(Jan. 5) By Philip Michell, Vertex Business Services

The past 18 months have been among the toughest in living memory for the retail industry.  Not only is there less money in consumer pockets, perceptions around worsening credit have meant what is there has stayed there, and significantly less has been reaching retailer’s registers. This is particularly evident at the premium end of the market, with same-store comparisons running at more than 20% year-over-year. An immediate reaction to such a harsh economic environment may be to encourage sales by pulling the ‘discount’ lever and slashing prices.  Of course in some markets this can be a winning short-term strategy, but for most it won’t be a sustainable or desirable one – price cuts don’t support or grow brand value, don’t secure customer loyalty on their own, and they certainly don’t prepare a retailer for success when the economy rebounds.   

The situation requires more than a blanket price cut; it needs a smart reassessment of how the retailer communicates with and serves its customer in order to maximize their value both in the short and long term. Managing the customer effectively can not only help a retailer boost profits by reducing the cost of servicing their needs and increasing cross/ up-selling opportunities, but also ensure that relationships are optimized so that the retailer is well positioned to take advantage of the upturn when it returns.  

Fortunately for retailers, the recent downturn has been a catalyst for the growth of lower cost channels to reach their customer.  Today more and more consumers purchase from a retailer through their multichannel offerings such as Web, catalog or phone. Given these channels are inherently less expensive to operate than stores, a growing consumer desire to use them provides an open invitation for retailers to accumulate customer spend without acquiring overhead.   

Smart retailers are well aware of this trend and are now focusing on the importance of customer management outside of the store environment.  For some this is a challenge, as non-store communication is not the core expertise of most retailers and can be a complex skill to master -- many now appreciating that it is not as simple as answering phones and delivering basic information to a caller.  Generating real value from a customer management program requires an understanding of the retailer’s and the caller’s drivers and the operational ability to respond to them.  This capability requirement is encouraging a growing number of retailers to use external experts in the field.

Providers with specialties in engaging customers outside of the store environment bring valuable experience in setting metrics that can be used to focus the program.  This ‘outcome’ based approach is infinitely more valuable than traditional models whereby retailers have paid for volume over value -- a somewhat outmoded format which limits the ability to deliver against the more meaningful metrics mentioned above. An excellent example of this relates to the operation of contact centers. For all contacts other than customer orders, each phone call or email represents an avoidable cost. However traditional internal operations or external supplier relationships are unlikely to be geared towards contact reduction since success may erode the size of the operation and the related supplier’s revenue. Turning this on its head, a new breed of partner is emerging -- willing to structure commercial agreements around common goals (such as net customer revenue), creating a shared desire in reducing avoidable costs.
 

In addition, external experts may have a variety of locations available to them, each of which are suitable for differing elements of a program for a different price. This enables a practice called smart-shoring -- the selection of a blend of on and offshore propositions to best serve a retailer’s need, while keeping their costs to a minimum.  This might mean that low maintenance contacts that can be handled at very low cost such as email or white mail, and other back end functions can be automated or moved to a considerably cheaper location. Standard, easily resolved inquiries that require voice contact can be handled from a medium cost location, while the most expensive of your channels, locations and services are reserved for the most complex and/or most valuable inquiries.  

External partners can also address the peaks and troughs in the retail industry, with the largest spike in business generated around the holidays.  During these peak times all customer management programs require significantly more manpower.  A retailer running an in-house program either accepts that it always needs to maintain a team large enough to cope with the rush, or it takes on the organizational challenge of hiring, training, paying and eventually terminating an entirely new work force for each season. A retailer can benefit from working with an outsourcer that covers multiple sectors. The outsourcer can deploy their permanent and fully trained staff year after year on the same brand, for the same peak season, and then redeploy them to a new sector once the retail rush is over. Balancing demands from multiple industries such as Utilities (with a typical peak at the beginning of the year) and Travel and Insurance (with peaks towards the middle of the year) yields significant benefits for each organization.  

Another benefit to working with an outsourcer is that economies of scale enable them to invest in some of the newest and most innovative technology that would otherwise be unattainable to a single retailer.  For example, there are voice and data analytic tools can identify patterns of issues that may otherwise have been obscured or seemed unimportant to an individual agent. Now, over the course of thousands of customer contacts, these issues are automatically highlighted so appropriate action can be taken. In addition, email has become an instant communication tool with customers expecting an email response almost as quickly as if they had phoned the retailer.  In Vertex’s contact centers, a system called “Numero” that enables contact centers to handle any form of inbound communication, including  email, white mail, call logging, Web forms and SMS, is being used that allows emails to be analyzed and the responses pre-populated with information and links that the customer service agents can build on. This allows a much richer response to be generated for the customer in a much faster time.  

This can create a two-fold productivity benefit for agents. For example, call queuing technology has developed to the stage where customers can maintain and advance their position in the queue without being forced to wait on the phone. An outsourcer is not only likely to provide cost effective access to such technology but can also likely provide a more rapid and painless implementation.  

Some of the aforementioned technologies combined with outsourcers’ expertise can help the retailer identify opportunities for cross- or up-selling and generating greater value from a single customer.  For example, an online catalog clothing business that wants to increase its sales can use data analytics to look at a number of customer interaction points in the sales cycle and determine where appropriate interventions can deliver easy wins. The company can examine which customers buy and which leave the Web site without making a purchase. Those that don’t make a purchase can be further subdivided into two smaller groups -- those that added items to their basket and those that didn’t. By surveying the two groups, the reasons for not pursuing a purchase can be uncovered.  Any problems that may be hindering consumers in making a purchase can be resolved, thereby driving an increase in the number of potential customers which go on to complete a purchase.  

For those customers who make a purchase, the same tools enable the retailer to dig deeper and understand the purchases made and how basket size can be increased. One of the easiest ways to do this is to increase the complementary items sold alongside the largest item purchased.   For the clothing company that might be a tie or cufflinks alongside a shirt -- however, analytics now enable additional dimensions such as time to be used.  For example, customers typically buy a new wheelbarrow two weeks after buying new garden tools.  This sort of insight provides cross-sell merchandising opportunities.

Finally, in spite of the challenging financial times, customer expectations towards the way in which they shop and engage with organizations and each other are changing dramatically. In addition to the requirement for SMS and Web chat to be supported, customers are increasingly expecting to be able to shop directly through their cell phones and engage through social networks such as Facebook and Twitter. While these channels provide an opportunity for increased revenues and engagement, ineffectively implemented they can not only raise expectations but generate an additional service challenge with incremental costs.