MINE YOUR OWN BUSINESS: ANALYTICS AND THE PATH TO PERSONALIZATION

Transcription

1 MINE YOUR OWN BUSINESS: ANALYTICS AND THE PATH TO PERSONALIZATION White Paper February 2015

2 2 INTRODUCTION: MINE YOUR OWN BUSINESS: THE PATH TO PERSONALIZATION The key to a customer s heart is through personalization shows that you care enough to have taken the time to determine what products or services they may want. But in an age when shoppers change channels more often than their underwear, getting an accurate view of consumer behavior across channels mobile, tablet, computer, kiosk and, yes, in-store shopping is more complicated than ever. Here s the good news: Access to customers via digital and social channels has lowered the barrier to entry for merchants of all sizes to compete in the ecommerce landscape. And, here s the bad news: Access to customers via digital and social channels has caused a whole lot of white noise, making it more challenging than ever to reach attention-challenged consumers. That s why leading retailers and etailers, like Walmart and Amazon, are leveraging rich consumer data to deliver a more personalized shopping experience tailored to the customer s profile and interests. BIG DATA = HUGE OPPORTUNITY Data mining has evolved dramatically over the past several years. Gone are the days when implementing a Google Analytics account gave you enough insight to drive an effective ecommerce strategy. Today s merchants recognize that the majority of consumers are likely to touch multiple channels before making a purchase (Custora). And while doomsayers are quick to predict the demise of the physical store at the hands of leviathans like Amazon and Alibaba, more than 70% of consumers still prefer to engage with the products they love in a physical store before making a purchase (PwC). In fact, Gartner predicts 85% of retail revenue will come from physical stores by Online merchants like Amazon have demonstrated the success of leveraging customer data to provide recommended product offerings. However, personalization is still a nascent field. Amazon has been known to reach inaccurate conclusions that leave customers at best amused, and at worst offended. Seemingly newbie mistakes like showing coffee makers to a customer who just purchased a coffee maker, when this is arguably a three-year purchase will leave customers cold.

3 3 Nonetheless, today s brick-and-mortar stores are starting to use their data to drive the same kind of online marketing success seen with ecommerce sales over in-store channels. That s why retail giant, Walmart, established a Silicon Valley in According to the company s VP of Engineering Ron Benson, Walmart is aggregating data across online and offline channels to improve engagement whenever and wherever the customer shops. Target is similarly capitalizing on cross-channel data, building persona-based customer profiles that interpolate purchase history, age, marital status, estimated salary and Web search history to deliver a more relevant and personalized shopping experience. The most famous example of Target s use of data is their ability to use purchase behavior to know a pregnant woman s due date before even her family knows (New York Times). The upshot? Today s leading cross-channel retailers have reached a critical inflection point. Applying the rules and tools of ecommerce, retailers are beginning to parse data from a variety of sources to develop a 360-degree view of the customer. Using that data they can deliver the frictionless, personalized cross-channel shopping experiences their customers want. So Many Sources, So Little Time Let s begin with the obvious: online sales are on the rise. In fact, Internet sales grew 18%, from $1.06 trillion in 2012 to $1.25 trillion in 2013, according to EMarketer. An increasing proportion of that online traffic is coming from mobile devices, which accounted for half of ecommerce traffic in Q1 14, up from 3% in Q1 10 (Custora). What s more, this trend shows no sign of reversing. Custora expects mobile commerce to increase from $40 billion to $50 billion in While mobile traffic is increasing, mobile sales are lagging (Custora). It appears more and more customers are turning to their mobile phones to research products, engage in showrooming (in-store comparison shopping), and to check inventory visibility, but still complete the majority of purchases in-store or online via computer. Savvy merchants are tracking these customers across channels over time to understand what combination of channel marketing initiatives will optimize sales and lifetime customer retention.

4 4 Industry-leading brands and retailers, like Apple and Saks, have also been experimenting with what they call contextual shopping. Using beacon technology, these retailers push relevant text notifications to in-store shoppers, offering targeted sales and promotions. While beacon technology remains controversial with many customers finding the experience intrusive, if not downright creepy the data pulled from in-store shopping has helped flesh out the 360-degree customer view. Beacon technology: Beacon technology consists of small, low-power Bluetooth communications devices installed in stores that communicate with customers smartphones to gather analytic data and provide proximity based targeting to individual customers. Retailers have long desired the ability to reach customers on their cell phones while shopping. However, challenges of wireless cellular transmission within buildings has limited the effectiveness. With smartphone adoption at over 50%, beacons which only communicate with smartphones provide an alternative to the cellular communications network for communicating with customers in building. The biggest challenge with adoption of beacon technology is gaining consumer permission. While most opt-in customers have shown to be receptive to the product information, flash sales, promotional messages, or checkout assistance that beacons enable, some customers dislike creep factor when receiving highly targeted messages based on their in-store behavior. Nonetheless, beacon technology is probably here to stay, and retailers will hone best practices over the coming months. The power of data and personalization coupled with the ability to reach customers directly is too important to ignore. According to Pew research, shopping is also becoming more social. Holiday sales data in 2013 demonstrated that nearly 65% of customers selected holiday gifts promoted on social channels. And more than 44% of consumers consulted with their social network before making a holiday purchase. In sum, a large percentage of today s customers engage in social shopping reaching out to friends and influencers on social media channels before making a purchase. And let s not forget the granddaddy of online data SEO. When it comes to online search, the top three results yield 60% of all clicks, reports Optify. Unfortunately, building a winning SEO strategy is not a simple set-it-and-forget-it initiative. Rather, SEO requires ongoing tracking and tweaking to align the most impactful keywords to relevant content on your channels. At a bare minimum, this requires a comprehensive audit followed by routine reporting to determine trending keywords within your space, along with ongoing relevancy analyses based on bounce rates and, most importantly, conversion.

5 5 Understanding which products customers are searching for in various locations and what keywords they are using to find them has become a veritable goldmine for cross-channel retail product marketers and merchandisers. Retail commerce leader Shopatron recently launched an online Inventory Lookup tool that enables in-store shoppers to instantly locate the products they want on retail websites, while providing real-time data from online product searches by location, SKU and date range, helping retailers optimize product marketing and stocking habits. Shopatron Retailer Inventory Lookup: Many shoppers still prefer to research online, but purchase in a store. Yet before they head to the store, they want to know that inventory is available to fulfill their order. Failure to provide the right information will result in lost sales. Inventory look-up provides three benefits: Seamless shopping that drives All of this data can help retailers continually improve their ecommerce success but only if they turn insights into action. As we said before, most consumers interact with more than one channel before making a purchase and the majority still indicate a preference for physically engaging with sales Increased in-store foot traffic Fewer out-of-stock scenarios. products in-store (PwC). Smart retailers understand that to maximize the value of their marketing efforts, they must broaden their perspective to comprehend consumer behavior in the brick-and-mortar space as well. CHARTING THE PATHS TO SUCCESS In many ways, tracking consumer behavior on a website is far simpler than monitoring in-store activity. Implementing accurate customer counting and in-store interaction with products requires digital eyeballs that capture behavior without intruding on consumer privacy. Leading retail analytics companies like Prism Skylabs utilize a retailer s existing security cameras to produce heat maps that detail customer interactions with products on shelves, including customer counting and cart abandonment. Enabling access to data via any device, Prism removes physical identity to comply with global privacy requirements. This model enables retailers to A/B test merchandising and inventory at different store locations to offer the kind of in-depth analysis previously available only on ecommerce sites. Embracing the showrooming phenomenon, big box retailers like Best Buy are equipping sales associates with tablets that provide extensive product information along with save-the-sale inducements, including geo-targeted deals and promotions. The sales associate functions as a marketing assistant, asking customers where they ve learned about products to gain a better understanding of the multi-touch experience. Data captured by sales associates, including qualitative observations that ecommerce sites cannot match, provide retailers with a more holistic view of the customer, helping retailers determine what s moving the needle by customer market segment, product and location. A new breed of analytics has also emerged around PoS technology, enabling retailers to integrate in-store purchase data with customer profiles pulled from other channels. Leading ecommerce solution providers like LYONSCG implement industry-leading PoS systems that not only track purchasing, payments and inventory in real-time, but also provide geo-targeted data on which products are selling in various locations across online and offline channels, providing a comprehensive view of consumer conversion.

6 6 Piecing the Puzzle Together Of course, what retailers truly want is a precise formula they can implement to turn online and offline data into sales. Divining the retail DaVinci code which is to say, anticipating how best to predict and guide the customer s shopping journey across a multiplicity of online and offline channels to optimize conversion has become the holy grail of retail commerce. The new paradigm for enterprise retailers with omni-channel presence Walmart, Target and Macy s is to analyze data across channels to improve understanding of multi-touch consumer behavior. Once retailers can systematically track consumer behavior that drives sales, they can incorporate predictive analytics that target customers with relevant promotions via the channels they prefer. However, according to Gartner, less than 5% of ecommerce companies currently use predictive analytic software. The ones who do Amazon, China s Alibaba and Japan s Rakuten are already integrating predictive modeling to improve ad and product marketing, and fuel conversion and customer loyalty. One interesting initiative that has grown out of this model is dynamic pricing. Walmart recently introduced this controversial pricing strategy, which factors in a cross-section of data about the customer, including location, income as well as other demographic information, to offer relevant products at optimal pricing. Implementing this strategy, Walmart is constantly running A/B tests on its product offerings and pricing, creating an endless data loop that enables them to refine their predictive modeling and product marketing efforts to drive conversion. As Karenann Terrell, executive vice president and CIO of Walmart stores, says Big data is helping us be a better company.

7 7 Let s Get Personal When it comes to customer targeting, there s a fine line between personalized and creepy. No doubt, we all remember the scene in the sci-fi dystopia, Minority Report, where Tom Cruise walks past an interactive billboard and receives a personalized product pitch based on his profile and purchase history. Eyeball scanning notwithstanding, that day is coming soon. Engineers are already hard at work developing technology that identifies consumers based on mobile phone numbers and facial recognition. And once that shopper has been identified, their profile and purchase history get stirred up with predictive analytics to deliver irresistible product offerings. So, how do consumers feel about this trend? According to a recent article in Forbes, 64% of consumers are concerned about websites tracking their buying behavior. Ironically, the same study revealed that 64% reported that they would welcome text-based offers while shopping in-store, especially if they featured competitive pricing. Clearly there s consumer appetite for personalization, so long as the customer controls the experience. According to Steven Baxter, solution manager at NCR, the vast majority of consumers appreciate retailers who enable them to control how they engage. These customers want a say in how, when, and where retailers reach out to them with the ability to select preferred channels. Those same consumers report a preference for seamlessly accessing consistent product information and deals across all channels, which represents a mighty big challenge as well as an enormous opportunity for retailers. A 2013 KPMG survey found that two-thirds of CIOs and CFOs recognize the importance of big data, while only 25% are currently turning that data into business success. This love of big data alongside uncertainty on how best to exploit its insights seems to define today s retail commerce landscape. While there is no lack of appetite for hoarding data across channels, the challenge remains on how to synthesize all of these findings to fuel predictive analytics that enable a personalized but not creepy shopping experience across channels.

8 8 That s a Wrap While there are plenty of great tools to help online brands and retailers measure the effectiveness of channel marketing strategies, these tools and findings have historically been siloed, hampering the ability to gauge overall effectiveness and identify optimal cross-channel experiences that maximize conversion and brand loyalty. The solution? Develop an API-based digital dashboard that pulls data from various metrics platforms including online sales, dealer sales, mobile traffic, SEO, landing pages and social channels. But that s only half of it. For cross-channel retailers, that dashboard should integrate data from the PoS as well as in-store insights, including customer counts and heat mapping. Once the data is captured, you re ready to build personas that predict consumer behavior by demographic, location and channel mix. Keep in mind that this is a dynamic process. Only those retailers who monitor closely and pivot nimbly will transform data into actionable insights. Technology leaders, like LYONSCG and Shopatron, make this complicated process a lot easier. As a premier ecommerce solution provider, Lyons integrates APIs across various data-tracking systems for instance, Omniture or Google Analytics for online behavioral paths; Shopatron for Inventory Lookup analytics; Radian6 or Attensity for social sentiment; Googlebot for SEO; Klout for social influence; and Prism Skylabs for in-store behavior to provide an instant view of customer behavior, segmented by time and location. Insights gleaned from these data points hold the golden key to developing predictive analytics that operationalize personalization for multi-touch commerce. Trendsetters like Amazon and Walmart are already demonstrating the ROI of big data. To push ahead of the pack, provident cross-channel retailers must harness the power of data to deliver the seamless, personalized shopping experiences that will fuel today s sales alongside tomorrow s customer lifetime value.

9 9 Thank You LYONSCG and Shopatron appreciate the opportunity to present our solutions for ecommerce to you. We believe that our extensive experience with strategy, creative services and technical implementation of solutions for many leading ecommerce sites will translate into a solution for you that will enable the growth that is desired. We would be happy to review some of our current live sites with you and to provide a detailed ecommerce demonstration. About LYONSCG LYONSCG is the industry s premier ecommerce Digital Agency, serving brand, retail, and B2B organizations with tailored ecommerce solutions that maximize online potential. Headquartered in Chicago, the firm offers a full range of services beginning with Digital Strategy and Digital Marketing and extending through Experience Design, Platform Implementation, Application Development, Hosting and Support. The approach is holistic to provide every client with a creative, robust and increasingly profitable ecommerce website. LYONSCG is ecommerce Realized! About Shopatron Shopatron is the world s leading provider of cloud-based order management solutions. Our patented Shopatron Order Exchange allows manufacturers and multi-channel retailers to seamlessly leverage the available inventory of every retail storefront and distribution center when fulfilling online orders. Unlike legacy order management software or custom-built solutions, Shopatron makes it easy and affordable to deploy advanced capabilities like in-store pickup, ship-from-store, inventory lookup and vendor drop-ship within existing ecommerce initiatives. With Shopatron, retail channels join forces to increase sales, turn inventory, and deliver a superior purchase experience to online shoppers. LYONSCG 20 N. Wacker Drive, Suite 1750 Chicago, IL P: F: W: