The emerging focus on service30 Aug
Influencing customer behaviour: more service, some price
Our 2017 Retail Report has found that given the shifting macro trends, it is no surprise that the customer service bar is constantly being raised by new experiences from across the retail industry and beyond.
With the pace of change so rapid and unforgiving, winning archetypes are recognising that the key to sustainable profitability is putting the customer at the heart of their operating model, ensuring consistency of offer and service across each and every touch point in the customer journey.
In a world where the customer can switch loyalties and channels in the click of an app it is vital that retailers understand their customers’ expressed and unexpressed desires and tailor their fulfilment operations to deliver high levels of customer convenience and service at optimal cost.
Stuart Higgins Director – Retail, LCP Consulting
But do retailers really understand their customers?
Given that retailers now perceive customer service as the most important factor in a consumer’s decision to purchase from them, clearly extensive knowledge about the customer is a priority.
From our research, however, it is surprising that the most widely used data source in defining a customer proposition continues to be retailers’ own internal understanding of their customer. Only 39% of retailers are actually talking to real customers to understand their needs.
This is all the more concerning given the findings that customer needs and expectations are higher than ever before and influenced by experiences beyond the retail sector.
How can retailers hope to truly understand their customer needs and expectations (and to respond with appropriate service models) if they are developing their entire customer understanding without looking outside the business’ existing knowledge base? It could be argued that greater use of external consultants for consumer understanding (up from 15% last year to 33% this year) helps bridge this knowledge gap around changing consumer expectations and needs. It is nonetheless a concern that the majority of retailers don’t talk to real customers when developing their offer.
There is a major risk in defining a customer offering based on an internal perspective of the customer, and that is that it can become a self-fulfilling prophecy: ‘customers buy what we offer so we think this is what they want and we will continue to offer it.’
On a positive note – and consistent with the theme of shifting macro trends – there is a marked decrease in the number of retailers focusing their service offer on matching that of the competitors.
This shows that retailers are beginning to realise that although not irrelevant, a competitor’s offer may not necessarily be the right one for their own customer, and should not be the major factor in influencing their customer proposition. In other words, it seems, some retailers are pushing back against the race to the bottom.
Expanding customer knowledge
After retailers’ own internal understanding of their customer, the second most widely used information source in developing a customer offer is analysis of existing customer data.
Although its usefulness should not be underestimated, ‘retrospective’ analysis, based on previous sales history, does have its limitations. For instance, sales and store card data will only capture existing or lapsed customers, and can only provide transactional insight into existing ranges.
Fundamentally, any historical analysis can only ever give a view in ‘hindsight’, and retailers need to combine this with other sources of information on future trends and expectations to give them ‘foresight.’
When it comes to developing a customer proposition, the winners are taking a balanced approach. They recognise that the answer isn’t in one survey or data set, but rather the connection between an apparently disparate set of data sources including macro trends, CRM and sales data, consumer surveys and insight.
But, this connection doesn’t come easily and retailers are starting to recognise the need to have capabilities and people in place that can facilitate this process. The emerging role of the ‘Customer Director,’ in some cases replacing the ‘Marketing Director,’ is closely linked to this requirement. As one major retailer stated: “this really gives the customer a seat at the board table.”
The world is going to keep changing and retailers must remain agile, optimising their end-to-end supply chains to deliver their customer proposition profitably. Given the ongoing changes that continue to have an impact on the sector, the question is no longer whether retailers know they need to put customers first and align their business operating model accordingly. It’s whether they have the capacity and motivation to change their business operating model and shape their supply chain to service their clients’ needs profitably.
Customer expectations have been evolving at a rapid pace and you must keep up with these changes. It is important for retailers to genuinely understand their customer expectations, or the customers they are trying to capture. At FatFace, we are just as interested in the 85% who don’t buy from us.
Simon Ratcliffe, Infrastructure Director, Fatface