Are You Driving the Retail Customer Experience?

Now more than ever, creating a rich shopping "experience" is de rigueur for retailers seeking to be a destination of choice.

Competing on the basis of the shopping experience – for example, delivering useful education, ‘best in class’ service, welcoming aesthetics and engaging entertainment – is not a novel idea. Many world class firms like Walt Disney, Southwest Airlines and Hard Rock Hotels have built significant businesses by leveraging an experiential-based business and marketing model.

It’s now the retail sector’s turn.

The evolving landscape

Recent market, technological and consumer developments have put the shopping experience at the center stage of retail marketing and operations. Stores and chains are increasingly seen by buyers as undifferentiated and unexciting; consumer spending has stalled and; pure-play Web retailers and online shopping tools have come into their own. At the same time, social networking’s popularity is exploding while bored, confused or fickle customers increasingly demand education, aesthetics and entertainment as part of their retail experience. To stay relevant and competitive particularly in the mid-market and premium segments, merchants will need to regularly orchestrate and promote compelling on and offline shopping memories. That memory itself will become the one of the products – i.e. the "experience."

Evolving consumer behavior is a major factor impacting the customer experience. For one thing, sales channels are changing. Online sales, already 7% of all transactions, are forecasted to hit 15% by 2019 (source: Google). Although in its infancy, mobile commerce is expected to explode over the next few years. Increasingly, buying decisions are being made before the consumer visits the web or traditional store. Twenty years ago, 70-80% of all grocery purchasing decisions were made at a store. Today, it is less than 50% according to Joel Rubinson, former chief research officer of the Advertising Research Foundation. Typically, consumers will first research products online or canvas their friends and then decide what they will buy before going to a store. Or, they may forego a trip to the store altogether and make purchases via the Internet.

Moreover, social networking is enabling consumers to take control of how marketing messages are distributed and consumed– at the expense of company-sponsored sites. Buyers now attach significant value to online reviews and often spend more money online after reading product recommendations by other consumers. Facebook, for example, accounts for 38% of social media page referrals online (source: MDC Partners, a marketing firm). According to pundits, reviews like these are trusted some 12 times more than advertising messages.

These changes have important consequences. When shoppers think about a brand, they now consider their entire buying and service experience. To be successful, marketing campaigns will now have to encompass and integrate all of the touch points of a company’s relationship with a consumer, including the first moment of contact when a product search begins, through the sale and service, and eventual product disposal and replacement. Though consumers have far more control over marketing messages than they ever have, retailers still have plenty of scope to guide opinions. That’s where experiential marketing comes in.

Who is getting it

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Recently, a number of retailers have pushed marketing boundaries to create innovative experiences that integrate entertainment, social media, information and traditional advertising. Two examples were highlighted in a recent issue of the Knowledge@Wharton newsletter:

Macy’s

In 2010, Macy’s hit the mark with a couple of highly successful marketing programs that integrated a number of different experiential elements. During New York’s Fashion Week, the retailer provided customers with a "magic fitting booth," which allowed them to "try on" virtual outfits and post images of themselves in their new clothes on Facebook. All year round, shoppers were able to use their phones to watch videos for fashion tips from designers and makeup artists. For the holiday season, Macy’s launched an animated website with an online tool enabling customers to send letters to Santa Claus. The site, which received more than 1M letters, was combined with a fundraising drive for a children’s charity and a mail order guide.

Bloomingdale’s

This merchant understands the critical role of human contact in delivering powerful retail experiences. Bloomingdale’s 8,000 in-store "associates" play a key role in delivering and enabling experiences. Their responsibilities include collecting customer information in databases. This information is then used for marketing programs such as birthday alerts or shopping recommendations based on previous purchases. "What we don’t want to lose is the assurance and authenticity of human contact: the touch, the feel, the laugh, the personal knowledge" says Tony Spring, President and COO of Bloomingdale’s.

Making it real

Incorporating the above elements – plus emerging mobile and location-based services– into the marketing and operational model will lead to further evolution of the shopping experience. To remain competitive and efficient, retailers will need to develop a holistic "customer experience" vision and strategy that integrates both traditional and new media, while addressing every point of the purchase/service continuum. Making this vision a reality will requires firms to revamp their organizational structure in order to bridge functional silos like digital marketing, public relations, store design, advertising and merchandising.

Mitchell Osak is managing director of Quanta Consulting Inc. Quanta has delivered a variety of winning strategy and organizational transformation consulting and educational solutions to global Fortune 1000 organizations. Mitchell can be reached at mosak@quantaconsulting.com