What’s the ultimate customer service goal?
Multi-channel contact integration is the ultimate customer service/support goal. That’s because it fosters consolidation and standardization of customer service, which means efficiencies and consistency for retailers. But contact integration remains elusive to many retailers. It can be an overwhelming challenge to consolidate contact information across in-store, online, mail, and telephone channels. So says Frank Shooster of Global Response, a call center and customer support firm, in a recent issue of Internet Retailer.
One strategy for achieving multi-channel integration is funneling customer service communications to outside agents (but there’s a risk that consistency of service may suffer). Another tactic is crafting a customer service strategy that provides a combination of self-help tools and personal service across all channels, which helps customers obtain the answers they need effectively without feeling pressured. In either case the biggest challenge is maintaining a consistent style among all contact points.
Multi-channel contact integration must be a strategic policy goal of management, not just a tactical or operational goal. It is also much more effective to plan and execute an integrated policy from the get-go, than to patch together separate sets of policies, procedures and practices. A unified view of every customer across channels is difficult to achieve, but ultimately, will prove financially rewarding.
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What’s all the fuss about customer-centricity?
Approximately 31% of Best Buy customers drive 80% of the retailer’s revenues. More profoundly, a mere 7% — call them “Best Customers” — drive approximately 43% of the company’s overall sales volume. So important are these individuals that it would take 39 “Uncommitted Customers,” who account for 12% of the store’s clients, to replace the lost lifetime value of a single “Best Customer.” You had better believe Best Buy knows who its best customers are, and treats them accordingly!
Being customer-centric means centering your company’s goals, growth strategies and tactical operations around attracting, winning and keeping profitable customers. Today, the customer-centric approach sits at the very heart of Best Buy’s growth strategy. As Jeff Zabin writes in a Brandweek profile, the company’s customer-centricity is based on sophisticated customer analytics.
Implementing customer centricity starts by taking a unified view of customer relationships. This means overlaying data from across multiple brands, formats, channels and geographies with third-party and publicly available data to create multidimensional customer profiles. The key is to then translate the data into actionable insights.
When it comes to capturing and integrating customer data, writes Zabin, Best Buy is practically in a class by itself. Its 15-plus terabyte database houses information about more than 75 million households and is informed by more than seven years of transaction and interaction data. Best Buy has developed a system based on this data to categorize its core customers: there’s Buzz (the young technology buff), Jill (the suburban soccer mom), Barry (the wealthy professional guy), and Ray (the family man).
Best Buy’s customer insights team deploys various modeling techniques to score individual customers in terms of their interests, lifestyles and passions. Giving each customer profile a distinct face helps employees interact more productively with people who walk into the stores. Sales associates are better able to anticipate (and fulfill) each customer’s needs.
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Did you predict the surge in gift cards?
Of course; gift cards are one of the most interesting trends of recent years. They’re convenient, easy, quick, practical and don’t require wrapping or schlepping. They’re also the perfect solution to an ever more common dilemma: what to give to someone who already has everything they ever could need or want! Indeed, 40% of people surveyed by Accenture said they preferred receiving a gift card to an actual gift.
For retailers, gift cards increase the number and share of purchases that occur after December 25th. Some estimates put post-holiday sales at upwards of 15% of total seasonal spending. According to the International Council of Shopping Centers, 38% of gift cards were redeemed in January last holiday season, meaning people who receive them are motivated to use them soon after receipt.
On the other hand, the value of unredeemed gift cards is in the billions of dollars, and retailers cannot report revenue from a gift card until it is used or after it has gone a long time without being used. Last winter, Best Buy reported a $43 million gain in fiscal 2006 from cards that hadn’t been used in two or more years. Limited Brands recorded $30 million in 2005 because of unredeemed cards. Consumer Reports estimates that 19% of the value of cards purchased last year went unredeemed.
Final numbers are not yet in, but the National Retail Federation was expecting gift card purchases of $25 billion for the just-passed holiday season, up from $18.5 billion in 2005. That means gift cards will have outperformed all other product categories except apparel, and the gap between clothing and gift cards is narrowing. Retailers should expect this trend to continue.
Gift card redemption expands the holiday season. While clearance markdowns have always generated retail traffic after the typical holiday rush, the significant rise in gift card popularity is transforming post-holiday consumer shopping. It is also affecting retailers’ pre-holiday financials, since gift card purchases aren’t recorded until they are redeemed.
The gift card trend highlights a number of points that retailers need to include in their operational plans for next holiday season and beyond, writes Michael Barrett of AMR Research:
■ Inventory plans must reflect the trend. Most financial plans treat January as a revenue vacation, heavy in markdowns and low in receipts and sales. Retailers that don’t recognize the shift in their business will find themselves overbought in December and under-bought in January and February.
■ It’s counterintuitive for most merchants and planners to put up big gains in the month traditionally reserved for inventory reconciliation and cycle counts, but ignoring these numbers will leave dollars on the table. The supply chain folks will probably welcome any balancing of product flow between the pre- and post-holiday time, so make sure they are in the loop as well.
■ Customers are “treating themselves” with gift cards. Surprisingly, many retailers last year found gift card redemptions were used to purchase new season and full-price products. In fashion categories such as apparel, retailers with fresh products on the floor saw a nice bump in sales and gross margin.
■ More often than not, spring season product is on the floor starting in January, but in the northern climates there is still plenty of cold weather left. There may be opportunity to create a mini-season to cater to the post-holiday shopper, but this requires solid pre-holiday execution to create the open planning dollars.
■ Evaluate the purchases that were made last year with gift cards and look at what you offered. The mass merchandise, hard goods and consumer electronics areas will find that gift card consumers are typically less price elastic than those shopping with their own dollars. Retailers should use analytical tools and price optimization software to avoid the markdown trap.
■ It is important to staff your stores appropriately. Many stores staff up Dec. 26 to handle the returns processing that has long ibeen the bane of holiday retailing. But don’t neglect the consumers armed with gift cards or otherwise nithere to browse and purchase; they niexpect the same icustomer experience ithat you would provide ion June 26.
■ Tie your workforce plans to not only your store sales, but also merchandising execution and customer service strategies to ensure an appropriate level of coverage to handle all types of transactions.
■ Support the cross-channel shopper. If one in five holiday consumers are going to make a holiday purchase online, as The Wall Street Journal reports, chances are high that similar numbers will want to use their gift card to pay for post-holiday purchases on the web. Cross-channel consumers spend up to 30% more than their single channel peers (AMR Research). Given the incremental spending of these customers, retailers must provide gift card programs that can be redeemed across all channels.
■ Many retailers are now exploring bringing their gift card programs in-house to avoid processing fees levied by the outsourced providers, where transaction fees will proliferate when retailers offer additional online gift card capabilities. In fact, some retailers provide consumers with online capabilities to check the balances of their cards, purchase new gift cards and refresh the stored value balance to create a stickier experience (think Starbucks).
■ Also, learn from the experiences of quick-serve retailers like Subway, and explore the combination of loyalty programs and stored value cards to further increase the customer relationship.
Act now, Barrett counsels retailers. The gift card horse is out of the barn, and retailers must adapt their planning and operations to exploit this consumer expectation. Secondary markets for gift cards have already sprung up (such as giftcardbuyback.com and eBay, indicating the staying power of the concept).
Gift cards are projected to have accounted for about 5% of the 2006 holiday season spending, but if the annual increases of 30% to 35% continue, we will soon be talking about numbers larger than some entire selling months. That will get a lot of attention.
Are you ready?
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How else do you get customers to love you?
Before love comes respect, writes Jeanne Bliss, author of Chief Customer Officer: Getting Past Lip Service to Passionate Action. And the way to customer respect is by making it painless and eventually a joy to do business with you. But it’s the unusual retail organization that’s set up to let people think and act collectively on behalf of customers. That’s because they’re stuck in silos making independent decisions, taking isolated actions for reasons other than servicing the customer.
But customers experience a company horizontally — across the silos. So if you want your customers to eventually love you, writes Bliss, you must first take these 10 steps to show customers you respect them:
1. Eliminate the customer obstacle course. Simplify the road map for customers. Make it clear for them how they can do business with you in a way that’s actually beneficial for them.
2. Stop the customer hot potato. He who speaks with the customer first should “own” the customer.
3. Give customers a choice. Let customers decide they want to receive emails, offers and promotions from you; don’t force them to “opt out” if they don’t.
4. De-silo your Web site. Your Web site should offer unified and consistent information and operation. Deliver a purposeful brand experience.
5. Consolidate phone numbers. Not easy, but simple. Do it!
6. Fix the top 10 issues bugging customers. You have the customer feedback; you know what they are. Now address them.
7. Help the front line to listen. De-robotize your front line; let them be human. Give them the skills and support for listening to and understanding customers. It is not a myth that solving customer problems builds more profitable customers.
8. Deliver what you promise. If you do, you’ll build loyalty and word of mouth. If you don’t, customers will walk and spread the bad word.
9. When you make a mistake, right the wrong. Ditto.
10. Work to believe. Work to eliminate the question of doubt about your customers’ integrity. It will do wonders for the attitude and actions that your front line brings to their interactions with customers.
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What else is driving results of industry leaders?
Loyalty programs, multi-channel marketing, branding the store, customization and customer-centricity are driving results of retail industry leaders. At the recent Shop.org conference, reports 1-to-1 weekly, such retailers as Borders, Best Buy, Home Depot, Gap and other brands detailed the rewards to be gained from these strategies.
Loyalty programs are having the biggest impact. Loyalty programs were the only online marketing tactic that increased in effectiveness during December 2005, and matched search engine optimization for marketing effectiveness. Many merchants are adding email campaigns to connect with loyalty program members. At Peet’s Coffee, for example, loyalty program members have contributed 50% of total revenue so far in 2006.
Multi-channel marketing puts the focus on enhancing the customer experience in all channels to drive business in all channels. The lifetime value of customers becomes accelerated when they become multi-channel customers. The goal is to generate and merge online and in-store data regarding customer loyalty, acquisition and retention, and then utilizing that data to drive customer value.
Branding the store as well as the products carried is a strategy being implemented by Timberland. It has also created a customization program in which customers can have their initials put on any number of multicolored boots. They can also enroll in a loyalty program that along with rewards gives them access to new product information, discounts and environmental information. So far this year Timberland’s loyalty program members have an average order volume 50% higher than non-members, and make additional purchases to their original orders at a 15% higher rate.
Customer-centricity is the strategic approach Best Buy has rolled out at 120 of its stores. As we described in the October 2006 issue of Integrated Retailing, based on its extensive database of demographic and transaction information, Best Buy has developed a system to categorize its core customers into four segments (technology buff, suburban mom, wealthy professional, family man). Giving its best customers distinct profiles enables sales associates to better anticipate and fulfill each customer’s needs.
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