How to Develop a Retail Business that Gives Your Customers

White Paper
How to Develop a
Retail Business that
Gives Your Customers
the Love they Expect
Table of contents
The Multi-Channel Age .......................................................................................................... 3 New Dynamic, New Perspective ........................................................................................... 4
Redefining Relationship – the Value:Cost Ratio .................................................................... 5
Consistency is King ............................................................................................................... 6
Broken Relationships ............................................................................................................. 7
Getting IT Right ..................................................................................................................... 8
© Copyright 2012 MICROS Systems, Inc. All rights reserved.
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The Multi-Channel Age
With more than 955 million monthly active users on Facebook, 175 million on LinkedIn and 140 million on
Twitter – and growing daily – we can no longer deny that a ‘New Age’ has dawned for retailers. Customers are
researching, comparing and increasingly purchasing products and services using ‘new’ channels such as the
web, m(obile)-commerce, s(ocial)-commerce, and even TV-commerce.
However, this is not to say that traditional channels are obsolete: recent studies indicate that the physical store in
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particular still has a pivotal role to play in a retail operation. Indeed, research from customer insight agency SMG ,
found that 65% of retailers go so far as to say the in-store experience they offer defines their brand, and more
than half claim it is still their most profitable channel.
With the proliferation of channels, not to mention the convergence of old and new, it is not surprising that many
retailers are struggling where to focus their energies and investments to make the best impact.
What is clear is that, in the ‘Multi-channel Age’, it is imperative to get the balance of channels right and align the
business to present a consistent and familiar experience of the brand at each point of contact.
With so much at stake, where should a retailer begin?
This paper outlines the steps required to successfully tackle this challenge and develop a retail operation fit for
the new multi-channel customer.
They include:
Ÿ Defining the market opportunity and nature of your
(desired) relationship with your customers in the context of
market competition, business opportunities and
customers’ needs
Ÿ Converting this to a brand proposition – that balances the
shopping experience you propose to deliver against these
needs and opportunities along with your costs and prices
Ÿ Aligning and measuring all processes, people and
systems – to enable and ensure consistent delivery of this
brand proposition, and to thereby achieve and sustain the
desired customer relationship.
This is far easier said than done. Let us explain.
1 Carried out with, and reported in, The Retail Bulletin, 20 March 2012
http://www.theretailbulletin.com/news/high_street_fights_back_65_of_retailers_believe_the_instore_experience_defines_their_brand_13-0312/1.2 Strukturelle Herausforderungen für den Einzelhandel
© Copyright 2012 MICROS Systems, Inc. All rights reserved.
3
New Dynamics, New Perspective
With the dawn of the Multi-channel Age, the key to a successful retail model can be found neither by studying
traditional, operationally vertical mechanics nor by blindly ploughing resources into new-channel initiatives.
Instead, it is essential to recognise that there has been a veritable power-shift in the industry.
With the explosion in potential touch points now out of a retailer’s direct control, we see the demand for products,
prices and service increasingly being dictated not by the retailer but by the consumer.
These new ‘pull-demand’ dynamics have irreversibly changed the retailer/customer relationship – not just
because the market power has shifted to the consumer, but because it is re-defining what customers expect and
accept from their retailers. In this way, the multi-channel shift is impacting even retailers who are abstaining from
establishing new or multiple channels.
In response, as a business imperative, all retailers must review their customer relationships with a fresh
perspective.
© Copyright 2012 MICROS Systems, Inc. All rights reserved.
4
Redefining Relationships – the Value:Cost Ratio
Crucially, defining a customer relationship that will work in this new environment involves weighing up how much
added value service to offer in order to meet customers’ expectations while being competitive, against how much
to spend – therefore how much to charge – in delivering this level of value. We might call this the value:cost ratio.
To help explain this concept, retail expert Marc Cox designed the ‘Love Grid’ (shown below). This compares the
three major categories of relationship a retailer might have with its customers – from a low-cost, no-frills
transactional one, to the higher value, quality service one that engages the customer on a more emotional level.
Customer Experience
Company Behaviour
Customer Relationship
Brand
Memorable
Product & price & added-value services
Sense of purpose
Love
Beliefs and values
Enjoyable
Retailer
Product & price & added-value services
OK
Dealer
Respect
Transaction
Product & price
‘The Love Grid’ / Source: Marc Cox
It is important to understand that each category on this grid has equal merit; the difference lies in the value:cost
ratio – in the relative responsibilities and consequences – essentially associated with each.
For example, to have a ‘Brand’ relationship, a retailer’s management style must be inclusive – engaging customers,
empowering employees, sourcing feedback, sharing results, personalising contact and generally encouraging
loyalty through an emotional connection and that ‘extra mile’ approach to service. It also involves being highly
accessible to customers, which in the Multi-channel Age increasingly means being available and engaged with
customers via new digital and/or social channels.
This inevitably costs more to achieve, and therefore will be a more expensive proposition to customers. However,
this is commercially viable where customers perceive and appreciate the extra value – or ‘love’ – received, and
so are willing to pay for it.
In contrast, the ‘Dealer’ relationship involves a focused, top-down, ‘get-it-done’ managerial approach, with efficient
processes and decisions based on cost-effectiveness that, critically, keeps availability high and prices low. This is
equally commercially viable if customers are looking for a commodity transaction and happy to expect and accept
a ‘basic’ service in return for keeping their own expenditure to a minimum.
Therefore, the first step in developing a successful brand proposition is to understand the exact nature of the
retailer/customer relationship, and ensure that you know what level of value customers expect for what price band.
If the value:cost ratio is acceptable to customers before they proceed with a transaction, then they are effectively
agreeing to the ratio’s merit, and, as long as the expectations are met, there is every chance that the transaction
will be repeated, thereby building into the desired ongoing relationship.
But, and it is a big but, this will only hold true if the expected value:cost ratio continues to be delivered consistently.
© Copyright 2012 MICROS Systems, Inc. All rights reserved.
5
Consistency is King
It logically follows that the second step, then, is to establish a business model that consistently delivers on the
defined proposition, or the value:cost ratio ‘agreed’ with – and therefore expected by – customers.
Often overlooked in the scramble to adapt to the new multi-channel environment, consistency of the offer is
nevertheless emerging as the key to giving the brand proposition the credibility that is all-important for customer
retention.
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SMG found that: while 98% of retailers agreed that multi-channel is vital, more than two-thirds of retailers
said that their multi-channel strategies currently do not deliver the same customer experience across all their
channels, and 66% recognise that such inconsistency affects customer loyalty.
Retail consultancy SD Retail goes further, suggesting that it is not just inconsistency between channels that
undermines customer retention: it is inconsistency between expectation and experience. It claims that, in recent
years retailers and customers have begun to travel in completely opposing directions. Regardless of their desired
customer relationship, the majority of retailers have responded to the global downturn by re-organising
themselves functionally (through processes, people and IT) to achieve ‘transactional’ relationships that prioritise
cost-efficiency, scale and standardisation.
This may perfectly meet the expectations of the customers of ‘Dealer’ retailers. However, for the majority of
retailers whose customers are looking for more from the relationship, this model fails to deliver the multi-faceted,
easy-to-access or personalised shopping experience expected.
In this situation, a retailer and its customer are in different positions on the ‘Love Grid’. Here, the value:cost ratio
is not delivered as ‘agreed’ in the customer’s mind, and the relationship inevitably breaks down.
2 Carried out with, and reported in, The Retail Bulletin, 20 March 2012
http://www.theretailbulletin.com/news/high_street_fights_back_65_
of_retailers_believe_the_instore_experience_defines_their_brand_
13-03-12/
© Copyright 2012 MICROS Systems, Inc. All rights reserved.
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Broken Relationships
Typically, we find that such a disconnection between the retailer’s actions and customer’s expectations are
caused by ‘silo thinking’, where departments and channels operate in a vacuum, see only their one-dimensional
view of the customer and systematically fail to communicate effectively with each other.
This makes their customer relations strategies appear incoherent and puts them out of step with their customer,
which creates some fundamental business issues
Competing channels
A disjointed retail operation invariably suffers a degree of internal competition between its own channels, with
different business silos focused on their own KPIs and processes and lacking real understanding of each others’
motives, challenges and opportunities.
This inevitably results in a confusing if not unsatisfying experience for customers. With many retailers reporting
growth in click and collect business and in store ordering from extended ranges for delivery to home, any
disconnect in the pricing, product availability, order management and customer communication can breed
disappointment and leave customers disillusioned.
Higher cost of sale
Further, by not being able to track, collate and share customer habits and responses from across its operation, a
retailer cannot fully understand its customers. This makes it difficult to consistently meet customers’ expectations
or make them feel appreciated. The fallout from this is a less loyal customer base and a higher cost of sale.
Undermined service, lost sales, increased HR costs
Inadequate internal coordination and poor stock, order and customer insight also prevent staff from having the
information they need to make effective decisions. This not only results in an underwhelming customer service,
but undermines a retailer’s ability to up-sell and cross-sell. Worse, this can ultimately lead to staff dissatisfaction
and a higher rate of churn - which increases training costs.
Poor stock performance
The effect of a silo approach to stock management is likely to be just as negative on profits. If stock is not
consistently available, visible or accessible to customers across all its channels, the upshot will be lost sales
against stock which lies redundant elsewhere in the business resulting in squeezed margins and customer
disappointment.
Unloved customers
In short, with disjointed processes, IT systems and structures, retailers are likely to operationally drift away from
their value proposition. This means that customers don’t get the experience they expect, and the relationship
between the two is compromised.
Retailers may have ‘got away with’ this situation before the Multi-channel Age, but emerging market dynamics
make it far easier for unloved customers to be wooed by competitors who live up to their relationship and
value:cost promises and make them feel better understood and appreciated.
© Copyright 2012 MICROS Systems, Inc. All rights reserved.
7
Getting IT Right
Fundamental to the ability of a retailer to consistently meet its customers’ expectations, then, is the ability to
underpin every aspect of its operations – from its managerial style and processes, to channels, service quality
and human resourcing – with the right technology infrastructure.
Seamlessly interconnected operation
In the ‘Retailer’ relationship, the right mix of solutions can all help a retailer to better understand its customers,
and respond with a value-added service that will appeal - and seal the relationship.
Importantly, by integrating its solutions operation-wide, a retailer’s various channels will be able to mutually
support each other – either simply through consistent communication or more proactively through coordinated
promotions or a cross-channel single basket order and delivery service.
By also enhancing the ability to boost profits through affinity- and up-selling, cross-organisational systems benefit
the business as a whole.
Shared information
Going a step further, successful customer-centricity at ‘Brand’ level can use a common IT infrastructure to dispense
the collated, cross-organisational information back through the interconnected estate in useful, accessible
formats, in real time.
Powerfully, guided selling applications can put information about products, stock, prices, promotions, orders – as
well as customer preferences and purchase history - at sales staff’s fingertips. This allows them to deliver the
personal, knowledgeable and consultative transaction that Multi-channel Age customers increasingly seek from a
store visit.
At ‘Brand’ retailer levels, this means a store associate would be able to engage with a customer anywhere on the
shop floor, accurately advise on their options for choosing and buying a product or service that may possibly
relate to previously purchased products, locate stock from anywhere in the business, simply arrange payment and
a convenient day for delivery using information previously captured or entered there and then.
It is not only customers who will respond to this ‘loving’ relationship, but the empowered - and subsequently more
motivated - staff, too.
Shared information can also help:
Ÿ
Ÿ
Ÿ
Ÿ
Ÿ
With benchmarking and understanding the role of channels and outlets
Improve effectiveness of merchandise planning and buying
Increase the cost-efficiency of stock replenishment
Optimise staff rosters and the store operating model
The assessment of supplier performance or supply chain bottlenecks.
Customer insight
Even deeper value can be mined from a fully interconnected organisation.
By collating and analysing customer-related data from each system, a retailer is able not only to log customer
activities, but map their actual journeys – taking into account what influences, pleases and motivates them, and
what triggers the all-important decision to purchase, in which channel and at what time.
© Copyright 2012 MICROS Systems, Inc. All rights reserved.
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This level of interconnectedness is increasingly required to support the ‘Brand’ relationship. It is important to
understand that ‘Brand’ quality customer insight needs more than data on a one-off purchase or isolated Twitter
exchange. True customer profiling collates multiple contacts from multiple channels to build an understanding of
the relevance of each contact – such as whether a Gen X-er genuinely likes Engelbert Humperdinck and Cliff
Richard, or is a regular Justin Bieber fan who has simply bought her Great Gran a birthday CD.
Armed with this integrated customer insight, retailers can offer a more enriching, engaging experience that
connects with customers on a more emotional and personally relevant level, and also go that extra mile to exceed
rather than merely meet customer expectations.
Moreover, by feeding continuously evolving insight – or mapping of customer journeys – back through its interconnected
estate, retailers will be better able to develop ongoing customer-oriented strategies, structures, processes and points
of interaction that:
Ÿ Attract and re-attract customers – both by being
Ÿ Enable brand consistency through all points of contact
present where they are (eg on social networks), and
by engaging and enticing them with personalised
communications through those various channels
Ÿ Deliver non-transactional elements to the relationship,
eg making it easy for satisfied customers to refer the
business through a simple Facebook ‘Like’
Ÿ Live up to the brand promise: eg by ensuring stock
availability matches customer expectations, and that all
channels offer multiple options for paying or receiving
Ÿ Reward loyalty and incentivise repeat custom
goods
Ÿ Gain valuable feedback that then feeds back into all
Ÿ Provide a great experience every time – with
core strategies.
personalised, swift and informed service
© Copyright 2012 MICROS Systems, Inc. All rights reserved.
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Consider MICROS
MICROS, is a global leader in technology
Consider SD Retail Consulting
SD Retail Consulting knows how to help make a difference. Throughout
our 40 year history, we have successfully designed and implemented
practical business solutions for retailers of all segments, sizes, markets
and scale designs throughout the world.
We know how to unlock value from your stores, headquarters, supply
chain, direct channels and support centres. We also provide a unique
approach, emphasising measurable results and change management
from the outset, ensuring that your team takes ownership and
accountability quickly and results are sustainable over the long term.
Consequently, the hard and soft benefits generated by our engagements
typically rival or exceed the ROI of any other project your organisation will
undertake in a given year.
For more information visit www.sdretail.com/
Find out more
about how MICROS
can help you grow
Get in touch with us for more information
or to schedule a demo and consultation
appointment.
E-mail: uk-retail@micros.com
Or contact us at: mprefontaine@sdretail.com
Consider MICROS
MICROS, is a global leader in technology solutions for retailers
that allow them to trade anywhere and everywhere, offering a
seamless cross-channel experience to their customers. MICROS
cross-channel platform provides the functionality that allows
retailers to successfully engage their customers – a true end to
end global retail solution suite. Our services include platform
implementation and integration, strategic business consulting,
design services including creative and user experience,
hosting, and managed services. Nearly 2000 retailers around
the world rely on MICROS to strengthen their businesses and
deliver results across all consumer touchpoints: store, web, direct and
mobile. MICROS retail solutions are installed in over 60,000
stores in 30 countries, while analytic solutions process data at a
corporate level for an additional 100,000 stores.
®
®
MICROS Systems UK Ltd.
Houghton Hall, Business Park
Houghton Regis
Dunstable LU5 5YG
Great Britain
Phone: +44 (0)1582 869-600
Phone: +44 (0)1582 869-601
E-mail: uk-retail@micros.com
www.micros-retail.co.uk
®
micros , micros-fidelio and micros-retail are registered trademarks of MICROS Systems, Inc. Certain product and company names appearing here may be the trademarks or service marks
owned and/or registered by third parties. All other product and brand names are the property of their respective owners.
© Copyright 2012 MICROS Systems, Inc. All rights reserved.
© Copyright 2012 MICROS Systems, Inc. All rights reserved.
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© Copyright 2012 MICROS Systems, Inc. All rights reserved.
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