The Omni-Channel Experience – Redefining the Retail Landscape: Part 1 of 3

Dave Louie

For retailers, talking about omni-channel is very fashionable nowadays.  At a high level, the concepts behind providing great customer experience across channels are easy to understand.  However, those in the business know that executing on a great omni-channel strategy is pretty challenging.
omnichannel_puzzle2
In this three-part blog series, we’ll discuss:

1. The state of omni-channel retail today and introduce a framework for analyzing omni-channel loyalty

2. How a loyalty program can help you solve some of the key challenges of providing a great omni-channel experience

3. A prototypical omni-channel retailer and how it would execute a comprehensive loyalty program

State of Omni-Channel Retail Today

Omni-channel retailers are acutely aware of three key trends that are heavily influencing the industry today.

1. Showrooming – For some retailers, it’s the bane of their existence.  For others, it’s just a mild annoyance.  Either way, it’s an undeniable phenomenon that’s been covered heavily in the press.

2. Increased acquisition costs – It’s becoming increasingly expensive to acquire loyal customers across all channels.  As an example, the SEM market is highly efficient, meaning it’s become more expensive to bid on effective keywords.  As another example, daily deals were pitched as a compelling acquisition tool, but for many retailers, it’s proving to be high cost and ineffective at bringing in profitable and loyal customers.

3. High customer expectations – Omni-channel customers have come to expect a great overall cross-channel experience.  In a recent eMarketer survey, 34% of survey respondents say 24/7 customer service is the most important attribute of a great retail experience.  20% of survey respondents say that being rewarded for purchases, feedback, and referrals is most important to them.

Given these trends, now more than ever, it’s critical that retailers invest in and focus on building a loyal customer base.

How is Omni-Channel Changing the Game?

For retailers, omni-channel means that the number of customer engagement points has dramatically increased.

omnichannel_circles

Just a few years ago, it was sufficient to interact with customers via an eCommerce website accessed via a PC and in-store.  Nowadays, retailers must effectively communicate across a myriad of channels, including PC, tablet, mobile, and in-store.  The mediums include website interaction, email, text message, or good old-fashioned face-to-face discussions with a store associate.

Due to the proliferation of personalization and CRM technologies, customers have come to expect you to know who they are, what they purchased, and their preferences for interaction.  For many retailers, implementing an overarching omni-channel strategy has revealed a key pain point: siloed data.  Many retailers have a heterogeneous set of vendors across eCommerce, POS, ESP, CRM, and Customer Support systems.  These systems were deployed at different stages of the company’s life, and over time, they’ve grown to be silos of data that are difficult to integrate for the purpose of providing a single view of the customer.

The bottom line is that executing an omni-channel strategy puts an increased strain on your whole team, especially Marketing and IT.

What Does This Mean to You as a Retailer?

Given that omni-channel is hard, there is a huge opportunity for retailers who get it right.  According to a Deloitte study, omni-channel customers spend 93% more per transaction than customers that only shop online.  Similarly, omni-channel customers spend 208% more per transactions than those that only purchase in store.

omnichannel_impact

Similarly, the Deloitte study found that customers who engaged with the brand in certain ways were more valuable than those that did not engage in a particular behavior.  For example, customers who visited a retailer’s mobile website spent 59% more than customers who did not.  Customers who liked a retailer on Facebook spent 44% more than customers who did not.

A Framework for Analyzing Customer Loyalty

At 500friends, we work with retailers every day and have developed a strategy for increasing omni-channel loyalty.  We have multiple frameworks we use to develop a strategy, and below are three key steps for one of those frameworks:

1. Understand your customers – Decide how you’d like to segment your customers, then develop an understanding for key characteristics of that segment.  You’ll want to analyze purchase behavior within a segment, including metrics such as frequency, average order value, and which channels they are purchasing from.  In addition, you’ll want to understand how those customers are interacting with you across various channels.  A modern loyalty program can help you gather the engagement data necessary for this analysis in a centralized location.

2. Develop hypotheses for behaviors that will lead to increased monetization – Once you understand your customers, it’s time to develop hypotheses on how to increase monetization for customers in a specific segment.  Let’s say that you’ve decided you want to target purchasers in a middle decile, as defined by lifetime value (LTV).  Based on your understanding of your customers, you’ve found that members in the next higher decile are more engaged in the form of writing reviews.  Therefore, you develop a cause-and-effect hypothesis that if you can get a middle decile customer to write more reviews, they will be more highly engaged, and therefore spend more money and move up to the higher decile.

3. Incentivize those behaviors to achieve results – Once you’ve decided on your hypothesis, a loyalty program can be used to incentivize a specific engagement activity.  Continuing the example above, you can test your cause-and-effect hypothesis by rewarding customers for writing a review.  Once you’ve set up the incentives, it’s important to review results to see if your hypothesis was correct.  Within 500friends, we call this process “loyalty program optimization”.

Summary

Omni-channel retail and the challenges that it presents are real phenomena that you need to tackle head on today.  Take a hard look at your customer loyalty strategy because what you’ll quickly realize is that you have a lot of untapped ideas on how to increase loyalty, and ultimately revenue, across numerous customer segments.  A modern loyalty program can help you execute on those ideas in a cost-effective and agile manner.

Up Next

In the next post, we’ll discuss in more detail how a loyalty program can help you solve some of the key challenges of providing a great omni-channel experience.  We’ll also discuss a few best practices you can employ in order to help nurture a loyal omni-channel customer base.

One thought on “The Omni-Channel Experience – Redefining the Retail Landscape: Part 1 of 3

  1. Hi Dave,

    I am interested in the study by Deloitte that you mention, “According to a Deloitte study, omni-channel customers spend 93% more per transaction than customers that only shop online. Similarly, omni-channel customers spend 208% more per transactions than those that only purchase in store. Can you give me a link or name/date of the study?

    Thank so much!

Leave a Reply

Your email address will not be published. Required fields are marked *

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>