This is the first article in a two-part series that looks at the fundamental need, in today’s increasingly online consumer-driven ecosystem, for companies with retail operations to develop and personalize customer experience using data, and how management teams can carry that out.
The term ‘retail experience’ is often centered in the physical realm—namely as the combination of in-store phenomena and shopping ‘Easter eggs’ that make the experience exciting. What this approach leaves out is the more internal, organic experience laid out by the data driving every interaction a customer has with a brand or retailer. As our world began to require digital interactions—with each other as well as with companies—at the start of the COVID-19 pandemic, that latter version of “experience” has become much more important, as retailers try to bring their digital offerings into line with the physical. We’ve seen a number of them leave out a critical piece of the puzzle, however: This two-part series of articles will examine that missing piece. Part One will look at the fragmented approach historically taken on the road to ‘customer experience,’ what this model leaves out, and a few examples. The second part will dive into the shifting mindset in corporate leadership, addressing new modes of data analysis toward creating a new standard for the customer journey—and, further, why we actually need to expand our understanding of ‘experience’ beyond just that of the customer.
Why should any company with retail operations expend energy and funds in upgrading their customer experience? The measure of the potential impact speaks for itself: According to one report, by further personalizing the customer experience, especially in terms of digital interaction, several industry players have increased the lifetime value of a customer by 20 to 30 percent across high-priority segments. It’s easier than one might think to get this wrong—even a small misstep can cause outsized losses. The weak link theory explains that one bad experience could make an otherwise loyal customer walk away forever.
Looking at a common approach to customer service reveals a number of potential weak links. Take for example a recent experience a friend described to me while trying to get his car serviced. Appointments for this particular brand have to be made using their app, but the app was down. My friend found a number to call, but no one answered at the other end. Now, even though the car only needs servicing a few times a year, technical glitches in accessing something as basic as making a service appointment reveals a massive missed opportunity. This is a fractured, fragmented approach to customer service: one destination for one kind of need (servicing), another destination thrown in (now the app needs servicing, too). The end result, and final insult, is that there is no one at the other end communicating with the customer.
Instead, there could be an integration of past customer data with current interactions: The app knows when your car needs servicing—based on when you bought it, when you last brought it in, and how much you drive—and it reminds you to make an appointment. It may offer you a coupon to the on-site café while you wait; it may suggest a number of weather-appropriate add-ons to servicing your car based on the time of year and the climate.
Without such insight deployed in current day-to-day interactions, a retail operation will disappoint its customers with a weak link in experience, but this “miss” also represents a major point of friction. Amazon is the standalone example of just how effective tweaking the system to remove friction can be. The single biggest move the company made toward that end was the one-click buy button. When that patent expired in 2017, it was, by one account, valued at $2.4 billion. It had single-handedly increased company sales by 5 percent, owing to its ability to decrease cart abandonment, which generally rests at a rate of about 70 percent. However, through data analysis, Amazon figured out that the place in the journey where customers most often abandoned their carts was when they had to fill out all of their information. The one-click button was Amazon’s tweak, allowing people to bypass repetitive data entry. It found that customers would rather have that ease of functioning than buy from independent retailers or other chains—even despite unfavorable price comparisons. In other words, they’d rather spend more at Amazon just to reduce the friction.
A successful approach to experience takes into account every interaction a customer has with the company—from store, to website and app, to transactions, phone calls, and emails. These interactions are both analog and digital. And all of the data gleaned from them need to go toward making the experience not simply satisfying, but delightful.
We know that the more personalized an interaction, the more emotional the level of engagement. Companies have a range of tools they can use to capture and keep the customer’s attention, including human-centric design, visual design, and other psychological principles. However, what provokes delight is not the same for every customer with every brand. One take on personalization for Amazon is a delivery tracker that tells you exactly how many stops away your package is. Does this cost the e-tailer many millions of dollars for a service that changes virtually nothing? Absolutely. But does it make you feel special? You bet it does.
After a tough pandemic year, demand for luxury goods isn’t expected to bounce back to pre-pandemic levels until the end of 2022—however, a November 2020 report shows online luxury shopping to have doubled, from 12 percent of total purchases in 2019 to 23 percent in 2020, and predicts that e-commerce will be the dominant channel for luxury by 2025. Industry leader Hermès was the first luxury brand to launch an e-commerce channel, way back in 2001, and has continued to expand and improve its online experience, to the point where, by July 2020 the company reported, even in the face of a massive revenue drop due to Covid-19, that 75 percent of its e-commerce customers were new. Even if people couldn’t afford it, Hermès listened, and made them feel special.
As the luxury sector—indeed, all of retail—eventually returns to normal, share of online shopping will only continue to grow. It will be critical for companies to design online experiences that are the digital twins of the personalized attention, recommendations, and structural control that a customer service rep/concierge may offer to an in-store customer. Emerging techniques to achieve this, such as machine learning (AI)-driven “concierge bots” and curated online journey managers all rely on past purchase history, consumer demo- and psychographics, purchase power, and more. All of these algorithms are hungry for data.
Herein lie some of the keys to successful ‘retail experience.’ Conversion alone is not enough. Retention and resurrection—adopting the product, then coming back for more—are also critical to a fully successful experience. In order to get there, much needs to evolve from our traditional approach, including our models of data management and analysis, corporate culture and leadership.
SUMMARY:
- Personalizing user experience can lead to a 20 to 30% bump in lifetime value of a customer across high priority segments.
- Missing or weak links can create friction, causing breakdowns in communications and service; genius tweaks like the one-click payment button and delivery tracking can remove friction.
- Successful experience encompasses every interaction a customer has with the company, digital and analog—from store, to website and app, to transactions, phone calls and emails.
Part Two of this series will examine the primacy of data and the new leadership mindset, with an eye toward moving retail into the age of true digital experience.
PART TWO: Why Harnessing Data Is the Key to Making the Right Retail Experience Happen
Bhrugu Pange is a Managing Director and leads the Technology Solutions practice at global management consultant AArete. He can be reached at bpange@aarete.com.
