Integrate for Success

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1 Integrate for Success Customer experience in Retail Retail insight

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3 cgi-group.co.uk 1 The Key to Thriving in the Retail Environment is Integration, Integration, Integration Retailers have endured tough trading conditions in the last few years; many are recording a slump in sales and profits and we have also seen a number of very large retailers go into administration. Empty shop fronts in the High Street and empty units in shopping malls are common place. It seems that the High Street is facing its biggest crisis yet with multi-million pound rent bills, business rates, hefty wage bills and corporation tax. The pressure on the High Street is being compounded by the dramatic growth in online shopping, which in a low growth consumer economy means that the physical store channel will need to contract over the medium term as the digital channel grows. However, there are success stories as well; not surprisingly these include discount stores and charity shops but there are also new and successful brands that have arrived on the scene and grown quickly. Many of these new entrants are online retailers who in contrast pay little rent, and have lower overheads. There appears to be an uneven playing field between the High Street and online. Are High Street stores becoming a liability rather than an asset? Can a retailer survive using an online strategy alone? Or can the two work harmoniously together and offer rewards of increased sales and market share? CGI and InsightNow 1 recently collaborated in undertaking a study of consumer perceptions of a number of major retail brands; the aims of the study were to understand shopper behaviour and the drivers of business success, and to identify what it is that is giving some brands an edge in today s marketplace, and why some businesses underperform and lose market share. The study collected data using a simple online questionnaire with a series of ratings questions about the shopper journey shown in the diagram below. Access store/ website Browse Decide/ purchase/ checkout Receive/ evaluate Future intentions The data collected from the survey (4,230 responses spread across 18 brands, in four retail subsectors) enabled us to benchmark brand performance in customer experience and analyse the relationship between customer experience and customer loyalty behaviours, such as repeat shopping and spending more in future. As a result we have been able to show how customer experience can contribute to driving customer loyalty and hence commercial performance. And, given that our study captured traditional bricks and mortar brands, online brands and multichannel brands, we have been able to highlight how important a digital and multichannel retail platform is to remaining competitive. This paper highlights the key findings from our study and sets out some pointers and guidelines to help retailers develop their future success strategies. 1. The project referenced in this white paper was delivered by Logica, which CGI acquired in August 2012

4 cgi-group.co.uk 2 Brands reap what they sow To map the various brands and understand how they relate to one another in terms of performance, we calculated each brand s Customer Experience Index and Customer Loyalty Index and plotted the results. The brands that appear in the top right hand corner of the quadrant chart, are clearly doing well; these brands deliver above average customer experience and reap higher loyalty as a result. On the other hand, the brands in the bottom left hand corner have a clear opportunity to increase customer loyalty through improvements in customer experience. 3 GC1 Customer Loyalty Index (Std Dev) T2 C6 T4 GC3 C1 GC2 C2 G1 T1 G2 G3 C3 C4 G4 G5 C5 T Customer Experience Index (Std Dev) Clothing Grocery Technology General Consumer Goods What strikes us about the best performing brands are that they are either retailers trading solely online, or High Street retailers with highly developed and sophisticated online propositions. For example, GC1 and C1 are both online only stores, and are leading the field in both customer experience and loyalty. Online channels make the shopping experience easy and convenient by allowing the consumer to engage in some or all aspects of the customer journey (be it browsing, ordering or purchasing) where they want, how they want and whenever they want, and via myriad of connected devices.

5 cgi-group.co.uk 3 The Grocery sector performs well as a whole, due to a number of retailers having a good online and in-store experience. It is no surprise that a number of grocery retailers score well for loyalty; as their loyalty schemes and cards are among the most mature in retail and the frequency of shopping is high due to the nature of the product. It can be seen from the results that some sectors have significantly better customer experience than others. In the technology sector, T4 is rated as one of the poorest performers overall. One reason why it may be more difficult for brands in the technology sector to achieve a high customer experience and loyalty score is the complexity of the product sale, as well as the confusing and evolving product ranges and longer time elapsing between purchases. The results for the Clothing sector, and General Consumer Goods are diverse, with a number of retailers doing well but some clear underperformers. In these sectors, the pure online retailers are rated well ahead of their bricks and mortar competitors by providing an excellent customer experience, and reaping the benefits of a highly loyal customer base.

6 cgi-group.co.uk 4 Importance of multichannel We asked our sample of shoppers how they would like to shop in future. Significantly, more than half of the in-store shoppers rank online as the number one channel they would like to use to shop with in future. With click and collect registering a strong third, and mobile applications fourth, there is an opportunity for retailers to drive increased sales through multiple digital channels. FUTURE CHANNEL PREFERENCE OF IN STORE CUSTOMERS 3% Website 11% In Store Click & Collect Mobile Application 31% 55% As well as driving sales, the multichannel approach also produces further touch points for the retailer and the customer. Many retailers are beginning to engage with their customers through social media, which can be an extremely positive process. Competitions, sharing of product photos and effective social engagement with brands have been shown to drive loyalty and strengthen a consumer s relationship with a particular brand; however social media is also becoming more prominent as an escalation point for poor customer experience. The social media channel can be used by a customer whether a retailer has a presence in social media or not. So from the point of view of delivering good customer experience, it is important that this channel is well managed and that customers wishing to use this channel are dealt with, in the same manner that a customer complaint which is raised in-store or over the phone would be dealt with.

7 cgi-group.co.uk 5 When we split the results of our benchmark by in-store customer experience and online customer experience, we found that the best performing brands overall are also the best performing brands for online customer experience. The retailers in the grocery sector show some of the best in-store scores. Our results show a strong correlation with the findings in the grocery Christmas statements, that online is becoming more prominent when it comes to separating the key performers in this sector. CUSTOMER EXPERIENCE INDEX GC1 C1 C2 GC2 T1 G1 C3 G2 G3 C4 G4 T2 G5 C5 T3 C6 T4 GC3 Clothing Grocery Technology General Consumer Goods In store Online

8 cgi-group.co.uk 6 Customer journey perspective Our Customer Experience Index and Customer Loyalty Index are derived from a number of questions which indicate how customers felt about their experience at a number of distinct touch points in the customer journey, both in-store and online. By drilling down into these constituent touch points we can see a number of stress points in the customer journey which are key drivers towards a positive experience. The brands that rank highest for the overall customer index perform above or at least around the average at all stages of the in-store and online customer journey. GC1 C1 C2 GC2 T1 G1 C3 G2 G3 C4 G4 T2 G5 C5 T3 C6 T4 GC3 CX Index rank Store accessibility Store browsing Checkout Access to website Easy website Online checkout Delivery As well as giving scores for their experience during their journey, our shoppers also provided us with rich comments that give greater insight into the areas they really value in the customer journey, as well as highlighting those areas they d like to see improved. Customer experience scores are lower with retailers who have poor accessibility; this is brought into sharp focus by a number of the comments alongside the score which relate to long journey time and the inconvenience of travelling to stores. I have to travel 15 miles to the store. Companies with a relatively small estate, have an even stronger reliance on the online channels. One of the most common issues is the time factor. There are a number of brands which are let down by aspects of the online shopping, even though many of them perform well for in-store experience, this is particularly evident in the grocery sector. These results correlate in the messages brought out by the retailers Christmas Trading updates, that online and other convenience channels are becoming increasingly important. As a busy working mother I have come to rely upon online grocery shopping. That reliance is largely to do with the dependability of the service. I like the 1 hour delivery slots - means I can plan my shopping around other commitments.

9 cgi-group.co.uk 7 It appears that convenience is really driving these changes in the retail market, with busy life styles and other pressures on day to day life. The development of new initiatives such as click and collect, and also immediate delivery or allotted delivery slots are clearly making consumers lives easier, resulting in a change in shopping habits. Because of this, customer expectations are also evolving, with innovative retailers moving forward and capitalising on market opportunities. It was easy to find what I wanted and well organised with an confirming the product was ready to collect 10 minutes after I had ordered online....easy to do the click and collect in-store, otherwise you have to pay delivery - but they do deliver next day. Whilst click and collect leverages store presence to meet a consumer need, there are other instances when a store presence is still highly valued. Despite the increasing importance of online, consumers still express the desire to switch between channels, looking to get the look and feel of goods before a purchase, especially when spending a significant amount of money. This highlights the importance of providing an integrated and consistent customer experience across channels and therefore allowing consumers to use the mix of channels that fits their shopping lifestyle. I d still prefer to try something on if I was spending a lot of money for an occasion. Multichannel would therefore seem the way forward and further support for this was found in the technology sector. Here the in-store shopping experience, especially in the phone retail sector suffers from overcrowded stores, difficulty in browsing, difficulty in obtaining service and poor checkout service. The comment below was fairly typical among the customers who had a poor experience: There are a lot of procedures to go through and the store was busy so I had a long wait. Under these circumstances effective online merchandising would help those customers who are prepared to use online channels as part of their decision making process for the purpose of narrowing down their selection of phones. I research the range of items I want online. I will shop with them if they offer what I want. I prefer to shop in-store after having done some research online. The store is then used for final look and feel, and to make the final purchase decision most of the browsing having already been done in advance online. The growing importance of online channels has sparked debate among retailers as to the value of their store presence. Our results show that despite the fact the high street is changing, the majority of consumers still value its existence. Consumers express an interest in being able to access the stores and interact with the products, regardless of the retail subsector. However, with customer needs and preferences evolving towards shopping multichannel and proof that the successful brands are the ones that are already responding, any retail brand that does not have a viable online strategy is at risk of losing competitiveness and market share.

10 cgi-group.co.uk 8 The differences between good and poor performers The key point about these performance benchmarks is that they tell us how well brands are performing against their peers across the elements of the customer journey. Successful brands are consistently good in the quality of the customer experience across all channels. They have understood that digital offers consumers an easy way to engage with the brand at various stages in the shopping journey; and they are providing the means for consumers to choose a purchase path which suits them best. They have put in place appropriate links between touch points, using mobile apps and websites appropriately, and in some cases offering online capability in-store for a truly integrated approach and our results indicate that seamless integration of channels is a critical success factor in delivering a good customer journey. Finally, the best performers have also ensured that customer support is a well publicised part of the customer journey and available in a choice of formats, from , to telephone to live web chat. GROCERY RETAILERS Little separates the Grocery retailers when it comes to in-store experience; it is the online experience which causes the divide and highlights the good and poor performers. With a growing number of online shoppers, there are a number of improvements in the customer experience which could be made to increase brand loyalty. CUSTOMER EXPERIENCE INDEX - Grocery Customer Experience Score G1 G2 G3 G4 G5 In store Online The Grocery retailers are clearly rapidly evolving in the online space, with a number of new and exciting developments around click and collect, as well as sophisticated online delivery. The best customer experiences in this sector tend to be around the reliability of the service, hour slots, the ease of shopping online, intelligent previously bought lists, and the front line service provided by delivery drivers. Always get good service and their delivery drivers excel with customer service. This awareness that customer service and brand values need to be addressed cross-channel has led to the grocery sector performing very positively in a number of aspects of the benchmark.

11 cgi-group.co.uk 9 Clothing retailers The clothing store brands are very diverse across their own peer group. Despite a number of comments around wanting to try clothes on and get the look and feel of clothes before a purchase, the best performing clothing brands stand out as online only retailers, or those which offer a good online experience. Clothing retailers that make the customer experience easier by offering free returns and free delivery, are performing well in this sector. A good delivery service along with click and collect is addressing the immediacy of the shopping experience. The rich comments provided alongside the benchmark indicate a number of small improvements which could make a big difference to the customer journey, for example, a number of respondents were keen to see better tracking for the delivery of goods ordered online. A number of retailers are now beginning to provide hourly slots for delivery, which in turn is raising customer s expectations of what is possible. Could give more info when the product is due to arrive. Rapid delivery, would be nice to specify a time You can see from the Customer Experience Scores that online success is really driving the experience. For the clothing sector, a number of retailers achieve above average for their online experience. CUSTOMER EXPERIENCE INDEX - Clothing Customer Experience Score C1 C2 C3 C4 C5 C6 In store Online

12 cgi-group.co.uk 10 Technology retailers In this sector, there appears to be a good opportunity to drive business by improving customer experience. Rapid advances in technology place a premium on an experience that helps a consumer to understand what value new technology offers. Consumers therefore require guidance and information as part of the service, whether in-store or online. Retailers that provide convenient channels, such as website and mobile applications, that allow their customers to view products, find tariff information and read product reviews will more likely engage customers in the early buying process. The results of the benchmark suggest that there is significant room for improvement in terms of how technology retailers exploit their online channels to provide these information services. Interestingly, despite the fact that the technology sector isn t performing as well as a number of the other sectors overall, it is the store experience which separates the technology sector rather than online. CUSTOMER EXPERIENCE INDEX - Technology Customer Experience Score T T2 T3 T4 In store Online Consumer behaviour suggests that a fully integrated in-store and online strategy would provide a great benefit in this sector; to help customers in their decision making process for what is often a complex product or pricing model, and also to help store staff increase the level of knowledge they have about their products. Whether it is a new smart phone or a new kettle that they are looking for, customers will often browse online and make product selections and make like-for-like comparisons between different products, ending up with a shortlist of similar items. However, consumers are often reluctant to actually purchase these items online unseen, preferring to go in-store to touch, feel and look at the product or products they have selected before making a decision. Customers move through a number of channels, making integration and consistency key to providing a seamless journey. A number of retailers in this sector are beginning to address the loyalty issues by putting in place services which are aimed to increase a consumer s stickiness to a brand. These services include technical support, lessons on how to use products, subscriptions to cloud based services for storage and complex aftercare packages.

13 cgi-group.co.uk 11 general consumer goods This sector shows the greatest variation across the brands of all the sectors we looked at. The difference between the top and bottom performer is wide. The retailers that have done well in this sector have a presence on all digital touch points. This allows customers to maximise the convenience of reserving products and then collecting in-store (click and collect), it seems to work well. Both GC1 and GC2 have mobile apps where you can purchase goods, adapting to the changing retail market. GC2 provides an example of effective integration of channels where the customer movement across channels is seamless and serves to make for an easy shopping experience. This strategy seems to work making it as easy and seamless as possible at every touch point. CUSTOMER EXPERIENCE INDEX - General Consumer Goods Customer Experience Score GC1 GC2 GC3 In store Online

14 cgi-group.co.uk 12 Commercial Implications We have seen how customer experience is strongly related to customer loyalty in the relationship between the respective indices. However, this relationship is more complicated than it first seems. Whilst brands with a strong performance in customer experience generate strong declarations of future intentions to continue to shop with them, they are not always favoured in terms of spending more. What we are seeing here is the discretionary spending effect at work; grocery shoppers would ideally like to cap the amount of money they spend on cost of living items like food, but ideally anticipate spending more in future on the latest gadgets, mobile phone technology and trends in new clothing. A common theme for all brands in the search for increased spending is that they all have integrated digital propositions that are aligned to the prevailing consumer preference for shopping using multiple channels - only 3 brands show increased spending for in-store whereas ten brands show increased spending for online. 30 Intention to spend more in the future: By Brand (Dec 2012) 20 Customer Score GC1 C1 C2 GC2 T1 G1 C3 G2 G3 C4 G4 T2 G5 C5 T3 C6 T4 GC3 Clothing Grocery Technology General Consumer Goods In store Online As well as looking at the way in which customers intend to spend in the future, we looked into what motivates customers to continue to shop with a brand. Not surprisingly, the quality of the product and services offered by a retailer is a key motivator for both store and digital channels. It is interesting to see how the drivers vary between in-store shoppers and online. With price, ease of shop and value for money really driving the online market, and in-store dominated by quality and ease of access. Analyses of verbatim customer comments show that ease of paying and checkingout are the main components of easy shopping.

15 cgi-group.co.uk 13 These results imply that innovation, company values and loyalty programmes are a nice to have feature when it comes to repeat shopping and spending. The real value in retaining customers is performing well on the core retail business functions, which lead to a good customer experience. CONTINUE SHOPPING Quality Ease of access Easy to shop Cheaper Value for money Great service Other Innovative In store Online Loyalty programme Company values 0% 5% 10% 15% 20% 25% 30%

16 cgi-group.co.uk 14 Conclusion All things being equal, customers who have a favourable shopping experience are likely to want to repeat the experience and indeed, this is what the results of our analysis show. The brands that have invested in digital channels deliver better customer experiences and customers of these brands are more loyal. With online sales estimated to reach 13.2% of total retail sales in 2012*, and the speed of growth in online sales moving at a pace, this strongly suggests that investment in online should deliver improved business and commercial results. But can a retailer survive on a store based strategy or an online based strategy alone? The established leading online retailers are acutely aware of why consumers shop in store and their strategies are geared to removing these as barriers to shopping online. Immediacy is being addressed by next day delivery - and even same day delivery in some cases. Easy and free returns help to address quality of product concerns. Innovations in mobile apps and interactive websites are designed to make online shopping an enjoyable experience. So how do traditional retailers combat this? Our view is that the key to success is integration, integration, integration! The findings in this paper show that successful brands have not only embraced digital channels but also integrated them with their in-store proposition. Successful brands appreciate the need to be available to as many customers and as much of the population as possible. They understand the shopping journey in the context of today s market place; they recognise the value of digital channels and what they offer consumers in terms of meeting their needs in successive stages of the shopping journey, such as check online but buy or collect in-store. They realise that an online proposition can in fact increase footfall at the store. By evolving their digital and online propositions and combining the best of all worlds by integrating them in a retail ecosystem means these successful brands will continue to prosper. Our study therefore presents a compelling case for brands to invest in digital and online channels. From a business perspective it means: Expanding the channels available to consumers to enable them to choose how they will undertake the customer journey and a purchase path that suits them. Ensuring appropriate links between channels so that the experience is seamless - for example, customers will be able to see what they purchased in-store when they go online, and product ranges and discounts are aligned between channels. Making digital experiences brand specific, highly relevant and personalised to individual shoppers, to stand out from the competition make recommendations based on previous purchases, offer alternatives and matching items/accessories. Using mobile technology to enhance convenient/easy shopping e.g. using SMS to provide information on order fulfilment and mobile apps to enhance perceived value of the brand. Ensure customer support is an integral part of the customer experience. Customers in digital channels must not be prevented or discouraged from contacting the retailer. These are significant business process, systems and IT challenges; but the successful brands have already started to conquer them; proving it can be done and that it is key to success and profitability. So, what next? From our research and work with retailers and other consumer focused businesses, CGI have identified a pressing need to create a more rigorous approach to multichannel customer experience management; a methodology that is based on data and facts rather than gut feel and intuition. In-store and back-office systems and processes must support the business strategy throughout the complete customer experience. It is key to commercial success to analyse the impacts and benefits to be gained from customer experience programmes from: organisation and culture, talent management, channel integration, systems and processes and

17 cgi-group.co.uk 15 the rapid and ongoing application of insight. We believe that the techniques and analytic tools are now available that allow a business to place its bets on improving its multichannel customer experience management with a clear view of the outcomes to be expected from these investments. We have developed an industry and segment specific model that creates a relationship between customer experience and commercial performance. The first component of our model is a Customer Experience Driver Model, which identifies what attributes of the customer experience drive the customer s perception of customer satisfaction and quantifies the impact of these attributes. This model is useful but in order to measure the value that increased customer satisfaction delivers to the business, we need to establish the relationship between customer attitudes and their actual buying behaviour. The second component of our model, therefore, combines the data and analytic results available from customer feedback surveys with actual customer buying patterns acquired though sales transaction and loyalty card data analysis. Armed with this model, we can for example estimate the improvement in customer satisfaction we would expect from a planned improvement in the ease of shopping attribute, but more importantly we can then in turn estimate the improvement in loyalty, and ultimately the resulting increase in value from (in the case of groceries) an increase in the share of basket. Because our model has been constructed around multichannel customer experience and recognises the importance of the digital and online channels, we believe it enables a retailer to answer some of the questions we posed at the beginning of this white paper, namely how to develop a retail model that enables the physical and digital retail propositions to work harmoniously together and offer rewards of increased sales and market share. CGI is one of the leading independent information technology and business process services firms in the world. Using leading edge technologies for both on and off-line ecommerce, Marketing, Sales and Service, we design and implement solutions and business processes which deliver enhanced customer value. These solutions empower organisations to unlock the insights in their data, to deploy this knowledge and intelligence to drive improvements and enhancements in joined-up customer experience, and to deliver increased customer acquisition, spend and loyalty. We then work with our clients to ensure that their strategies, business processes, and ongoing use of these solutions deliver genuine business performance improvement and increased profitability, through the provision of support, management and operational outsourcing as required. Our approach to data analytics enables our clients to understand how their customer initiatives impact their profitability and creates value by aligning the customer perspective to the business strategy. We work closely with our clients to understand their business and the value their customers create for their business. Data analytics is a key component of the process as it helps us to identify patterns and relationships in the data to create insight into customers attributes, attitudes and behaviours. But our approach to analytics extends beyond customer insight to create value from data. By combining customer insight with our technology and industry expertise, we enable our clients to translate the insight into a strategy for continuous value creation though relevance, efficiency and effectiveness of operations, marketing, sales and services.

18 cgi-group.co.uk 16 Our approach to data analytics builds on the wider CGI data and technology expertise to deliver Better understanding of customers through customer profiling and segmentation, Building and maintaining a loyal customer base through customer acquisition and retention modelling, Maximising customer lifetime value through analytical customer relationship management solutions, Tactical customer management and revenue generation through pricing and promotions, and Strategic business performance management through customer profitability analytics. Our past projects include: Developing a single customer view capability for a convenience retail offering of a global oil and gas corporation. Using advanced analytical methods we modelled the behaviour of their customer base to provide insight into the qualitative differences between customers that engage with the brand through their loyalty scheme and the ones that do not. Improving customer retention and satisfaction for a European mobile phone operator. We developed a customer churn model based on an integrated data solution to help our client achieve a record breaking reduction in level of customer churn. Developing lifestyle segmentations for a large utilities company. Using smart meter consumption data we used dimension reduction techniques to develop customer lifestyle segmentations based on their energy consumption patterns. Developing a targeted offering model for use in customer call centres of a large European mobile phone operator. Using predictive analytical models to offer the most appropriate product to each caller, our client was able to convert the customer service centre into a highly successful inbound sales channel. Transforming the go to market presence and service offerings for a large European bookmaker and on-line gaming operator. Using our expert knowledge on best practice data driven marketing processes and infrastructure, we performed a marketing capabilities audit to assess how data is used to inform and drive tactical and strategic marketing activities, and product and service development. Our data analytics services are part of our wider Business Consulting offering on enterprise performance, analytics and data. With a dedicated team of experienced analytics consultants we help our clients to create value from their data across a number of sectors.

19 CGI GROUP INC. T: + 44 (0) E: cgi.com With over 69,000 professionals in countries, CGI fosters local accountability for client success while bringing global delivery capabilities to clients front doors. Founded in 1976, CGI applies a disciplined delivery approach that has achieved an industry-leading track record of on-time, on-budget projects. Our high-quality business consulting, systems integration and outsourcing services help clients leverage current investments while adopting new technology and business strategies that achieve top and bottom line results. As a demonstration of our commitment, our average client satisfaction score for the past 10 years has measured consistently higher than 9 out of CGI GROUP INC. Code All rights reserved. This document is protected by international copyright law and may not be reprinted, reproduced, copied or utilised in whole or in part by any means including electronic, mec hanical, or other means without the prior written consent of CGI. Whilst reasonable care has been taken by CGI to ensure the information contained herein is reasonably accurate, CGI shall not, under any circumstances be liable for any loss or damage (direct or consequential) suffered by any party as a result of the contents of this publication or the reliance of any party thereon or any inaccuracy or omission therein. The information in this document is therefore provided on an as is basis without warranty and is subject to change without further notice and cannot be construed as a commitment by CGI.

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