Customer centricity part II: Gathering your customer information

 

In my March article, Customer Centricity, the Retail Buzzword of 2009, I wrote that customer centricity would be a hot topic for the New Year. Several popular breakout sessions at this month’s NRF; including Are You Truly a Customer-Centric Retailer, gave evidence customer centricity is a top priority for retail companies.

Customer Centricity, the Retail Buzzword of 2009

2009: The Year of the Customer

One trend I’ve picked up on from conversations with my retail clients is an urgent
need to modify their business processes to be customer centric. That’s why I’m
declaring Customer Centricity as the retail buzzword of 2009.

Customer Centricity is the use of a deep understanding of customer wants and needs
to deliver tailored retail offerings and a preferred shopping experience. It requires
execution at a detailed level enabled by the use of scalable business applications that
utilize powerful analytics to automate relevant business processes.

Gone are the days when retailers could increase revenue and margins by opening a
large number of new stores. Today revenue and margin improvements must come
from the stores they have or with less. Since retailers spent the past several years
fine tuning their supply-chains they can no longer find additional margin
improvements in them. There’s no more juice left to squeeze out of the supply-
chain. Retailers are turning to customer centricity to find the revenue and margin
gains of tomorrow.

It seems paradoxical that many retailers have a limited understanding of their best
customers, how to communicate relevant promotions to them, and how to assort
stores based upon local preferences. Traditional brick-and-mortar retailers built
efficient supply-chains and a one-size fits all approach to merchandising. In good
times, treating all customers like the average customer works fine. In bad times, the
times we find ourselves in, there is no average customer and customer centricity is
critical for survival.

It is increasingly important for retailers to know their customers and their buying
behaviors. Customer centricity allows a retailer to do things like:

• Assort stores and develop plan-o-grams based upon local market preferences.
• Optimize pricing.
• Target promotions to customers that are most likely to respond.
• Provide better service by knowing what treatment a customer prefers.
• Customize the shopping experience with relevant products and information
  tailored to each customer.

As the world of retail becomes multi-channel, most brick and mortar retailers are at a
disadvantage. While web and catalog retailers have always captured data about their
customers, store based retail often did not. Although web and catalog retailers have
data about their customers I have found that they don’t always use the data to drive
business decisions.

Becoming a customer centric retailer does not happen overnight, it is a deliberate
process. The change must come from the top because it is strategic to the business
and impacts all parts of the organization. Customer centricity must be a core
competency of the organization if it is to be successful. Resources must be
dedicated and skills built to manage the transformation to maximize its impact. Parts
of the process can be outsourced to partners, but successful retailers will build an
internal customer centric team like they have for merchandising or the supply-chain.

The transformation to customer centricity follows a four-step process:

1. Gather – bring together your customer information from both internal and
   external sources.
2. Discern – analyze the data to see what it tells you about your customers and
   their behaviors.
3. Engage – your customers in relevant ways based upon their unique
   characteristics.
4. Refine – your customer centric processes by measuring results.

Following the four-step process is critical for a successful transformation. Without
properly executing the gather and discern steps it will be impossible to engage your
customers well. You must realize that each of the four steps is a significant amount
of effort. That’s why the change must be driven by the top leadership of the
business. Each step requires the coordination of resources throughout the business.

I’ll discuss each step in upcoming Predictive Retailer articles. For now though let’s
look at some factors that are critical for a successful customer centric transition.

First, have a clear business objective at the start of the project. The first objective
could be tactical like localizing assortments or targeting promotions for a loyalty
program. Only by establishing a clear business reason up front gives you the ability to
measure your success.

Second, customer centricity is a business problem and must have a single business
owner. Designate an executive to manage and own the process. Ultimately customer
centricity will be leveraged in every department, but it must be owned by one
person. I’ve seen successful Chief Customer Officers in shared services departments,
marketing, and merchandising. Avoid splitting the responsibility, which really means
no one’s in charge. Make somebody the king. The IT organization is generally not a
good choice for ownership since customer centricity is a business issue; however IT
is a critical partner because they are the data management experts.

Third, customer centricity is a strategic process so avoid the temptation to
outsource too much of it. If you do not have the internal skills and resources to do it
well, get them. You may need more external help in the beginning, but your goal
must be to internalize the process; particularly the decision making aspects. Most
retailers do not outsource their merchandising or store operations because they’re
critical processes. Customer centricity is too.

Lastly, but most importantly, customer centricity must be driven at the executive
level. It requires input from all areas of the business and affects all of them as well.
The top of the organization must embrace and drive the change to be successful.

There are two red-flag scenarios I want to point out to you so you can avoid them.
Often these situations occur when the four-step process is not followed. If you feel
your customer centric project moving in one of these two directions take a step
back and reevaluate how the project is organized.

The first scenario is when a retailer defines customer centricity as just gathering all
customer information into one database. Often the project has a name like Single
Customer View. While these projects tend to be technologically successful, at the
end management usually questions what the business improvement is for the
invested time and money. You must have clear business objective of why you’re
gathering the data into a single view. A database has no value on its own. Generally
this is a sign that customer centricity lacks senior management sponsorship, a
business owner, or a clear business goal.

The second scenario is when too much of the gather and discern steps get
outsourced. Generally this happens when a retailer feels they do not have the
internal resources or skills to do the steps properly. Often times these projects do
not meet their expectations. The reason for this is because of the thousands of little
decisions made during the gather and discerns steps. An external party does not
understand the business as well as internal resources and therefore their
assumptions are inaccurate. Even if the initial project is successful it may be difficult
to scale up or move to other areas of the business. If the customer centric
competency does not exist within the organization it may be hard to leverage
effectively.

Remember the four-step process is critical for a successful customer centric
conversion. Make sure that you set the project up in the beginning according the
success factors as well. I look forward to discussing each of the four-steps in
upcoming Predictive Retailer articles. If you would like to discuss you customer
centric needs with me you can reach me at 919-531-2246 or Robert.signore@sas.com.

Tuesday NRF ‘09 social media recap

Tuesday was the last day the EXPO floor was open at NRF. It sounds like the floor was very busy with people checking out the latest technology and networking. The NRF has a great article about the floor, More than just SWAG: What’s on the EXPO floor. Here’s what people were saying:

kadrorlj: day 2 walking #nrfexpo floor – i like potential of retailers using Stratacache to visually show web content dynamically to stores

f1fe: Feet recovering from #nrf. With the economy, the show was better than I expected.

datachick: #NRF great for networking. Too busy chatting to tweet.

mnemecek: RT @swaynetteVisit SAS @ NRF ‘09 booth 1337 http://snurl.com/9ycsj #NRF- Family Dollar, Cabela’s, Winehouse news http://tinyurl.com/6sg9xd

hayesdavis: Walking the expo floor talking to people about @zitefeed. Very positive response. #nrf

datachick: http://twitpic.com/12is7 – Coolest booth @ #NRFScentair’s Aromalogos – scent marketing. Actually very nice.

rwang0: #NRFfield report: tchotchkes at NRF are far and few between. “poor trick or treating” in the convention areas. sign of a bad economy>

and my favorite:

wandac: my sore feet at #NRF yesterday was worth the trip to Letterman last night

I hope Wanda’s feet feel better now.

The morning Super Session The Sky has Fallen, Now What? generated quite a bit of SM activity. Scott Silverman of Shop.Org also wrote about Investing in E-Commerce in 2009. Several people agreed:

samdecker: RT @scottsilverman: #NRF – E-Commerce is a worthy retail investment in this tough climate. http://bit.ly/12lM 

kzimmerman: RT @scottsilverman: #NRF – E-Commerce is a worthy retail investment in this tough climate. http://bit.ly/12lM

bkwalker: RT @scottsilverman: #NRF – E-Commerce is a worthy retail investment in this tough climate. http://bit.ly/12lM

 

Monday NRF social media recap

The NRF Big Show was in full swing Monday, January 12th. The expo floor was open and the schedule was full of Keynote, Big Ideas, and Breakout sessions.

The Keynote address by Lee Scott, President and CEO of Wal-Mart, and Tracy Mullen, President and CEO of NRF, generated a lot of tweets early in the day. Most of the comments were about Mr. Scott’s appeal for retailers to help play a part in solving current economic and social concerns. For example:

bizuser: Are retailers ready to walk the talk of Lee Scott’s at #NRF “delivering shareholder value AND solving community problems” http://is.gd/fxMs

retailweek: #NRF: Wal-Mart’s Lee Scott says retailers must work to improve society http://tinyurl.com/a8z7ch

kadrorlj: lee scott gives political speech at #nrf, sounds like he’s running for office.

A transcript of Mr. Scott’s comments is on the Wal-Mart website. In addition to the Retail Week article above, the NRF posted video of the speech on the show’s blog.

I recently had conversations with retailers about their charitable programs for my holiday 2008 article. Most retailers have some form of community outreach, but the CarMax Community Cares program certainly incorporates what Mr. Scott mentioned.

Analytics found its way onto Twitter as well. Analytics in retail is what this blog is all about.

bizuser: anything new?… tons of data, need for actionable analytics, customer centricity… stop talking, start doing… #NRF http://is.gd/fy3k

I can’t agree more, start doing!

Finally, several people commented on the international crowd:

wandac: Seems to be a larger international contingent this year at #NRF

hayesdavis: Crowd here is very international which is very cool. This pre-session video montage is less so. #nrf

If you are a member of Twitter, you can view all the tweets from the show at http://search.twitter.com/search?q=%23nrf.

Sunday NRF social media recap

Sunday morning started with 14 Breakout Sessions followed by two Super Sessions in the afternoon. Two of the morning breakout sessions had the majority of the comments on Twitter.

Tom Davenport, President’s Distinguished Professor of Information Technology and Management at Babson College, presented the Analytical Trends and Directions in Retailing breakout session. Tom is co-author of the book Competing on Analytics: The New Science of Winning. Here a Twitter tweet from Tom’s session:

“kadrorlj: store-level empowerment from retail analytics to increase conversion interesting – Davenport”

A summary of the session can be found at the blog Trends in Analytics. 

Are you Truly a Customer-Centric retailer? seemed to be a popular breakout session that generated several comments. Here are some from Twitter:

“hayesdavis:Rexall found out that online coupons get spread around.”

“hayesdavis: BBY case study is interesting. Break down by lifestyle activities instead of merchandise attributes.”

“armchair_sailor: Dan Moe’s presentation on customer centricity was educational”

This session was blogged on the NRF site at Winning with Customer Centricity.  

The afternoon super session, Capitalizing on Global Trends to Create a Superior Customer Experience, was well received by those who attended. This session featured Martin Lindstrom author of “Brand Sense” and “Buyology: Truth and Lies About Why We Buy.” Here’s a tweet from Twitter:

“JeffPR: opening keynote at #nrf was awesome…and a little scary given the power of brands over our purchasing decisions. “

Jennifer Mcnally blogged about the session at Can I smash your brand?

Jeff Roster of Gartner (JeffPR on Twitter) is writing about his experience at NRF this year on his blog. He has some great observations about the first day.

2009 NRF Big Show special edition

Even if you’re not able to make it to the National Retail Federation (NRF) Big Show this year, you still can keep up with what’s going on in New York City. There are a lot of attendees posting what’s interesting using Social Media technologies like Internet blogs and Twitter. We’ll post a daily summary of what people are saying at show. It will almost be like being there, but without the snow.

Holiday 2008 — Holiday Spirit from the Retail Industry

I hope this Holiday edition of The Predictive Retailer finds you well. I want to take this opportunity to share with you a story that demonstrates the retail industry’s Holiday spirit.

Retailers are in the business of serving the communities they’re part of, however many retailers serve their communities in other ways beyond business.

It is not uncommon for a retailer to have programs designed to support non-profit organizations through charitable contributions, but some retailers also support their employee’s participation in community service programs. I spoke with one such retailer, CarMax, about how their Associates make a difference in the communities they live and work in.

The CarMax Foundation provides opportunities for CarMax Associates to make a lasting impact on their communities. Associates participate in the volunteer program as part of a team or individually. If an individual CarMax Associate volunteers at least 10 hours with a charitable organization, the CarMax Foundation matches their time with a donation of $10 per hour.

I spoke with Trina Lee, Director of Public Relations, and Sharon Handley, CarMax Foundation Manager, recently about how CaxMax associates are directly involved with the foundation.

“The majority of the program is Associate driven,” Sharon said. “Regional committees solicit ideas from Associates. Grants and regional giving all come from Associate ideas.”

Beyond grant distribution, The CarMax Foundation allows associates to organize local volunteer programs, called CarMax Cares, where groups of CarMax Associates donate their time to community projects. “Teams can be built by any Associate,” Sharon said. “Our CarMax Cares program has been growing exponentially year over year.”

Trina mentioned how excited CarMax Associates are about the program. “Our Associates enjoy working for an employer who supports the community.” Associates have recently organized blood drives, food drives, and Toy drives for the holiday season.

Senior management is also active in the CarMax Cares program. “We held our annual managers meeting in New Orleans in February of 2007, which was right after hurricane Katrina,” according to Sharon. “400 senior managers participated in a one day habitat for humanity project.”

The CarMax Foundation is a fairly new program that started in 2003. Sharon commented. “We may not donate as much money compared to many other retailers, but we can still have a big impact on the community with our CarMax Cares program.”

The CarMax program is a great example how the retail industry supports the communities it’s in.

Have a great holiday everyone. I look forward to a super 2009.

-Rob

Promotion Optimization

“May you live in interesting times”
-Old Chinese Curse

Although The Yale book of Quotations claims there is no actual Chinese phrase to this effect, the retail industry finds itself in, to put it mildly, said times for sure. With the National Retail Federation reporting weak August sales as the lingering economic downturn continues to put pressure on family finances, many retailers reported their business decreased in September as well. Earlier predictions for this holiday season expected a below average growth rate of 2.2%; and this was before early October’s financial turbulence. Looks like “interesting” may be around for a while.