Consulting Magazine
Consumers’ newfound power stems from their ability, and increasing willingness, to walk away from retailers when their experience disappoints them. There isn’t necessarily the desire for loyalty anymore, and many consumers have taken a “What have you done for me lately” attitude says Microsoft’s David Gruehn.
Power to the People
Retailers need to get to know what their customers want, in terms of products and experiences, and then deliver those needs. But. that’s easier said than done.
“Consumer expectations have accelerated rapidly over the past 10 years—like no other time in history, with no sign of a slowdown in sight.” says Steve Ladwig. general manager, IBM retail store solutions. He also notes that consumers “are demanding even greater flexibility and choice.”
They can do that thanks to the power of information their fingertips increasingly wield. The same technology that fueled back-end retail advancements, like tighter supply chain integration. also equipped consumers with the devices and connectivity they need to learn about products, compare prices and consult with their own “demand networks” (i.e. friends and family members) to make savvier purchasing decisions.
One in 10 consumers reached out to friends or family during the 2006 holiday shopping season by using their cell phones to talk, text or send digital pictures while collecting input and sharing product information, according to an IBM survey.
“Customers are more empowered than ever before through access to information.” notes David Gruehn. U.S. industry solutions director for Microsoft’s retail and hospitality group.
That rings true in the beleaguered record industry where British band Radiohead ceded full authority of pricing decisions to fans. In October, the band let fans choose how much, if anything. to pay to download its newest album. Earlier this year, the artist known once again as Prince gave away more than 3 million copies of his album to fans in the U.K., where he chose not to sell a single copy. The massive giveaway strengthened brand loyalty and helped stoke Prince’s lucrative concert-ticket sales.
The music industry is not alone in contending with major challenges: 64 percent of survey respondents indicate that they are likely or very likely to switch or discontinue doing business with companies (in 10 different product and service categories) they currently patronize, according to an Accenture study entitled “Seller Beware: The Curse of the Disloyal Customer.”
Consumers’ newfound power also stems from their ability, and increasing willingness, to walk away from retailers when their experiences disappoint them. “They expect the same seamless experience in a store as they have at home.” Gruehn adds. “There isn’t necessarily a desire for loyalty anymore, and many consumers have taken a ‘What have you done for me lately?’ attitude.”
Too many of those expectations of a seamless experience remain unfilled, according to a new study (See “Cracks in Brick-and-Mortar Satisfaction”) from the University of Pennsylvania’s Wharton School of Business and The Verde Group, a consulting firm that helps companies measure the cost of customer dissatisfaction before prioritizing and fixing the sources of displeasure.
“The younger you are, the more problems you tend to experience.” notes The Verde Group CEO Paula Courtney. Eighteen-to 29-year-old shoppers are 66 percent more likely to experience problems in retail stores than shoppers who are older than 65, according to the survey. The most prominent complaints among 18- to 29-year-old shoppers? Being ignored by staff; finding sales associates to be more interested in selling than offering genuine help; encountering employees with insufficient product knowledge; and failing to find items due to disorganized store layouts.
The Wharton-Verde Group study also identifies sales associate capabilities that, when present on the sales floor, can reduce the most damaging causes of customer dissatisfaction. One of those capabilities, authenticity, happens to be the title of a new book from James H. Gilmore and B. Joseph Pine, the team that previously wrote The Experience Economy and Mass Customization.
“Goods and services are no longer enough.” write Gilmore and Pine, whose new book provides organizational approaches to assessing and rendering authenticity. “What consumers want today are experiences—memorable events that engage them in an inherently personal way.”
Innovation and Improvement
Retailers have fared better in delivering this sort of experience online, yet in-person shopping currently accounts for well over 90 percent of retail spending in the U.S., according to Jupiter Research, and may never dip below 85 percent of total retail spending.
What’s needed, says LRA Worldwide Inc. Vice President Zach Conen, are ways to apply the mass customization concepts championed by Amazon.com and eBay, for example, on the actual shopping floor.
“How can an actual brick-and-mortar storefront operation personalize the experience for customers who walk through the door?” Conen asks. “Part of it has to do with technology—CRM on steroids—but part of it is providing tools and training to the front line to be able to quickly assess and recognize the needs, moods and predispositions of the customer.”
Those areas—particularly technology and customer service—represent focal points in the innovations consulting firms are helping their retail clients develop.
Accenture currently helps clients “integrate a holistic view of the customer across multiple channels into business processes in an automatic, seamless manner.” explains Janet Hoffman, managing director of the firm’s North American retail practice. Accenture’s technology labs created a promotion planning soft-
ware prototype that leverages two years of loyalty data to plan and deliver personalized promotional offers to individual customers during their shopping visit online or in a store.
Accenture also helps retail clients leverage social networking sites to market and sell retail offerings. And the firm is working with retail clients to provide customers access to personalized information “closer to the moment of need that is not cost prohibitive and is scalable.” Hoffman adds. The firm recently showcased an in-store video intelligence device that automatically changes the content on digital screens to tailor messages in real-time to the audience. The screen’s content can change based on the age. ethnic and gender makeup of who’s shopping the store at a particular moment. Hoffman reports.
Other firms are integrating similarly gee-whiz technology into their retail client’s brick-and-mortar environments. IBM’s “Any-place Kiosks” feature large screens and wireless capabilities that allow shoppers to connect to the Internet via kiosks inside stores, airports, hotels and other locations. IBM’s vice president for retail Systems. Jill Puleri. says the tool increases consumers’ options by blending online experiences with the in-person experience.
Another component of Big Blue’s global consumer services initiative “is a new self-checkout system that can be easily customized and quickly implemented by retailers.” says Puleri. “Retailers have found that their experts in their stores make a difference” in terms of higher sales. And, she says, the kiosks are a way that retailers can share their experts across numerous locations. For example, a shopper preparing for a Colorado adventure might walk into the rock-climbing department of a national outdoors sports retailer in Austin. Texas, and tap the kiosk to connect with the rock-climbing expert in the chain’s
Boulder. Colo., store for advice on harnesses and the scoop on multi-pitch climbing routes in Boulder Canyon.
“A lot of people say [kiosks and similar technology) eliminates human interaction.” Puleri says. “[But] it actually can be used to increase human interaction while greatly enhancing the shopping experience.”
Not all retail innovation comes in the bells-and-whistles variety. however, Amin Shahidi. director of EDS’ global retail industry practice, says that many trends in the marketplace “are less about the introduction of ground-breaking technologies and more about targeting and addressing the right business issues with the appropriate solution and driving an effective implementation.”
Recent EDS research, for example, suggests that barcodes—which were until recently presumed past their sell-by date due to the advent of radio frequency identification (RFID) technology, which has not advanced as smoothly as predicted (Wal-Mart dropped its mandate to suppliers) — may yet play a key role in supermarket innovation: 30 percent of U.K. supermarket shoppers want to access nutritional, product sourcing and environmental information about their food from their shopping carts.
“Overall”, Shahidi adds, “retailers are re-inventing and re-energizing their time-tested and proven strategies. Simply put, they’re improving on what already works.”
Consulting Service Implications
The implications of increasingly powerful customers, and retailers’ desire to harness that power through experiences, places new demands on the consulting firms that serve the industry. These firms can expect to address the following challenges in light of current conditions on the retail industry.
