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35 posts categorized "Digital Path to Purchase"

November 04, 2013

Is There a Difference Between Segmentation and Personalization?

Judy Bayer, Director of Strategic Analytics for Teradata International, and Marie Taillard, a professor of marketing and Director of the Creativity Marketing Centre at the ESCP Europe Business School in London, wrote a very interesting article in which they stated that they no longer believe in segmentation. ["A New Framework for Customer Segmentation," HBR Blog Network, 12 June 2013] Obviously, the headline for their article (which they may not have personally selected) undercuts that statement; nevertheless, their arguments are both interesting and persuasive. They believe that segmentation (like dividing consumers by gender, ethnicity, geography, religion, etc.) promotes a "rigid methodology that carves out the market" in unnatural ways. They accept the notion that you "can't be all things to all people," and they believe that rigid segmentation defies that concept. They continue:

Drill and board clear"To resolve these contradictions, we had begun pleading with students and clients to look for 'jobs to be done.' The approach echoes Ted Levitt’s famous comment about selling ¼ inch holes rather than ¼ inch electric drills, and advocates a mindset shift away from selling products to 'doing jobs' that solve customers’ problems. In Clay Christensen’s words, customers 'hire' products or other solutions because they have a specific job to fulfil, not because they belong to a certain segment."

To continue reading, click on the link to the new Enterra Insights site.

November 01, 2013

SAP Discusses the Future of Business, Part 2

In Part 1 of this two-part series, I indicated that I divided the facts presented in an interesting SAP slideshow entitled "99 Facts on the Future of Business" into thirteen separate categories. In that post, I discussed the first five categories: Big Data; Business Leadership; Customer Service/Experience; and Education. In this post, I'll discuss the remaining eight categories, namely: Emerging Markets; Innovate or Perish; the Internet of Things; Risk Management; the Supply Chain; Targeted Marketing; Urban Growth; and a Miscellaneous category. SAP introduced the presentation by explaining:

"Business Innovation is the key ingredient for growth in the future of business. Changes in technology, new customer expectations, a re-defined contract between employees and employers, strained resources, and business and social networks are requiring businesses to become insight-driven businesses. In this presentation, we have gathered 99 facts that represent the changes taking place in the world today. Each fact represents a key insight and suggests where we need to focus and change to become viable, sustainable and growing future businesses."

As noted in Part 1, I placed these facts into thirteen categories to help paint a more coherent picture of the future as seen by the analysts at SAP. In the first post, I included the first five categories: Big Data; Business Leadership; Customer Service/Experience; and Education. In this post, I'll discuss the remaining eight categories, namely: Emerging Markets; Innovate or Perish; the Internet of Things; Risk Management; the Supply Chain; Targeted Marketing; Urban Growth; and a Miscellaneous category.

99 Facts

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October 31, 2013

SAP Discusses the Future of Business, Part 1

In an interesting slideshow entitled "99 Facts on the Future of Business," the folks at SAP paint a picture of the future to which businesses should pay attention. The company introduces the presentation by explaining: "Business Innovation is the key ingredient for growth in the future of business. Changes in technology, new customer expectations, a re-defined contract between employees and employers, strained resources, and business and social networks are requiring businesses to become insight-driven businesses. In this presentation, we have gathered 99 facts that represent the changes taking place in the world today. Each fact represents a key insight and suggests where we need to focus and change to become viable, sustainable and growing future businesses." I've placed these facts into thirteen categories to help paint a more coherent picture of the future as seen by the analysts at SAP. In this post, I'll include the first five categories in this post. They are: Big Data; Business Leadership; Customer Service/Experience; and Education. The remaining eight categories will be provided in the next post.

99 Facts

To continue reading this post, click on this link to the new Enterra Insights site.

October 29, 2013

Order Fulfillment in an Omnichannel Environment

A year ago, Dan Gilmore, Editor in Chief of Supply Chain Digest, wrote, "In case you haven't noticed, e-commerce is growing at a breakneck pace, putting a near panic in traditional brick and mortar retailers, and of course driving many of them to invest heavily in their own dot com sites and business units – even if most of them are losing money at it for now." ["Multi-Channel Commerce and the Supply Chain," 9 November 2012] As we approach what hopefully will be a good holiday season for retailers, order fulfillment is rising quickly to the top of concerns for many retailers — especially omnichannel order fulfillment. I previously addressed this topic in a post entitled The Impact of Omnichannel Operations on the Supply Chain, but with the holiday season upon us, I thought it might be a good time to discuss it some more. Gilmore continues:

Omnichannel Fulfillment"E-commerce ... is now part of the whole 'multi-channel commerce' phenomenon. Multiple paths of purchase and delivery. Buy anywhere, pick up anywhere. More sales and delivery channels are coming too: your television…vending machines…what else? A senior supply chain executive from one of the country's largest retailers told me at a dinner ... that 'multi-channel is going to create big winners and losers' in the retail sector, depending on the decisions and investments each merchant makes. One of the weird things here is how technology driven this all is. ... Of course, this is not only a retailer phenomenon. Manufacturers and wholesalers of all sorts are dealing with many of the same e-commerce/multi-channel supply chain challenges and questions. How aggressive do we go? Will we tick off our channels? Do we insource or outsource e-fulfillment operations? If we insource it, do we use an existing DC, or a separate fulfillment operation? Etc."

Gilmore's questions point out why omnichannel operations are so difficult to get right. He goes on to discuss three of the biggest questions involved in omnichannel operations: How do you best fulfill orders? How do you manage shipping costs? And, how do you manage inventories.

Omnichannel Order Fulfillment

Jason Denmon, a supply chain management consultant, writes, "Fulfillment can get complex as customers expect a seamless experience across all channels. One of the key decision points is whether to manage fulfillment of each channel in shared or separate distribution centers." ["Aligning fulfillment operations with a changing channel mix," Modern Materials Handling, 29 June 2012] Jim Barnes of enVista told Gilmore:

"We like the idea of combining the dot com and retail distribution operation if and only if the retailer has the ability to consolidate reserve inventory but logically keep it separated using a Distributed Order Management (DOM) or what I like to refer as enterprise commerce flow (ECF). In principle we like them combined, but many retailers don't know how to do it, therefore you see a lot of physical or virtual fences separating dot com from retail order distribution. ... The bigger question is regarding service and this is why there is a strong argument against combining retail and B2C. I believe to keep up with Amazon retailers are going to be required to establish more satellite or spoke locations in larger demographic areas that allow the retailers to service customer same day, at worst case next day."

Denmon agrees that "operating out of a shared Distribution Center is most effective when the channels or segments have common order profiles (item type and quantity) that share the same inventory." But, as Barnes notes, that isn't always the case. As a result, Denmon claims, "Fulfillment with each channel in its own distribution center makes sense when the channels have unique requirements." Denmon concludes:

"Choosing what type of fulfillment operation is best for your company starts with a holistic view across the business, channels and segments. Getting stakeholder alignment across channels is a critical first step. Start by asking these questions:

• Where are the synergies and differences between channels?
• Are you struggling to respond quickly to market demand? Or dealing with excessive mark-downs and out of stocks as a result of allocation problems?
• How is the performance of each channel measured?
• What are the tipping points where you are willing to sacrifice the optimization of one channel for the overall benefit of the organization? How wide is your lens?
• What are the impacts of changing business requirements in your channel mix?
• Do you have true business/stakeholder alignment between channels with an overarching strategy that drives one consensus plan?

"With an understanding of the full impact of multiple channels on your fulfillment operation, you can look for synergies and ways to deliver the seamless experience your customers expect."

Shipping Costs

A lot more retailers are offering free shipping on orders. That makes getting a handle on shipping costs particularly critical. As Gilmore writes, "Discounted/free shipping is sapping the profits out of e-commerce." But, as Bob Trebilcock, Executive Editor of Modern Materials Handling, notes, retailers continue to offer these shipping options because customers expect them. He writes, "Companies] are now operating in a world where cheap or free shipping dominates. Even wholesale businesses are having to guarantee next-day delivery to meet the expectations of business customers that are influenced by consumer expectations." ["Four trends driving automation," 22 May 2012] Jones Lang LaSalle, a global real estate services firm, asserts that the cost of new warehouses designed for omnichannel operations is significantly higher than the cost of traditional warehouses and distribution centers. "Traditional warehouses that support stores require less investment and machinery and fewer staff," they write. "The new e-commerce distribution centers, which involves direct order fulfillment, can cost three times as much and involve three times as many employees." ["Growing E-Commerce Forces Transformation in Distribution Networks, Report Finds," SupplyChainBrain, 25 May 2012] All of that new cost must be absorbed or passed on. Last December, Supply Chain Digest published the following graphic to show "what a number of leading retailers and service providers are doing relative to multi-channel fulfillment strategies."

Multi_Channel_Fulfillment_Strategies

As you can see, with so many fulfillment strategies in play, keeping shipping costs in check is no easy matter.

Inventory Management

Gilmore doesn't believe than anyone has been able to master omnichannel inventory management, but, he writes, "Some of the Distributed Order Management solutions are getting close." Kris Bjorson, head of Jones Lang LaSalle's Retail/e-commerce Distribution Group, told the SupplyChainBrain staff, "Traditional retailers must support the delivery of merchandise and manage both in-store and online inventories and shipments at a frenetic pace against the backdrop of intense competition from pure e-commerce rivals." Stephen Gerrard, Vice President of Marketing & Strategic Planning at Voxware, Inc., notes, "Warehouses are now on the front line of customer satisfaction, but enterprises are still downsizing the supply chain as much as possible. Logistics has to do more with less." ["Warehouses: The New Front Line of Online Customer Satisfaction," Supply Chain Digest, 10 May 2012] It is ironic that at a time when the supply chain is playing an increasingly important role that many executives still only see it as an area to cut costs rather than as an area that will differentiate them from their competitors. Supply chain professionals are fond of saying: The supply chain doesn't support the business the supply chain is the business.

Supply chain analyst Bob Ferrari writes, "Many in the industry believe that there is no single formula for success in this new evolving multi-channel commerce world and each retailer will have to continue to 'tune-in' to customer needs and requirements and provide appropriate, differentiated capabilities that can best balance all physical and online assets." ["Bricks and Clicks - The New Business Model and Supply Chain Capability for Retail Industry," Supply Chain Management, 28 March 2012] Bill McBeath of ChainLink Research concludes, "The rising emphasis on omni-channel has reached a pitched crescendo this year, with no signs of abating. One of the reasons it is 'taking so long' is there are so many dimensions to really doing omni-channel well. It touches everything. Even though e-commerce has been around for well over a decade, we are really just getting started on the journey of putting in place the various dimensions of the foundation for wide spread true omni-channel integration. In reality there are currently centers of gravity—unifying the front-end (the shopper experience) vs. unifying the back-end (fulfillment). For now that is probably the enterprise’s best approach, since, especially the front-end mobile game is just discovering itself." ["Reading the Pulse of Retail at NRF 2013: Omni-Channel Still the Big Thing," 22 January 2013]

October 28, 2013

The Future of Retailing is All About Personalization

"The individualization of customer relation," writes Bertrand Duperrin, Consulting Director at Nextmodernity, "is the new concern of marketing departments." ["The individualization of customer relationship: why and how?" Bertrand Duperrin's Notepad, 24 June 2013] Tresilian Segal, head of Adobe's Digital Marketing across Northern Europe, agrees that "a commitment to personalisation seems a relative no-brainer." However, she asks, "Is the case for personalisation is well understood?" ["Maximise your personalisation process with these 8 tips," Fourth Source, 14 June 2013] A February 2013 survey conducted by inContact helps make the case. According to the survey, "Consumers are making less of their buying decisions based on brand loyalty, but rather on which companies can match their desired experience." ["Consumers Value Personalized Service Over Brand Loyalty," Progressive Grocer, 25 March 2013] The article continues:

Personalisation"According to the findings, 56 percent of U.S. adults would be at least somewhat likely to switch to another brand or company if it offered more options and channels than their current provider. Additionally, younger consumers aged 18 to 44 (64 percent) indicated this was true significantly more than their counterparts aged 55 or older (45 percent), showing a major shift among the younger consumer base in terms of decision making. Based on the findings, the younger generation of consumers — who are used to an influx of information and a variety of choices — showed a desire for options that allow for a tailored experience in their interaction with brands. To that end, younger consumers demand more options and availability to handle these interactions, while companies are at risk of losing customers if they neglect to accommodate preferences or adopt evolving channels of communication in providing service. 'The survey results are clear: consumers expect more choices and more ways to interact with business today,' said Paul Jarman, CEO of inContact. 'The smartest companies are quickly adapting to changing consumer behaviors and needs, extending customer service beyond just phone and email to mobile apps, text messaging, chat and social media.' Survey respondents showed overall that they not only prefer, but expect, companies to offer options for a variety of channels and devices."

In previous posts, I have discussed the fact that consumers are increasingly looking for an "experience" as they shop (be it online or in store). Lauren Hertler insists, "At the end of the day, creating an optimal experience for a customer is determined by the ability to deliver personalized communications." ["Driving Performance through Personalization," ExactTarget Blog, 30 September 2013] Although most pundits concern themselves with online experiences associated with multi-channel retailing, Gavin O'Malley believes that personalization is just as important when a consumer is in a brick-and-mortar store. "Consumers are craving more personalized, less siloed shopping experiences," he writes, "and [they] could be convinced to stop 'showrooming' and actually make in-store purchases." ["Consumers Desperate For More Personalization During Purchase," Online Media Daily, 26 September 2013] The one thing that all of these analysts agree upon is that there is a case (they believe a strong case) to be made for understanding and engaging in retail personalization.

Natasha Hritzuk, senior director of consumer insights at Microsoft, told O'Malley, “Consumers are absolutely desperate for more personalization during their purchase journey. The idea of personalization isn't new, but [the industry as a whole] is still not delivering on its promise." O'Malley continues:

"The retail industry is also failing to appreciate consumers' desire for a more seamless shopping experience, according to Hritzuk. Consumers don't want to encounter gaps between a brand's online, mobile, and in-store presence, she said. 'They want to operate seamlessly.' Along with breaking down the barriers between digital and physical-store experiences, retailers can also use ecommerce learnings to increase in-store purchases, according to Hritzuk. 'We need to understand why people showroom,' she said, referring to the increasingly popular consumer practice of testing products in-store, but preferring to buy them online. For one, 'It’s easier to buy [products] online,' said Hritzuk. 'You can [buy something] online in 3 to 4 minutes compared to the 20 minutes it can take to buy [a product] in stores,' she said. 'We need to take that friction free purchase transaction, and [implement] it in stores.'"

Eric Tobias, Vice President of Web Products at ExactTarget, told Hertler that "personalization can be achieved using four main building blocks." They are:

  • Collection and identification of data
  • Data aggregation
  • Taking action on the data
  • Providing continuity to the customer by nurturing the 1-1 relationship

Tobias continued, "The primary goal, of course, is to deliver the right experience at the right time using the right channel." He then offered four tips "to help all marketers get more personal":

  1. "Let data be your guide–no more guesswork!
  2. "Inject personalized content into transactional messages. Transactional messages are a key component to creating a relationship with your customers–don’t overlook them. Surprisingly, in a study of the top retailers, 79% had no email personalization after an online purchase.
  3. "Capture user behavior during/after the shopping process. Listen to what your customers are doing on your site to help drive recommendations or post-purchase remarketing opportunities.
  4. "Make your data actionable. It's been shown that almost half of all people will completely abandon a brand's communications after only two un-personalized attempts."

Segal agrees that good personalization begins with the data. She explains, "Let the data do the hard work and decide what the most relevant content and offers are to serve the customer at the detailed level." She also agrees that content should be personalized. "Get rid of 'spray and pray' emails," she writes. She also agrees that gathering and analyzing data is essential to capture and analyze the customer's digital journey. "Identifying key points along your customer's virtual path is important," she writes, "as it allows you to decipher where conversion is highest." Nevertheless, she cautions, "While per­son­al­isa­tion may often rely heav­ily on data and analytics, it is important not to completely surrender all con­trol of customer experience management to machines. There is still a role for behavioural tar­get­ing, as long as you test against it regularly. A blend of data-led and intuitive marketing often works the best."

"'Big data' promises to be the solution to getting a 360 degree view of your customer and make more intelligent personalization decisions," writes Linda Bustos. ["Using Big Data for Big Personalization," GetElastic, 11 July 2013] Bustos' article included the following "infographic from Monetate [that] covers the big data problem, the segmentation opportunity, and 3 keys for data and segmentation success."

Big-data-personalization-infographic

Alicia Fiorletta concludes, "As shoppers continue to leverage digital tools and channels to research, browse and buy products, they also are beginning to demand more relevant products and offers. With these heightened expectations, personalization is becoming an integral component of retailers' cross-channel marketing strategies." ["Retailers Across Verticals Personalize With Digital Solutions," Retail TouchPoints, 6 May 2013] Duperrin adds, "When business treat groups and not individuals, [i.e.,] trying to please everyone at the same time, [that strategy] often leads to pleas[ing] no one since the lowest common denominator is never satisfying for each person taken individually." The requirement for retail channels to become even more personalized is likely to continue. I agree with Duperrin who insists that the technology used to get know customers better must be complemented by knowledgeable and caring people who can really put the finishing touches on personalization.

October 24, 2013

Avoid Competitive Obsolescence Using Technology

Michael Fitzgerald, Nina Kruschwitz, Didier Bonnet, and Michael Welch, report, "A study by MIT Sloan Management Review and Capgemini Consulting finds that companies now face a digital imperative: adopt new technologies effectively or face competitive obsolescence." ["Embracing Digital Technology," MIT Sloan Management Review, October 2013] The term "digital technology" is pretty broad and, by itself, is probably not very useful. The authors define it as "social media, mobile, analytics or embedded devices" that "enable major business improvements (such as enhancing customer experience, streamlining operations or creating new business models)." The authors obviously believe that companies that fail to adopt these technologies and transform their operations will fail or, like old soldiers, just fade away. They report that the key findings from the survey are:

  • According to 78% of respondents, achieving digital transformation will become critical to their organizations within the next two years.

  • However, 63% said the pace of technology change in their organization is too slow.

  • The most frequently cited obstacle to digital transformation was “lack of urgency.”

  • Only 38% of respondents said that digital transformation was a permanent fixture on their CEO’s agenda.

  • Where CEOs have shared their vision for digital transformation, 93% of employees feel that it is the right thing for the organization. But, a mere 36% of CEOs have shared such a vision.

According to previous research, "digital transformation will require companies to draw from a core set of four digital capabilities: a unified digital platform; solution delivery; analytics capabilities; and business and IT integration." ["The Digital Capabilities Your Company Needs," by George Westerman, Didier Bonnet, and Andrew McAfee, MIT Sloan Management Review, 29 October 2012] Despite the fact that so many executives believe that achieving digital transformation for their companies is critical, the authors report that "many companies struggle to gain transformational effects from new digital technologies." This is problematic since the authors conclude: "Almost no organization is sheltered from the competitive disruption wrought by the widespread adoption of digital technologies."

Transformation
The challenge, of course, is that every business is unique in some way. That means that no single path to digital transformation is going to work for everyone. The path to digital transformation begins with understanding your business. The first case study that the authors present involves Starbucks. Although some coffee drinkers simply want to buy a cup of java on their way to work, many others want to sit and enjoy that cup of Joe. For consumers who want to enjoy their purchases on site, Starbucks offers "free Wi-Fi in Starbucks stores, along with a digital landing page with a variety of digital media choices, including free content from publications like The Economist." For those consumers who want to rush off to work (or elsewhere), Starbucks has managed to "cut 10 seconds from every card or mobile phone transaction, reducing time-in-line by 900,000 hours. Starbucks is adding mobile payment processing to its stores, and is processing 3 million mobile payments per week. Soon, customers will order directly from their mobile phones." Fitzgerald, Kruschwitz, Bonnet, and Welch continue:

"The world is going through a kind of digital transformation as everything — customers and equipment alike — becomes connected. The connected world creates a digital imperative for companies. They must succeed in creating transformation through technology, or they'll face destruction at the hands of their competitors that do."

There are likely going to be two networks at play: one that connects customers and the other that connects everything else. This second network is often referred to as the Internet of Things (IoT) or the Industrial Internet. To learn more about the IoT, read my posts entitled The Internet of Things Looks Like Big Business and Fellow Travelers: Big Data and the Internet of Things. Although the authors insist that undergoing a digital transformation is an imperative for companies, they don't pretend that such an effort will be easy. "Even in a connected world," they write, "it takes time, effort and willpower to get major transformative effects from new technology." The authors write with a sense of urgency on this subject. George Westerman, a research scientist at MIT's Center for Digital Business, told them, "The big thing is, technology change is happening so rapidly that every industry is being affected by this." The rapid pace of change is probably the main reason that companies are struggling to transform.

During the dot.com era, many companies were quick to purchase and employ IT systems that later proved unsustainable. Having been burnt in the past, they are hesitant to jump in again during a time of rapid change. Hesitancy, however, is not a winning strategy. The authors report that "previous research by Capgemini Consulting and MIT's Center for Digital Business found that companies that invest in important new technologies and manage them well are more profitable than their industry peers." The obvious answer to this conundrum is investing in technologies that are adaptable and easily updatable. This is much easier to do than in the past thanks to cloud computing and software-as-a-service offerings. The authors promise, "Business leaders who embrace the digital imperative will see boosts in their operations, customer relations and business models."

With the digital path to purchase becoming an increasingly important channel for commerce, it comes as no surprise that the study found that "customer experiences reflect the clearest impact of digital transformation. The survey found that improving customer relationships was the area where companies were having the most success with digital technology. Most prominent was improving the overall customer experience, followed closely by enhancing products and services in customer-friendly ways." To learn more about why enhancing customer experience is important read my post entitled Analytics 2.0: Big Data, Big Testing, and Big Experiences -- Part 2.

The authors admit that "there is no one factor that impedes digital transformation," but they do acknowledge that some companies "lack both the management temperament and relevant experience to know how to effectively drive transformation through technology." They conclude their article by offering "nine specific hurdles in the broad areas of leadership, institutional obstacles and execution that companies need to overcome to achieve digital transformation." They are:

  1. Lack of Urgency — "Complacency affects more companies than any other organizational barrier cited in our survey."

  2. The Vision Thing — "Digital transformation starts with a vision from top leadership."

  3. Picking a Direction — "Creating a road map towards digital transformation is challenging."

  4. Attitudes of Older Workers — "Responses to the survey suggest a deep-rooted perception that older people will have trouble reframing."

  5. Legacy Technology — "Problems arising from older systems are a legitimate issue."

  6. Innovation Fatigue — "For people of any age, there is also the possibility of technology fatigue."

  7. Corporate Politics — "Internal power centers, controlled by departments or individuals, can inhibit changes that dictate less power or different ways of working."

  8. Making a Case for Digital Transformation — "Only half of the companies surveyed said they create business cases for their digital initiatives."

  9. Incentives — "The companies that do best at digital transformation also do the best job of aligning incentives with digital transformation efforts."

If I were asked to prioritize those obstacles to transformation, lack of vision and legacy technologies would be high on my list followed closely by corporate politics. If you had any doubt about whether the industrial age is over and the information age has arrived, this survey should put your doubts to rest. If your company has yet to join the digital age in a meaningful way (i.e., aligned itself utilizing a unified digital platform), then it might just be a candidate for history's dustbin.

October 22, 2013

Get Personal with Your Customers

"In a climate where companies send mass, generic emails to entire mailing lists on a regular basis," writes Malcolm Duckett, "consumers have become deadened by indiscriminate email campaigns." Duckett believes that "a targeted approach is the only real way to avoid damaging your company's relationship with customers and to build brand loyalty." ["Intelligent email marketing should be personalised and targeted," Fourth Source, 7 May 2013] Janet Kyle Altman, of Kaufman, Rossin & Co., basically says the same thing, but in a different way. She writes, "Your target is not 'everyone'." ["To Market Successfully, Your Customer Can't Be 'Everyone'," Business News Daily, 27 September 2013] It's obvious that you can't personalize your marketing efforts if you know little to nothing about the consumer you wish to reach. Richard Ting asserts that "brands are missing out by not fully understanding who their customers are. Let's face it: the signal-to-noise ratio is still fairly low among brands." ["The Customer Profile: Your Brand's Secret Weapon," HBR Blog Network, 11 March 2013]

Orangedudes-target-customer-600pxAngela Wells calls the "getting to know your customer" approach Business-to-People (B2P) marketing. "B2P Marketing," she writes, "is the recognition that businesses aren't actually buying what you're trying to sell. Individual decision makers — people — are making the decisions for their companies, not impersonal disengaged companies as a whole." ["Forget About B2B And B2C - Technology Enables B2P (Business To People) Marketing," Marketing Tools: CRM, 28 June 2013] Whether your desired customer is sitting behind a desk at a business or on the couch in their home, doesn't really matter. Wells is correct that individual decisions are what you are trying to influence. Duckett insists that "saying the right thing at the right time to the right person" is getting easier thanks to technology. He writes, "The new generation of cloud-based marketing automation tools out there can help make this quick, simple and effective." He recommends a four-step approach for getting to know customers better.

"Step 1 – Create a profile: Clearly identify and classify visitors by monitoring and remembering their behaviour. There are tools that let marketers automatically record visitors’ individual behaviours as part of a 'customer history' record.

"Step 2 – Target: The marketer can set up simple targeting 'rules' (one by one as needed) so, for example, a rule might say 'target people who have looked at brand A more than 15 times', 'target visitors who have been visiting for 2 months but have not purchased' or 'target visitors who have purchased but not for 3 months'. Then the marketer will communicate to the system what content they want to try on each segment (this might include a set of email variants or even content to show in the visitor’s web page or triggers to your telesales team).

'Step 3 – See what works: Gathering this data on which content delivers the best results from this target segment (and the control group) is useful to marketers that then need to look at conversion rates, number of sale and, basket size to make their decision.

"Step 4 – Repeat and love the engagement: Keep the process going, each time building into the targeting the additional behavioural information harvested from the visitors. Your system should also include functions to ensure customers aren't repeatedly contacted with the same message or offer. This is important; otherwise customers will get wise and exploit the brand. For example, they will come to understand that if they abandon a basket one day, they will receive a discount the next – or will get frustrated when continually offered a deal they are not interested in, for example, a product they already purchased elsewhere."

Duckett concludes, "By engaging the visitor at every stage, marketers can ensure that customers are not disappointed by their experience of the brand, either by confusing content or unnecessary adverts. The end goal is that the visitor's experience will be easy, engaging and ultimately provide the visitor and the brand with exactly what they want." As I've noted in previous posts, it's easy for online customers to jump on or off the path to purchase. That's why I agree with Duckett that consumers must encounter a good experience at every stage or touchpoint along their journey.

Ting believes that many companies don't get to know their customers better because the data they collect about them is siloed. "Combined," he writes, "this information would be enough to create the ultimate 360-degree customer profile, which would allow enhanced targeting and personalization." The different types of siloes into which data is gathered include:

  • "What they're saying — social CRM. What are your consumers saying about your products and services in social media? Are your consumers' brand sentiments shifting from positive to negative or vice versa?

  • "What they're buying — purchase history. What is the last product a consumer purchased from you? How often does he buy from you? What are her favorite products? Are people making more or fewer purchases?

  • "What they're doing — brand interaction history. Are they using your mobile apps? How often are they using them? Are they visiting your website? Are they spending more or less time with your brand?

  • "What they're liking — social interest graph. What interests do they share on social media channels, and who is in the network of people who share similar interests?"

He cautions, "It may seem simple to combine these discrete data sets into one holistic customer profile, but there are major technology obstacles brands need to get past." Integrating data is never as straight forward as people think it will be. Ting insists that a customer's lifetime value will increase "by better engaging them over the long term and with purpose. ... To surgically cut through the noise, advertisers need to develop richer customer profiles. It's not the sexiest of topics in advertising, but it's one that will ultimately allow brands to target and personalize the experiences and messages that consumers deserve." Altman concludes, "No matter what product you sell or service you deliver, more targeted marketing gives you a better return. Targeting a specific audience gets you in front of them more often, with messages that touch them emotionally. If you try to be everything to everyone, your message becomes vague and less impactful."

Wells agrees. "With the rise of social media and engagement," she writes, "it has become increasingly obvious that we are all targeting people – those people who make the decisions whether or not to purchase what you are trying to sell. These people we are targeting are consuming media like never before, across a range of social platforms such as Facebook, Twitter, LinkedIn, and so much more." It should be pretty obvious by now that none of the recommendations offered by these pundits can be achieved without the right kind of technology. The secret is to get personal with your customers without creeping them out. It's a fine line that companies must walk when making personalized offers. The right technology and a good marketing department or firm will help you walk that line.

October 16, 2013

The Impact of Omnichannel Operations on the Supply Chain

At the end of my post entitled Surviving in the Omni-channel World, I indicated that, in a later post, I would discuss the impact of omnichannel operations on the supply chain. In that post, I quoted the editorial staff of SupplyChainBrain who wrote: "With more customers shopping online and on their mobile devices, it seems imperative that retailers offer different channels for fulfillment to not only keep prices low, but to remain competitive and foster customer loyalty." ["Multichannel Fulfillment Is The New Normal," 11 March 2013] Dave Kilzer, senior vice president of supply chain solutions with Idhasoft, told the SCB staff that many companies fail to understand the nuances between "all-channel" and "omnichannel" operations. He stated that omnichannel "describes a distributor's ability to provide an equally high level of service, regardless of the means by which product is purchased or shipped. All-channel can result in excess inventory, physically separated and unable to cross boundaries to meet the needs of the moment. Omni-channel, by contrast, makes it possible to hold inventory in multiple locations while treating it in one coherent 'bucket'." ["'The 'Omni-Channel' - and Its Implications for the Supply Chain," SupplyChainBrain, 11 July 2013]

As I understand it, the differences between all-channel and omnichannel operations described by Kilzer rest on a distributor's ability to tap all sources of supply regardless of where they are located. The article helps explain this:

Omnichannel Fulfillment"The two concepts involve different rules of allocation, and the supporting technology has to recognize that. It's getting to the point, says Kilzer, 'where much of fulfillment in e-commerce is now being fueled, not from a DC, but from the backroom of a retail location.' In essence, the distributor is reaching all the way to the store shelf. The setup requires pinpoint visibility throughout the distribution chain, including the ability to manage the 'black hole' that is created when a consumer takes product off the shelf and moves to the checkout stand. 'Those two seconds are how tightly inventory has to be tracked,' says Kilzer."

Clearly, successful omnichannel operations involve a number of technologies that can track supplies in real-time as well as predictive analytics that ensure supply is going to be able to meet demand. That's why Ann Grackin, CEO of ChainLink Research, told the SCB staff that "more dollars are being spent on operational challenges: customer experience touch points (single view of the customer, POS, store and web design); IT infrastructure challenges from web to wireless in the store; and supply chain – which includes inbound merchandise allocation, replenishment, inventory management, and fulfillment to the customer." ["Supply Chain Takes Its Power Position in the Retail Industry!," SupplyChainBrain, 11 March 2013] If, as the SCB staff claims, omnichannel fulfillment is the new norm, it should come as no surprise that the staff believes that the supply chain now sits in a new power position. To ensure that supply chain professionals make the most of their empowered position, the ChainLink analysts assert that those professionals need to ensure they have the following technology tools in their kit:

"• WMS –Various warehouse technologies to support inventory management and omnichannel fulfillment. The past model of web-only or catalog-only inventory infuriates potential buyers. Amazon has shown the way: pass-through shopping with inventory status from partners – merchants and manufacturers to locate the specific products – puts private label retailers to shame. Private label, who own the end-to-end – from manufacturers through to point of sale – still can’t provide seamless inventory locating and fulfillment. Yet Amazon can, without owning the back of the supply chain. Voila – collaboration and process mastery!

"• Source tagging and B2B transacting – RFID, bar-coding and EDI will continue to grow to provide seamless communications and visibility across the trading network.

"• Transportation and Trade – Logistics technology and process methods such as collaboration for carrier consolidation to reduce inbound coordination and bottlenecks.

"• Mobile and Wireless – Our research showed more mobile for supply chain than the shopper experience! End-to-end visibility, coordination with third-party services, direct store delivery, and same-day service to customers will grow. Wireless infrastructure in stores will grow not only to support mobile checkout and tablets for sales assistance but store operation such as inventory management and pricing.

"• Demand Management – Demand process and technologies continue to evolve. One method yet to master is how to make sense out of the great customer insights coming from social. There are solutions that provide these, but they are 'newbies.' Few traditional demand forecasting players provide these – at their peril. Retailers and brand companies are reaching beyond the traditionalists to access these.

"• Social Enterprise – There are three flavors of social: one for customer facing marketing and customer support; one for B2B collaboration; and one for knowledge sharing in the enterprise. The latter two we call Enterprise Social Networking. Retailers will begin to understand the differences and not just use social for marketing."

Research conducted by SD Retail Consulting concluded that, despite the impact that omnichannel operations will have on the future survival of businesses, many large companies have been slow to adapt. ["Largest Retailers Slow to Adapt to Needs of Omni-Channel Shopping Environment, Study Finds," by SD Retail Consulting, SupplyChainBrain, 7 June 2013] Some of the more significant findings from their research include:

"• U.S. trails U.K. for in-store pick-up of web-based orders: Only 29% of U.S. retailers surveyed have implemented in-store pick-up options, and a mere 24% are planning to unveil a pilot program by late 2013. These figures represent a stark contrast to U.K. retailers, where 78% of retailers surveyed have deployed in-store pick-ups. U.K. retailers continue to improve on the convenience of in-store pick-up programs, testing additional benefits such as free parking for customers who pick up during morning business hours

"• Mobile POS Is Rare: Only 18% of U.S. retailers have implemented mobile POS systems across a significant portion of their stores, and in most of those cases, retailers have only rolled it out to select groups of stores, rather than entire chains. Further, mobile POS is still typically utilized for only one or two specific uses (i.e., line busting or search/assistance within specific departments), rather than leveraging the full extent of its capabilities (CRM, labor scheduling, traffic counters, etc.)

"• Store staff are not getting effective cross-channel training: 80% of U.S. and U.K. retailers said they have not invested sufficiently in training their staff on how to handle multichannel customers in-store, whether on how to handle 'show rooming,' competitive price-matching, in-store pick-up requests, or addressing specific product knowledge customers may have gained from the web. Additionally, fewer than 25% of retailers surveyed indicated that their field management was providing the leadership necessary to drive improved productivity through their physical stores in this new multichannel environment

"• No store associate incentive and recognition for cross-channel selling: Less than 10% of retailers surveyed are currently compensating their associates in some way that recognizes their contribution to cross-channel sales. Retailers with cross-channel customers acknowledge that while the store may not ring the sale, their associates play a critical part in driving company top-line sales, yet methods for compensating employees for contributing to the sale by servicing the shopper in-store (before they actually transact on-line) have yet to be formalized."

What clearly pops out to me is that visibility and collaboration need to be improved dramatically if omnichannel operations are to succeed. In order to achieve the necessary level of collaboration, new key performance indicators need to be developed that take in account new digital paths to purchase that are being embraced by many consumers.

October 10, 2013

Surviving in the Omni-channel World

Erik Brynjolfsson, Yu Jeffrey Hu, and Mohammad S. Rahman believe that mobile technology is forever changing the face of retailing. They write, "Recent technology advances in mobile computing and augmented reality are blurring the boundaries between traditional and Internet retailing." ["Competing in the Age of Omnichannel Retailing," MIT Sloan Management Review, 21 May 2013] As a result, they assert that "retailers [can] interact with consumers through multiple touch points and expose them to a rich blend of offline sensory information and online content." The editorial staff at SupplyChainBrain agrees that mobile technology has changed the retail landscape, and the staff insists that interactions with consumers are just as critical after the sale as before the sale if they are to remain happy and loyal. "With more customers shopping online and on their mobile devices," it writes, "it seems imperative that retailers offer different channels for fulfillment to not only keep prices low, but to remain competitive and foster customer loyalty." ["Multichannel Fulfillment Is The New Normal," 11 March 2013]

Brynjolfsson, Hu, and Rahman believe that technology has finally reached the tipping point in the retail arena. They describe the new business landscape this way:

Omnichannel marketing"In the United States today, more than 50% of cell phone owners have smartphones, and more than 70% of these have used their devices for comparison shopping, a habit that is becoming increasingly common worldwide. In the past, brick-and-mortar retail stores were unique in allowing consumers to touch and feel merchandise and provide instant gratification; Internet retailers, meanwhile, tried to woo shoppers with wide product selection, low prices and content such as product reviews and ratings. As the retailing industry evolves toward a seamless 'omnichannel retailing' experience, the distinctions between physical and online will vanish, turning the world into a showroom without walls. The retail industry is shifting toward a concierge model geared toward helping consumers, rather than focusing only on transactions and deliveries."

It doesn't take much imagination to envision the challenges and complications created by this new retail landscape. Although analysts seem to be in agreement that retailers must adapt to this omnichannel world or risk extinction, "some of the largest U.S. and U.K. retailers [have been] slow to adapt their store operations to changing consumer buying habits, according to a study by SD Retail Consulting, a retail advisory firm and unit of Hilco Trading, LLC." ["Largest Retailers Slow to Adapt to Needs of Omni-Channel Shopping Environment, Study Finds," by SD Retail Consulting, SupplyChainBrain, 7 June 2013] Antony Karabus, president of SD Retail Consulting, stated, "The largest retailers must examine every customer touch point and how they play their part in creating that seamless customer experience. For the minority of retailers who are successfully transforming their store environments, the rewards will be substantial."

Charles Hunt, owner of Duvet and Pillow Warehouse, a fast-growing online retailer, told reporters from The Economist, "'Multichannel' (or even better, 'omnichannel') is something almost every self-respecting retailer wants to be. It means letting customers shop with smartphones, tablets, laptops and even in stores as if waited upon by a single salesman with an unfailing memory and uncanny intuition about their preferences. Pure-play internet vendors are good at this. But most resist the idea that actual stores, with their rents, payrolls and security cameras, ought to be one of those channels. The thought of having the same costs as bricks-and-mortar competitors 'scares the living daylights out of me'." ["Mixing bricks with clicks," 23 March 2013] Hunt clearly spots the sorest point in omnichannel operations — the differential costs between online and brick-and-mortar operations.

Another sore spot, however, is omnichannel alignment. McKinsey & Company analysts Duarte Braga, Paul-Louis Caylar, and Pascal Griede, note, "At many companies, ... channel conflict or poor coordination gets in the way of true multichannel harmony. Successful multichannel leaders understand the importance of flexibility – helping customers shift between channels at the different steps of their decision journey to achieve the experience they want." ["A symphony of separate instruments: Cross-channel and online sales," Telecom, Media, and High Tech Extranet, 24 October 2012] Braga and colleagues note companies that began as brick-and-mortar stores are sometimes as reluctant to enter the online market as Hunt indicates he is to enter the brick-and-mortar arena. This kind of reluctance can result in the disharmonies noted by the McKinsey analysts. They conclude:

"No company today would neglect digital sales altogether. Yet many still view these efforts as sideshows to their 'real' business in stores. By taking smart advantage of the range of digital platforms currently available, retailers can delight customers both inside and outside their stores, while harvesting valuable consumer insights. Going a step further to integrate these digital channels within a truly multichannel strategy can boost performance across all channels – whether online or offline."

Brynjolfsson, Hu, and Rahman report how "the availability of product price and availability information, the ability of consumers to shop online and pick up products in local stores, and the aggregation of offline information and online content have combined to make the retailing landscape increasingly competitive." They note that "retailers used to rely on barriers such as geography and customer ignorance to advance their positions in traditional markets. However, technology removes these barriers." For brick-and-mortar stores location still matters in two ways. The most obvious way that location matters is, of course, ensuring that a store is located in an area easily accessible and desirable to shoppers. In the mobile age, Brynjolfsson, Hu, and Rahman point out that location also provides an advantage when shoppers are nearby. They explain:

"The growing prevalence of location-based applications on mobile devices is a critical enabler of these changes. According to the Pew Research Center, 74% of U.S. smartphone users used their phones to obtain location-based information in 2012. Retailers are taking advantage of opportunities created by location-based applications. Walgreens, for example, has teamed up with Foursquare, a location-based social networking website, to offer customers electronic coupons on their phones the moment they enter a Walgreens store. Saks Fifth Avenue has also worked with Foursquare to steer consumers toward physical locations by offering goodies (such as high-end brand Nars lipstick). Macy's offers free Wi-Fi in its stores; consumers can scan QR codes on products to see online product reviews, prices and exclusive video content on fashion trends, advice and tips. In some cases, the location-based applications aren't managed by the retailers but by third parties. For instance, RedLaser, an eBay company, allows consumers to scan UPC codes to determine whether specific products are available nearby and at what price. Mobile applications themselves are becoming increasingly advanced. For example, Loopt, of Mountain View, California, provides real-time location-based services aimed at specific users and popular locations. Retailers can use Loopt as a virtual loyalty card, allowing them to connect directly with consumers based on their location. Loopt users can find friends nearby and receive coupons and rewards for checking into specific locations. Another app called Doot enables users to leave public or private messages for friends or family members at restaurants or stores; the messages are activated when the designated people reach the sites."

Brynjolfsson, Hu, and Rahman offer seven strategies for achieving successful omnichannel retail operations. They are:

1. Provide attractive pricing and curated content.

2. Harness the power of data and analytics.

3. Avoid direct price comparisons.

4. Learn to sell niche products.

5. Emphasize product knowledge.

6. Establish switching costs.

7. Embrace competition.

They conclude:

"Technology is making omnichannel retailing inevitable and is reducing the ability of geography and ignorance to shield retailers from competition. It is breaking down the barriers between different retail channels as well as the divisions that separate retailers and their suppliers. At the same time, omnichannel retailing expands the overall pie by extending market reach and introducing consumers to products they may not have known about. Supply chains that generate increased consumer value are likely to win in the long run. More transparency is likely to speed up this process, leading to more of a 'winner-take-all' effect. As a result, retailers and manufacturers will need to find an area where they are truly the world’s best, as opposed to just working harder to hide from competition. With omnichannel retailing, competition will increase on many fronts, but so will the opportunities for savvy retailers and supply-chain partners to gain competitive advantage."

Omnichannel operations for many companies will result in smaller retail stores and larger distribution centers. I will discuss the backend impacts of omnichannel operations on the supply chain in a future post.

October 04, 2013

Getting to Know Emerging Markets, Part 2

In Part 1 of this two-part series, I noted that many respected analysts believe that the future of the global economy (and, therefore, the fortunes of many businesses) depends on emerging market countries and the consumers who live there. Many of those same analysts noted, however, that companies that believe they can use a one-size-fits-all strategy for emerging markets are going to be disappointed. Not only do emerging markets have peculiarities that make them unique, consumers living in those markets also have varying taste and lifestyle preferences. The only way to discover those variations and respond correctly to them is through the collection and analysis of Big Data. In this post, I'll discuss recommended strategies for getting to know the consumers in emerging markets and the conditions in which they live.

Emerging marketsBoston Consulting Group analysts conclude that "multinational companies have the right priorities — emerging markets are the growth spots of the future — but have not fully put in place winning practices." ["Playing to Win in Emerging Markets," by Amitabh Mall, David C. Michael, Lori Spivey, Andrew Tratz, Bernd Waltermann, and Jeff Walters, bcg.perspectives, 13 September 2013] That's because they don't fully understand the consumers living in areas in which they hope to expand. Mark Harrington, the Chief Marketing Officer at ListenLogic, asserts that Big Data now provides the opportunity to obtain that understanding. ["How Marketers Are Finally Getting to Know Their Customers," Direct Marketing News, 24 July 2013] he writes:

"Having the ability to visualize millions of consumers based on their needs, attitudes, actions, and experiences delivers multidimensional insight to drive critical marketing components, ranging from promotions to product innovation. Marketers can gain deep understanding of what prospects and customers want, need, like, and dislike without ever asking a question. And they can do this on a continual basis to track markets shift in the always-on world."

One of the tools he suggests using is ethnography. Jessica Weber and John Cheng explain that ethnography involves "studying the customs of individuals and cultures." ["Making the Most of Ethnographic Research," UX Magazine, 5 August 2013] They continue:

"Ethnographic research offers several key benefits for defining a long term, multi-channel [user experience] strategy, including:

  • Identifying user needs that have yet to be met
  • Testing market demand for products that do not exist
  • Providing a holistic view of a problem space
  • Exposing opportunities for competitive differentiation

"The principal advantage of ethnographic methods is the ability to see the impact of the physical world on factors that could drive digital design. Ethnographic research is all about discovery of the unknown — disproving assumptions about user behavior and uncovering unexpected insights. Whenever you're in the field, something you see is going to surprise you, and those surprises are almost always at the root of innovation."

In previous posts, I've noted that providing a positive user experience at every touchpoint in a consumer's digital path to purchase is important because it is so easy to opt out of a purchase decision at any given moment. Weber and Cheng add:

"The user experience can be thought of as a composite of the user, the interface, and the context; context being an amalgamation of environment and situation. In ethnography, research is conducted in the field, where users' real-world behaviors and interactions with products and services take place, so that researchers can gain insight into how context impacts the user experiences."

Ethnographic research can also take advantage of Big Data and the refined segmentation that it can provide. Weber and Cheng conclude, "To design and develop optimal user experiences, companies must answer the right questions at the right time." Big Data that is analyzed by a cognitive computer system can actually help discover some pertinent questions that might have been overlooked and test hypotheses about them. Jodie Sangster, CEO of the Association for Data-Driven Marketing and Advertising in Australia, believes that global marketing in the future is going to be data driven. ["Where Is Global Marketing Going?" Direct Marketing News, 26 August 2013] "The future of all marketing and advertising around the globe is data-driven," she writes, "and at last, the value of measurable, accountable, customer-centric marketing has been realized." Nevertheless, Sangster agrees with Boston Consulting Group analysts that companies are still grappling with winning strategies. She explains:

"As organizations prepare themselves to ride the Big Data wave, most businesses are still struggling to centralize, analyse, and commercialize their own small data sets. It's not a local issue and it's not a new one, either: The IBM Global CMO Study first identified this struggle as the number one issue keeping CMOs worldwide awake at night in 2011. Another study released in Asia Pacific last year 2012 noted that Down Under, more than 50% of organizations felt ill equipped to grapple with the challenge of how to retrieve the value that's locked away in their data. This will continue to be the case for many more years."

Erin Haselkorn reminds us that "collecting data and analyzing it to find meaningful conclusions has always been part of how marketers go about connecting with consumers." However, with the advent of Big Data technologies, "their strategies have improved dramatically over time." ["Data helps marketers move beyond general stereotypes," Marketing Forward, 10 September 2013] As a result, he writes, marketing teams have been able to "transition away from broad stereotyping toward better targeted forms of data mining. ... We now have the capability to zoom in on the specific customer."

Although most new global middle class consumers are found in Asia, "the middle class in Latin America and the Caribbean region grew by 50 percent over the past decade." ["World Bank: Middle class grows by 50 percent in Latin America, Caribbean region," Fox News, 13 November 2013] It doesn't take a data scientist to know that tastes and lifestyles vary greatly in Latin American, Asia, and Africa — the three areas experiencing the greatest middle class growth. Regardless of where consumers are located, local conditions and culture will play a major role in their purchasing behavior. McKinsey analysts Maria Valdeviesa de Uster, Jon Vander Ark, and Wesley Walden assert that unless companies learn how to "act like a local" they will never succeed in emerging markets. ["Act like a local: How to sell in emerging markets," McKinsey & Company, September 2012] They offer three "imperatives" that will help companies "accelerate growth in emerging markets." They are:

  1. "Get on the ground. Information on customers and the market is often hard to obtain. Successful companies invest in all the data sources and expert information available, but nothing beats getting a firsthand sense of how the market works by visiting local areas and resellers. This ground-level view also gives sales leaders a clear read of where the market is heading and lets them plan for it.

  2. "Overinvest in the right partners. In developed markets, a company may have many capable potential partners. In emerging markets, finding a partner is a much more strategic endeavor. With limited choice, partnerships are for the long haul, which means companies must find the right capabilities and partners that share their values.

  3. "Build talent for the long term. Annual growth in emerging markets can exceed 10 percent. That pace requires sales leaders to think creatively about how they will attract and retain the talent they will need to keep up."

Although I don't disagree with the "boots on the ground" imperative, I can't help but observe that the emerging world's embrace of mobile technologies means that every day more data becomes available for analysis. That data doesn't necessarily need to be analyzed in-country. And, I as noted in Part 1 of this series, emerging markets are likely to have large virtual marketplaces to accommodate this phenomenon. In addition to the fact that smartphone use is increasing, another reason that the number of virtual marketplaces is growing is that infrastructure in many emerging market countries is lacking or sub-standard. That makes building and supplying brick-and-mortar stores more challenging. Lack of infrastructure is one of the many challenges identified by McKinsey analysts. They conclude:

"Emerging-market infrastructure is often less developed, channels are fragmented, and cultural preferences often more complex and varied. Demand can be unpredictable, making the near-term return on sales investment uncertain, even if long-term growth prospects are extremely attractive."

Some of that uncertainty can be reduced by good data collection and analysis. One thing that most analysts can probably agree upon is that companies that get a late start in getting to know emerging markets are going to have a tougher time cracking those markets in the years ahead.