Introducing the Customer Mix

Transcription

1 Introducing the Customer Mix Why the Marketing Mix is no longer a relevant framework for multichannel retailers and what they should focus on instead January 2016

2 Introduction Practicology markets itself as a multichannel retail-focused consultancy with a difference. As the name suggests, we like to deliver practical solutions to our clients problems and challenges, rather than abstract theory. However, there s no doubt that frameworks can be helpful to create a strategy, as long as that strategy can be effectively delivered by the business. With this in mind, I asked myself whether the Marketing Mix framework commonly used to set marketing strategy and plans was still relevant to our clients. This white paper argues that it s not relevant. More crucially, if multichannel retailers and other consumer-focused businesses want to be truly customer-centric, then they need to adopt an alternative framework to build their marketing and sales strategies. This alternative framework that we have developed, the Customer Mix as I like to call it, puts consumers at the heart of a business approach to marketing and selling. It is fit for purpose in an age where people have almost unlimited information at their finger-tips wherever they go, can buy products online from anywhere in the world and are task-rich yet time-poor. I hope that you find the following useful. We welcome all feedback on the Customer Mix framework. Martin Newman, CEO, Practicology martin@practicology.com Page 2 of 7

3 Is the Marketing Mix still meaningful? Developed in the 1960s, the original Marketing Mix framework for creating a marketing strategy as conceived by American academic E. Jerome McCarthy - included four aspects (the 4 Ps): Product Price Place Promotion The above four aspects were subsequently complemented by three more aspects to make the 7 Ps: People Process Physical Evidence And this framework continues to be espoused and used to this day. But is it fit for purpose in the Internet age, when the balance of power has fundamentally shifted from suppliers (retailers and product manufacturers) in favour of consumers? And, in particular, is it fit for purpose for a multichannel retailer? We don t think so, the main reason being that it s not customer-focused. The People aspect of the 7 Ps refers to staff, not customers. And as we are now constantly told as multichannel retailers: the customer is king. The Marketing Mix framework was originally created in a time before everyone had access to the internet. Retailers were not serving customers who have extreme choice, extreme price and product features transparency, and an almost limitless number of different customer journeys they can follow. Today multichannel retailers have a much harder time acquiring their customers, and an even harder time trying to retain them. As many businesses declare themselves to be customer-focused, surely there should be a framework that really puts the customer at the heart of what s being delivered? Page 3 of 7

4 Introducing the Customer Mix How different would the framework be if we really put ourselves in customers shoes, rather than simply thinking about what we want to deliver to potential customers and how we deliver it? So, instead of the 7 Ps, I ve created a Customer Mix framework with 6 Ws that aims to do just that. The following explains why it s the right framework for retailers today. The Marketing Mix doesn t properly consider customers motivations, preferences and loyalties (or lack of). It doesn t consider that different groups of customers might want very different things from the same retailer. The Customer Mix addresses this. The Marketing Mix considers each purchase as a standalone transaction, rather than one of a potential group of transactions over time. For example, the Process element of the Marketing Mix refers to the customer experience delivered primarily before and during a single transaction. Due to the costs incurred in acquiring and serving customers, modern multichannel retailers need customers who they can build relationships with, and so must focus on customer lifetime value. The Customer Mix looks past the next transaction, and thinks about what s required not just to sell an item, but to keep the customer s loyalty for future purchases. Page 4 of 7

5 So what does each of the Ws within the Customer Mix really stand for and, more importantly what do they mean for a multichannel retailer s business? Who There s no P in the Marketing Mix that is focused on customers. In the Customer Mix we directly consider Who the different target customers are. Few retailers are niche enough to have a single customer type with one set of needs and desires. The majority of multichannel retailers have created a variety of ways to shop primarily because they do not serve a homogenous customer base. We analyse our clients data to help them understand who their best customers are, and create key customer segments. In customer-centric organisations, these customer segments are developed into customer personas. Staff across the business can consider how their decisions on everything from products, to prices to service will likely impact on these target groups. Why Combined with Who, Why informs us on our target customer segments and their motivations. It prompts retailers to consider not just why a customer wants a particular product, but why the channels used during the customer journey may be important to the purchase decision, as well as the fulfilment timeframe. An understanding of Why helps retailers to become more relevant to their customers. It can inform marketing and merchandising decisions. For example, if a customer segment is time-poor and cash-rich, thinking about motivation might lead to the creation of premium services to engage them better, rather than a change to the product range being required. What This replaces Product in the marketing mix and focuses on what we believe our target customer segments will be most interested in purchasing. But it goes beyond product too, as What the customers want can include value, convenience or personalisation of the offer. Sometimes products and services cannot be separated. One example is the many online subscription-based ecommerce sites that have sprung up. The consumer isn t just buying into the products provided, but the concept that they receive something in the post on a regular basis. Page 5 of 7

6 Where Replacing Place in the Marketing Mix, Where considers locations for fulfilment, and also locations for every other aspect of the customer journey including research and purchase. In a complex multichannel customer journey we can no longer assume that a product is purchased in a store or at a desktop computer, and fulfilled by either home delivery or taken from the store at the point of purchase. What s offered at a variety of locations may be important to a customer s overall decision to purchase, and remain a customer too. We regularly support clients in their Where decisions - such as roll-out plans for international websites, supporting multichannel strategy development and even multichannel store design. As an example an online grocery shopper can buy the same brands for a similar price from a number of supermarkets. In this case, having an app that allows the customer to add to their shopping list while they are commuting to work might be important, as might the grocer s ability to offer click and collect at their supermarket. Considering Where leads retailers to question every aspect of their multichannel strategy. For instance, do their apps, mobile site and any other infrastructure support customers wanting to shop on the move, or complete transactions within the store on their own device? And for online-only retailers without stores, do they need to consider physical collection points for customers who don t find delivery convenient? When Combined with Where, When gives us a real sense of how important convenience is to the customer experience. But When is also important in its own right. Timeliness can be key to customer demand in particular products such as flowers, food or gifts may only be demanded if they can be fulfilled within a very specific timeframe. As consumers in developed economies become more time-pressured, timeliness will only ever become a more important aspect of the Customer Mix. Again, questions about When can consider multiple points in the customer journey. Our client House of Fraser allows its loyalty cardholders early access to Sales events, online and in store. Many retailers report differing success with their marketing s depending on the time of day they are sent out. Page 6 of 7

7 And flash offers and price changes can be enabled in moments on the web, which makes time a much more powerful aspect of a retailer s tactics. We often help clients to optimise their marketing and trading calendars to maximise sales opportunities. What s Next There s no P for lifetime value or ongoing customer relationships in the Marketing Mix. In the Customer Mix this is crucial. Also implicit in the What s Next element of the Customer Mix is the idea that in modern retailing, customer loyalty can rarely be earned with a single transaction. At the point you convert a customer for the first time, the best retailers already have a strategy in place for how they will continue to engage with them to keep them coming back. This requires proactive customer relationship management (CRM), rather than the type of reactive and transaction-driven CRM programmes that are still widespread in the industry. Lifetime customer value is a crucial measure of a retailer s success with its customers, and should be an indicator of both future sales and profitability. Our work in this area, helping our clients to improve the value and longevity of their client relationships, involves considering some or all of the other five Ws to allow retailers to meaningfully engage with their customers. About Practicology Practicology is a strategic multichannel consultancy with offices in London, Sydney and Melbourne, founded in the UK in The 50-strong global team continues to grow, but our point of difference remains the same; every consultant has worked within retail and consumer brands and understand our clients challenges. We deliver an end-to-end portfolio of services including strategic consulting, organisational change, platform selection, ecommerce data & analytics, conversion rate optimisation, digital marketing and content. Recent UK clients include House of Fraser, Selfridges, B&Q, Canon, Ann Summers, Dreams, Hobbycraft, Ted Baker and Great Western Railway. Page 7 of 7