Where will retailers find their next big growth opportunity? Supply chain advantages are maturing and lifestyle marketing is no longer novel. For national retailers, beautifully merchandised stores are located in about every mall and on every street corner in the country.
Furthermore, retailers are frustrated by their inability to get more return on the huge investments they make each year on labor, real estate, product, and marketing. Traditional approaches to growth are no longer working as well as they used to. To get better results, we need to think in new ways and operate differently.
The Next Big Opportunity: “Operational-ize\” the In-Store Customer Interaction
Retailers, reluctantly, have a ‘gut feeling’ that their customers are not getting a consistent in-store brand experience. Most executives are disappointed in the customer interaction capabilities of store teams. At the same time, customer expectations continue to increase as shopping options expand. Most of us can recall at least one positive in-store experience. Apple stores certainly deliver them regularly. The store team focuses on you from the moment you enter the store. There is a governing manager ensuring your connection is made properly. A skilled associate interacts with genuine curiosity, not in a pushy way. You are provided relevant information about the products you are interested in. The experience adds value to the product and the brand.
Sadly for most consumers and retailers, memorable customer experiences are the exception and not the rule.
So, why can’t retailers deliver more consistent in-store customer experiences? They’ve tried training initiatives, new technologies, and process improvement programs before, but with little sustainable success. The primary challenge is the sheer SCALE of a successful retail business. There is a real challenge of delivering a positive, profitable customer experience in a retail chain with 800 stores that operates 360 days/year, which means it has 288,000 open store days. On average, each store receives about 350 customer visits a day, totaling over 100 million opportunities annually to delight or disappoint customers. There’s no question about room for improvement and growth; the question is: how to systematically improve the interaction in a decentralized, geographically dispersed structure complicated with budget constraints, layers of field management, and high employee turnover. How can we institutionalize the urgency \”to help customers buy\” and take advantage of these obvious customer and revenue opportunities? In short, to perform better, we need a new strategy.
Designing Quality In-Store Customer Experiences
Why not apply business processes similar to those used in other operational areas to design and deliver high-quality customer experiences?
In the supply chain, retailers have sophisticated business methodologies and defined measures for success. As a result, very high standards are consistently delivered. Can retailers apply the same operational expertise to in-store customer experiences? We believe—actually we know—they can!
First, retailers must recognize that creating consistent in-store customer experiences is a company-wide effort. Every layer—from corporate leadership to the floor associate—has an influence on a customer’s in-store experience. Policy changes or traditional training programs delivered independently aren’t effective in changing behaviors across so many layers of the organization.
For consistent in-store customer experiences to become a reality, retailers need to rethink three critical design elements:
1. New customer-centric metrics.
Traditional measures like comp store sales and sales-per-hour don’t tell us anything about the customer. Measuring in-store experiences requires tracking customer visits, then mapping those visits to the right sales, staff, and store performance data. The level of detail a CEO needs for measurement is very different than the information needed for field or store management, but they all need to be connected to systematically improve the customer experience. The innovative measure is ROV – Return On Visit. If ROV becomes the central metric for the organization, mandated by the CEO, it will highlight missed customer buying opportunities and accurately reward customer-centric performance. It simplifies retail measurement enormously.
2. Customer-opportunity based performance standards.
Once we measure a store’s current performance using ROV, the question is, “what SHOULD the store’s performance be?” Setting store goals based on customer opportunity is completely new for retailers and, when done correctly, it unlocks huge missed revenues that exist in every retail fleet. Some stores will have the opportunity to grow by 50%. As with other operational processes, retailers need clear expectations and objective standards for defining ‘quality in-store customer experiences’ and the organizational behaviors that create them. Developing more aligned goals, combined with clear behavioral standards for all levels of the field organization, makes execution more elegant and predictable.
3. Customer-centric processes and business rhythms.
Designing the right system requires more than observing measures and hoping to hit the standards. The field organization needs step-by-step processes that systematically move stores from where they are, to where they need to be. The business rhythms between the layers of management need to be augmented to include new processes that identify what actions stores need to take to capture the missed customer opportunity. This isn’t difficult; however it does require leadership to coordinate and align customer-centric objectives.
Delivering Quality In-Store Customer Experiences
Better measures, standards, and processes are the foundation for creating better customer experiences in individual stores. To deliver customer experiences consistently across an entire chain of decentralized stores, retailers need two more ingredients.
4. Role-specific planning and measurement technology.
Everyone in the organization needs to look at measures and processes in the same way – with information relevant for their roles. That means we need technology to deliver individualized data to the CEO, to field leadership, and to thousands of employees, chain-wide. More data is not needed. On the contrary, what is needed are fewer and more precise metrics that are mapped to specific actions that can then be monitored and evaluated, making execution more efficient and effective.
5. In-store professionalism.
At the end of the day, customer experiences are most influenced by the behaviors of store employees. Over the past 20 years, store managers have been trained, and are expected, to be operators. Today we need more than operational expertise. Using the \’operational\’ approach, managers need to learn how to systematically coach behaviors that lead to consistent customer experiences. This process approach allows managers to run stores in a more predictable and professional manner that enables store associates to succeed and deliver better results overall.
Creating more consistent, higher quality in-store customer experiences is the ‘brass ring.’ Retailers who use all five of these components to improve their in-store customer experiences can expect between 15% and 30% more revenue from existing customers, stores, and staff. While these efforts require corporate commitment, most retail chains have huge opportunities to dramatically improve their in-store customer experiences. It\’s an exciting new strategic growth opportunity that not all retailers are aware of, nor are they actively pursuing.
In our next article we will take a deeper look at using granular data and new metrics to uncover ‘hidden’ business growth opportunities as well as the many reasons why these opportunities for performance improvement exist.
The Yacobian Group (TYG) is a technology firm that has developed a comprehensive system called BlueDay. It allows everyone in the retail organization to make better decisions – from the CEO to the part-time associate. With it, retailers have the knowledge of why stores are hitting or missing goals, what to do about it, and how to do it. BlueDay provides integrated software, business processes, behaviors, and comprehensive learning tools to maximize performance every day. Better | Decisions | For All.