Omnichannel Urgency: Retail at the Customer Experience Tipping Point

By Bob Elliott, managing director, SAP Canada

This is today’s retail reality:Bob Elliott

  • 79% of consumers spend at least 50% of total shopping time researching products online
  • 82% of consumers will substitute and switch brands due to an out-of-stock product
  • 59% of consumers are willing to try a new brand to get better customer service

A vast majority of all purchases begin online. The expectations have never been higher for retailers to deliver shopping experiences through their website, a mobile app or their social networks.  Although the brick-and-mortar store still accounts for most purchases, the beginning of the transaction starts elsewhere.

Innovative retailers are dramatically changing their business model to stay ahead by shifting their storefronts to the digital world. They’re building apps, integrating social media and ensuring a complete omni-channel experience for the customer at every touch point.

Being visible and available to your customer through every channel is highly important for competitive retailers, but how do you retain your customer? What can you do to stop them using another brand or service that’s equally available? The most competitive brands are turning to loyalty management strategies to create a consistent customer experience that provides incentives, and rewards customers for their loyalty.

The beauty of a rewards program is that they entice consumers to repeat their shopping experience. The benefit to retailers is that these programs are often more effective in increasing revenue over the long run than one-time price promotions and can help move stock that might otherwise sit on the shelves.

A smart loyalty program, backed up with high end software, allows you to gather all the information you need from your customer to provide them with personalized, tailored offers to keep them loyal to your brand. Combine real-time personalized promotions with the weight of your shoppers’ point-of-sale transaction history, and we’re talking about a serious market advantage. Your shoppers’ transaction history (easily recorded and assigned to a loyalty account) contains every scrap of detail you can imagine, including:

  • The time, date, location, and frequency of store visit
  • The size and value of each visit
  • The value and frequency of coupon usage
  • The individual items purchased (brand name versus store brand)

With the power of technology like SAP HANA, this data could be loaded and accessed today, in real-time, to trigger personalized promotions through smart phones. Imagine walking into a grocery store to stock up on your weekly staples. As soon as you pick up a carton of eggs, your smartphone chimes as you pass a digital marketing sensor. You check your phone and find out that your favorite brand of breakfast sausages are 50 cents off for the next hour – what luck! Of course, there’s no luck involved whatsoever.

The in-memory analytics engine studied your transaction history, identified a product related to eggs for which you have an existing affinity, and priced it just right to entice you to purchase a high-markup item you didn’t plan on buying. This all happened without human intervention in a fraction of a second. Scale this model to several interaction points throughout your stores, and you begin to see the impact precision retailing can have on your top line.

Juniper Research forecasts retail payment values on NFC-capable smartphones upwards of $180 billion globally by 2017. Mobile spending in general will reach $1.3 trillion globally and account for 35 percent of the technology economy by 2016, according to Forrester Research. Retailers of all shapes, sizes, and markets will be investing in ways to own a piece of this pie. It’s not a question of if but when.

Can banks step up to the digital challenge?

bob-elliott1By Bob Elliott, managing director, SAP Canada

The digital journey we’re on today means that even traditional institutions need to become “full service” to connect with customers through every channel.  But for many banks, how feasible is this?  Can a traditional bricks and mortar bank compete with PayPal, Facebook or Amazon?  This is the new reality for banks today. Just last week Facebook announced that the company received Irish regulatory approval to become a “payment and remittance processor,” i.e., a bank, and PayPal is already a bank in many jurisdictions.

When some of the most famous and frequently used brands in the world start competing for your business, what can you do to win? Is it too little too late? Banks are trying hard to go digital –  they’re hiring smart people and they’re making big investments – but can you think of one “physical” business that has successfully evolved into a digital leader?  Companies like Amazon or Facebook are purely digital. They were invented for the internet. They have been using customer and behavior data for years to create a relevant and meaningful digital experience.  And they are engaged with your customers today.

Very few brick and mortar retail businesses have evolved into an internet age powerhouse.  Bookstores, record shops, photography stores, video rental firms, etc. have been decimated by new digital competitors.  Banks have offered online services for several years but are just getting started in the mobile/multi-channel space, and most are struggling to make their cross-channel experience meaningful and seamless for their customers.  When you think about the internal structures of a large bank versus a start up like Facebook, you can begin to understand why banks cannot behave like a start-up.  The challenges include: brick and mortar investments and mentality; complex,  inflexible and aged legacy IT systems; and leadership by the same executives that built up the legacy business.

However, can a digital upstart seriously take on the banking industry and win? For me, the answer is no.  This has been demonstrated by startup banks such as Simple, Moven, Fidor and more. They are fledglings, and what happens to fledglings is they fall out of the nest, can’t fly or get eaten by a predator. We saw this when US based Simple was acquired by multinational Spanish banking group BBVA.  BBVA hopes to use Simple as a stand-alone entity to help them become a  next generation bank.  Many banks are adopting this strategy – acquire a fledgling and hope it can help them transform.

This may be a good plan but it’s traditional thinking.   Let’s flip this thinking upside-down and consider an even bigger risk for banks:  what would happen if an online player like Google were to acquire Citibank in a hostile takeover tomorrow?  What would you do if you were acquired? How would you react? This is the scenario that banks should be considering in their digital strategy.  Of course, there could be regulatory barriers but these are also changing rapidly.    As is often the case, the best defense is a strong offense, and investing in a modern, open and flexible IT platform that is designed to work in a multi-channel / omni-channel world is key to survival, growth and profitability.  This is not optional, it’s required, and we’re seeing examples around the world – Commonwealth Bank of Australia, Standard Bank of South Africa and Deutschebank are great examples.

Canadian bank ATB, the largest Alberta-based financial institution, has leapfrogged the traditional competition by completely transforming the platform on which it runs its business. The transformation meant ATB could bring mobile banking to its customers for the first time, and they rolled this out in months, not years, giving their customers more options for interacting with the bank. Now running their business on an SAP cloud network, ATB is a more nimble organization. They have the flexibility to introduce new offerings to the market quicker than the competition, while improving customer service, productivity and profitability. A perfect example of what other Canadian banks need to do to compete with oncoming trends.

 

3 Steps For Joining The Innovation Economy

bob-elliottWe are in an era when innovation is more likely to come from the outside in. And it will be collaborative. No more cloistered Ph.Ds. in R&D; ideas will stream in from outside corporate walls, across geographic borders, and even from customers. And innovation will be marked by continuous input and improvement.

The constraints have gone away

In the past, an individual entrepreneur with a great idea for a new product was constrained by capital, requirements for economies of scale, and physical production requirements. In the innovation economy, where the idea rules, the individual could sell their great idea for a car part to GM or Ford, who could then use it to 3-D print their new car model.

Anyone can innovate today. Typically, there are about three necessary steps to take to keep up with today’s economy:

1.       Bring supply chain partners into the innovation process. Innovation will be a collaborative process not just among individuals, but across companies. Subcontractors and supply chain partners will be integral in the ideation process. For example, Boeing or Airbus used to outsource the manufacturing of an airplane wing. Going forward, they’ll also challenge their subcontractors to come up with their best ideas for the design of that part, while maintaining control of the overall design and engineering of the aircraft.

2.       Stop the one-way flow. The gap between the developed world and the developing world is closing, no more so than in the area of innovation. Whereas companies in developed economies historically came up with ideas for products that would eventually make their way to developing countries, now innovation is emerging from developing countries. Coined “reverse innovation” by Vijay Govindarajan and Chris Trimble of the Tuck School of Business at Dartmouth, products developed to meet the needs of developing nations, like battery-operated medical instruments in rural India, end up having desirable features for the developed world as well.

3.       Bring customers into the process. The passive customer is no more. In the innovation economy, ideas will flow from customer to company and back again. The idea of co-creation – that business value will be increasingly delivered by company and customer together – is increasingly relevant as new technologies enable customers to not only co-innovate, but co-design, co-market, and even co-produce.

The market leaders in the innovation economy will use the best idea coming from any direction – customer or supplier, emerging market or individual entrepreneur.

About the author:

Bob Elliott is Managing Director for SAP Canada. He is responsible for the business operations in Canada and driving growth for SAP’s industry-leading cloud, mobile, and database and technology solutions that help 9,000 Canadian customers in 25 industries become best-run businesses.

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