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5 Steps to Effective Retail CRM
Given the challenging business climate currently facing retailers, it may seem to be a
bad time to talk about investment. But when business is at a premium, it is arguably
the best time to invest in the most valuable resource a retailer has: customers.
Much of the growth and value to be
gained at retail in the near term will
likely come from attracting and
retaining customers. Customers
today are constantly in a hurry and
sometimes impatient but are always
ready to spread the word about their
experience, so the best a retailer can
do is to understand them well
enough to thoroughly meet their
needs. For example, a recent
research report from the IBM Institute
for Business Value, titled “Why
Advocacy Matters to Retailers,”
found that Advocates (defined as
customers who would recommend
the retailer) spend on average 17%
more with their primary retailer than
Antagonists (defined as customers
who actively dislike their primary
retailer).
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Achieving this advantage means
building strong customer relationships, which are typically formed by
merchants who have the best information and intelligence about their
customers. The majority of retailers
are now realizing the value in building
stronger bonds with their customers
and putting dollars behind that effort.
According to a 2007 report from
AMR Research, 53% of retailers
planned to add, improve or replace
their CRM applications to increase
intelligence about consumers and
build shopping allegiance. “Retail
leaders seek to retain and expand
relationships with their most valuable
customers by providing consistent
and positive cross-channel interactions,” the report stated.
The following white paper will detail
five critical steps toward building a
CRM strategy and processes in the
face of today’s hyper competitive and
cross-channel dominated retail landscape. These five steps represent a
roadmap toward generating useful
customer data, and then turning that
data into action which will ultimately
increase customer satisfaction as well
as the efficiency of your marketing
and store operations.
STEP 1:
Create a 360 Degree View
of the Customer
Increasing customer intelligence
takes a myopic focus. All employees
in a retail operation need to see the
customer through one lens. That single view is the foundation of all relationship marketing efforts. In order
for this foundation to be solid, realtime data on customer purchases,
behaviors and preferences must be
collected and presented in an accessible manner.
By operating with a 360 degree view
of the customer, retailers have a central database that can be accessed by
sales, marketing, C-level executives,
store associates, contact center
agents, and even merchandise managers looking for information to accurately predict orders and inventory
levels using market basket analysis
and product affinity.
With access to a single view of the
customer, everyone in the retail operation sees the same view of individual
customers or key customer groups.
For example, the contact center
agent that has an unhappy customer
who is trying to return a product can
use the database to determine how
valuable that customer is. Maybe the
customer’s purchase pattern has been
very active over the past quarter. That
means the contact center agent can
see that this is a high value customer
and should be treated with time,
effort and careful follow up.
The roadblock to obtaining a single
view of customers has traditionally
been that customer programs have
been housed in a series of disparate
solutions and databases. For example, in the past a retailer may have
outsourced the management of their
loyalty program to an outside vendor
and the accompanying data on those
members was hosted by that vendor.
The marketing department often
works on a separate system to measure the results of their campaigns and
then the IT department typically has
to develop custom reports to compare that against sales data.
The emergence of cross-channel
shopping has made the 360 degree
view of the customer even more critical for retailers. With a single view of
customers across channels, retailers
can gain a deep understanding of
changes, such as transaction history
online vs. in-store to determine shifts
in channel preferences. Ultimately,
with one database and one dashboard, sales, marketing and operations make decisions based on facts,
not interpretation.
“Loyalty can be a great metric if it is
tied to market basket and wallet
share. If it is simply a discount card,
then as a metric there is not much
value,” said Rob Garf, Vice President
of Retail Strategies for AMR
Research. “One need only look at
Best Buy or Chico’s to see what a
good loyalty plan can do to increase
sales and wallet share.”
STEP 2:
Reward Customer Loyalty
As they navigate the multi-channel
retail world, consumers clearly want
rewards for their purchases. They
even want rewards for engaging with
your campaigns. According to a
report on U.S. loyalty program membership released by Colloquy late in
2007, points-based programs are
showing explosive consumer growth.
More than 1.3 billion people claim
membership in some kind of loyalty
program. The annual growth rate of
those programs over the past seven
years is 5.9 percent a year, which is
more than twice the growth rate of
the Consumer Price Index.
This means that retailers need to be
ready to calculate, maintain, and
administer loyalty programs across
all channels. It’s very difficult to do
this without a single customer view
and impossible to do without a
tracking technology for rewards.
Since transactions play a critical
role in all customer relationships,
industry experts stress the importance of integrating all loyalty and
CRM programs into your sales
process. “CRM starts at the point
of sale,” says Jim Dion, CEO of
Dionco Inc., a leading retail consultant. “If you don’t have a system that allows you to capture
customer information at the point
of sale, you lose visibility into customer behavior, customer value
and customer loyalty. If I don’t ask
the customer for information, or
have a system that captures information, I have a data problem.”
Loyalty programs must meet customer expectations. If these programs are not implemented and
maintained properly, they will ultimately backfire and lead to a
diminished customer experience
and the inevitable decrease in customer value. The same Colloquy
data that shows the growth of loyalty program membership also
reveals that consumers’ definition
of loyalty is fairly loose. The average American belongs to 12 different loyalty programs, yet less than
40% consider themselves active
members. Even more concerning is
the stat that 80% would be willing
to trade their allegiance to another retailer in order to receive a
better loyalty offer.
In order to provide a loyalty program that stands out from the
crowd, retailers must have a combination of the right reward offers
with the right infrastructure to
properly manage the program.
“An integrated CRM system gives
retailers the ability to narrow their
targeting to make more personal-
ized offers to customers, enhancing the value of those offers, and
enabling them to more accurately
measure results,” said Diane
Cerulli, Director of Product
Marketing, Epicor Software
Corporation. “Using any combination of demographics, recency, frequency and monetization, purchase history and response to loyalty initiatives, retailers need to
offer promotions via integrated,
multi-channel campaigns.”
STEP 3:
Match Customers to
Targeted Offers
Both a single customer view and a
successful loyalty program depend
on data. This leads to the third
step in achieving retail relationship
management: segmentation.
Segmentation is viewed as the foundation of effective one-to-one marketing. For retailers, this means the
ability to sort customers into addressable segments and send targeted
messages to that segment will be a
key component of their future
growth. A segment is defined by a
combination of factors, including purchase data, qualitative insight (surveys), demographics, and behaviors.
It is important to point out that the
concept of segmentation has
changed radically since the rise of
internet marketing. In the direct
mail heyday, segmentation was
largely a manual task that broke
customers down by zip code,
income level and response rate.
For example, five years ago a sporting goods retailer might simply mail
a flyer featuring its new running
shoes to higher income zip codes,
male oriented, in the Northeast.
Now retailers know that different
kinds of running shoes should be
matched with more targeted cus-
tomer segments. The higher income
male breaks down into segments
such as casual runner, intense racer,
brand champion, bargain shopper,
gift-giver, etc. Then it needs to be
parsed along the more traditional
lines of geography and response
rates.
The single view of the customer
combined with loyalty programs,
will help retailers paint a picture of
customer value. For example,
some retailers may be organized
internally around product lines.
But that might not work for customers, especially in a multi-channel environment. The product segment approach might be easy to
apply, and does make sense on
the surface, but may not work for
customers who buy across product
segments.
To illustrate this, let’s go back to
the sporting goods retailer. If that
retailer segments by product line,
it may send emails to running shoe
customers, direct mail pieces to
outdoor enthusiasts, and yet a different email campaign to golfers.
What if the customer buys all
three products? Then the retailer
acts as if it doesn’t know the customer. It has crafted offers based
on three different customer views.
However, if a more sophisticated
and informed customer segment is
addressed the retailer can act from
an informed viewpoint.
For example, with a robust CRM
system in place, a retailer can
place a customer into a welldefined segment such as “email
only, frequent shopper, male, instore purchaser” and then it is
much easier to craft a targeted
email campaign based on recent
purchase behavior.
Beyond using segmentation to
target and acquire new customers,
the practice is also critical in recog-
Turning The Key On CRM:
The Drivers of Successful Retail Loyalty
Faced with a challenging business climate and
increased competition from a variety of new sales
channels, the new imperatives for retailers are: building deeper relationships with their best customers,
presenting a consistently rewarding shopping experience across all channels; and, most importantly,
having the ability to measure the impact of marketing campaigns on sales lift and profit margins.
In order to execute on all of these imperatives, retailers need to make CRM data available to a number
of different areas of disciplines throughout the
organization, including marketing, merchandising,
operations and finance. Therefore it is imperative
that next generation CRM solutions for retail are not
designed for use by the IT department only.
The Epicor Retail CRM Solution
Epicor Retail CRM was designed to be easy to
access and operate for non-technical users, featuring
a user-friendly, point-and-click interface.
Built using the latest Microsoft technology including
.NET, Microsoft SQL Server Reporting Services and
Sharepoint Services, Epicor Retail CRM is an open
architecture application that can integrate with any
POS system or Microsoft SQL Server 2005 or Oracle
database. This scalable solution is designed to meet
the needs of specialty and general merchandise
retailers from Tier 4 all the way to Tier 1.
Addressing all of the new customer-facing business
imperatives, Epicor Retail CRM provides a 360
degree view of the customer, enabling retailers to:
● Build and manage a loyalty program
●
●
●
●
Manage and execute multi-channel campaigns
and promotions
Analyze a rich database of customer and
transaction information
Segment and manage lists
Analyze and measure the impact of CRM
efforts
The solution provides a simple step-by-step wizard, allowing executives from all areas of the
business to view data and run reports without IT
support. Delivered on a browser-based interface,
Epicor Retail CRM allows executives to access all
reports and applications from corporate headquarters, in a store environment, from a home
office or on the road.
In addition to its user-friendly interface, Epicor
Retail CRM also provides users with turnkey analytics features, including pre-built reports for:
Customer Analysis, Customer Trend Analysis,
Loyalty Plan Analysis, Retention Analysis, Cross
Shopping Analysis and Campaign and Promotion
Analysis.
Unlike other customer relationship management
solutions which traditionally have only focused on
one area of the business, Epicor Retail CRM provides real-time connectivity to all sales channels.
This real-time performance allows retailers to
deliver instant promotional offers at the point of
sale, using receipt coupons or on-screen offers,
ultimately saving marketing dollars by eliminating
the costs of designing and mailing coupons.
nizing a retailer’s best customers.
A CRM solution should help merchants easily identify their most
profitable customers and send them
personalized offers across all sales
channels.
STEP 4:
Communicate in
Real-Time
Steps one, two and three will only
drive results and have maximum
impact if they are updated in real
time. Very simply, customer data
changes constantly. It is not based
solely on the last purchase. Retailers
need visibility into email response
rates, contact center interactions, as
well as sales activity within the
store.
Going back to Jim Dion’s point that
CRM starts at the transaction level,
many retailers are now seeing the
value in recognizing and rewarding
their best customers directly at the
point of sale, by extending instant
rewards and immediate discounts
off a current purchase, or coupons
for future trips.
Proving this real-time information
is not only rewarding for the customer, but also provides valuable
intelligence to sales associates
who can use the data to drive upsell, and cross-sell opportunities
while shoppers are still in your
store or on your site. By delivering
offers directly at the point of sale
or via a printed receipt, retailers
also see significant savings by
eliminating the need for an outside resource to track member
points and send special offers
based on point totals.
Access to real-time data becomes
even more critical for retailers who
operate multiple locations and
multiple channels. Cross-channel
shoppers now expect to be recognized regardless of the location
they are shopping, and they are
demanding the ability to check
their point totals and redeem their
points in all channels as well.
Those retailers that have integrated their CRM programs with their
POS system can deliver targeted
offers right to the POS screen or
deliver a printed offer right on the
coupon at check out. Some retailers have gone as far as providing
kiosks at the front of the store so
that customers can check their loyalty program status. This also provides the retailer with a chance to
send personalized offers while the
customer is in the shopping mindset, and also save the cost of
sending separate offers via direct
mail or on a coupon.
The reality is that nearly all retailers are employing some kind of
business intelligence tools today—
it has really become the cost of
entry in today’s business environment. But business intelligence
must be actionable. If a retailer is
making their decisions on customer data from last month or last
quarter, they are likely going to be
too late to respond to changes in
buying habits. When a retailer is
making media decisions potentially
worth hundreds of thousands of
dollars there’s a lot at stake.
STEP 5:
Close the Loop
The most effective CRM solutions
and processes will not only
encourage and support customer
relationships, they will allow companies to “close the loop” they
started by initiating customer data
and measuring and tracking the
results of their marketing campaigns. Ultimately, all the data in
the world will only be valuable if it
can help forecast the success of
future efforts.
Tom Davenport, Babson College
professor and author of
“Competing on Analytics,” identifies three major analytics processes. The first is customers. Data
analysis, as we saw in the segmentation step in this paper, allows
retailers to target their most profitable customers. The second area
is supply chain. Retailers can use
analytics to solve inventory issues.
The third is financial performance.
Detailed customer data enables
retailers to model and anticipate
their performance, and try to
understand the drivers of profitability and financial performance.
“Just about anybody these days
can buy the technology to do
sophisticated analysis; almost
everybody has a lot of data and a
data warehouse,” Davenport
wrote in Harvard Business Review
article in 2007. “So what really distinguishes the analytical competitors from people competing on
more traditional factors is this idea
of an analytical culture. It’s the
secret sauce behind analytical
competition. It basically means
that senior executives have said,
‘We’re going to use data and
sophisticated statistics in our decision making; we’re not going to
be satisfied with the same kind of
information that other organizations have gotten.’ And they’re
relentless about pushing this
through many aspects of their
organizations, targeting the kinds of
processes and behaviors that it
takes to be successful.”
By building dashboards that analyze
the effectiveness of their various
campaigns and promotions, retailers can drill down into purchase
histories, market baskets and their
various sales channels to determine
which efforts have been profitable
and which need to be altered in
the next quarter.
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Conclusion: Next Steps
As Davenport points out, data and
the ability to analyze are a competitive necessity. Customers have
become algorithms and representations of numbers as much as they
are humans with emotions and
changing behaviors. In the retail
industry, where personal interactions
are mixed with business intelligence
in real-time, a competitive CRM
system is a vital component
of a retailer’s overall strategy.
The five steps laid out in this
whitepaper can move retailers
toward that goal of achieving loyal
customer relationships by employing
the technology necessary to understanding what’s behind the emotions and behaviors.
It is critical that retailers have a
phased plan for their CRM program
that includes feedback from their
customers as well as regular analysis
of the data. While physical expansion has slowed for many retailers,
it is also still critical for retailers to
make sure that all of their systems
and processes are scalable to handle growth.
Retailers should have an eye
towards constantly growing their
customer base across channels
and also need to be prepared for
potential acquisitions as well as
new banners and formats.
Regardless of how big a retailer
grows in terms of store count and
its customer data base, ultimately
each customer wants to feel they
are special and are having their
unique preferences addressed.
Whether customers are interacting
with a store associate, a call center
or a web site, they demand a seamless, personalized experience and
will ultimately commit more share of
their wallet to those retailers that
deliver on these terms. ■
About Epicor Retail Solutions
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Epicor Retail Solutions are used by hundreds of the world’s leading retailers
to become more profitable, productive, and competitive. Our solutions leverage proven Microsoft .NET technology to improve business operations and
meet the evolving merchandise and service expectations of today’s crosschannel shoppers. Epicor delivers comprehensive retail management solutions
to hundreds of retailers in all tiers – from regional chains to multi-channel
global brands. Epicor employs more than 850 employees in retail-focused
operations. For more information, please visit www.epicor.com/retail.