Customer experience is the key growth engine in retail. Trying to meet your customer expectations in an ever-changing landscape might seem difficult, but it’s worth it. Analysis from McKinsey and Forrester suggests it is the largest opportunity for growth in the retail industry. A Gartner study of retail marketers found that more than four out of five retailers expect to be competing mostly or completely on the basis of customer experience. Focusing on price, proximity, and product is no longer sufficient to guarantee growth.
So where should you focus to start seeing growth? CX drives growth by ensuring that you:
1. Keep customers longer
Centriam’s 2017 Retail Survey found that customers who had a great customer experience were at least three times more likely to return. A meta-analysis from Forrester found that CX leaders’ retention rates are more than 12 percentage points higher than laggards. This is key, because retail is a high-churn industry. With an average of 27 percent annual attrition, retailers turn over more customers than almost any other industry. Improving customer experience provides a dual benefit of stemming those losses and increasing acquisition. This is because making your customers feel appreciated makes a difference. Sixty-nine percent of consumers say their choice of retailer is influenced by where they feel most appreciated, and word of mouth will amplify improvements you make in this area.
2. Improve profit margins
Better customer experience lowers price sensitivity. Forrester found that customers who give scores of “excellent” are 4.5 times more willing to pay a premium for the experience than customers who have “very poor” experiences. Centriam’s data suggests this difference could be even larger, with customers who have a positive experience being eight times less price sensitive! This is especially important for premium retailers: in addition to selling high quality products, premium retailers should be cultivating memorable experiences.
3. Accelerate growth
When analyzing revenue growth and customer experience quality in retail, one correlation is very clear: companies with superior CX grow revenue faster than their competitors with inferior CX. The leaders’ average annual growth of 17 percent far surpasses the three percent growth of their laggard competitors. Innovative market entrants like Stitch Fix, Dollar Shave Club, and Amazon have created previously unimagined value in retail by using new digital tools and systems. From 2011 through 2018, the growth of such companies has been greater than 100 percent annually. CX investment — whether digital or traditional — will accelerate your company’s growth and help to fend off these fast-growing digital upstarts.
A key enabler for retail customer experience is a dynamic data layer. What exactly is a dynamic data layer? It’s a set of data collected across customer touchpoints which is continuously updated and used to improve customer outcomes. “Continuously updated” is key to allow quick customer follow up that aligns with their expectations. We actually found that 57 percent of retail customers expect to be followed up with within one day!
A dynamic data layer allows for huge leaps in reporting, analysis, personalization, and understanding the customer journey across branded touchpoints. Let’s take a look at these three benefits of a dynamic data layer:
1. Fuel reporting and analysis
In order to improve existing customer experience programs, you need to understand the details of how customer experience varies. Discover the highs, the lows, and the sequences that lead to success, as well as the predictors of customer loss. You also need to know how your CX metric varies across other criteria. Below are several analysis criteria to consider:
- New or returning customer
- Size of basket and basket composition
- Customer segment
- Purchase history
- Loyalty club membership
- Level of discount or use of coupons
- Customer acquisition source
- Cost to serve (service calls, returns/restocking)
- Department(s) shopped
- Store location
- Time of day shopped
- Store traffic level
- Salesperson and level of commission
- Before or after store remodel or refreshes
2. Power personalization
It’s important to remember that the dynamic data layer also powers personalization. There are several reasons why adding personalization is important to customer experience. Individualizing survey invitations increase response rates. In fact, research has shown that personalizing survey invitations can raise open rates nine percentage points! Additionally, customizing allows for better data collection by targeting questions about new products or services, new store layouts, or new programs only to relevant customers. This saves customers time, increasing the likelihood they will take another survey from you in the future.
However, the number of questions plays a factor as well. You can increase the quality of the data you collect by asking fewer, more relevant questions, which minimizes the cognitive load of a survey. Personalization not only reinforces that you value the customer and their time, it shows you have invested in systems that gather feedback in an easy way.
3. Decipher customer journeys
The dynamic data layer also helps inform your understanding of the buyer’s journey. Learning the connected customer experience across your branded touchpoints is important. It allows you to trigger surveys across touchpoints from point of purchase through usage, service, and return purchases. Doing many small surveys across touchpoints keeps the experience simple and fast for your customers, while providing you opportunities to detect challenges earlier in the life cycle. Keep in mind that surveys should be kept short, but still should be linked to data which allows you to make the survey informative to your organization. A long, unguided survey full of minimally relevant questions to the customer will feel like an interrogation; the goal of your survey should be to continue conversations.
Getting started with your customer experience program doesn’t have to be a complicated endeavor. It just might be easier than you think. Minimally, all you need is:
- A touchpoint where you can survey your customer or send them a follow-up survey invitation
- A way to route feedback data so you can follow up with certain customers
- A data repository that facilitates reporting, measurement, and deep-dive analytics
These three points are essential, regardless of how small or large your CX program is. Think of it as the three A’s: Ask, Act, Assess. The dynamic data layer discussed earlier will increase your impact each step of the way. Let’s look at each of them in turn.
Ask your customers about a specific experience
Most retailers that we work with start with a few key touchpoints and then expand that number over time. These touchpoints may include:
- App usage
- Product usage (e.g. six month follow-up survey)
- Website visits
- Service delivery or install
- In-store service (such as Geek Squad or Genius Bar)
If you are in the enviable position of being able to choose a touchpoint, keep in mind that the most important touchpoints to monitor occur frequently and have the potential to either delight or annoy customers. For further information, see our blog on selecting a smart touchpoint.
To make the “Ask” effective, select one KPI (e.g., NPS, CSAT, customer effort) and support it with several driver questions like, “Was the store staff friendly? Was it easy to find the items you were looking for? What was the cleanliness of the store?” Since your surveys will be touchpoint specific, your driver questions should be focused on that touchpoint too. We typically employ three quick guidelines for our surveys: make them direct, personalized, and effective.
Which metric or question should I use to measure customer experience?
We get asked this question a lot. We have found that the specific metric is less important than picking a metric and consistently using it. All metrics can work and if you have time for a thorough brand-specific study, then you should do that. If time is short, choose customer satisfaction, repurchase likelihood, likelihood to recommend, or customer effort. We have also seen a weighted combination of metrics work. Several syndicated measures do precisely this, such as the Customer Experience index (CXi) which combines ease, emotion, and effectiveness, or the American Customer Satisfaction Index (ACSI) that blends satisfaction, meeting of expectations, and comparison to ideal.
To test this recommendation that the specific metric is less important, we surveyed over 600 retail customers across three popular metrics. It doesn’t matter if a respondent identified as a promoter, as highly satisfied, or as having their needs met. The respondent was more likely to buy again and was less price sensitive in all three cases. All of these metrics — as well as others — can work.
Act on specific customer feedback quickly
If you recieve feedback that a customer’s experience is not up to standard, quickly follow up with that customer and close the loop. Speed is key. When we asked retail customers about a recent problematic experience, the majority (57 percent) said they expected follow up within a day. A targeted follow-up plan is also important. You should address the concerns of the most valuable customers first. Perhaps high value customers should get a call from the store manager or from a different trained local resource. Both can make the interaction more personalized. Having a strong close-the-loop process in place will demonstrate your commitment to the customer and they will notice. Sound too good to be true? To track improvements for your pilot program, set up a control — don’t follow up with a random 20 percent and monitor customer satisfaction and follow-up purchase behaviors. You just might be surprised at the results.
Assess your program performance
Your customer experience program should be an ongoing, iterative process. Expanding and improving the program over time is critical to its longevity and success. Results should be continually monitored and analyzed. Your assessment will likely fall into three areas:
- Measure the impact of your follow-up programs: Are the customers you follow up with returning to shop more? Are they buying more diverse products?
- Summarize and disseminate customer feedback to other parts of the organization: Are there consistent messages your customers are saying about their online or in-store shopping experiences? Are customer verbatims revealing opportunities to improve your shopping experience?
- Segment results to understand how customer experience varies: Are all customers going through the same retail experience?
Generating insights from your programs is another area to take advantage of the dynamic data layer, which makes it easier to look at experience scores by acquisition source, store location, items purchased, or new versus returning customer.
When considering which technology should underpin your customer experience program, it helps to remember the “three P’s”: People, Process, and Platform. That’s because you want a platform that is easy for people to use. You also need a platform that will support your customer recovery processes.
At Centriam, we believe you need a purpose-built technology to deliver noticeably better CX. To support the challenges of retail, this platform must be more than a survey tool and is different than a CRM tool. This CX platform should make it easy to ask your customers about their experiences, take action on customers most likely to benefit from follow up, and assess the impact of you customer experience program over time. But how do you evaluate a CX platform? We suggest asking these three questions:
- Can you personally set up and manage the platform with minimal training?
- Will the platform help your organization take action?
- Will the platform grow with your program over time … without growing pains?
In the following section, we’ll dig deeper into each of these three and arm you with additional questions to help assess your CX platform options for your retail brand.
Platform management and setup
Platforms should be easily configurable. When we say easy, we mean that an everyday user should be able to make changes in just a few minutes without needing support from an IT department. You may choose to use a service provider to support your program. However, you shouldn’t be forced to rely entirely on that service provider because your platform is so challenging to use. For example, you should not need a three-day certification period to modify a survey.
To help you assess your current tool or future considerations, think about the following areas:
- Can you easily bring new customer data into the tool?
- Can you create a new survey?
- Can you determine who gets invited to the survey, on which channel, and at which time?
The answer to all three questions should be “yes”, and it should take a business user minutes — not days — to complete each area. Related to program set up is the ease of accessing the survey data. This is a critical point, so additional questions in this area are likely warranted:
- Can a business user easily set up reports inside the application?
- Can the Business Intelligence team export the data they need for their dashboarding tool of choice?
- Can the data be exported in both manual and automated ways?
Actionable, meaningful data
Your company does not need more information for information’s sake. But it is probably hungry for data that encourages actions and incites proactive change. To assess this, you will want to know if the platform does the following:
- Does it help you send specific customer feedback to the right person for follow up? (This is also known as, “closing the loop.”) Can you use any data element collected, such as disposition or rating score, to route the data? Can you also use any customer data from the dynamic data layer, such as customer segment, to further refine routing?
- Can you leverage a combination of verbatim comments and customer attributes to direct follow up? For example, if a promoter has negative sentiment about billing, can they automatically be sent an email with a link to an interactive video that explains their bill?
- Can you add additional follow-up actions or segment existing actions over time? Can you divide the aforementioned rule into two rules (in minutes versus days while the program is live): gold customers receive a call, while all others are sent an email?
Program scalability over time
Your CX program will grow in breadth over time, whether it be the number of touchpoints you have or the markets and channels you support. The depth of your program will also likely grow in the level of personalization, the versioning of surveys, and the number of routing rules. Keeping that end in mind, you want a platform that is simple to expand over time. Avoid a platform that needs to be customized to your current state or even worse, a platform that requires professional services to “re-customize” in order to support growth. If you are viewing a product demo, ask to be shown the following … after all, it should be easy and hence not add too much time to the demo!
- Does your platform have the ability to expand information available over time, without having to set up a new data feed, so you can perform more detailed analyses?
- How does your platform expand to include more touchpoints (each new touchpoint being triggered by new source data)?
- Does your platform allow you to bring in new data to further personalize touchpoints? For example, personalize existing surveys to improve feedback quality with specific data points.
- Does your platform make it easy to add new users and selectively permission what they can do on the platform? For example, if you wanted to make select survey data available to a network analyst, provide editing and data rights for all surveys to a CX researcher, while only granting permission to modify recovery offers for a program manager, each persona should be easy to customize.
There are a lot of ways to build a business case to support investing in customer experience. Common sources of revenue include increasing customer loyalty, growing word of mouth, lowering cost to serve, or raising employee retention. (For a description of each category and its main financial drivers, go here.) We’ll focus on increasing customer loyalty for this example, as it generally contributes the most to comparative year over year sales in retail.
Building a business case requires two things:
- Choosing your financial driver metrics.
- Determining realistic values for each metrics.
Choose your financial driver metrics
Customer loyalty expresses itself in multiple shopping behaviors, so your business case should measure multiple metrics. That means you should have at least three lines in your business case. These most likely will be: repurchase rate, product breadth, and price sensitivity. Minimally to estimate the financial impact of improving customer experience in retail, you want to include:
- Number of repurchases: We expect customers with higher loyalty to come back and repurchase more frequently.
- Basket size: We expect highly satisfied customers to purchase a broader group of products and hence have larger average basket sizes.
- Level of discounts: More loyal customers are generally less price sensitive and less likely to use discounts.
This list represents a minimum starting point, but you may want to include other metrics for socialization. You could also expand this list to include repurchase rate, number of unique items, or percentage of customers using coupons.
Determine realistic values for each metric
There are a lot of ways to estimate program impact. Some are very rigorous, while others are little more than guessing. We believe a little bit of structure can go a long way to building a robust business case, so we encourage our clients to break their estimates into parts. Below we outline three questions to answer, using a close-the-loop follow-up campaign as an example.
- What portion of your customers are going to be impacted by the program? In the case of the close-the-loop, let’s say you contact 15 percent of customers over the course of the year. Twenty percent of those customers raise an issue that warrants follow up. Overall, that is three percent of your customer base (15% x 20% = 3%).
- How much will the program increase customer experience? A well-executed follow-up campaign can have a dramatic increase on customer experience. It is unlikely to turn everybody you reach out to into a “completely satisfied” customer or a “promoter”, but it can have a dramatic increase. Increases of around two points on a five point satisfaction scale — or four points on a typical NPS scale — are possible for those customers who have their issue resolved.
- How much does customer behavior vary with customer experience? This is the part where you want to cross-tab a cohort of customers (see table below). In this case, customers with higher CX scores make 0.35 more purchases over the course of a year than less satisfied customers. This is due to a combination of higher customer retention and higher purchase frequency among those retained. Similarly, customers with higher CX scores spend $2.50 more on every purchase because they have more diverse baskets and are less likely to use coupons. As the table below shows, these differences mean that customers in the close-the-loop program are worth over $15 more than those not in the program.
Now all we have to do is multiply our estimate from step 1 with step 3 with the size of our customer base. Let’s say we have one million customers. With three percent of customers participating in the program, the expected program contribution is $456,000 in additional revenue per year. You can then repeat this process for other programs. If you need help with this exercise, Centriam’s service team is here for you.
Building or enhancing your customer experience program doesn’t have to be an arduous process. Through a combination of products and services, Centriam redefines how companies manage their customer experience efforts.
Our platform enables companies to track customer behavior and collect customer feedback across channels. It empowers companies to analyze and act on all data and measure the impact of customer experience campaigns on customer behavior. Centriam is designed for customer experience and marketing professionals who want to delight their customers.