1 A lesson in loyalty One of the key prerequisites of effective retailing is achieving customer loyalty. However, with the rise of cross-channel shopping, this is proving somewhat difficult. Lindsay James finds out how Microsoft and its partners are working to change this As today s customers have evolved, retailers are finding it increasingly difficult to foster loyalty. Driven by the pervasive nature of the internet, consumers are getting swept up in the multi-channel storm, and are increasingly learning, shopping, and communicating in new ways. Unpredictable and capricious, these customers no longer believe that long-term brand loyalty will guarantee the best all-round value or the most satisfying shopping experience. And this presents a mammoth challenge to retailers. Retailers need to find a way to succeed in this new reality, says Dilip Popat, global industry director at Microsoft. They must move beyond simply reacting to consumer trends, and instead they need to understand the underlying changes, and then build on them. They need to learn much more about their customers, deliver the experiences that today s smart shoppers demand, and participate in the new forms of communication that consumers favour. Today s consumers are presented with and welcome a growing number of channels through which they can buy from, adds Tony Bryant, head of business development at K3 Retail. Their ever more diverse shopping journey may take them to the store, website, catalogue, or increasingly, any combination of these choices, in whatever sequence suits their personal circumstances or inclination. In other words, they want to channel-hop. To earn customer loyalty today, retailers need to stay in touch with, and motivate, customers across all channels, attracting new customers, retaining existing ones and influencing their spend rather than trying to control them. Patrick Munden, head of European seller communications for internet giant ebay, agrees: The old distinctions of online and offline are rapidly blurring, he says. In fact, they are disappearing. A new retail is emerging to provide a seamless way of shopping that is more convenient, accessible, local and global and more relevant to more
3 consumers than anything yet seen. This new retail is internet-enabled, platformsupported and technology-driven. Today a store is wherever you want it to be, and so, in order to maintain customer loyalty, retailers need to take a tailored approach to each channel so as to not compromise customer demand and/or the retail experience. Success, then, depends on retailers ability to adapt to the new reality consumers are shaping. As they make these changes, they will transform their businesses into more customer-centric organisations, and they will drive customer centricity as a core value. Unfortunately, however, many retailers are lacking the tools to develop this strong connection with their customers, particularly in the multi-channel world. According to Aberdeen s March 2011 report, Next Generation Customer Loyalty: The Evolution of the Digital Customer, only 25 per cent of retailers, and 33 per cent of the best in class, have an integrated loyalty management solution, and more than one fifth of retailers have identified a lack of marketing across all channels as a top pressure pertaining to their loyalty efforts. A common failing is in the delivery of true multi-channel retailing, says Russell Dorset, sales and marketing director at Maginus. Even with rising customer expectations, many retailers still find it difficult to deliver a true multichannel offering. Not only this, but the increased uptake in m-commerce compounds the issue further, making it even more important for a retailer to integrate its sales channels, or risk a complex landscape, resulting in poor customer service and loss of loyalty. In fact, with recent statistics from Aldata s Global Retail CIO Survey 2011 highlighting that 41 per cent of all retailers plan to add a mobile channel within the next three years, it would seem that even pure-play e-tailers are having to meet the multi-channel challenge. We ve seen a rapid growth and adoption of mobile shopping over the last year, says ebay s Munden. In 2010, ebay global sales through mobile devices more than tripled from US$600million in 2009 to US$2 billion. These are expected to grow to US$4billion in Our recent research into m-commerce revealed some interesting points, he continues. A third of consumers who shopped via their mobile never completed their transactions due to frustrations with erratic network coverage and slow connection speeds. 88 per cent of consumers are less likely to shop via their handsets, because many shopping websites are not optimised for mobiles. While these frustrations need to be addressed by mobile operators and network providers, retailers too have a role to play to ensure they can meet the consumer demand for mobile shopping, and deliver the experience they expect, whichever channel they choose. Clearly something needs to be done about the current level of channel integration, and this is something that Microsoft has acknowledged. We understand that retailers need increasingly powerful, user-friendly, and affordable solutions, says Popat. And we understand that these solutions need to be integrated to allow business processes to be connected to customers needs, irrespective of the channels they are using. That s why we have developed Microsoft Dynamics AX for Retail. Microsoft Dynamics AX for Retail provides vital integration across the retail value chain, giving retailers all of the tools and visibility they need to facilitate a much needed boost to their cross-channel loyalty strategy. By creating centralised information and automating processes, retailers can ensure consistent practices and pricing across multiple channels, says Klavs Skovgaard Lund, product manager at To-Increase. They can also create and distribute specific offers, coupons and rebate combinations, facilitating better inventory managements and lowering costs. Microsoft Gold Partner Maginus has been using the solution as a platform for its Multi- Channel Commerce (MCC) solution for a number of years. Dynamics AX for Retail is a store and head office foundation system for traditional bricks and mortar retailers which, when complimented with MCC, Keeping stock: having the right items, in the right place, at the right time Leading retailers constantly think about what gives their customers an incentive to return. Typically, it s a product selection that consistently meets their needs, yet also offers fresh, new items that could increase their interest that s not forgetting reduced prices, which can also drive up foot traffic. Peter Leith, director of product strategy at JustEnough Software, says that advanced assortment planning solutions can help retailers capitalise on their customers buying behaviours by offering the right mix of product inventory down to the attribute level, such as colour and size. By default, an optimised assortment planning process will increase customer loyalty, improve sales and drive up margins, he says. Higher margins help free up money that retailers can spend on initiatives such as proactively planning markdowns that target their most loyal customers. As a result, these businesses can expect higher in-store traffic and reduced stock write-offs at the end of the season. Customers want to feel like retailers truly understand them and know what they are looking for, and Leith says that s ultimately what creates a sense of loyalty toward the brand. At the heart of this is incorporating demand signals into deeper aspects of the planning process, he adds. Today s advanced planning technology makes this possible for retailers of any size and type. In the future, retailers are going to have to get better at using granular demand data to ensure they are offering exactly what their customers want, at the right time, across every channel and for the right price.
4 unleashes its real power to provide a multichannel consumer experience which in turn delivers on customer demands and therefore creates customer loyalty, explains Dorset. The key benefit for the retailer is that they gain 360-degree visibility of their customers across all channels, which helps to maximise sales, minimise costs, improve efficiency and personalise the customer experience. Another partner building on the solution is Aldata, with its Retail solution that helps retailers to engage more closely with their customers. Designed specifically for mid-size and speciality retailers, it delivers the security of the Dynamics AX for Retail platform fully integrated with the tools to create highly targeted marketing campaigns and deliver them to customers at the time most likely to influence purchase, via their preferred communication channel: whether it be internet, text message, or print, says Mark Croxton, Aldata UK managing director. This increases customer retention and boosts sales by allowing retailers to analyse and drive marketing campaigns based on customers purchase behaviour and buying patterns, test new product introductions and link the intelligence from this directly into their front- and back-office operations. Clearly, Dynamics AX for Retail is providing the base platform for many successes in the industry, but this is just the beginning. The second iteration of the solution, Dynamics AX for Retail R2, was made available earlier this year and is set to change the way retailers operate forever. With the R2 release we have enhanced the solution in a number of areas, firstly at a functional level with additional capabilities to drive the whole loyalty process, adds Popat. The solution gives retailers the end-to-end visibility that they need, from the store back to the supply chain. That integration is key because it provides the insight that enables retailers to be able to respond to what is happening to the consumer and see the impact it has on the business. And this isn t the only new release from Microsoft that has set tongues wagging. The software giant s latest customer relationship management (CRM) offering, Dynamics CRM 2011, was also unveiled earlier this year, and has already received a string of plaudits. Indeed, the solution delivers breakthrough productivity by providing familiar, intelligent and connected experiences to users in all areas of customer interface for the retail organisation. In January, we launched what I consider a seminal and historic product for the CRM industry, remarked Kirill Tatarinov, corporate vice president of Microsoft Business Solutions, at Convergence With the deep customer care capabilities that come with the product, we provide capabilities that help call centres and support organisations for companies of all sizes worldwide to run on this modern technology and be much more efficient. And it s worth noting that Microsoft, 100 per cent of Microsoft, this year runs on Microsoft Dynamics CRM, and that is another testament of how the product is ready for a super global scale. Partners such as K3 are leveraging the CRM platform to deliver added value. To develop a good loyalty programme, retailers need to understand loyalty across customers, products and channels, and this is the functionality that Dynamics CRM delivers, explains Bryant. The portal allows easy integration with existing systems, providing multiple membership tiers and membership with both card and cardless support. In addition, the solution supports configurable business rules for earning loyalty points, balance points, ageing, and support for different redemption methods, including regular Open for business: connecting with today s shoppers Research shows that, in most instances, shoppers make up their minds about what they are going to buy within a few seconds of entering a store. When a customer enters a shop, 70 per cent of the time they make their buying decision in the first few seconds, says Monica Menghini, global vice president for consumer goods and retail industries at Dassault Systèmes. But that does not mean shoppers are impulsive. In fact, today s shoppers are more informed and empowered about their purchasing options than ever before, actually making them less prone to impulse buying. They know what they want, and they expect companies to innovate and bring products to market faster than ever before. Shoppers are consumers with an active reason to buy, Menghini says. They experience shopping as a holistic set of choices. Each brand must overcome barriers at each decision point encountered by the shopper and must deliver the right message when and where the shopper is the most receptive. Otherwise, even the best brands simply become clutter. Increasingly, shopping is a multi-sensory experience that must appeal to consumers through sight, touch, sound, smell and taste. Seeing through the eyes of the shopper is a way to create mystery, intimacy and sensuality with the consumers of this century, because shoppers are first moved by emotion, Menghini explains. Nothing is more sensorial than a shopping experience, but only seven per cent of shoppers rate shopping as an exciting experience. Menghini says the first 'moment of truth' has become the store. The next creative revolution for the fastmoving consumer industries is going to happen in the store, and this is where Dassault Systèmes is going, she says. With solutions like 3DVIA Shopper, our mission is to prescribe the right solution to win in stores. From store, space and shelf configurators to design and lifelike experience solutions, Dassault Systèmes is working to offer the consumer industries an end-to-end solution with the same shopper-centric vision that our clients have today.
5 purchases, gift cards and so on, from various channels. This is then backed up with the ability to collect customer information and break it down to meaningful analytics. What s more, by using Dynamics CRM 2011 and Dynamics AX for Retail in tandem, retailers can achieve even more, using the combination to support their clientelling and marketing efforts. As Popat explains: CRM is a great tool for holding customers records and the history of what a customer is doing, but then how do you use that with loyalty and clientelling solutions? Clientelling fundamentally involves taking the consumer information you have already got across channels and personalising it so that you can understand what each individual wants, and this can be easily achieved with the combination of our solutions. Not only do these solutions help a retailer to improve end-to-end customer centricity in its business, but they also help deliver the connected experiences that today s shoppers demand across channels. With a consistent 360-degree view of the customer across all channels, top line revenue growth should improve with better conversion rates and average purchase spend should increase through cross-selling opportunities and promotions, Bryant says. Enhanced brand value across the channels with cost-effective marketing campaigns and better customer insight enables multiple choice access points Research shows that shoppers make purchase decisions within seconds of entering a store for the consumer, yet one voice response from no longer has a place in the new digital and the retailer. Informed, efficient staff know the connected world. Consumers will continue customer and excel in customer satisfaction. to demand a higher level of service and value Looking to the future, Popat believes that from retailers, and loyalty will only happen the traditional concept of long-term loyalty when retailers succeed in delivering a truly to a brand or retailer is now in the past, and connected experience, something they will Multi-channel customer relationships: the facts of the matter A recent report from Aldata has highlighted that customer relationship management, loyalty systems and mobile commerce have become the top investment priorities for retailers this year, displacing promotions management and promotions optimisation from their previous top spot. The Multi-Channel Customer Relationships report, which is based on the findings from the Global Retail CIO Survey 2011 goes on to explain that the continued unpredictable economic climate is forcing retailers to consider how they can retain and build on sales from existing customers. And, after many years of expressing customer first ideologies and the importance of loyalty programmes, it seems that now investment is being put in place to support and sustain these concepts. Within three years 80 per cent of those retailers interviewed plan to have a single view of the customer across all sales channels. A massive 46 per cent of retailers plan to implement new systems to gain a single view of the customer over the next three years. When it comes to comprehensive loyalty solutions, 44 per cent will implement new systems and a further 11 per cent will upgrade their current systems. Also of interest is the fact that while in food retail there is a high level of loyalty system deployment (47 per cent), an equal number of non-food retailers are looking to catch up and possibly leapfrog their food retail peers by deploying new solutions during the next three years. 45