Digital Marketing Drives the Omnichannel Experience

Digital Marketing Drives the Omnichannel Experience Insights from a panel discussion at a recent SAS Global Forum Executive Conference CONCLUSIONS PAPER

SAS Conclusions Paper Table of Contents Introduction.... 1 The time is ripe for omnichannel retailing... 1 Data challenges in an omnichannel world.... 2 Getting started.... 3 Organizational barriers to the omnichannel ideal.... 3 Is a unified customer data warehouse the answer?... 4 What will success look like?... 5 Getting from what to why.... 5 The perennial question of attribution.... 5 Closing Thoughts... 6 For More Information... 7 About the Presenter... 8

Digital Marketing Drives the Omnichannel Experience Introduction The consumer walks into the big-box electronics store looking for a flat-screen TV. While in the store, he scans the barcode of a product with his smartphone to research specifications and compare models, then browses online to see if another retailer offers the same model at a better deal. After looking at all the chairs in the furniture showroom, the shopper found nothing she liked. The sales associate shows her additional collections on an ipad. After browsing the online offerings and reading reviews, she decides to pre-order a new style that will arrive in the store the next week. When the consumer walks into an outlet of a national drug store chain, the company detects his presence via Foursquare and sends coupons to his mobile phone. The coupons are tailored to his needs and preferences based on his prior purchases and website activity. His purchases today add up toward rewards when he uses the store s customer loyalty app on his phone. New technologies, particularly smart mobile devices and location-based awareness, are transforming the retail environment. According to an article in the May 2013 MIT Sloan Management Review: In the past, brick-and-mortar retail stores were unique in allowing customers to touch and feel merchandise and provide instant gratification; Internet retailers, meanwhile, tried to woo shoppers with wide product selection, low prices, and content such as product reviews and ratings. As the retailing industry evolves toward a seamless omnichannel retail experience, the distinctions between physical and online will vanish, turning the world into a showroom without walls. 1 Customers are looking for a seamless experience, and they expect the retailer to know who they are across all channels. When they browse the merchandise in your stores, they expect you to know they already have your product in their online shopping cart and want to find the same item in the store. They expect you to know that their previous purchases entitle them to special offers and gold-star treatment. They expect you to know them across product categories, and to have up-to-the-minute information about what they want and what they have already purchased. The time is ripe for omnichannel retailing Recent technology advances in mobile computing and augmented reality are blurring the boundaries between traditional and Internet retailing, enabling retailers to interact with consumers through multiple touch points and expose them to a rich blend of offline sensory information and online content. Competing in the Age of Omnichannel Retailing, MIT Sloan Management Review, May 2013 More than 50 percent of cell phone owners in the US have smartphones, and about 70 percent of them have used their devices for comparison shopping. Digital marketing has evolved to the point that delivering an omnichannel experience to your customers an experience that is consistent and relevant both online and offline in real time is definitely within reach. 1 Erik Brynjolfsson, Yu Jeffrey Hu, and Mohammad Rahman, Competing in the Age of Omnichannel Retailing, MITSloan Management Review, May 2013 1

SAS Conclusions Paper Google recently published a study that said seven out of 10 consumers shop on a smartphone while they re actually in the store, said David Bilbrough, a SAS solutions architect specializing in digital marketing and customer analytics. For example, if you have the Target app, and you re in the Target store, you can scan an item and see customer reviews of that product. Even better, you can use your Amazon app to see how much the same product costs at Amazon. Don t underestimate your customers readiness for this blended online/offline retail experience, said a marketing executive at a national women s clothing chain. It was originally thought that since we had older customers the vast majority are baby boomers there wouldn t be much pull through mobile channels, but looking at the data, we found that wasn t true. Our customers aren t as apt to use mobile phones for shopping, but they are comfortable using the ipad because the screen is a little larger. Many of the retailer s customers research on the ipad or another device and then come into the store to try on the items they had found online and make the purchase. Advanced technologies on smartphones and other devices are merging touch-and-feel information in the physical world with online content, creating an omnichannel environment. Online and offline retailers may need to compete in new and innovative ways. Competing in the Age of Omnichannel Retailing, MIT Sloan Management Review, May 2013 Data challenges in an omnichannel world To succeed in the omnichannel environment, marketers have to understand how these new methods work, how they have transformed the buying process, and how to determine when the person online is the same as the person in the store. Furthermore, they have to be able to understand the relationships between both sequential and simultaneous interactions in all channels. You want to avoid the gaffes that can stem from having only partial insight or being too slow, said Bilbrough. If somebody added an item to their online shopping cart to see what the discount was on the app, then they buy it in the store, and then you send a coupon for that product on their app, they ll be like, Dude, I just bought that; what are you trying to do to me? You don t want to prospect a consumer; you want to understand the consideration process and the buying process, and use data wisely to understand how customers are navigating that process and how best to influence them along the way. Consider also that the customer experience doesn t start when a consumer comes to your website; it started with where they came from. If they came in from a pay-per-click ad, or they clicked on a banner or came through social media, you want to know that and take all that into account in how you manage the interaction. For most retailers, this kind of comprehensive view and agility are elusive, representing a big data challenge from two angles: From a technology standpoint How do you gather, integrate and analyze all this data while the window of opportunity is open? You might need to manage hundreds of thousands of customers and transactions, or trigger a dozen decisions in one brief online encounter. From a personal standpoint How do you gather and use the maximum available data to understand customers, without making them uncomfortable about how much you know about them? 2

Digital Marketing Drives the Omnichannel Experience Customers expect you to know them as individuals, of course, but if they share (or you gather) more than basic demographic and transactional information, be prepared to make it worthwhile for them. In exchange for passively or actively allowing retailers to collect information about them, customers expect something of value in return. The thinking is, If I opt in, let you monitor what I do and share my information, I m going to have much higher expectations of personalized service. That mindset raises the bar for retailers, but it also opens up opportunities, if you can use the data effectively. Suppose the customer shopped online for a dress, considered it, read reviews, put it in her shopping cart but ultimately didn t buy it. That would be great information to know when she walks into the store. Perhaps a discount offer or coupon would be just the incentive to turn indecision into a sale. Even a no-sale yields valuable information to help fine-tune future marketing and merchandising decisions, said the director of customer relationship marketing for a nationwide apparel retailer. Suppose I m on the website, I click on Skirts, then spend a lot of time browsing and looking at skirts, but I don t buy one. Then I go into a store the next day but I don t buy a skirt. That information indicates a marketing opportunity. I m obviously interested in skirts, so did the store not have the size or style I wanted, or do I just need a little nudge to go back and purchase that skirt? Having that kind of data on a timely basis is very, very important to us. Getting started Where do you start with an omnichannel data strategy? The first step is to identify the many ways consumers interact with you, which will naturally vary by industry and by brand, said Bilbrough. Through which touch points does the consumer gain awareness of your brand? Or research your offerings and alternatives? Comparison shop and make purchases? Knowing how customers interact with the brand at each stage of the sales funnel tells you where data-driven insights can help you make a better experience for that customer. Having identified where customers are going to interact with my brand, I can tailor the messages to guide the decision process. Then we have to determine how much we can use that information without going too far and scaring them off or compromising their privacy. Organizational barriers to the omnichannel ideal A seamless customer experience requires seamless data sharing. The online experience must be consistent with the catalog experience and match the in-store experience all in alignment with customer expectations. That means getting the Web team, the email marketing team, the social media team, the print and broadcast advertising folks, and the catalog and merchandising people to talk to each other. Customers do trust us with their information, and we do have a lot of data we have about a 95 percent capture rate with our point-of-sale platform across all our brands. So we have to be sensitive to how we use it and how detailed we get with them. We want to be personal, but we don t want to be creepy. Director of CRM for a national clothing retailer 3

SAS Conclusions Paper In most large retail organizations, those groups tend to operate in their own ways and be protective of their own data and campaigns. Organizational structures actually tend to inhibit cross-functional collaboration. That silo approach will have to change. Successful omnichannel retailers must have leadership that oversees all of these teams, so they will work together to maximize the customer experience rather than their own group s success. Furthermore, because of the magnitude of the data challenges and the pace of change in technologies marketers need to be a little friendlier with IT, and vice versa. The IT team needs to know the business, and the business side needs to be data savvy. It s no longer enough to toss the data and analytics questions over the wall and hope the IT capacity is there to deal with it. Is a unified customer data warehouse the answer? It s not the only answer or the best answer for everyone, but for one of our panelists, it was the way to go. It s important to try to assimilate the data into one single location. The best thing we did was lay a foundation for a single view of the customer. Each of our brands has a different personality, but we wanted a 360-degree view of the customer across brands. So we keep the data together but the brands separate, while understanding the customer across all brands and channels. In addition to the usual array of internal data such as demographics, campaign responses, sales, revenues and other customer data this retailer now integrates the following types of information into its customer data warehouse: Competitive landscape. The retailer brings in several hundred variables about its customers that tell a lot about what type of merchandise she is buying, share of wallet, her personality and lifestyle. Online behavior. Integrating clickstream data into the customer database has been very powerful. The retailer knows where its customers are clicking on the Web and what they are buying as well as what they are looking at, clicking on and then not buying, which represents a tremendous marketing opportunity. Trade area. Knowing the customer s zip code, the retailer can determine the location of the nearest store, whether a customer shops in her trade area, is gravitating to online channels, or tends to shop the brand when away from home. Local market. What other kinds of stores are available in the customer s trade area, and what are their sales? Is this brand the only game in town, or is there notable competition, and if so, how are they faring? The second thing we started to think about was real-time data, said the retailer s CRM director. Everyone was demanding real-time capabilities, but with big data, it s clearly impossible to think about putting everything in real time, and it s not necessary. Not everything has to be in real time. 4

Digital Marketing Drives the Omnichannel Experience What will success look like? Marketers need to look beyond the simplistic and immediate measures of success, such as likes and clicks, said Bilbrough. Are we just looking to get them to the next page? Probably not. That practice would be very antiquated in 2013. We need to be able to optimize for a more complex business goal: how to make that visitor a good customer for the brand. When it comes to managing the digital data, start by identifying a success metric a quantitative indicator. In the quaint old days of say, 2009, we could just look at our conversion rate online. In today s omnichannel environment, where consumers have multiple ways to shop for products and multiple ways to buy the products, it s just not that simple anymore. We need to understand the interactions among online marketing, offline marketing, online shopping and offline shopping. To get a key performance indicator, we have to determine what behavior we are trying to drive. Once we identify whether we re using it as a proxy for a marketing success event or using it as a test-and-control in a measurement experiment, we can look at the effects of one activity on the other and make sure that we re getting that information. Once we understand the behavior we want to maximize, we can see what information we re looking for. Identify the attributes of a good customer, create models around that profile, use that profile to find more prospects just like them, and know how to win them over. David Bilbrough Digital Marketing Solutions Architect, SAS Finally, when we ve got the information, and we ve got the success metric, do we understand the underlying behavior that is driving it? We must have the analytical procedures in place to enable us to understand not only whether we reached a success metric, but why or why not. Getting from what to why The why can be elusive, because correlation is not the same as causation, said Bilbrough. Earlier in my career, running marketing campaigns for banks, we ran a campaign that had all the correct pay-per-click metrics going well. We had a great click-through rate, a low bounce rate a lot of great metrics for the media but we just weren t selling the number of bank accounts that we needed to sell. We were asked to explain why the campaign wasn t delivering, and when I looked at all the data that we had at the time, I had to honestly say, We don t know why. I can tell you how many people didn t convert, but if you want to know why, we re going to need more data. What s the additional data that would get from what to why? The perennial question of attribution Whose campaign made the sale? Was it the email blast? The new catalog? The in-store promotion? Each marketing function will be more than willing to take credit, but the consumer interacts with multiple marketing activities on the path to purchase. Understanding the influence and interactions among these marketing activities is therefore more important to success than attributing success to any one or two activities. There s a big difference between analysis and measurement. Reporting is not analysis; it s just measurement. You can t just count the number of people coming into the website to understand their intents. You really need to diagnose the underlying intention of that customer the why using analytics in order to increase your odds of being successful. David Bilbrough Digital Marketing Solutions Architect, SAS 5

SAS Conclusions Paper For that, I m still a big fan of test and control, said Bilbrough. It is still a great way to measure the relationship between things that are happening. For instance, you can have a test cell with a target market that is exposed to television ads, pay-per-click ads, banner ads and billboards and other test cells with different combinations. Execute the campaigns, compare the results, and you can start to see which activities had synergy and where the whole was greater than the sum of the parts. Those are the kinds of relationships we have to explore and understand in an omnichannel environment. Through a process of elimination, removing cells, you can zero in on the factors that count, as well as those that don t, said Bilbrough. I would go in and code my variables, and then take the customer base that has a certain combination of treatments, and then I can begin to understand logarithmically what effect those treatments have on each other. I can tie that together in a formula that explains that a particular treatment correlates to a large number of conversions but if I can also take that treatment out and have the same number of conversions, it s not important. I m still a big fan of the testand-control process. Set up an experiment where you can test scenarios against each other and show with statistical significance whether or not the campaign variables were driving success, which ones and in what manner. David Bilbrough Digital Marketing Solutions Architect, SAS Can you use this process of elimination to gauge the monetary value each marketing activity brings to the equation? To some extent, said Bilbrough. You might not be able to prove the ROI, but you can show that the market in which you ran that TV commercial had a 15 or 20 percent uptick in the pay-per-click rate, which led to a 20 to 25 percent uptick in engaged sessions, which led to a 5 to 10 percent uptick in conversion. And then you can say that lift constituted X number of people, and that lift is associated with a certain level of profit per transaction, and from that you can estimate the ROI from a campaign. It s not necessarily incontrovertible, but it is a reasonable measure of the success of that campaign. Closing Thoughts Technology is making omnichannel retailing inevitable and is reducing the ability of geography and ignorance to shield retailers from competition. It is breaking down the barriers between different retail channels as well as the divisions that separate retailers and their suppliers. At the same time, omnichannel retailing expands the overall pie by extending market reach and introducing consumers to products they may not have known about. Competing in the Age of Omnichannel Retailing, MIT Sloan Management Review, May 2013 To maximize the potential benefit of their digital marketing to succeed in this promising yet sometimes chaotic new world marketers will focus on three important concepts: Personalize. Customers know that retailers are gathering more and more information about them, and so they increasingly expect that we will do something useful with that data. To them, useful means something that benefits them it s personalized, relevant and meaningful. 6

Digital Marketing Drives the Omnichannel Experience Reciprocate. Smart retailers will engage with a customers in a two-way conversation, serving up useful information via their preferred channel or device to better serve them. Retailers must also work to foster greater trust in safeguarding personal data and using it to benefit customers. Collaborate. The best way to show customers that we care about them will be to engage with them according to one cohesive profile, regardless of channel. That will require an organizational structure that ensures collaboration and consistency across marketing functions for campaign planning, creative and data sharing. As customers embrace more converged online/offline shopping processes scan to research, swipe to pay or get loyalty points, browse to shop online in the store and so on they will be more and more frustrated when they don t get a coordinated experience across those channels. They want to be seen as one valued customer, shopping with one consistent entity. The most successful retailers of the coming decade will be the ones that recognize omnichannel shopping as a growing baseline expectation and that implement the organizational culture and data strategies to deliver on that promise. Key Takeaways The marketing organization needs to have a top-down view of the total customer experience across marketing functions. To personalize the experience, you need to be able to analyze (not just measure) real-time interactions and correlate them across online and offline channels. Use systematic test-and-control mechanisms to understand what is really driving performance not just the what (visitors, conversions, etc.) but the why. For More Information Download related SAS white papers: Drive Marketing Relevance in Today s Digital World: sas.com/reg/gen/ corp/1406579 Leveraging Analytics to Improve the Customer Experience: sas.com/reg/gen/ corp/2154694 Argyle Conversations: Successful Marketing in the Digital Age: sas.com/reg/gen/ corp/2228276 For more about SAS customer intelligence solutions: sas.com/software/customer-intelligence To read more thought leader views on marketing, visit the SAS Customer Intelligence Knowledge Exchange: sas.com/knowledge-exchange/customer-intelligence To get fresh perspectives from marketing practitioners on the SAS Customer Analytics blog: blogs.sas.com/content/customeranalytics Twitter: @SAS_CI 7

SAS Conclusions Paper About the Presenter David Bilbrough Digital Marketing Solutions Architect, SAS David Bilbrough has more than 10 years of experience with online marketing and digital assets, helping marketers use analytics to turn data into insights that can optimize the customer experience. Before joining SAS, Bilbrough managed marketing and analytics initiatives for well-known financial institutions such as Wells Fargo, BB&T, E*TRADE Financial, Navy Federal Credit Union and Coldwell Banker. He also writes about customer analytics on his blog at FindGreatCustomers.com. http://findgreatcustomers.com/competitive-intelligence/ 8

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