Sarah Davis, head of Kurt Salmon’s digital practice, examines the key components to delivering a personalised customer experience and where 1:1 retailing is showing results in store.
Despite all the hype around mobile and online sales, stores remain pivotal to retail success, with 88% of UK retail sales going through stores. The challenge for retailers, therefore, is to make sure that the store – often their most costly asset – is meeting the demands of the modern customer who, courtesy of the online environment, now has a 24/7 service mentality and huge expectations. As such, retailers need to find ways to deliver an in-store shopping experience that while different, is just as personal as that achieved by many of the online specialists.
While the growth in digital innovation over the past decade has been exceptional, over half of UK retailers still have no formal process for innovating around the store experience, which makes it almost impossible to achieve consistent integration of technological advancement across channels. As such, there is still a long way to go to creating a shopping environment where there are no barriers between the shopping channels and customers receive a seamless, consistent and personalised experience, irrespective of how and when they shop. This is what Kurt Salmon calls 1:1 Retailing.
To be successful exponents of this within the store environment, retailers need to utilise the technology available to gather a detailed profile of each customer, their shopping behaviour and purchasing history, and then deliver appropriate personalised in-store service and marketing messages. They should couple this with an exciting in-store environment to create theatre and experience, with sales associates who have easy access to product information to provide the knowledge and service that consumers seek.
The benefits are certainly there to be had, given that conservatively around 50% of customers leave a store without engaging with a member of staff or a product; fewer than 20% are encouraged to purchase complementary items; and only a handful are even offered products based on their personal history and search or loyalty programme preferences. By providing a personal service, conversion rates can increase between 30-50% and traffic around 10-30%, generating between five and nine times more selling opportunities. By improving up-selling and cross-selling by 5-9%, Kurt Salmon estimates that retailers could sell an additional 15-25% of product.
When it comes to shopping in stores, it is all about the dwell time – and that means finding ways to keep the customer engaged. Kurt Salmon projects at Macy’s and Nordstrom in the USA show that the time spent in store is directly related to basket size and has an exponential relationship with conversion rates – with the added bonus of improvements in customer loyalty, referrals, cross-selling and brand perception.
So, the more retailers know about their customers the better. Customer identity data, often driven from loyalty schemes, holds the potential to enable real differentiation in the in-store experience. With beacon technology and geo-fencing, stores can immediately recognise when a customer steps over the threshold and can take steps to have a store associate engage with the customer, or marketed with relevant products. It might have taken more than 20 years, but at last RFID is being widely adopted so a store can easily recognise the product that a customer is touching, trying on and interacting with and make recommendations based on previous preferences. Although the use of customer tracking is by no means a new idea and has been a feature of online sales for some time, going forward it should be integrated into the physical estate and no longer used in isolation online.
Some retailers now use the manipulation of big data sets to really understand how a customer explores their store. For example, Tesco offers free wi-fi to its Clubcard holders, while in-store. This means not only can they follow movements but they can also use targeted marketing campaigns to forward promotions tailored to an individual customer. Although this is an extremely positive method of engagement, consumers do expect to be rewarded for their data contribution.
THROUGHOUT THE JOURNEY
One of the biggest obstacles facing personalisation will always be privacy concerns. Customer opt-in remains critical for the most individualised customised experience. Company apps can often be underutilised because the user has to commit to the download prior to purchase. Retailers, therefore, need to identify the best incentives for participation in interactive experiences.
Where progressive retailers are investing more time to connect with customers is in the “pre” and “post” sections of the customer journey. Pre-purchase push notifications can work alongside smart email campaigns to encourage the “on the fence” consumer and increase conversion rates. Capturing customer feedback via a robust post-purchase follow-up process is critical. When these techniques are used together it gives retailers real power to grow sales across all channels.
Curry’s is a good example of a retailer that has covered off the post-purchase phase, focusing on support and helping customers make the best use of their purchase. The electrical retailer will install a product, test it, remove the packaging and take away the old product free of charge.
Within the purchase phase of the journey, it is all about showing product clearly, demonstrating value for money and educating: so this is the area where sales associates need to have knowledge of the customer and the product at their fingertips as part of the service offer. It’s also important to give customers and staff access to tablets and/or kiosks that provide information about product availability and delivery details. The Geniuses in Apple stores, who give great product demonstrations and tutorials, or Lush, awarded for its customer service and strong product knowledge, are among the best retail examples of strong management of the in-store purchase experience.
Tom Cole, former Vice-Chairman and CAO of Macy’s, is quoted as saying that “people do not go shopping only to acquire necessities; they go shopping to spend time with friends and family and to meet people; this is an element that no e-Shop will ever provide.”
Among those companies using cutting-edge ideas to drive brand awareness and improvements in business performance is Hiut Denim Co. The jeans manufacturer has window installations at its stockist, Rivet and Hide, which uses motion sensors to detect passers-by and play audio messages encouraging them to stop, look and find out about their brand. When icons painted onto the inside of the window in conductive ink are touched, they trigger the next audio message.
While video screens are hardly revolutionary, their innovative use within Burberry’s flagship store is exceptionally creative. Thanks to RFID chips in selected items of clothing, mirrors are transformed into displays showing exclusive video material about the item. At Uniqlo, digital mirrors in fitting rooms mean customers can change the colour of the items they are trying on at the touch of a button. These widely contrasting solutions share a surprising and playful approach to technology, captivating the customer and offering added value.
Despite suggestions by some commentators that the growth in online will see stores becoming mini depots, service points or showrooms, the value proposition for stores is actually in the social dimension, the convenience and the in-store experience. As the consumer shopping journey will increasingly touch a number of channels, the overriding necessity is to deliver consistency.
To achieve this, retailers must undergo extensive change that encompasses new processes, management systems, technology and infrastructure, while keeping the needs of the modern day consumer at its heart – but the prize is higher sales and profit.