Tuesday, 10 January 2012

Impact of Emerging Mobile Technologies on Retail CRM

By Faraz Ghani & Chad Chesworth


In our last article 'Mobile CRM - Emerging Trends for the Retail Sector', we had identified mobililty trends that are reshaping Retail CRM. In this article, we seek to investigate how these trends are going to impact specific CRM initiatives for retailers. 

·         Loyalty Programs

In recent years the top sixteen European retailers have spent over $1 billion annually on loyalty programs. Over the last 20 years loyalty marketing has become a particularly important tool in competitive differentiation.  However, there is a need to come up with an innovative initiative that will challenge the traditional plastic loyalty card as a means of customer identification. One of the biggest hurdles for consumers joining loyalty programs is the need to carry plastic loyalty cards. The digitisation of loyalty programs is becoming increasing popular as with CardStar, a US based loyalty management firm which has over 200 store loyalty programs on their mobile platform. Customers can just select the relevant retailer on their phone to use when at the POS.
Some retailer have abandoned loyalty program in the past as they were not able to attract the critical mass of customers to their program since they perceived other loyalty programs more valuable and chose not to engage with the retailer’s loyalty program.
The move to mobile loyalty allows retailers the opportunity to take advantage of the paradigm shift in customer identification process to earn and burn loyalty currency. Since loyalty program data will be stored on mobile devices, customers will have the ability to identify themselves through loyalty apps and NFC loyalty cards without the need for physical loyalty cards. This has the potential to significantly increase up-take and reward rates for loyalty programs and rejuvenate loyalty programs for retailers who have a longer repurchase cycle like furniture and white goods stores.
Our assessment on plastic cards is that they will be vastly overtaken by mobile loyalty solutions within the next few years, but plastic cards will be around for some time to cater to baby boomers and generation X. NFC, mobile apps and LBS will be central to adoption of new loyalty programs and will increase the pressure on incumbent loyalty programs by providing an alternate to loyalty cards which has been a big barrier to entry thus far.
For loyalty-averse customers, checking-in of social networks may work as an alternate to joining loyalty programs. Social check-ins may provide a convenient alternative for customers than identifying via loyalty programs.  

·         Mobile Advertising

Mobile advertising allows targeted promotional messages to be delivered to mobile phones based on personal preferences and shopping habits, which allows retailers to provide information to customers that is personalised and relevant to their requirements. Needless to say, the importance of mobile phones in marketing applications is increasing dramatically for retailers. Mobile advertising is expected to grow to £355m in the UK by 2014 (Mobile Stats, 2011). The challenge in utilizing the mobile medium for communication is to ensure the right messages are received at the right time and by the right people. With an array of mobile channels and a treasure trove of customer data available at their disposal, retailers would be able to delivered highly targeted and personalised messages to individual customers based on location, purchase behaviour, frequency, time of day and channel used.
The question arises how retailers could get the recency and frequency of offers right for customers via mobile. Key factors for mobile are timeliness and relevance. Studies have shown that consumers want to be marketed to, but they want to control the content and frequency.  Looking ahead, mobile advertising will become increasing central to retail marketing and CRM strategy and retailers will increasingly look at ways of building communication opt-ins on multiple mobile channels for delivering targeted messages to customers and prospects which could be achieved by giving value back to consumers in one form or another. Retailers will need to find out what incentives would work for specific customer segments. The amount of data generated from new channels will be extensive and to successfully deploy the new technologies, retailers will need to manage and make sense of the data faster and better.


·         Mobile Coupons

Coupons have long been a tool used by supermarkets to attract customers, up-sell and cross-sell. They have evolved over time and play an important role in retail marketing strategy, specifically with digital coupons taking off. Research in the UK suggests that 20% of people use their mobile devices to obtain some form of coupons/coupon codes. Traditionally, customers have had to carry hardcopy coupons for redemption at tills. Most ‘coupon at till’ programs also print paper coupons that need to be available for redemption the next time a customer makes a purchase.
Mobile coupons create a number of new opportunities for retailers to enter into dialogue with consumers on an individual basis to driving repeat purchase and loyalty. Such coupons can be stored in mobile apps and redeemable at POS or ePOS.  
Similarly Location-based Mobile Couponing can enable retailers to reach their audience at a time when recipients are most likely to respond. Although elusive as yet, location-based coupons have the potential to significantly increase conversion rates. 
NFC coupons could be another form of mobile coupons that would allow coupons to be stored in the mobile wallet when customers use NFC payment services.  The coupons could be redeemed automatically when a customer uses the mobile wallet for purchase.
Looking ahead, mobile coupons have the potential to replace other forms of coupons to a great extent due to the ease of handling and cost savings through reduced paper use. Retailers will be increasingly looking to integrate coupons with other initiatives like NFC, LBS, AR, loyalty programs and mobile apps.


·         In-store Experience

Mobile apps, LBS, NFC and Augmented Reality will have a profound impact on future in-store experiences in terms of engagement and interactivity.
Some possible in-store experience may be:
·    Retailers identifying customer location in-store and sending relevant coupons for items based on previous purchase history.
·    Customers being able to get product details and get preferential pricing by identifying themselves at NFC readers near the products.
·    Customers picking pre-purchased products in-store already packed for them that have been purchased through mobile apps or mobile websites.
Although in-store experiences will change and form important parts of CRM strategies for retailers, much work needs to be done with respect to developing operating models for multiple functions to work together and retailers will increasingly look to define the ‘digital’ operating models that meet their specific business needs and those of their customers. 

 

Conclusion

These trends and development bring about several challenges for businesses right from issues around integrating newer channels into their marketing mix, managing change to designing new operating models and working with greater amounts of data from even more sources to derive customer intelligence and acting on the insight faster to improve customer-focused initiatives, products, services, range and pricing strategies.
Interestingly, these evolving trends also offer the opportunity to businesses that have traditionally been behind the CRM adoption curve to leapfrog into the forefront with new initiatives since they have the capability to bypass the barriers to success created by well established incumbent CRM programs.
The main point to consider is that not all the conclusions drawn will apply to every retailer. Rather, the point is that they are general forecasts as to the direction of the future of CRM. Retail CRM initiatives are going to go through stages of substantial advancements in the coming years.
For retailers that currently operate or would like to introduce loyalty programs, it would it would be important to offer a digital alternative to traditional loyalty cards as it will become the rule rather than the exception soon.

Key conclusions in terms of CRM activities, initiatives and strategy that have been identified are as follows:
·    NFC will be increasingly adopted in payments and loyalty programs.
·    A general shift from plastic loyalty cards to digital loyalty interface on smart mobile devices.
·    A general shift from hard copy coupons and vouchers to mobile coupons and vouchers which are highly relevant and personal to individual customers.
·    LBS initiatives being utilized to drive loyalty, WOM and improve customer relationships.
·    In-store experiences becoming much more interactive, personal and engaging.
·    Recognition that social networks are increasingly important customer service channels in their own right that require due care and attention, but not at the expense of traditional channels.
·    A shift from re-active to pro-active CRM with customers being at the centre of strategic decisions. 

Tuesday, 6 December 2011

Mobile CRM - Emerging Trends for the Retail Sector

By Faraz Ghani & Chad Chesworth

This is the first of two articles on emerging Mobile CRM trends in the retail sector. This article focuses on evaluating the trends and the second one will delve into the implications on these trends on retailers, consumers and future CRM initiatives.

Mobile technologies threaten to be just as disruptive as the web was in the 90s due to the fact that they free people from tethered systems and give them ubiquitous access. As mobile commerce undergoes rapid change, retailers are perpetually looking to connect with customers and prospects on newer channels to build awareness and relationships.

The exponential growth in the number of smartphones worldwide is a cue to retailers to familiarise themselves with mobile as a key medium for customer engagement. As a result of changes in the business environment and advances in technology CRM is going through an evolutionary phase with a great deal of innovation happening particularly with the introduction of new channels particularly within mobility. As consumer habits of interacting with retailers evolve with technology, retailers now more than ever before are having to understand and manage relationships with their customers. 

Emerging Mobile CRM Trends

1.       Near-field Communication (NFC)

NFC is a wireless technology that has gained a lot of interest in recent times due to its emerging use in mobile payments. Besides payments, NFC has other benefits for retailers potentially allowing them to build better relationships and strengthen customer loyalty.

NFC payment is being trialled in several countries with rollout plans soon

An example of NFC would be customers being uniquely identified through their mobile devices via sensors when entering stores, which could allow retailers to instantly send promotional communication or coupons to their mobile devices. More interestingly though, is the ability of retailers to track customers as they move between different isles in the store. This could allow retailers to send specific messages in specific areas of the store, but also allow them to view where exactly in the store their customers are going and in the pattern they are doing it.

Research suggests that two thirds of consumers do not decide on the brands they want to purchase until they are in store. The importance of this is that in-store NFC could potentially help retailers improve the most important elements that influence in-store decisions, which are: store displays, atmosphere, promotions, service and layout.
NFC is the strongest candidate in more than two decades to replace the antiquated plastic loyalty cards which requires customers to swipe them at POS to earn and redeem points as it is one of the biggest Downsides for new loyalty program entrants to make inroads since many customers already have substantial amount of loyalty points on their preferred programs and they may find it an inconvenience to carry additional cards. NFC customer identification would release customers from the need to carry loyalty cards and provide them a convenient mode of earning and burning their loyalty currency with retailer without worrying about carrying plastic cards.

Some of the obstacles to the adoption of NFC have been down to the costs to embed NFC devices in store-fronts and marketing collateral, consumer adoption and usage of smartphones and the cost of implementing the infrastructure to support the functions this technology facilitate. Most of these issues are being addressed with the trial and launch of NFC payment services. Some organisations like Air New Zealand citing the lack of NFC-enabled mobile devices have implemented NFC stickers embedded with chips to enable communication with NFC readers. These stickers can be placed on mobile phones and serve the dual function as permanent boarding passes and loyalty cards.

Air New Zealand has introduced NFC stickers as boarding passes for use with non-NFC mobile phones
 

2.       Location-based Services (LBS)

Location-based services (LBS) integrate a derived estimate of a mobile device’s location with other information to provide added value to the user. The most important attractions of LBS use is that it allows retailers to identify the customer’s location at a certain time, while also being able to be highly personal, accurate, low cost and easy to use. LBS embedded with mobile web or mobile apps serve as a powerful personalisation driver for managing end-to-end customer experience and pushing targeted communications.

This also highlights the potential of integrating social media and geo-location with mobile CRM. Through use of mobile check-ins on popular social networking sites such as Facebook and Foursquare, consumers can inform their friends/followers of their locations. This lets others see where the person is which may lead viewers to visit the same outlet. Geo location could act as a driver for retailers getting customers into stores where incentives may be given to customers who check in more often. “Specials” can also be offered by retailers to entice potential customers to shop at their store, when people search an area they are in for deals. The implications of the aforementioned are that it can give marketers who make use of such services the benefit of word of mouth (WOM), credibility and engagement.

LBS will be increasingly prominent in the retail environment, another possible use being an alternative to traditional loyalty programs to identify customers and reward their repeat purchase. By ‘checking-in’, customers will identify themselves and receive a specific code for redemption at POS which would close the loop and provide purchase data on the individual. The ‘checking-in’ process will need to be incentivised through tangible and intangible rewards to give customers reasons to share their location.

 
LBS is commonly used with wayfinding and social check-in services

3.       Augmented Reality (AR)

In the literal sense, AR provides an enhanced view of a physical, real-world environment through use of computer-generated sensory input such as sound, video, graphics or GPS data. From a retail perspective, AR has the potential to deliver enhanced information about products and services to consumers. Although, AR has been extensively used in wayfinding and travel specific apps to date, it has the potential to deliver much more functionality in the form of enhanced sensory experience, product details and special offers on retail products and services. It can also deflect some customer service functions by allowing customers to retrieve information on products or placement details through their mobile devices.

Augmented Reality creates new dimensions to physical realities

4.       Social Media on Mobile & Social Media as Customer Service Channel

One in eleven people in the world are on Facebook and Twitter has over 100m users, which is an example of how social media has transformed the web into a platform of influence. Social networks have millions of people who are a rich source of insight and provide a wealth of opportunity for retailers to make use of in terms of understanding customers better, allowing them to build better relationships as a result. Some of the main processes of building customer intelligence through social media are:
·    Online Media Analysis:  Involves identifying what and where customers are talking about a company and who the most influential sources are
·    Reputation Tracking: Analyses what consumers and bloggers are saying about the company and what the threat of the comments are
·    Customer Feedback Management: Views of customers in the social spectrum and how they compare with the rest of the customer feedback channels that the company has to see if the views/attitudes match.

The Internet’s power, scope and interactivity provide retailers with the opportunity and potential to transform their relationships with customers through new channels and in doing so strengthen their competitive advantage. Twitter and Facebook offer unparallelled opportunities for retailers to react to customers sounding off in public which can be quite damaging to a brand if not handled properly, so the importance of reacting to these unsatisfied customers can’t be stressed enough. This offers retailers the opportunity to adequately respond and satisfy customers which would likely lead to more satisfied customers and positive visibility on social channels.

Overall, social media is gaining increasing importance as a customer service channel alongside traditional channels and its use on mobile devices is exploding. There is a whole new generation of consumers that wants to be engaged on social media on their mobile devices and servicing them will put greater emphasis on ‘first call resolution’ from a social context since a disgruntled customer can potential cause a lot of harm. The right people, training, processes and technology will be required to deliver the right experience.

5.       Next Generation Mobile Apps

Mobile Apps have gained ever increasing prominence due to the upsurge in smartphone usage over the years. Some retailers like ebay and Best Buy have taken the lead and even have apps for specific customer segments like ebay’s Daily Deal app for deal lovers and Best Buy’s Gaming App for gaming enthusiasts. From a CRM context, mobile apps provide immense promise of engagement with consumers especially when integrated with other initiatives like loyalty, coupons, LBS, AR and Social.


Some of the challenges concerning deployment of mobile apps include selection of the most optimum app platforms based on smartphone OS of consumers and the use of native apps versus mobile apps. Other challenges stem from the actual utility of the app and the user experience. For a mobile app to deliver the desired results, retailers need to understand their demographics and also need to fit the app within the overall digital strategy of the business. Multifunctional mobile apps that deliver superior user experience usually require alignment between multiple departments within the business to deliver the required functionality highlighting the need for cross-function coordination, change and skill realignment within the business.

Looking ahead, mobile apps will become increasingly popular and retailers will introduce apps to cater to various customer segments with more and more apps incorporating technologies like NFC, AR, LBS and so forth to deliver improved functionality. Different apps from the same retailer will perform different sets of functions and consumers would select the apps that meet their needs best as opposed to the 'one size fits all' app. Mobile apps will also increasingly embed initiatives such as NFC, LBS, AR, loyalty programs, coupons, social media and barcode scanning to provide more meaningful interaction.

US retailer Stop & Shop has deployed Scan It! its multifunctional mobile app that integrates barcode scanning, couponing, loyalty program and self checkout. Apps incorporating multiple features are increasingly becoming common in the retail landscape
In our forthcoming post, we will be exploring the major implication of these trends on retail CRM and how they will help in reshaping the customer experience.