The omni-channel concept

As so often with jargon, the term omni-channel retail means different things to different people, but a useful way to think about it is to consider the evolution of the terminology here:

  • Single channel: back in the early days of the web, the ecommerce store was essentially a single, standalone channel, as was the bricks-and-mortar shop.
  • Multichannel: as retailers began to integrate these different customer touchpoints, the term multichannel, meaning retail that takes account of customers using different channels, came into vogue.
  • Cross-channel: although multichannel and cross-channel are often used interchangeably, many experts see a subtle difference. If multichannel retail recognizes that customers use often different channels (mobile, the website, the store, etc.) when making a purchase, cross-channel retail is about then linking up these different channels so that customers have a consistent experience.
  • Omni-channel: again, cross-channel and omni-channel are often used in place of each other. A useful way to differentiate the two is to think of omni-channel as retail where the customer not only has a consistent experience across channels, but where the whole experience is designed to be as seamless as possible. This means, for example, that information about an order or product will be available whenever, however and wherever a customer chooses to interact with a retailer. Personalization is key here.

Omni-Channel Retailing is then the latest buzz phrase for what was coined as Multi-Channel Retail when business sat up and began noticing the potential of the Web on customer service in the 1990s. At that time the name of the game was multi-channel distribution, as customers identify with a brand regardless of channel of delivery and they believe an organization to be a single entity, but they have been surprised to find that this may not be so, as an enquiry or booking made with a travel company via one channel is not always recognized by another channel, and prices and availability might vary between channels.

 Omni-Channel Retailing is very similar to and an evolution of multi-channel retailing, but concentrated more on a seamless approach to the consumer experience through all available shopping channels.  While it’s not a new term, and it’s not a new concept, technology keeps reinventing what it means to be multichannel. The latest two channels to be added to the concept of the multichannel contact center are social media, which customers are increasingly relying on to contact companies, and mobile apps, as more and more consumers carry tablets and smartphones and conduct their personal and professional business using these devices.

The addition of the mobile channel is increasingly critical for the travel industry. While many consumers book their vacations from their work or home computers, they may continue the relationships with their travel companies while on the move, and this means mobile devices.

Mobile connectivity, the proliferation of technologies, and the rise of advocacy and social marketing all add fuel to the digital fire as worldwide e-commerce doubles to $1.5 trillion in annual revenues by 2015.  Pinterest boards, QR code walls, showrooming, mobile couponing, pop-up shops, mobile apps, Tweet Mirror, Facebook walls, digital circulars, augmented reality, flash sales, it’s a digital jungle out there for retailers today. As consumers embrace new technologies and services, companies find it difficult to stay current and harder still to determine where and how to invest their budgets. It’s all too tempting simply to jump on the next new thing (and the next and the next), just in hopes of keeping pace and try to seamlessly deliver relevant content to customers and prospects based on their location, historical behavior, and current actions, content that removes the boundaries and friction that interrupt engagement with your brand,  content that in­fluences customer behavior.

Omni-channel marketing weaves all your existing customer touch points together into a single, seamless and immersive brand experience. By maintaining focus on customer needs and behaviors, it delivers the right message to the right customer at the right time. Forward-thinking brands have already begun to abandon the silo approach in favor of a more holistic  strategy that blurs the lines between channels. An omni-channel strategy is all about that convergence, the convergence of Online and of­ine, Old media and new media, Inbound and outbound, Customers and technology, Data and strategy, Behavior and results. Done right, this approach helps companies attract, build, and maintain stronger, more profitable customer relationships via responsive and proactive communications that deliver real value.

Customers expect constant connection and instant gratification. Whether they are consumers making retail purchases or B2B buyers shopping for business solutions, your customers are more connected today than ever before. Device-wise, smartphone and tablet penetration has increased dramatically over the past couple of years. Add to that the wide adoption of various social networks, rating sites, and ecommerce destinations and shopping is suddenly a 24/7, hyper-connected experience. Along with a hunger for constant access, customers have developed a taste for instant gratification. They want the right information and functionality in the context of the overall experience. The funnel is dead. Today’s customers bounce in and out of different channels, across multiple devices, and into the orbits of many third party in­fluencers. Only an omni-channel experience provides the channel coverage, consistency of experience, and reduced friction that delivers results in this environment.

 And a omni-channel approach provides more valuable customer insights as the customer-centric and data-driven nature of omni-channel marketing makes it a perfect vehicle for learning more about your customers’ behaviors and preferences. This knowledge will inform and improve your strategy development, goal definition, and predictive modeling. It will also bring higher sales. An IDC research found that multi-channel customers spend 15 to 30 percent more than single-channel customers and IDC predicts that omni-channel customers will spend over 20 percent more than multi-channel customers. Additionally, they anticipate that omni-channel customers will be more loyal and more evangelistic about their favorite brands. This finding is not surprising when you consider how an omni-channel strategy expands (through breadth of coverage) and deepens (through highly relevant interactions) the brand/customer relationship, moving them through the conversion cycle more efficiently. It also Increases loyalty as the long-tail value of a well-executed omni-channel strategy is greater customer satisfaction. It caters to your customers’ needs, and gives them a congruent experience, consistency of channel, device, and purchase methods; produce value through deeper personalization, truly relevant communications, timely delivery, greater convenience, appropriate click-through and functionality for reduced friction and seamless sharing, channel-connected options for viral word-of-mouth

 

Omnichannel must be a strategy

At one time you could rest easy knowing your brand had a presence in multiple channels, both online and of­fline, but those days are gone. A multi-channel strategy is about establishing a series of individual touch points through various channels. An omni-channel strategy is about tying those points together via channel-to-channel awareness to create an uninterrupted “surround” experience that drives engagement, purchase, and loyalty.

I suggest retailers take a deep breath and a big step back. While many new technologies have merit, true digital transformation starts with the basics: a well-defined strategy rooted in a firm understanding of consumer needs, a clear competitive differentiation, and sound economics. Online-only retailers have built their businesses around digital (and increasingly around mobile) technologies, and they have advantages that brick-and-mortar and click-and-mortar companies (models that integrate offline and online presences) cannot duplicate.

But the click-and-mortar approach has its own ace to play, which is the power and reach of omni-channel interaction. Consumers still can’t touch, hold, try on, or taste a product online. The Internet cannot provide the immediate gratification of instant ownership. Indeed, a number of online retailers have responded to these limitations by opening real-world stores, among them Kiddicare and Screwfix in the U.K. and Bonobos in the U.S. There are major opportunities for retailers to rethink category management -including promotion, pricing, distribution, advertising, and point of sale- for an omni-channel world.

Data is providing new and in-depth insights and everything is being digitized. A recent research from McKinsey indicates that the world’s data is doubling every two years and Forrester Research predicts that digital marketing -which relies heavily on the creation and analysis of electronic data- will grow from a $6 billion opportunity today to a $16 billion business by 2016. Technology has reached yet another in­flection point in its data collection and analysis capabilities. An omni-channel marketing strategy is derived from the study of customer behavior data while its execution is powered by the smart application of data insights. Understanding your audience has become exponentially more complex. Demographics and buyer personas are a good start, but an omni-channel approach requires a deeper dive:

·         Who is your audience?

·         What are their interests as they relate to your brand and beyond your brand?

·         Why do you want to target these people?

·         What is a typical click-stream for new customers vs. repeat customers?

·         Where do they spend their time – online and of­ine?

·         What are their most pressing emotional, aesthetic, and functional needs?

·         Which types of outreach and engagement do they respond to most eagerly?

·         Which types tend to turn them off?

It’s also important to look at what your competitors are doing. Since omni-channel marketing is not a strategy that many brands have mastered, it represents a valuable opportunity for those who can bring it to market. Consider which channels does the competition overlook; are any of your competitors engaging in omni-channel efforts – successful or not?; and where does the competition fall short addressing customer needs?;

While every strategy is unique to the business it drives, Jean-Marc Bellaïche, Thierry Chassaing, and Sunil Kapadia suggest a a series of factors that all retailers need to consider:

1)   E-Influence Remakes the Consumer Purchasing Funnel

Purchasing has long been more journey than event. In today’s omni-channel world, the journey has more stages than ever, with the customer deciding not only where, when, and what to buy, but which channels to use and the role each will play. The linear route through the classic purchasing funnel has morphed into a fluid and dynamic process as boundaries between marketing and selling online and offline blur—and often disappear entirely. (See Exhibit 1.)

E-commerce statistics grab the headlines, but the biggest change may be the rise of “e-influence,” which takes many forms. (See Exhibit 2.) Regardless of whether consumers place their orders online, they are using digital channels, not only to determine what to buy and where to make the purchase but also to monitor prices (in real time) while they look for the best deal and exchange opinions with friends.

The impact of e-influence in certain sectors -apparel and electronics, for instance- is easy to spot. But even in grocery, a segment in which e-commerce has yet to take a big share in most countries, e-influence has nonetheless become an important tool for shoppers. A hypermarket can attract customers by reaching out to them in multiple ways -making nutritional information available on its website, for example, or providing sophisticated mobile apps with which customers can compile a virtual shopping cart by scanning products at home-. Walmart is introducing a mobile app that will allow customers to add gift cards onto their smartphones and “clip” digital coupons. One specialty retailer found that customers using the Web and mobile devices to preshop and prepare lists purchased three times as much merchandise as single-channel, in-store shoppers. The company was able to quadruple online sales as a percentage of total sales, and traffic to stores increased as well.

1)   Defining the Roles of Physical and Digital Channels

Achieving clarity about the roles that various channels play is crucial in creating an omni-channel experience that appears seamless from the customer’s point of view. This can be a complex challenge, though, especially for large retailers with multiple store types and a host of online points of customer interaction.

Clear business objectives cut through the complexity and determine which channels can be used most effectively toward different ends. If capturing a greater share of consumers from the Millennial generation (ages 16 to 34) is your goal, you will want a good mobile app. Half of Millennials use smartphones or tablets while shopping, compared with only one in five non-Millennials. Likewise, a retailer targeting consumers of beauty products should invest in social media. Some 80 percent of these consumers are present on Facebook and more than half read blogs.

Smart retailers also analyze product inventories through an omni-channel lens, deciding, for example, whether the same assortments should be offered online and offline, customizing the right product mix for a marketplace presence, and determining how much overlap to include among channels and what kinds of exclusives work best in each channel. They design relevant interfaces accordingly, optimizing discovery through Pinterest or providing a mobile scan-and-compare capability online.

2)   Managing Economic Realities

Defining consumer journeys and clarifying the strategic role of each channel are important parts of the equation; so, too, is separating the “need-to-haves” from the “nice-to-haves.” This means getting a solid grasp on the economic implications of cross-channel assortment and pricing decisions, options in customer relationship management, and various delivery scenarios.

Making one’s full in-store assortment available through e-commerce might seem desirable, but it can easily undermine profitability. Some products have advantaged distribution economics online while others are cheaper to sell in the store. Winning strategies optimize both. BCG´s analysis shows that it is difficult to make a profit selling online items with price tags of less than $20. The arithmetic becomes more complex, however, when you add in considerations of customer loyalty, overall household economics, and inventory management. Retailers mastering an omni-channel strategy need sophisticated models that take into account all relevant factors, from price and shipping costs to inventory levels and end-of-season discounting.

The trend toward dynamic pricing, driven by online marketplaces, complicates things further. Online players adjust prices multiple times daily, depending on what competitors are doing and how much inventory they have left in stock. Deciding when and where to match prices (online and off) and how to leverage customer-based pricing have become important issues. Successful retailers will set clear guidelines on price matching and when to allow inconsistent pricing or promotions between online and offline channels. They will also seek ways of managing price perception, such as working with suppliers to offer exclusive inventory that cannot be easily price-shopped. We expect to see more and more companies using à la carte pricing to their advantage, borrowing models from other industries such as airlines, which often offer a base ticket price and then charge for add-on services such as checking bags.

The myriad channels available to retailers require that they develop new customer-relationship-management, marketing, and promotion capabilities. With options ranging from Facebook and YouTube campaigns to investing in sophisticated targeting and retargeting technologies, determining which channels will deliver the highest return on investment becomes ever more important. The following are a few of real best practices:

–       A media retailer that rigorously segments its customer base, defining more than 20 microsegments in order to deliver highly tailored e-mail and Web campaigns 

–       A luxury retailer launching its new fragrances online first with YouTube videos and messages to its 8 million Facebook fans, resulting in 250,000 samples delivered to prequalified customers 

–       A specialty retailer using mobile apps targeted at dedicated consumers in its category as a way of developing community and viral marketing, a program that has generated a six-figure membership base with more than half of its members visiting the company’s site multiple times each week 

Even more sophisticated forms of targeting will likely soon emerge, including those that use new mobile technologies to reach out to users in real time. Imagine, for example, receiving a message, or even coupons, for an energy drink from Twitter moments after tweeting, “just finished 10-mile run.”

3)   Acquiring the Necessary Internal Enablers

The digital world demands new capabilities and skills -big-data analytics are one example, digital-marketing capabilities are another, and mobile capabilities are a third- as well as rethinking existing functions and programs. Supply chain management, organizational structure and incentives, and performance measurement are three areas especially deserving of near-term attention:

·         Supply Chain. Modifications to the supply chain can improve efficiency, customer retention, and product attractiveness—all at the same time. Potential initiatives cover a wide range, including experimenting with automated picking technologies at distribution centers, exploring variations on “click and collect” formats (ordering online and picking up in a store or dedicated facility), and working with suppliers on new online-friendly packaging that emphasizes sturdiness and protection rather than attention-grabbing graphics.

·         Organizational Structure. The growth in omni-channel retailing has surfaced a number of pain points in organizational structure. Oftentimes, incentives are structured to optimize single-channel results rather than to drive overall business, and metrics for omni-channel success are not clearly defined or tied to the overall business plan. Legacy systems do not provide one view of customer behavior across channels; in-store and online promotions are frequently out of sync with each other. Many store associates and managers are less prepared for an omni-channel world than are their customers.

Structuring traditional- and digital-commerce teams is an especially tough challenge. As one retail executive put it, “The problem with integrated teams is that the online channel often does not get the attention it needs. The problem with separated teams is that they create inherent conflicts of interest.” One model that many retailers are finding effective is establishing separate teams that are measured against shared objectives and coordinated in such a way as to encourage interaction.

·         Performance Measurement. Performance measurement systems need to be updated for the digital world, a fact many companies have been slow to grasp. As retailers move to digital or omni-channel distribution, key performance indicators shift from such long-standing measures as sales per store to economics per customer or household. Retailers can access enormous amounts of data about customer behaviors all along the purchase pathway today. But more information is not better information without the capability to track metrics covering both online and physical channels. A recent survey showed that many European retailers continue to look at such output metrics as net sales and average order value, even in their online operations, rather than the input metrics that truly influence success, such as customer retention rates, Web and mobile traffic volume, time spent on site, and customer conversion. 

New technologies and applications are coming to market too fast for companies to be able to assess and adopt each one of them. Companies need to encourage rapid experimentation without fear of failure. A speedy “pilot-learn-adjust” capability is increasingly essential to building digital and mobile-age organizations. Competing in the omni-channel world may also require partnerships with others in the retail value chain, particularly with manufacturers that face similar threats from the hegemonic rise of marketplaces.

Thus, though Omni-channel has been on the lips of industry pundits and analysts for some time, but not many brands have fully embraced this new paradigm as most companies aren’t equipped to handle the strategic and tactical shift. Their business and operational structure is defined by a channel-specific approach. Marketers who can get their heads around the omni-channel concept, and get their teams aligned behind the strategy, will have a distinct advantage over their competitors.

4)   It All Starts with Strategy

It’s easy to lose sight of the forest from the sheer number of trees. But the task does not have to be forbidding. Change takes time, but almost inevitably there are quick wins to be scored while making progress against longer-term strategic goals. Certanly, for most travel companies, specially distributors, it is more complicated to define the perfect approach, as there is no a physical product, what forces them to focus on the experience of choosing and acquiring the travel product. The traveler] may start their holiday research on their mobile handsets whilst having a few minutes to spare at a bus stop. They may take to their PCs in the office at lunch hour and continue their research at home on tablets or laptops. As the purchase decision gets nearer they may prefer to make a telephone call or pop into a retail shop. The important aspect to remember is that the consumer is considering your business as one entity however they are interacting with it at the time.

Nothing will damage a travel company faster than a customer finding one price for a flight or hotel on a website, another price in an e-mail reminder and yet another price when he or she calls the contact center. For this reason, it’s critical that travel organizations maintain an unsiloed multichannel approach that ensures consistency of the message being handed to consumers.

It is to be mentioned the recent success of Thomas Cook in building a first-rate mobile app for travelers ensuring the company’s mobile presence – which is well-integrated with the travel company’s “omni-channel” customer support intitiative – and setting the standard in the online travel industry, as part of Harriet Green, CEO of Thomas Cook, strategy to simplify their British brands to five omni-channel B2C brands.

A good omni-channel strategy for a travel website starts with a robust and reliable contact center platform onto which the multiple channels can be built and properly integrated. Not only is an excellent mobile app a must, but a social media strategy is critical, as well. Travelers tend to be heavy users of social media, and they are very likely to voice their strong feelings – either good or bad – with hundreds or even thousands of friends when it comes to their travel experiences.

Systems need to access the same product availability and pricing, allowing the same products to be booked at the same prices regardless of channel.  Organizationally, staff incentives need to be set so that a customer enquiring about a web booking with a retail outlet or call centre will be treated with the same courtesy and given the same amount of time as if making the booking in person. Travel companies are aware of this and now realize that they need to be firing on all channels in a cohesive manner, providing one view of products, gaining one view of customers. To achieve this requires a considerable degree of systems re-engineering, possibly abandoning early generation e-commerce and back office systems to obtain the high degree of integration necessary.

In any case, at the implementation level, an omni-channel strategy demands a higher level of coordination and ­flexibility. There are not only a lot of moving parts to consider, but an interdependence that requires precise execution and management. A few things to remember:

·      Be aware: Your customer, who they are, where they are, and how their life is changing, should always be at the center of your strategy and implementation.

· Be consistent: Your design, message, and brand experience must remain intact throughout each stage of customer engagement. Entry point doesn’t matter. Channel doesn’t matter. Media type doesn’t matter. Everything should remain aligned.

·  Be relevant: As you transition from strategy to execution, keep relevance as your guiding principle. Does each of your choices make sense in the context of the customer’s natural behavior? Do they serve a real need? Do they offer real value?

·    Be vigilant: Constantly monitor not only key metrics, but also more holistic performance indicators. Pay attention to things like click paths and time spent interacting with various campaign elements.

·   Be agile: Omni-channelmarketing is less like a campaign and more like an on-going conversation. Because customer behavior can change so quickly, you must be ready to be both strategically proactive and responsibly reactive.

·      Be adaptable: To succeed, fail fast. As you watch and respond to your customers, be prepared to try new things. Set aside a healthy testing budget –at least 15 percent of your overall budget- to test emerging opportunities

In brief, Omni-channel represents a conceptual and philosophical shift in how successful brands approach today’s multi-faceted marketplace. Though it relies heavily on new and emerging technologies, it is firmly rooted in a foundation of strong brand/customer relationships. Using customer needs and behaviors as a compass, brands who embrace omni-channel marketing have an enormous opportunity to create relevant, immersive experiences that simultaneously increase customer acquisition, improve conversion, and ensure retention.