The multichannel challenge

I have not written on this blog since July 2010.  It is not that I was struggling to find topics, but more a lack of time: my current interim contract with Matches Fashion and the adoption of an adorable child finally becoming a reality just took their toll on my spare time.   

In the April 1^st edition of Retail Week, I read an interesting supplement with same title as this post (in the print version) that motivated me to start blogging again.  This supplement contains a lot of good comments but I will highlight a few here.

Ok, it’s a word now, so we can write “multichannel”, no longer having to write “multi-channel”.  Every one in retail is now more than just talking about it, as it must have a prominent position in every retailers strategy.

 But critically, retailers are finally understanding what multichannel really means.  It’s not just about adding one more channel to market, it is about providing integrated and seamless services to your customers.   A transaction can then involve 2 or more channels ideally at no extra costs and in a very flexible way.  

Darryl Owen, the SAP head of retail for EMEA, provides a short list of must-haves for a multichannel software solution:

·         Centralised data, including master data and transactional data.This is about full and true integration between all systems supporting the various channels.  One system must be the holder of the single truth.

·         Real-time IT infrastructure.As technology enables customers to be always connected, they will expect real-time information with all channels.   So if your tills poll once/day, here is one priority for you to change.

·         Accurate data analytics.Reporting must be consistent throughout the channels.  This means for instance that each customer or each product have the same unique identification across channels.

·         The ability to think ahead.This is absolutely key for success and competitive advantage.  Your systems and business processes must be fully flexible to associate existing channels differently or incorporate new channels no one has even thought of yet.  

I would like to comment on the “multichannel shopper” article as well:

 <<In December, Deloitte surveyed 2,000 multichannel consumers to find out about their shopping habits. Shoppers’ expectations are shifting as quickly as their behaviour. Deloitte head of multichannel Colin Jeffrey says: “What one retailer offers as a new service quickly becomes the expected. Customers will struggle to understand why others don’t have the same.”

The research showed that on average multichannel customers spent nearly twice that of their store-only peers, with multichannel customers spending an average of £130 per transaction compared with £67 for store-only transactions and £113 for internet-only customers.>>

Being a multichannel retailer is first about providing new convenience to existing customers rather than increasing sales.  However, as Deloitte’s research showed, multichannel customers tend to spend more.  So for instance, when using a click & collect in store service, a customer might purchase additional products while in store collecting the order placed online.


A key point to realise is the speed of change with multichannel customer behaviours.  Success will not be about playing the crystal ball game about what is to come, but to transform the organisation’s systems, processes and culture, so as to be as flexible as possible to adapt to any new technologies and customer behaviours while remaining competitive.

Knowledge management is the process of leveraging organizational knowledge

In their paper "Strategic planning for knowledge management implementation in engineering firms",

Ravi Shankar, (Ravi Shankar is an Assistant Professor in the Department of Management Studies, IIT Delhi, New Delhi, India.), M.D. Singh, (M.D. Singh is a Senior Lecturer in the Department of Mechanical Engineering, Motilal Nehru National Institute of Technology, Allahabad, India.), Amol Gupta, (Amol Gupta is a Student in the Department of Computer Science, TIT&S Bhiwani, Haryana, India.) and Rakesh Narain, (Rakesh Narain is a Senior Lecturer in the Department of Mechanical Engineering, Motilal Nehru National Institute of Technology, Allahabad, India.) seem (have not yet read it) to define Knowledge Management the way I have done since 2005 (hence the title of this blog!):

<<Knowledge management (KM) is the process of leveraging organizational knowledge to deliver long-term advantage to a business and is based on a business strategy that involves engineering various knowledge-centric business processes and developing organization structures to support these. These, in turn, require technology to capture, codify, store, disseminate and reuse the knowledge. Successful deployment of KM is not a simple process. This paper suggests that a major reason for the failure of many KM projects is the absence of a well-defined strategic plan to guide implementation. This paper discusses the strategic planning needs of the KM deployment process, and develops a framework that could be used specifically by engineering firms to guide the KM implementation process.>>

I have also argued in several posts that KM cannot truly succeed if it is not adressed strategically.

Scaling up with social media: luxury brands have a natural advantage.

Jeremiah Owyang recently did a presentation on how companies can scale up with social media technologies.  Do read it.  His starting observation is that customers (let alone prospects) will always outnumber a company's total workforce (let alone the ones formally responsible for customer relationships).  Since social media puts companies in "direct" contact with a growing number of people, they are in danger of counter-productive social media initiatives leaving most customers or prospects frustrated for lack of response from the company to their queries/issues/concerns.

Jeremiah suggest 3 good strategic solutions to this problem:
<<

• Using all the voices in your ecosystem (the Rings of Influence) not just being the only ones to talk.
• Develop more customer to customer technologies that leverage your customers to do your marketing, sales, and support.
• Invest in Social CRM systems, while immature now, they will eventually help companies respond in real time –and maybe even anticipate customer need.

>>

 Reading this, I realised it was confirming my position that luxury goods and services companies are the best suited for an effective social media strategy: their ratio "number of customers/number of employees" is by nature the lowest!  So, they can realistically connect with a large number of customers by involving all their employees for instance.  Luxury brands can be more in control of what is being said about them in the socialsphere than FMCG brands. 

A hint that Burberry is on the right track about social media integration

 In my last post, I wrote that I didn't know of a retailer that is yet offering a fully integrated multi-channels experience.  I have however just discovered that Burberry's own social media site www.artofthetrench.com might indicate that they are on the right track towards this full integration.  The site allows a Facebook account connection (in fact imposes it) before uploading your own trench coat pictures.  This of course does not mean that Burberry will implement this type of integration on its ecommerce site but it's a start.

PS. I am not suggesting that a Facebook account should necessarily give you access to all ecommerce sites! Social media is not just about Facebook for a start, and a social media strategy should not be application dependent anyway.  If the technology might still need to be defined, the goal is clear however: offering an integrated and consistent multi-channels customer experience and follow each customer as a unique individual through all channels.

Loyalty cards are about customer knowledge, next step: integration with social media

Despite its recent loss of market share, Asda continues to argue that its lowest price policy is a better strategy than its main rivals’ loyalty card schemes.  I think they are wrong but not with respect to prices but because of the valuable customer data they are not collecting.  Asda simply does not “know” its loyal customers.

In Retail Week May 28^th 2010 edition, there is an interesting article about customer loyalty: “Loyalty cards: the bedrock of future success?” 

 <<[David Roth (former B&Q marketing director, now chief executive of the Store WPP)] observes: “The world is going to divide between those who can organise and make use of their customer data and the others, who will wake up in five or six years’ time, outmanoeuvred. The person who owns the data, owns the customer.”
But he maintains that loyalty schemes are primarily a means to an end and will not on their own make a retailer successful.  He says: “Gaining customer loyalty is about a lot more than a scheme. The value proposition will be important.”
For all the interest in loyalty and the success of some programmes, they will never be a panacea for retail’s ills and typically cannot answer one vital question. As [James] McCoy (Yougov SixthSense research director) says: “Loyalty schemes can tell you what people are buying - but not what they’re not buying. As well as whatever they are spending at one retailer, they might be spending another £40 a week at Lidl, which you have no idea about. The challenge is to find the data you don’t have.” >>

David Roth and McCoy are absolutely correct.  In the FMCG sector, loyalty schemes will increasingly be a necessity for commercial success but will not be sufficient by themselves to ensure competitive advantage.  Competitive advantage will first come with what is done with the information collected at the till.  Tesco Clubcard is a perfect illustration of this: I am a Tesco customer and I receive at home personalised mail including discount coupons for products that I am likely to buy based on my purchase history.

However, the true Holy Grail of competitive advantage is not in the customers’ purchase history data, it is with the knowledge of what they want but cannot find or afford, what they might buy if they were made aware of it or if it was conditioned differently, what they buy with the competition, etc…  The most valuable customer knowledge will not come from transactions at the till but from engaging with customers to get them to tell what their needs and wants are.  Luxury goods retailers have known this for centuries and have always valued and leveraged the in-store customer knowledge obtained by the salesperson through the conversations with his/her “loyal” customers.

So FMCG retailers will need to engage with the customers registered in their loyalty scheme.  Since they will have to do this through all channels, it will require a holistic approach to customer identification: So this means one account per customer for all channels.  This might seem obvious but I have not yet come across a single retailer (from FMCG to luxury) with such a pervasive integration strategy.  For instance, all retailers with a Facebook page do not integrate the Facebook account with the ecommerce customer account: This means no systematic way of tying up a customer’s comments on Facebook with his/her online (let alone offline) purchase history.

<<Tesco is one of the most advanced of retailers in its ability to mine customer data and use it effectively and, notes Shore Capital analyst Clive Black, has put its scheme at the heart of its business, rather than run it as an add-on.>>

Similarly, in the next few years, retailers will gain competitive advantage from putting social media and all customer interactions at the heart of its business, rather than run it as a an add-on.