Thursday, August 14, 2008

Revolution or solution? InfoSys Bows Shopping 360 For In-store Usage

By John Gaffney, Senior Editor

It might be the long sought solution for click tracking in stores. Or it might be another customer tracking technology that takes a long time for retailers to understand and adopt. Whatever it turns out to be there are certainly some dramatic possibilities in InfoSys new Shopping 360 technology. As positioned by InfoSys executives, Shopping 360 is a combination of auto-ID technologies that allow retailers to track shoppers as they travel through a store and even as they browse shelves and make purchases. This tracking is enabled by an in-store network of wireless sensor-based applications. “It enables real-time collaboration between people (shoppers), places (retailers) and products (CPG companies) at the point of purchase,” says InfoSys.

The product is patent-protected and secretive at this time. However, it is being pitched by the company as a technology that is affordable and a generator of information that will lead to more customer loyalty and even more total spend. The jury is still out on whether Shopping 360 will displace RFID technology. The company says it monitors shelf activity without “expensive RFID tags.” The cost is expected to be low. In fact it is “without capital investment” according to the company’s collateral material.

It also has a mobile phone component. “A software application gets downloaded onto a shopper’s cellular phone when they opt-in to use the Shopper Concierge service (the application in Shopping 360 that serves shopping lists and targeted offers). The software application communicates with the ShoppingTrip360 platform over the wireless Internet,” says an InfoSys spokesperson. “This permission-based opt-in network ensures that the shopper controls his own privacy and ability to interact with the store network. It also ensures that CPG companies for the first time in history have the ability to interact with the shopper at the moment-of-truth in a location-aware and context-aware environment. The shopper can download recipes, shopping lists, and receive advertisements, coupons, relevant messaging. The shopper can finally actively engage with this network just like she does today when she logs onto the internet.”

The technology has been in beta testing and the company isn’t saying what retailers or CPG firms have been involved. But if it’s a wireless technology that enables the amount of in-store tracking and information collection that it promises, many retail analysts are hyped.

“Our firm often talks about the notion of an in-store "cookie" and what it may one day be,” says Laura Davis Taylor, CEO of Retail Media Consulting. “Many times, we've talked about enabling the cell phone to serve this role, as it seems logical that a shopper might one day be able to "identify" their presence with their phone for opt-in shopper tracking--if they are motivated to do so. Reviewing the Infosys technology was very exciting for us because it appears to embrace all of the above. It links shopper data, shopper behavior, inventory, store operations and more to provide an "ecosystem" of sorts that can generate some of the powerful insights e-commerce websites do--and isn't that the model we should be going for in-store? Most importantly, it's permission-based, ensuring that it will be accepted while allowing the retailers to learn how to better serve their shopper. Kudos to them.”

Among the technologies promised in the Shopping 360 network are “store heat maps” which track cart paths; “smart shelves,” which track inventory and shelf browsing activities; and “smart visual merchandising” which enables couponing, more information on products and recommendations on new products.

What will it do for retailers and CPG firms? Retailers can monitor the total number of shoppers and their shopping trip paths, allowing them to gauge in-store energy demand based on occupancy, or open new checkout counters when lines start forming. CPG companies get granular visibility on the efficiency of their promotional spending, through an analysis of shoppers who interact with promotional displays, or through monitoring shopper traffic to a particular area as well as subsequent purchases.

Thursday, August 7, 2008

Limiting Problem Shopping Experiences Especially Key In Current Retail Environment

By John Gaffney, Senior Analyst

Retailers that understand the importance of negative shopping experiences and limit their occurrence have a better chance to optimize the holiday selling season. That’s the key takeaway from Measuring & Improving Customer Experience, a session at the Customer Engagement Conference, which took place earlier this week.

“Retailers need to get their value equation right this holidays season, that’s for sure,” said Stephen Hoch, Director of The Baker Retail Initiative at The Wharton School of Business, and a presenter during the session. “Pricing, discounting, and product value are all important but we cannot lose sight of the fact that customers need to feel welcome in the store and they need to be serviced. In the long-term that service will be just as important as anything else.”

Paula Courtney, President of The Verde Group, joined Hoch in presenting the results of research they conducted on the impact of customer dissatisfaction. According to that research problem shopping experiences are frequent and can have a huge impact on customers. More than half of all shoppers experience at least one problem in any given shopping visit. And when problems occur they come in bunches. A shopper who encounters a problem while shopping will, on average, experience 3.8 problems in that shopping trip. Six percent of the survey respondents said they encountered more than 10 problems in a shopping trip.

The issue is more than an inconvenience. In fact Hoch and Courtney believe it can hit retailer’s right in the pocketbook during the fourth quarter. The biggest impact is in loyalty. 82 percent of the problem customers said they “definitely will not” purchase from the retailer again, and 79 percent would not recommend the retailer to others. The social networking effect from “problem” experiences is potentially huge. Dissatisfied customers told 1.7 people on the average about their experience. But the amount of people they tell via social networks and product review sites is not calculated in the report.

The heart of the problem, and the solution, is the sales associate. Of the top ten most bothersome problems for shoppers, nine are sales associate issues, according to the research. “They annoy the most shoppers, lose the most business and drive the most negative word-of-mouth,” says Courtney. “Loyalty risk is greatest when shoppers need but cannot find a Sales Associate. Inattentiveness to long check-out lines and being ignored by a Sales Associate also account for significant loyalty loss. Being ignored by employees is the single largest driver of negative word-of-mouth.”

The customer value loss and market reputation damage from problem shopping experiences can be overcome, however. Courtney calls the antidote a “wow” experience in which the customer is effectively engaged by an informed, authentic sales associate. At least 50% of shoppers have experienced a “WOW” shopping experience at some point in their shopping history, according to the research. “WOW” shopping experiences are rare, and generate over 4 times more word-of-mouth than problem experiences.

“These are key experiences for a retailer to provide but they can be simple experiences,” she said. “Sometimes it’s just mitigating problems before they occur. Sometimes its resolving a problem to complete satisfaction of the customer.”

The Measuring & Improving Customer Experience session, as well as all web seminars from the Customer Engagement Conference, will be available online for to all registrants for 90 days.

Friday, August 1, 2008

Analysts Suggest Subtle Shifts In Customer Segmentation Strategies To Provide Shelter From The Economic Storm

by John Gaffney, Senior Editor

Retailers that have identified and analyzed their customer base over the past year may find a new use for that work now that the economy is more unsettled. The knowledge gained by putting customers into actionable segments may provide a hedge against overreactive decisions.

“There are many various levels of customer segmentation, and sometimes it mystifies me as to how companies decide on them,” says Ron Shevlin, senior analyst at the Aite Group. “But at this point it’s not the time to abandon that strategy if it’s in place. Smart companies will use that knowledge to continue to serve the customers that are most likely to respond to them.”

Updating customer value, and continuing to hone in on the needs and values that will motivate customer segments has always been a foundation of retail CRM. As the economy continues to show lower growth rates, a strong argument could be made that some customer segments are changing. Are the most frequent customers maintaining an income level that allows them to be frequent? Are the “luxury” shoppers still in first class? Knowing the answers is essential. Customer strategy experts suggest the following rules for re-evaluating and acting on customer segments.

1. Clearly define the rules of engagement. Each customer segment should have a protocol for frequency and relevancy of communication. For example, if a fashion retailer defined one of its segments as “frequent discount shoppers” it probably alerted that segment via email and direct mail as to sales and events. Just because that retailer needs to make up some ground in the fourth quarter doesn’t mean that it should drop prices more frequently and then bombard the discount segment with emails. The same practice holds true for every other customer segment regardless of whether it is defined by attitude, behavior, revenue, or demographics. “There is a temptation for segment-oriented marketers to return to the practice of carpet bombing,” says Nick Godfrey partner at Customer Portfolios. “It’s not needed. You must decide before the fourth quarter gets very busy exactly how far you’re willing to go to change pricing, marketing messaging, and tactics. To go beyond those agreed rules of engagement compromises your brand and customer relationships.”

2. Protect the Brand: The brand, as Godfrey points out, is simply an aggregation of customers. Customer value is best increased by acting with the knowledge of sound segment valuation and analysis. The highest value customer segment (i.e. the customers who spend the most, shop the most frequently and recommend your company) must be shown the best practices a retailer has to offer. The best customer will still be the best customer after the holiday season is over, says Godfrey. Although the economy may have taken some segment metrics down (such as purchase frequency) they have not taken them out. “The brand does not evaporate on December 24th,” he says. “The brand is made up of customers. Their motivations may change but they are still in a lifecycle with your company that should be followed.”

3. Understand segment changes: It is quite possible, and even probable, that the monetary value of key customer segments have changed. First, the credit, housing, and oil crises have very simply taken retail spending down. Second, inflation has hit many retail verticals, so the amount of money key segments will spend will be affected by the value exchange. Example: The “convenience oriented housewife” may still spend 90 percent of her grocery budget at your store. But what she can actually purchase for the same amount of revenue has dropped.

Shevlin maintains that retailers do not execute against their segment work effectively. Therefore, when segment value changes they tend to overreact. They tend to reinvent campaigns based on segment value changes, and even reinvent their entire segment profile. In most cases it is not necessary.

“You don’t have to move from student body right to student body left just because of the latest and greatest customer survey,” he says. “The smart market researcher knows that customer research needs to be analyzed. Do changes mean that actual spending plans are changing? Are they simple reflections of changing attitudes or are they hard and fast economic changes?”

Real-time customer data updates can be critical. It’s hard to find the percentage of retailers that currently implement real time reports. A recent Aberdeen report put the number at 20 percent, but that was based on retailers currently implementing loyalty programs. Retailers that understand the importance of customer analysis will most likely plan for better real-time customer data, and update their segment strategy accordingly.

“The last place I want to panic is where I can be seen by my most valuable customers,” says Godfrey. “The evidence of a downturn is still debatable. You can make it as bad as you want to. Don’t risk panic on your valuable customer segments.”