Author Archives: Douw G Steyn

Douw G Steyn

About Douw G Steyn

Always a student with a passion for digital business and -marketing...

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

Chatbots in Retailing – a Fact or a Fad?

Retailers are frequently yelled at by frustrated customers, or, if things go well, they are commended. That’s part of the emotional exchange that comes with a retailer’s job description. However, chatbots may change all of that.

A chatbot is a computer program which conducts a conversation via auditory or textual methods. In other words, sales assistants in a number of retail businesses are now robots. To this end, bots can help retailers in many other ways.

“Chabots are seen as easy and fun ways to help customers achieve an outcome. You’ll encounter them on web sites, social media and even on your smartphone. Say hello to Siri, Allo and Alexa, to name a few”, writes Christine Crandell recently in Forbes.

Siri, Allo and Alexa are computer characters which, through natural language-style dialogs with humans, perform various tasks, such as answering questions, helping them to navigate websites. “They can either look like a human being, or a digital avatar, an animal, alien or may have an image that does not look like a living creature at all” according to ChatBots.org

Apart from retailers not having to face angry customers anymore, the bots allow Bricks and Clicks retailers to catch up on lost sleep. A chatbot is a handy aid for retailers with online customers when their bed time arrives.  “We’d all like to be all things to all customers, but even the most dogged marketer has to sleep sometime”, according to TargetMarketing magazine. The fiction of chatbots has now became a reality as many retailers has bought into the technology.

How chatbots can be used by retailers

Chatbots can be used in many ways by retailers. Nicki Baird (Forbes) suggests that chatbots can do everything – from interacting with customers about new products, to helping them to figure out the trading hours of your shop. Furthermore, leverage chatbots the ubiquity of messaging apps and allows retailers to conduct one-to-one conversations with customers in real-time. Besides, retailers have the opportunity to make money with chatbots.

Ross Simmonds (Crate, Hustle and Grind), identified seven ways retailers can make money with bots:

  1. Bots as a Services (BaaS) – help people and teams to be more productive. They can manage tasks or tackle communications challenges – by replicating business models already in use;
  2. Bots plus sponsored and native content – native or sponsored content is a model in which brands pay to have their content distributed by media companies directly into their channels;
  3. Bot leveraged affiliate marketing – for example: retailers can develop a bot that offers tips and tricks on how to stay healthy and use affiliate links to send people to fitness products that have affiliate links associated with them;
  4. Bots for research – there are bots that you can pay to do the research for you.
  5. Bots for lead generation – may act as a lead generator with an initial focus on content. Chatbots designed to deliver insights and information to users who are looking for advice or information can be lined up with products that the retailer offers;
  6. Pure retail sales bots – the user will make the purchase directly through a chat with the bot and it will act similar to a transaction from a typical website;
  7. Cost per conversation/task – as bots become more sophisticated, people may be willing to pay to have conversations with the bots that can help them with various challenges in life.

“Thanks to big data, artificial intelligence (AI) and predictive analytics, as well as the proliferation of messaging apps, retailers finally have the tools (including chatbots) to get the right messages to their customers”, suggests Craig Alberino in TotalRetail. However, the chatbot hype is not favored by everyone…

Consumers that use  chatbots can complete a purchase in a minute or two. Have a look at the video from Kore:

The future use of chatbots

Although the use of chatbots is getting much attention nowadays, not everyone is excited about it. Jon Evens writing last year in The Walrus reminded us of the “Eliza effect: “Humans unconsciously assume that software which communicates conversationally has much more intelligence and sophistication than is actually present.

Inevitably, the software eventually fails to match that assumption, disappointing and frustrating the user who unconsciously expected more.” Consequently, your frustrated customers may want to communicate (again) in person with you. Because the computer does not understands… Above all, what is good and bad about chatbots? Quora.com responded as follows:

The Good Things about Chatbots The Bad Things about Chatbots
1.       Chatbots are a good alternative for mobile apps 1.       Chatbots have a high error rate
2.       With bots, nothing new needs to be learnt 2.       Chatbots don’t put people first
3.       Bots are capable of providing a great user experience 3.       Bots are limited in their capabilities
4.       Chatbots as the factotum for all business needs 4.       Chatbots aren’t as intelligent as humans

Concluding

In summary, are chatbots the “silver bullets” that retailers can use to compete in a digitized retail environment? Or will it be another fad with demanding customers not getting assisted properly? I suppose we have to wait and see. However, Leo Sun (fool.com) recently asked: “Were the social network’s chatbot ambitions ahead of their time?”

Importantly, this is after Facebook is reportedly scaling back its chatbot efforts on Messenger after the programs failed to fulfill 70% of users’ requests. Consequently those requests couldn’t be handled without human agents, and bots built by outside developers “had issues” because the “technology to understand human requests wasn’t developed enough.”

Finally, perhaps Dale 1, (2016) sobering comment can be noted by all: “If we want to have better conversations with machines, we stand to benefit from having better conversations among ourselves.”

Additional reading:

  1. Artificial Intelligence – Digital Outcomes or Digital Disruptions for Retailers?

Note:

1 Dale, R. 2016. The return of the chatbots. Natural Language Engineering, 22(5):811-817.

Image and video:

  1. Pixabay
  2. Kore

How successful are Retailers in the Omnichannel?

Bricks and Clicks (B&C) retailing is with us for more than two decades. The adding of the online channel to their physical business has allowed retailers to survive and grow even during tough trading conditions.  However, a recent report by Andria Cheng in eMarketer suggests that B&C retailers are struggling to the get their omnichannel strategies to work.

Andria refers to a 2016 survey of about 350 retail and consumer goods CEOs in countries such as the US and China. The survey was conducted by PricewaterhouseCoopers (PwC) for JDA, a supply chain software provider for retailers from Ann Taylor parent company Ann Inc. to grocer Albertsons. Several worrying aspects about the use of the omnichannel in the retail industry came to the fore with this survey.

How effective are Bricks and Clicks retailers using the omnichannel?

The reasons for retailers to become Bricks and Clicks were discussed previously by this author: “Crossing the digital threshold – adding Clicks to Bricks for sustainable retail outcomes”.  However, the implementation of an omnichannel retail strategy seems not that straightforward.

Results from the survey commissioned by PwC (reported by eMarketer) indicated the following:

  • More than half of retailers haven’t started implementing, are struggling to define or don’t even have plans to develop a “digital transformation strategy”.
  • Only 10% of CEOs say they are able to make a profit while fulfilling omnichannel demand because of delivery and other supply chain complexities.
  • 75% of retail executives said their online operating costs as a percentage of sales have seen either “significant” or “some” increase in the past 12 months. One key driver of that increase: 74% of retailers said customer returns are hurting profit to “a great extent” or “to some extent.”
  • CEOs, especially those in the soft-lines (like apparel) and hard goods (like appliances) sectors, said that their greatest concern is inventory exhaustion, or “out of stock.” Out of stock is a big problem hurting retailers’ ability to convert sales when consumers visit stores.
  • More than half (51%) of respondents said they offer or plan to offer pick up in store in the next 12 months.
  • With the high costs of free shipping and other delivery offers, 33% of survey respondents said they would offer same-day delivery in 2017, down from 44% last year. Meanwhile, a third of respondents said they plan to increase the minimum order value. The percentage of retailers offering specific delivery time slots also has declined.
  • Almost three-fifths of retailers surveyed said they have no plans to reduce their store investment and said their online sales are “additional” sales that aren’t hurting their physical store sales.
  • Automation and internet of things rank lower on their investment list for now, even though these are the areas that are gaining ground as retailers consider them “true game changers,” according to the survey.

Digital technology such as artificial intelligence (AI) and self-service technology (SST) are for long now available for retailers to use.

How to add digital technology seamlessly to your retail business

Digital communication technology is part of the retail setup and is here to stay.  However, retailers are reluctant to adopt the technology for a number of reasons. Retailers should consider the following when deciding to add digital:

  1. Visualize what your business will achieve by adding digital and how your customers will respond to it;
  2. Develop a business plan to integrate the digital with the physical operations of your business;
  3. The integration will cost you money – find out how much and where the funds will come from;
  4. Before your spend a cent on it – discuss and argue the process with all the stakeholders – allow everyone to have their say;
  5. If possible, do a quick survey with your customers to get their opinion on the matter;
  6. Once everyone has agreed with the integration, develop and implement an integration strategy;
  7. Measure the results and make corrections as the process moves forward;
  8. If you lose money continuously, start again or discard the process.

Most of the reactions of the CEOs coming from the PwC survey can probably be because they didn’t plan properly. To be honest, failing to plan is planning to fail.

A strategic planning session

Concluding

The digitization of retail is as revolutionary as it gets. Not only that, it is disruptive. Integrating the digital with the physical is no more ‘a nice to have’. Retailers ignoring the revolution facilitated by digital communication technology, and driven by their customers 1, will fail. Strategic planning may help retailers to do the integration orderly and seamlessly. Only then retailers can enjoy success in the omni retail channel.

Note:

1 Picot-Coupey, K., Huré, E. and Piveteau, L. 2016. Channel design to enrich customers’ shopping experiences: Synchronizing clicks with bricks in an omni-channel perspective–the Direct Optic case. International Journal of Retail & Distribution Management, 44(3):336-368.

Further reading

  1. How do Customers Respond to Self-Service Technology in Retail Shops?
  2. Artificial Intelligence – Digital Outcomes or Digital Disruptions for Retailers?
  3. Retail and the Internet of Things

Images:

  1. Flickr.com
  2. Wikimedia