I believe we have reached an inflection point where old paradigms must be replaced with new approaches that address today’s empowered consumer, as well as the new realities of retail and supply chain that have arisen as a consequence. In Part I of this series, I explained why the traditional paradigm of forecasting demand at SKU level and pushing products, even in a demand driven posture, is insufficient. I argued that we need a new end-to-end process looking holistically from continuously deriving customer insights to making profitable offers and delivering to delight the customer. In this post, I will map out the key activities in this “Delight” process.
Key Activities in the Delight Process
There are seven key activities in the end-to-end Delight process. At the heart of each activity is the customer. These activities need to be continuous, in real time, and in many cases, concurrent even though they are generally thought of as a sequence.
The identify activity is all about understanding distinct patterns of behavior. This includes at least three kinds of insights:
- Anticipating what each customer might need and when
- Predicting the paths to purchase she is likely to take
- Understanding what compels her to pick a particular offer
When someone in North America starts looking for Extra Long Twin bedding sets, it is highly likely they are buying for someone going to a college dorm. Combine this with other clues such as time of the year and other accompanying searches or purchases and you can be practically sure if this is the case. Would this insight not be extremely useful for a retailer or manufacturer offering products or services to young adults, particularly when parents are poised to spend on their future?
Similarly, insights about search paths, online comparisons, and past brand purchases can help define distinct purchase paths, as well as indicate what attributes might drive particular purchase choices.
Insights are only useful when acted upon in a timely and effective manner. Insights about individual needs and preferences can be leveraged to drive interest towards your brand. The soon-to-be college student can be driven to your brand through multiple channels, including social media, targeted advertising and personalized promotions.
Targeted advertising or promotions may attract attention but may no longer be sufficient to close the sale. Manufacturers and retailers must engage the customer not only to personalize the final product and/or offer, but also to deliver a differentiating and enjoyable purchasing experience. While one student may want to explore at length to pick out a matching selection of dorm items with a lavender theme for her room, another one might simply want to get through his check-list quickly and within a budget. The retailer that senses these preferences correctly and provides a shopping experience to match will be much more likely to win the sale – and possibly the customer’s future loyalty.
Even though selling and engagement are often simultaneous, I have called out selling as distinct from engagement since it deals specifically with the determining the price, features, delivery and other value-added aspects of the offer. Selling is crucial not only in winning the sale, but also in staying profitable while doing so. On the one hand, we must continuously refine our insights about the customer’s notion of value, such as expectations from the product, urgency and sensitivity to price. On the other hand, we must be able to dynamically evaluate cost-to-serve of various alternatives so that offers are made with transaction profitability and/or customer lifetime value to the brand in mind.
Now, more than ever before, fulfillment is simply an extension of the brand experience. Timely delivery, free shipping, easy and mostly free returns are becoming the norm. Furthermore, a recent study[i] found that more than half of consumers would abandon a transaction when faced with having to pay for returns. Fast and cost-effective fulfillment is simply not possible without end-to-end coordination and agility across promising, order management, transportation, warehouse management and reverse logistics.
Desirable and profitable behaviors must be rewarded and encouraged. Today, loyalty to a brand is based on the promise that the brand projects, but also the customer’s perception of how well the brand understands her as an individual. The service industries have long perfected the art of building a mutual relationship with their most profitable clients. This is gradually becoming the norm for most other industries.
All the activities from Identify, Attract, Engage and Sell to Fulfill and Reward are highly dependent on having the right and timely insights. None of this will be possible without processes and tools that are designed to learn continuously with every interaction. Buying behaviors and preferences all evolve over time. The nature of clues for the same types of events may themselves change with technology and turnover in product portfolios. Learning is not simply about looking for patterns after the fact, but also about proactive experimentation. About identifying different hypotheses and testing them out with engaged customers. We must be able to learn faster than the pace of change in order to keep up. I predict that the science of learning about customer behavior is going to see tremendous innovations in the years to come. We are only seeing the tip of the iceberg at this point.
Is this Wishful Thinking?
This combination of continuous insights, personalized offers, intelligent fulfillment, and profitability may seem like wishful thinking. However, as I will explain in the third and final post of this series, launching February 10th, I believe this is not only possible, but also imminent. Please stay tuned.
[i] “Returns – The Ticking Time Bomb of Multichannel Retailing,” Tom Enright, Gartner Report G00267240, September 2014.