Amazon’s foundation in 1994 was the start of big changes in the retail world. It may have taken 20 years for the full effects to trickle down into every sector of retail, but it is now obvious that shopping habits have been turned upside down by the rise of online retail.

The real question is perhaps whether well-established retailers have a chance to reinvent themselves, and capitalise on their brand recognition. I caught up with David Cosgrave , who leads SAS’s Customer Intelligence team in South EMEA, to discuss the link between customer experience and brand values in retail.

What are some of the biggest changes that the retail industry has faced in the past 5 years?

I think we’ve seen both predictable and more surprising changes. For example, bricks-and-mortar stores are changing. As new town centre developments replace out-of-town malls, retailers are having to change established brand standards to fit new shop units, often in old buildings. The good news is that millennials are far more likely to visit individual-looking stores, so this enforced change actually has huge benefits. The prevalence of digital and mobile shopping, even for staunchly brick-and-mortar retailers, is obviously the other main trend. But perhaps more importantly, by 2020, customer experience is expected to have taken over from price and product quality as the number one differentiator for brands."

Is customer experience really that important?

Customer experience is huge, and particularly for retaining customers. One study suggests that brands offering good customer experience retain 89% of customers, compared with just 33% for those with a poor customer experience. And research has shown that, as a consumer experiences an innovation in one area of their lives (such as getting used to the on-demand convenience of Uber, or a seamless omni-channel experience by their bank), they are less willing to put up with inconveniences in another aspect of their lives – meaning that a previously acceptable retail experience is no longer seen as such by the consumer.

Successful brands are now actively looking for ways to improve their customers’ experience, by making them unique, relevant, simple and innovative. Most forward-thinking retail executives are looking to analytics to help them mine the rich data that they already have to come up with exciting innovations and find new ways to service their customers. And Gartner research suggests that 50% of product innovations in the next few years will be led by customer experience-related concerns.

What are some of the elements of customer experience?

It is particularly important to see customer experience as a single continuous ecosystem, because that’s how customers see it. They don’t separate it into advertising, in-store, and digital. Instead, they see it as them interacting with a single organization via various methods which are more or less convenient or attractive for them. It’s also important to note that customers, in exchange for giving a brand access to their personal data, expect in return to be treated like an individual and receive benefits for this – and the majority are willing to make this trade-off, in spite of privacy concerns.

That said, there are issues that are more important: for example, there is a theory that brands should try to sound and feel more ‘human’, because that makes customers more likely to want to build a relationship with them. And there’s no question that authenticity is important, as is recognising and rewarding customer loyalty. The problem, though, is that many brands don’t do this at all well. And recent expansions into AI, such as human-sounding chatbots, promise to bridge that gap, but, as we have seen, when things go wrong, it has a terrible effect on the customer’s experience.

Beyond the buzz of what artificial intelligence can do, how will AI change companies and the way they are managed? Learn more from this HBR collection.

 

How can traditional retailers compete against the Amazons of this world?

I don’t think it’s necessarily a matter of traditional vs. online. And in fact, consider Amazon’s concept store called Amazon Go where, through machine learning and image recognition, they can actually provide all the convenience of an online store, but with the immediate gratification and tangible experience of a physical store. From a customer experience perspective, this is a really compelling model – no more queues, no more credit cards – just fill up your shopping basket and go. It will be interesting to see how this plays out – and with Amazon now entering the physical retail market with their purchase of Whole Foods, a whole new level of disruption may hit the retail industry before long.

Traditional retailers are faced with many logistical challenge when trying to remove the frustrations that hinder customer experience in physical stores – products out of stock, missing sizes and colours, traffic and parking challenges, lengthy till queues and so on. Those retailers, like Macy’s, who’ve embraced omni-channel as a differentiator are required to be more efficient about how they handle stock and logistics – and data and analytics plays a vital role in ensuring the right stock gets to the most likely store to fulfil the probable customer demand in those stores.

What tools do retailers need to win in the omnichannel era?

First of all, they need to recognise that omnichannel is already here – at least in the customer’s expectation. To success in omnichannel means that customer experience needs to be coordinated across channels, not siloed. For example, contact needs to be consistent: customers do not want to have to repeat themselves when they move to another channel. And for those customers wishing to “showroom” online but complete or collect the purchase in-store, they of course expect that product to be immediately available at the nearest store. Retailers have to tie this into a seamless back-end, ensuring that all channels have the same view of the truth, while also making sure that the right products are on the right shelf to meet demand. Consistent data management across channels, and in-depth predictive analysis of historical behaviour, can provide strong competitive advantage in this area.

But top of the win-list is a focus on mobile, often the first channel for customers. Over 50% of customers reported that a bad mobile experience would make them less likely to engage with that company, and a massive 90% said that they have had problems seeking customer support via mobile. As consumers, our first instinct is to pull out our phones to find information about a product – and if the buying journey ends there due to a badly designed mobile interface, the retailer has lost a potential customer already.

How can you measure customer experience?

I think probably the most important is to talk to customers, regularly, and not just through satisfaction surveys when they actually buy. Using analytical techniques to mine through customer voice recordings, call centre logs, surveys and emails, a brand can start to understand the main reasons for customer dissatisfaction. And analyzing digital platform effectiveness, and tying this to in-store purchases, can help to understand where the bottlenecks or points of failure are in the omnichannel ecosystem.

It’s certainly no good waiting for complaints: evidence shows that only 1 in 26 unhappy customers complain. The rest just go elsewhere. It is helpful to link customer experience metrics to business outcomes: retention of customers, or sales, perhaps. Finally, the best customer experience measurement programmes are also dynamic, and change over time to reflect what really matters to customers. How you measure customer experience can itself be part of the experience!