In a Web-enabled world populated by buyers with highly developed personal preferences, Canadian retailers must learn to abandon traditional mass marketing strategies and adopt more customer centric approaches to selling.
Ironically, in their rush to capture consumers around the world suddenly made accessible by technologies such as the Internet, many businesses neglect the individual buyer, according to Rodney McBrien, partner at the Total Store Solutions division of IBM’s Global Business Service.
McBrien was among the speakers in a series of online seminars collectively called Innovation in Action held yesterday by IBM.
“Canadian retailers have lost sight of the customer,” McBrien said during his presentation titled: Retail Revolution.
Rather than sell to customers using a “one size-fits-all approach” characteristic of mass marketing, retailers “should base strategies on factors such as: individual lifestyle, customer preference, customer segments, and location.”
Canadian businesses are facing unprecedented challenges from the Internet, foreign competitors and from increasingly demanding consumers, according to the retailer specialist.
Technology’s impact on traditional consumer behaviour was also highlighted by Don Tapscott, Canadian futurist and founder of Toronto-based think tank New Paradigm.
Traditionally, the marketing paradigm was one of control and unidirectional, noted Tapscott in a presentation titled: Innovation through Collaboration.
“Businesses created products, defined their features and benefits and set prices. Companies chose the places to sell products and services [which they] promoted aggressively through advertising, public relations, direct mail and other “in-your-face programs.”
“They controlled the message,” said Tapscott.
But new channels for online collaboration such as wikis and social networks are altering the landscape, he said.
For instance, rather than watching the TV as their parents did, children today are growing up interacting online.
“A new model is emerging – one that is interactive, customized, consumer-focused and collaborative,” Tapscott said.
McBrien echoed this view and said retailers should take notice of the growing numbers of online communities where word-of-mouth recommendation often plays a big role in generating a “ripple effect” that could affect any business.
He cited a recent survey that found 31 per cent of customers tell their friends about bad experiences they had dealing with businesses and about 48 per cent of consumers avoid stores where they had unfavourable experiences.
By contrast, 78 per cent of respondents developed “deeper relationships” with stores which they associate with satisfying experiences.
In developing a more customer-centric marketing strategy, retailers should focus on three key factors:
Customer understanding – Sellers must gain knowledge of who their customers are and what they demand. This requires deeper insight into individual customer preferences and customer segments.
Business insight – Businesses must assess existing practices covering areas such as purchasing and product pricing to determine if they are in line with what consumers want.
Prioritizing process and practices – Retailers need to look into how they are allocating promotional assets. For example are the special offers or sales events geared to what customers are actually looking for. Cut out coupons on flyers might not be the best method to attract a largely online audience.
McBrien cited New York upscale retailer Saks Fifth Avenue’s marketing boo-boo of axing its women’s petite line as a classic example of how mass marketing can alienate a business’s customer.
Sales records had indicated that the department store’s petite line was a perennial slow seller. Seeking to maximize its top grossing lines, Saks decided to drop its petite offering.
What followed was a huge backlash from Saks female customers and a drop in the sales of other departments, that the store was left with no other option but to re-instate the line.
“Saks failed to realize that the petite segment made up their best customers. These women came to the store and bought items not only for themselves but also for other people in their lives,” said McBrien.
He said the issue may have been avoided had the store’s marketing department access to more detailed customer data. But as with most retailers, vital information is often not shared throughout the organization.
Another company that saw the need to alter its mass marketing strategy was Wal-Mart, said McBrien.
Originally, the retailer built its model upon the idea of selling the same goods throughout its thousands of North American and Canadian locations.
But a re-assessment of its customer contact and marketing processes led Wal-Mart to tweaking this model to accommodate “different allocations for different locations,” McBrien said.
Here are four key areas where help retailers can improve customer contact:
Insight – The current crop of customer relations management (CRM) tools can aid businesses in obtaining shopper intelligence, developing better customer targeting and retention strategies, and designing “shopping experiences” focused on customer expectations, shopping attitudes and behaviour.
Personalized dialogue – Relevant and customized communication with consumers should be delivered across all channels and touch points of retail organizations. This enables the customer’s perspective to be “embedded” in every touch point.
Multi-channel execution – Stores must make it a point to support a consistent customer experience across all channels and develop a “shopping anytime, anywhere” model if it is appropriate.
“If customers have a good experience shopping in the store, they should also have the same experience when shopping online.”
As well, businesses must use information technology capabilities to integrate various departments and processes that support them, McBrien said.
Associate commitment – Traditionally, customers approached a store associate to obtain information about a product they intend to buy. Today, however, consumers have the opportunity to research a product on the Internet even before they set foot on a store, said McBrien.
Retailers must start investing more on sales associate training to arm them with the adequate information to serve this new breed of highly informed consumers.