Inside This Issue - Opinion
Chains need to go beyond multichannel, omnichannel
October 28th, 2013
by Adam Pressman & Deepika Pandey
Many retailers today are immersed in building multichannel capabilities. The multichannel wave has led to many good initiatives, making it easier for customers to interact with retailers across distinct channels, including fast-growing mobile channels.
For example, A.T. Kearney’s Future Role of Stores research indicates that although 92% of retail sales still occur via traditional channels, only 61% of shopping time is spent in stores. Clearly the role of the brick-and-mortar store is changing, and retailers’ investments in other channels have helped them surf the disruptive wave.
But, to the degree that retailers offer a separate experience in each channel, they are letting customers down, because customers don’t think in channels. Customers want consistent and easy interactions, and many use multiple channels to do it — often even concurrently.
A.T. Kearney’s Integrated Customer Engagement research highlights that nearly 40% of Millennials and Gen Xers at least occasionally interact with retailers across multiple channels simultaneously. For example, a customer might call the store on the telephone while also browsing its website, or access a mobile app while visiting the brick-and-mortar store.
Walgreens has found that more than 40% of its online site visitors plan to visit a Walgreens store. It has also found that customers engaged across the store and online spend 3.5 times more than those who only shop at one of its 8,000-plus conventional drug stores. If customers engage across the stores, online and mobile, they are six times more valuable. So how can Walgreens — or any retailer — best serve and satisfy these customers?
Challenges with ‘channel’
Many retailers view “omnichannel” as a fulfillment strategy when really it is an experience strategy. Fulfillment is critical, but technology has redefined what convenient, consistent, personalized and value-compelling means to consumers. Retailers are beginning to realize that they can improve overall operating effectiveness and efficiency by integrating their offerings, focusing on customer needs and desires rather than just on deploying technology or silo-specific “channels.”
Over the years, channels developed as individual modules to surf successive waves of technology. But these silos can lead to inconsistent messaging and execution across channels regarding, for example, inventory availability. Worse, they provide limited insights into the omnichannel shopper. Is she an existing company customer, or entirely new? If existing, is she buying more or different items than before?
These evolving behaviors and interactions also lead to challenges in metrics. The traditional retail metrics of same-store sales and sales per square foot do not reflect the realities of today’s retail environment and customer expectations. Additionally, many retailers have not yet determined the best way to measure and evaluate the effectiveness of their technology deployments. Do customers value these new offerings? Do employees find that these new tools make their jobs easier or more fulfilling? Is the level of adoption where it should be?
Further Enabling Customer Experience and Engagement
A retailer can meet these challenges by focusing on an integrated operating model and capabilities to enhance the experiences for the omnichannel customer.
For example, imagine a customer entering a store with smartphone in hand. What if he has opted into a tracking program that can immediately notify the pharmacy so that his prescription will be waiting for him by the time he gets to the counter? A similar program might work with drive-through offerings.
Such efforts would build on knowledge not so much of a specific channel (what can a mobile device do?) but customer desires (what can a customer or employee do with a mobile device?). Options could include payment by scanning a device, for speed and convenience a là Starbucks; product recommendations specific to a store and a customer’s interests; consultation services available through a Skype-like offering; enabling them to print photos directly from a mobile app to a store; or providing virtual IVR capability on a smartphone to better enhance the customer experience when she contacts Customer Care.
We don’t mean to present an exhaustive list of options here. Rather, our point is that the choice of these or any other options depends on an understanding of the customer’s journey. Although that journey may involve different roles for each channel, the retailer should define those roles through the lens of the consumer, not internal functions. To plan channel strategy, you must first understand how consumers shop and what drives them to stores or to interact via other channels.
For example, Walgreens knows that half of its mobile customers are using their smartphones in the store. Walgreens also knows that consumers go to its stores to fill immediate needs, to try out new products, and to spend time with others.
Additionally, by understanding customer preferences and journeys, Walgreens can deploy digital couponing and marketing to support the customer in an effective manner. The challenge for Walgreens, and other retailers, is to use that knowledge to enhance the experience its customers have with the brand as a whole, rather than with any individual channel.
One initiative that Walgreens, in particular, has used to help achieve its omnichannel vision is Refill by Scan, in which you use your phone to scan the barcode of your pill bottle to send prescription information. Within a few hours, your prescription is ready for pickup (you also have the option to change your location or pickup date or time). Customers have rated the app highly, with comments such as “convenient” and “super easy to use.”
Walgreens’ Balance Rewards loyalty program highlights other areas for enhanced engagement as it is available and integrated across all channels. For example, customers can sign up through Walgreens mobile apps and can link their information with Apple’s Passbook. Customers are also engaged beyond just promotions. Through the Steps program, Balance Rewards members are rewarded for healthy behaviors (“taking steps”). Steps is a truly omnichannel experience, as users can track their progress via the Web and mobile apps and can link wearable devices for easy tracking.
Of course it’s not just a matter of designing apps. Continued focus on four key areas will help retailers deliver the omnichannel promise.
Consumers will tend not to tell retailers directly how they want to make use of emerging technology. They are constantly bombarded with new options and methods of interaction. Retailers need to show customers the promise of the integrated customer experience.
Testing rapidly, actively learning from those efforts and determining which ones do and don’t work are key aspects of successful innovation. Retailers can take measured “risks” to deploy new technology and experiences, but with clear mechanisms in place to define expected return on investment and to know if efforts are meeting their desired outcomes.
Retailers will need to ensure they have the appropriate analytical skills and infrastructure in place to translate “big data” to “big insights” to understand their omnichannel customer and operations and to best anticipate and respond to customer needs.
Additionally, these insights must be leveraged to build buy-in across many parts of the organization. Ongoing attribution of omnichannel impact is critical. For example, how search drives direct revenue is often known, but search’s impact on driving in-store traffic is much harder to quantify.
A critical enabler of achieving integrated efforts is to ensure metrics and incentives align with desired outcomes.
Measurement can be particularly tricky, but gaining a view of enhanced metrics such as attribution of e-commerce sales to stores, digital marketing influence on offline spend, speed to fulfillment, brand/customer loyalty, and out-of-stock percentage provides a deeper, integrated view of operations and how customer experiences and engagement are being enhanced. This relates to overall corporate alignment, as well as through to the field and in-store employees.
Last, but not least, retailers should ensure that their field and contact center staff are well versed in their company’s offerings and are armed with the needed knowledge, training and tools to confidently support the adoption of these experiences. Employee engagement is critical.
Also, clear feedback mechanisms are needed to capture employee insights as they will continue to interact directly with your customers and will understand to what degree tools and experiences are being adopted.
Retailers today, and in the future, have the opportunities to create and extend customer engagement in new and innovative ways.
With all of the devices, apps and information available to customers and employees today, retailers that can make it as easy as possible to interact with a brand — seamlessly integrating experiences across touch points, creating personalized interactions and delivering timely communications — will be in the best position to succeed.
ADAM PRESSMAN is a principal at A.T. Kearney, a global management consulting firm; he can be reached at Adam.Pressman@atkearney.com. DEEPIKA PANDEY is vice president of digital marketing and customer experience at Walgreen Co.; she can be reached at Deepika.Pandey@walgreens.com.