ads.” 6 But, word of mouth also has a sharp end. So, retailers need to make WOM work, like a marriage, ‘for better or for worse’ (preferably for better).

Notes:

1 Berger, J. 2014. Word of mouth and interpersonal communication: A review and directions for future research. Journal of Consumer Psychology, 24(4):586-607.

2 Bughin, J., Doogan, J. and Vetvik, O.J. 2010. A new way to measure word-of-mouth marketing. McKinsey Quarterly, 2:113-116.

3 Lovett, Mitchell J., Renana Peres, and Linli Xu. 2016. There’s No Free Lunch Conversation: The Effect of Brand Advertising on Word of Mouth. Marketing Science Institute.

4 Thomas, V.L. and Saenger, C.  2017. Promoting or protecting my brand: The identity-expression and fear-of-imitation conflict, Journal of Consumer Marketing, 34(1).

5 Silverman, G. 2011. Secrets of word-of-mouth marketing: how to trigger exponential sales through runaway word of mouth, AMACOM Div American Mgmt Assn.

6 Berger, J. and Schwartz, E.M. 2011. What drives immediate and ongoing word of mouth? Journal of Marketing Research, 48(5):869-880.

Image and video:

  1. Pixabay.com
  2. WOMMA