Whitepaper on Customer Experience Management (CEM) perspectives in Retail (Written and Published in December 2009)

1. Emerging Customer Experience (CxP) perspectives in Retail
Abstract
In today’s hyper competitive world of retail, customer experience programs that focus solely
on pricing benefits deliver no loyalty at all. This whitepaper will focus on the new and
tangible perspectives in customer experience management and addresses privacy issues
faced by customers today.
Author: Priyadarshini Rajkumar (U20647)
Annual Retail Industry Week- November 16-20, 2009

2. Introduction
The goal as a company is to have customer service that is
not just the best, but legendary. - SAM WALTON
Whether you are a mom and pop corner shop or a retail giant, customer loyalty is the DNA
to delivering success and timeless value to every business. In a survey conducted by
Forrester1
in the first quarter of 2009, we have compelling evidence that customer
experience highly correlates to customer loyalty in each of the 12 industries and 100
companies they surveyed. And the correlation component has increased compared to the
results of the previous year. It was found a good experience correlates with a willingness to
repurchase a product or service, a reluctance to switch and likelihood to spread a positive
word-of-mouth endorsement.
Exhibit 1: Components of CxPi results for Retailers
Based on my insights and on available industry research, the article makes a case for 6
actionable best-practices that can help retailers take their customer experience
management program to a sophisticated level.
1) Help customer to fulfill their shopping plans without disappointment
Despite the attempt to rein in ‘stock outs’ through new technologies and store-level
operations, they continue to dog the retail industry. The typical figure2
is 8 % of sales lost to

3. them, but the real figure is likely much worse: many shoppers simply leave the store, with
all of their would-be purchases, when an item is unavailable. Below is a real-world scenario
that illustrates how a retailer can enhance the experience.
A customer who is planning to do his weekly shopping could send his shopping list to the
retailer prior to the commencement of the shopping activity (through any appropriate
channel - mobile, online, kiosk, call center and the like). The retailer can identify the top 5
nearest stores (to the customer) in which all the items in the shopping list are available in
stock and those hard pressed for time can get their shopping lists organized in a fashion that
can help them to finish shopping faster by providing a store map and directions instead of
walking down the long aisles. For those items out of stock the retailer could accept an online
order or make recommendations on substitutes/alternative products.
2) Stay obsessively customer focused rather than customer obsessed
Retailers are consistently trying to find innovative and persuasive ways of retaining loyal
customers. As a retailer, if you are not going to constantly give them those unique
features and benefits that are highly valued by the customer then you are not creating
sustainable and lucrative relationship with your customer. Following are some of the
new ways that retailers could benefit from
 Personalization is Power
Retailers who attempt to micro slice and dice the segmentation pie to heighten
the customization factor is sure to formulate a unique selling proposition to win
the hearts of the consumer. Following are some of the examples to illustrate the
personalization that retailers could offer their customers
o You would find the needs and habits of customers to a retail store in a
specific geographic location would vary compared to the same store
format at a different location. In order to address this and a gamut of
aspects in customer experience, retailers are adopting to demand
driven and customer-centric models which in turn empowers them
with huge amounts of data ready to be sliced and diced into
meaningful business decisions such as rationalizing assortments at a
store level or items/assortments exclusive to a particular store format
and location.
o Nutrition meter – Retailer can help their customer’s to shop smart so
as to fulfill their health or lifestyle goals such as weight loss, reduce
blood pressure levels etc.
 Savings Tracker
Providing a periodical savings tracker that illustrates the $ value saved by
shopping with the retailer in comparison with the competition or the market
price. Furthermore, for a customer shopping at a retailer’s local store, the
retailer can provide price/service comparison (if any) between their store and
their online/mobile channels so that customers can accrue the benefits during

4. the shopping process. This will be a boom in the post-recession years to come as
consumers are becoming more and more price yet value conscious.
 Channel-wise Promotions
A Knowledge Networks/PDI study3
(published in August 2009) of in-store
sampling found sales lifts lasting as long as 20 weeks after the event. This, in
turn, suggests that sampling may be far more cost effective than previously
thought. The study found that sampling or preview tasting sessions not only
increased sales of newly launched products, but line extensions and even well-
established existing products, as well. The study reports that sampling can have a
positive “halo effect” on related merchandise, lifting the sales of non-sampled
products within the parent brand’s franchise.
A well-timed communication and marketing from a retailer’s standpoint (through
narrowcasts, podcasts, mobile or online mediums) on any new products/offers
introduced will strongly invoke customer interest. For instance, walk near your
favorite supermarket and your mobile phone will tell you about special sales,
bespoke promotions, new products launches coming up for the week (based on
customer data). It is interesting to note that a recent McKinsey4
research
indicates that consumers who shop across a number of channels spend more
annually than those who shop in just one.
3) Power to the customer
 Using SKU-level browsing information
Retailers have been trying to understand and measure the in-store activity of shoppers.
Holistically leveraging the store’s digital infrastructure sets the stage for a business
intelligence platform to aggregate these feeds and turn them into actionable shopper
insights, and systems are coming to the fore that do just this. IP cameras strategically
situated throughout a store, for example, can measure conversion rates: of shoppers
entering the store, how many go down a specific aisle? Of those that do, how many
linger in front of a specific category (dwell time), and how many actually make a
purchase? These metrics, standardized and automated, are exactly the type’s brand
marketers and sophisticated retailers are looking for to measure in-store shopping
activity2
.

5. Taking one step further to this is to understand the shopper’s in-store browsing activity
at a single SKU level. So imagine the ability to create customer segmentations and use
them as a lens through which to view activity—from single SKUs to categories—of
customers shopping by hour. Retailers could accomplish this by asking customers to opt-
in to use either with sophisticated barcode scanners or free downloadable mobile
applications with barcode scanning capabilities for the in-store shopping process. This
will enable retailers not just understand shoppers in-store browsing patterns/conversion
rates on a single item on the shelf but also participate in the consumer’s decision making
journey by proactively providing the necessary information and tools. And with about
20% of mobile phone users using smart phones, consumers’ anytime access to
information is growing. Consumer clout is also growing as social networking and
participation in services such as Twitter increases. More shoppers are turning to
consumer ratings and reviews as important inputs in shopping and buying decisions
using their mobile phones or kiosks within a retail store. Moreover, it provides a
platform for the consumer to make well informed purchase decisions without having to
walk out of the store. This could have a very positive impact on the customer
experience. For instance, let us consider a typical customer who wants to purchase a
laptop after doing some initial research (online reviews, peer groups et al) and has
considered 2 alternatives prior checking out at his favorite retail store. When at the
store, the customer evaluates the 2 options he has considered and in the process finds
out an additional model that fits his needs. The retailer provides the customer with the
necessary tools and information to evaluate all the 3 alternatives, which enables the
customer to make the right purchasing decision, thereby delivering a delightful
customer experience, all within the store premises.
 Do-it Yourself’ Loyalty programs
One other area of concern to customers is the insignificant and the umpteen loyalty
rewards. Loyalty rewards given by retailers may not necessarily be worthy or useful to
customers. An appropriate reward (that is valued by the customer) given in the
appropriate form (say, mobile coupons) by a retailer has a direct positive impact on the
experience and the loyalty factor to the customer. ‘Do it Yourself’ loyalty programs are
emerging and will help retailers to sustain a long-term association with the customer.
 Alternatives to loyalty cards
Today almost every service industry such as banking, insurance, grocery, apparel, books,
music, electronics, entertainment, airline etc. has a loyalty program in the form of

6. loyalty cards. Assuming 1 loyalty card per industry, a customer still has to manage a
wallet full of loyalty cards, not to say the plight of a customer who has 2 or 3 loyalty
cards in the same business category such as grocery retail. Whether today’s retailers are
trying to address this burgeoning customer frustration or not, free iPhone mobile
applications such as Cardstar5
are already alleviating customers burden of carrying
loyalty cards. The Cardstar application generates a nifty image of a company’s club or
supersaver –type card, with bar code images and works with loyalty card programs for
over 190 companies in 3 countries (US, Canada, and the UK) including a variety of
retailers in its network.
4) Engage and Reward the customer at every touch point
Instant gratification at the Point of Purchase or In-store in terms of offers on products,
instant coupons for next purchase, event based dialogues/messages (e.g. special events
like birthdays or dropping an item in the online shopping cart), appreciation for a high
net worth customer are some of the opportunity areas for retailers. Today leading
retailers are moving from points and discounts to personalized services, transferring
rewards to charity programs, green initiatives, after-hours shopping, referrals, access to
product manuals, recipes, articles, “how to” guides and newsletters6
. Similarly,
customers are rewarded for their contribution to community and environment.
Identifying and understanding (past data intelligence) every customer from the moment
of entry into the store as opposed acknowledgment at POS will enable retailers to
connect, sell and reward customers appropriately. This is one area where leading mass
merchandise retailers are trying to get a perfect fit, as it is very effective for most
purchasing environments where queuing isn't such an issue, such as a high-end mall
apparel stores. Retailers are exploring technologies such as mobile phones, biometrics,
and in-store kiosks to help spot their customers.
5) Never stop listening to the customer
Most retailers have access to the same information, but do very little with it and
certainly don't use it to drive big strategic change. Today we are witnessing a paradigm
shift in the customer and retailer equation. Consumers have moved from shoppers to
participants and retailers cannot sustain without listening to them. UK based retailer,
ASDA7
has recently announced plans to roll out initiatives aimed at addressing
customers' demand for more openness and transparency. ‘Chosen by You’ (Example:
customers can say what products they want at their local store); ‘Your ASDA’; ‘Bright
Ideas’ and ‘Connect with the grocer’ are some of the programs that are run by the
consumer and for the consumer. Ultimately it will show that ASDA is listening.

7. To get their’ wow’ factor soaring and reap the desired ROI; retailers need to have a
robust customer connect, participation and feedback mechanism where customers
learn, experience and share for the common good.
Exhibit 2: Holistic view of a complete brand experience
6) Last but not the least, never fail to address customer privacy concerns
When Kroger’s partner company, Dunhumby came up with a concept of personalized
pricing using dynamic price tags on the shelves, it did not kick start as it demonstrated
first degree price discrimination and complete customer paranoia. Whenever a
customer walks into an aisle he would see dynamic prices based on his data available
with the retailer.
In an increasingly pervasive and cut-throat world, there is a constant fear factor that irks
customers about their privacy. There is huge amount of free customer data and
information out there, and it is ubiquitous not just for retail but across all businesses.
Retailers need to ensure that customers do not get ‘paranoid’ about their private data
that hungrily translates into shopping patterns, behavior, basket etc.
Entrust the customer to participate or opt for targeted shopping based on his/her
shopping data and personal details available from the retailer or any other 3rd
party
affiliates. It is all about addressing customer’s sensitivities and tuning their mindsets
and not using the inadvertently offensive approach.
Conclusion

8. To summarize, successful retailers who continue to achieve customer loyalty excellence,
will have superiority in these key competencies.
Exhibit 3: Key competencies that differentiate successful retailers
The next decade’s successful retailers will sell food, food service, clothing and furnishings;
retail brands will merge to become solution providers grouped under a single roof. Stores
will incorporate areas of low interaction / quick process; islands of high interaction / high
service; spaces for interactive research for later online purchase; and service points for
other providers such as airlines and health clinics using a range of the emerging
technologies. In consequence, in-store layout and communication will be based on the ‘life
shapes’ of a store’s shoppers8
. Being able to accrue significant ROI on ‘customer
experiences’ is no longer a utopia or distortion; it is but to become the norm of the next
decade of retailing.
References
1) http://experiencematters.wordpress.com/2008/12/15/forrester%E2%80%99s-2008-
customer-experience-rankings/
2) http://www.register.hawkinsstrategic.com/register/Paper_3_Download.html
3) http://www.pmalink.com/?tag=knowledge-networks-pdi
4) https://www.mckinseyquarterly.com/ghost.aspx?
ID=/The_consumer_decision_journey_2373
5) http://www.undertheradarblog.com/blog/category/uncategorized/
6) http://www.tcs.com/SiteCollectionDocuments/White
%20Papers/Retail_Whitepaper_Retailer_loyalty_Program_10_2009.pdf

9. 7) http://www.retail-week.com/retail-sectors/food/asda-installs-webcams-as-it-aims-
for-company-transparency/5006841.article
8) http://www.tnsglobal.com/_assets/files/TNS_Market_Research_Shopper_Insights_2
008.pdf