Turning Shoppers Into Advocates

IBM Global Business Services

IBM Institute for Business Value

Retail Turning shoppers into advocates The customer focused retail enterprise IBM Institute for Business Value IBM Global Business Services, through the IBM Institute for Business Value, develops fact-based strategic insights for senior business executives around critical industry-specific and cross-industry issues. This executive brief is based on an in-depth study by the Institute’s research team. It is part of an ongoing commitment by IBM Global Business Services to provide analysis and viewpoints that help companies realize business value. You may contact the authors or send an e-mail to [email protected] for more information. Turning shoppers into advocates The customer focused retail enterprise By Herb Kleinberger, Melody Badgett and Maureen Stancik Boyce

While retailers are heeding the daily drumbeat of pundits on the importance of focusing on the customer experience, a gap remains between what retailers are delivering and what shoppers expect. Retailers can close this gap by systematically integrating knowledge of what their best customers want and expect from their brand into every core operational decision. This is where the bar will be set for retailers – to turn shoppers into advocates and create a sustainable, differentiated advantage.

Unprecedented diversity, fragmentation of compelling experience. This is a transforma- consumer values and information transpar- tional strategy that will enable retailers to turn ency have polarized the retail marketplace shoppers into advocates – customers who will and created an imperative for all retailers to recommend and promote the retailer to others, differentiate. In addition, the challenges of an spend more of their wallet with that retailer and increasingly price-driven world have raised the remain loyal over time.1 bar for retailers to create a shopping experience that builds loyalty to brands, channels Retailers can develop advocates by becoming and services and is not based solely on price. a customer focused enterprise and blending the customer perspective with a traditional Certainly these messages are not new and product-centric approach. This new perspec- many retailers are moving forward on their tive will require retailers to build customer customer strategies and are gaining deeper insights into their core business decisions insights into their core customers’ needs. But such as merchandising, marketing, customer that is just the first step. The new dimension to service, new product development, and store be explored is how retailers can change the and channel operations to significantly change way they operate to create a satisfying and the day-today operations of the business.

Turning shoppers into advocates We believe that retailers that are customer Becoming more customer focused is focused achieve greater customer advocacy, important for all retailers, regardless of value retention and loyalty, capture increased share proposition. The pace of change in the market- of wallet and market share, develop deeper place will quickly make winners and losers. customer trust and demonstrate superior Leading retailers will move first to build strong financial results. bases of loyal, profitable customers who are also advocates of the company and achieve sustainable, differentiated advantage. Where will you be?

IBMIBM Global Global BusinessBusiness Services Services Turning shoppers into advocates The customer focused retail enterprise

The new business model: The with them, and the tactile performance or customer focused enterprise how their customers use their products or What does being customer focused services mean for retailers? 4. Prioritization of investments based on criteria Several factors in today’s retail marketplace that define a successful shopping experi- are driving the need for differentiation and ence for their best customers. customer focus. Retail market fragmenta- Becoming customer focused requires a shift tion and complexity are increasing, while in how retailers think about and organize their boundaries between traditional segments businesses. This is not to suggest embracing a continue to blur. In addition, the vast amount new perspective and abandoning the old way Becoming customer of available information is raising the bar on of doing things. In contrast, it is about bringing focused requires what customers expect retailers to provide in together an inside-out, operational view with the shopping experience. To navigate the ever- bringing together a an outside-in, customer view to deliver a changing marketplace, successful retailers “customer view” with superior shopping experience. are placing customers at the center of their a traditional “product- strategies and operations and becoming truly Traditionally, retailers have operated their busi- centric” view. customer focused. nesses with an internal focus on their core operations that is product-centric. At the same Retailers that are customer focused embody time, the view of the shopping experience is four characteristics: often constrained by functional silos, which 1. Deep understanding of the needs, shopping each have their own perspective and expecta- preferences and expectations of their best tions for the customer. These separate views customers across all channels, touchpoints, can lead to an ineffective customer experi- products and services ence due to an internal approach to managing 2. High priority placed on using customer operations that doesn’t completely consider insights to drive decisions in merchandising, the impact on the customer. For example, pricing and promotions, customer service, customers continually toss the promotional and marketing and communications mailers they receive at home because they are unrelated to their shopping baskets or habits. 3. Consideration given to both the emotive The reality is that marketing promotions are aspect of the shopping experience or often created with a mass approach and are how their customers feel about shopping cast with a wide net (see Figure 1). with them and how they want to interact

Turning shoppers into advocates FIGURE 1. Disconnected views of the shopping experience.

Demand Browse and Transact Fulfill Service and Remarketing generation research support

“The coupons and “I can’t find “I can never find “I wasn’t able to “I was rushed “I’m receiving What your offers I receive clothing items that anyone to help reserve an item off the phone three e-mails a customer by mail have little fit my particular me, and if I do, from the Web site and didn’t get week, and they sees to do with what lifestyle or needs” they can’t tell me and then go pick all my questions all say something I purchase, so I whether a product it up in the store” answered” different” toss them” is in stock or not” GAP

Mass approach Assortment No access Inventory Metrics reward Separate How you to marketing planning to inventory management reducing marketing plans operate and promotions doesn’t reflect availability; doesn’t span average call by division and customer staffing based channels time channel needs solely on cost

Source: IBM Global Business Services; IBM Institute for Business Value.

By balancing internal objectives with customer customers defect and take with them their objectives, retailers can bridge the gap purchases of low-margin items that didn’t meet between what the customer experiences and corporate targets, and the high-margin items how the company operates. The starting point that were bought in tandem. for this transformation is leveraging customer data across the company. When insights are aligned with customer- facing processes, retailers can transform their Consumer insights are critical to businesses in the following ways: align a product-centric view with the • The focus on the shopping experience customer view becomes channel, lifestyle and segment As retailers combine inside and outside based. perspectives, incorporating consumer insights • Merchandise selection includes category, into decision making across all core business segment and local market needs and processes is essential. Often times, retailers assortment decisions are based on opti- capture significant amounts of customer data, mizing the baskets of core customers. but it gets trapped in Marketing and is not • Marketing becomes less mass-market- leveraged across the company. This could driven and more personalized by segment. result in a category being deleted because of low margin and poor sales performance, • Organizational metrics include both product when this category was actually preferred by performance and customer satisfaction (see top customers. Unfortunately, a retailer may Figure 2). discover this only after some of their best

IBM Global Business Services FIGURE 2. Transformation of processes with consumer insights.

Modified view: Traditional leverages Example processes Traditional/product view consumer insight Assortment planning/ Category buyers and planners focus on Buyers and planners work with customer category management product and department financial goals data analysts, marketing and store/channel and performance representatives; criteria includes customer segment goals and performance

SKU Decisions made primarily on item Decisions filtered through performance and rationalization performance versus plan needs of top customer segments

In-store customer Store associates do not have access Store associates are empowered with data on service to customer preferences and purchase customer preferences and transaction histories history and provide uniform service to provide more personalized service via “clienteling” or guided selling approach

Channel integration Online services are limited and brand Customers and employees have access to experience is inconsistent; channels are multiple online services that are integrated and siloed and not integrated coordinated seamlessly across channels

Space planning Decision criteria limited to product Decision criteria is augmented by store specific By infusing critical features and/or vendor requirements guidelines to optimize core customer profiles customer facing and historical performance and preferences processes with Price and promotion Strategy is uniform across all Figure 3.Strategy Good isexperiences differentiated based encourage on understanding management customers and managed independentlycustomers of how to becomedifferent customer “advocates.” segments respond consumer insights, across channels to price and promotion changes; decisions retailers can embed coordinated across channels the customer Campaign management Programs based on mass-market Programs are tailored and designed to attract approach and managed separately and drive business with specific customer perspective into their across channels segments; coordinated across channels business model. Call center customer Metrics based on productivity and Metrics also include customer segment growth service customer service representative and satisfaction; CSRs have access to customer (CSR) has limited or no knowledge of data; top customers offered higher level of customer histories or profitability; all service customers treated the same Source: IBM Institute for Business Value.

This alignment helps retailers build more customer segments based on shopping satisfying shopping experiences and develop basket analysis, customers are happier to see more customer advocates. For example, monthly mailers in their mail box because they when marketing plans are tailored to specific discover promotions they can directly use (see Figure 3).

Turning shoppers into advocates FIGURE 3. Good experiences encourage customers to become “advocates.”

Demand Browse and Transact Fulfill Service and Remarketing generation research support

“I can’t wait to “I can always find “The sales people “I can reserve “The service “I receive e-mails receive my monthly clothing that suits are available and items or purchase representative that provide me newsletters in my tastes and can easily tell me items online and was friendly, and related offers for the mail and see needs” whether a product pick them up in answered all my the store, catalog the coupons and is in stock or not” the store” questions” or Web site” information just for me” Common view Promotions and Assortment Inventory Inventory Metrics include Marketing plans offers tailored to planning availability management productivity coordinated each customer reflects market provided to integrated and customer across channels segment and customer associates; across satisfaction needs staffing balances channels goals cost with customer needs

Source: IBM Global Business Services; IBM Institute for Business Value.

Customer focus drives value across redemption rates of 20 percent or more versus the enterprise the 1 to 2 percent industry average, penetration Greater customer focus helps drive greater rates of 80 percent, and an increase in market value across the enterprise through improved share from 16 percent in 1995 when the loyalty revenues, margin and asset utilization. This program was launched to 31 percent as of 2 value can be realized by adopting a set of August 2006. customer strategies with clearly identified Similarly, by optimizing multiple channels and metrics, which can then be tied to measurable leveraging existing assets and investments, results and bottom-line business impact. retailers can help improve channel cross- For example, by developing more targeted over rates and, in turn, improve revenue and marketing campaigns, retailers can help margins. JC Penney, for instance, success- improve response rates, increase market fully leverages its Web site, catalog and and wallet share, and, in turn, drive greater stores – and drives customers to shop across revenue. U.K. grocer, Tesco, for example, sends channels. Accordingly, jcpenney.com achieved out highly customized promotions based on US$1 billion in sales in 2005, has grown 30 to insights gathered through its Club Card loyalty 50 percent consistently since its launch and 3 program. This has contributed to coupon has 10 percent conversion rates.

IBM Global Business Services How do retailers operationalize this experience. Retailers that have this capability new view? know, for instance, who their top customers Six core capabilities are necessary for are and how profitable they are, what types of services they prefer, how their shopping needs this transformation vary by occasion and when and where they A customer focused retail enterprise under- like to shop. stands the entire customer experience and delivers against it to build customer advocates. The key components of consumer insight To transform their businesses, customer include: focused retailers integrate six core capabilities • Shopper intelligence and feedback loop: into their business models (see Figure 4): Deep insights are captured from multiple Consumer insight sources such as interaction and transaction Customer focused retailers data, demographics and contextual infor- have a deep understanding mation; customer feedback is encouraged of their core customers’ and captured. needs and wants and use • Moments of truth: Transaction points with these insights to develop a consumer-driven, customers are identified, and the brand outside-in approach to designing the customer promise is delivered at all key customer experience decision points.

Retailers can FIGURE 4. deliver a satisfying Customer focused capabilities. Multichannel Personalized dialogs shopping experience Consumer insight execution by having a deep understanding of who their core customers are and what they expect IT IT from the brand capabilities Associate Organizational capabilities experience. Tailored offers commitment alignment

Source: “Advocacy in the customer focused enterprise: The next generation of CRM Done Right.” IBM Global Business Services. April 2006.

Turning shoppers into advocates • Outside-in shopping experience design: Personalized dialogs The shopping experience is designed with Customer focused retailers a full understanding of what core customers have the ability to deliver expect, how they feel in their interactions relevant and custom- with the retailer and how they use the ized communications to products and services. their customers in near realtime across all channels and touchpoints. With this capa- • Multidimensional segmentation: Core bility, for example, a retailer is able to make customer segments are defined based on customized recommendations at the point life stage, product usage, psychographics of sale (POS) to fill “gaps” in its customers’ and shopping preferences. shopping baskets based on past purchases. • Targeted customer acquisition and retention: One U.S. grocer, Stop ‘n Shop, offers its Strategies for satisfying existing customers customers such recommendations through its and acquiring new customers are based on shopping buddy device.5 deep insights. The key competencies required to deliver • Innovative consumer research methods: personalized dialogs include: New approaches to understanding and capturing customer needs, emotions and • Realtime, intelligent messaging: Customer behaviors are explored and leveraged. insights become part of every interaction through the use of relationship attributes, And now from the customer’s perspective Retailers can more life event information and data-driven U.S. office supply retailer, Staples’ redesign of decision making. effectively connect its Web site exemplifies building a customer • Value exchange and relevance: Customers with shoppers experience from the outside in. Staples wanted fully understand that the information they to provide a better online experience for its by tailoring provide will be used to their benefit and a small business customers and convert more communications balanced trade is created. occasional shoppers into loyal shoppers. To better and interactions to understand customers’ needs, Staples launched • Voice of the customer: The customer’s their unique needs onsite usability studies with small business perspective is embedded in the design of and preferences. customers. This research included watching their interactions and touchpoints; customers are customers’ employees perform the following encouraged to provide feedback. activities: place orders on the Web site, speak • Segmented treatment: Core customers with Staples customer service reps and receive receive differentiated treatment based on and put away products delivered by Staples. This their preferences and profitability. data was used to create seven personas of typical • Sales associate effectiveness: Staffing customers, identify top customers, and build new models are adjusted to have the right skills features on the Web site that directly addressed available to meet customer needs, and their needs. This innovative approach drove higher associates have access to customer data to conversion rates and higher average order sizes 4 offer more personalized service. following the site relaunch. • One-to-one relationships: Individual customers receive customized and relevant messaging and communications.

IBM Global Business Services Taking customer service to the next level • Seamless interactions: Customers can U.S. department store, Nordstrom, well seamlessly continue interactions and dialogs recognized for its high level of customer service, over multiple channels without disruption or decided to raise the bar by customizing its loss of information. As shoppers communications to key customers through an • Coherence across channels: Activities have come to automated “clienteling” program. This personal- across functional areas are integrated and expect anytime, book software replaced sales associates’ coordinated to deliver the desired brand paper-based customer books by assembling anywhere shopping, experience and value proposition. multichannel customer transaction histories and preferences into a database and making this data accessible • Employee and customer cross-channel excellence is critical. to associates at the point of sale. This system, services: Employees and customers for example, provides associates with a list can access information captured across of customers that might be interested in new channels and touchpoints. merchandise, trunk shows or upcoming sales • Cross-channel optimization: A systematic based on their particular profiles. This level of approach is in place to exploit the strengths personalization was impossible with associates’ of one channel to complement the relative paper-based customer books, which were filled weaknesses of other channels. with hand-written entries of customer preferences. During 2005, Nordstrom reported that one-third The multichannel experience becomes of all sales were a result of interactions between even more important sales associates and customers, facilitated by the Multichannel capabilities are becoming extremely 6 personal-book software. important for consumer electronics retailers, in particular, as online research has become a Multichannel execution prerequisite for shoppers. According to a recent Customer focused retailers study, 77 percent of consumer electronics coordinate and integrate purchases were influenced by Internet research.7 all channels to support a To satisfy these shoppers, electronics retailers consistent customer experi- are offering multichannel services, such as buy ence. With this capability, online/pick up in-store, buy online/return in retailers can serve customers as a single store, realtime inventory status check, “endless brand, regardless of which touchpoints or aisle” and online access to in-depth consumer channels customers use. reviews. Circuit City has gone further by offering a guarantee that online orders will be ready for The critical components of multichannel in-store pick-up within 24 minutes or it will execution include: provide a US$24 gift certificate.8 To support this • Anytime, anywhere shopping: Customers commitment and create greater accountability for can personalize and choose the channels the shopping experience, Circuit City has created a they would like to use for communications new position, VP of Multi-Channel Experience.9 and shopping activities. • Single view of the customer: A consistent customer profile is shared and used across channels, media, divisions and customer touchpoints.

Turning shoppers into advocates Tailored offers Tailoring offerings to meet local market To provide a meaningful needs shopping experience In an effort to drive more customer relevancy, to their best customers, Wal-Mart augmented its customer insights and customer focused retailers segmentation capabilities and is using this data offer products and services that align with to develop more tailored offerings and store customers’ expectations and shopping By incorporating formats. For example, to appeal to the affluent occasions. This capability is based on the shoppers in the Plano, Texas market, Wal-Mart shopper insights systematic use of customer insights in all core staffed the store with consumer electronics into the development value chain processes, from merchandising specialists, brought in twice the number of process, retailers to store/channel operations to customer organic products and offered a wine selection can deliver more management. with 1000 bottles, ranging from US$4 to US$500 per bottle. Similarly, to appeal to the African relevant products The key components required to develop American customers in the Evergreen Park, Illinois tailored offers include: and services. market, Wal-Mart tailored the men’s apparel • Customized solutions: Products and and music section of the store to the tastes and services address the needs of core preferences of these customers. Initial results customer segments, enabling custom from these localization efforts have been positive. solutions versus one-size-fits-all offerings. For example, an expansion of gospel, rhythm and • Localized assortment planning: blues and hip hop music in its Evergreen Park 10 Merchandise categories and item assort- store led to an increase in sales. ments are tailored and optimized for local market and customer segment needs. Associate commitment Store associates are critical • Customer focused store strategies: Key to an organization’s ability store activities such as staffing, space to achieve its desired vision planning, signage, shelf placement and for its customers. Customer in-store promotions are aligned with the focused retailers adopt strate- overall merchandise strategy and customer gies to sustain employee commitment, so that segments’ needs and goals. they are motivated to satisfy customers. These • Consumer-driven supply chain: The supply strategies include hiring the right people, chain network is aligned to support flexibility providing them with meaningful training and responsiveness, and deliver the desired and giving them the tools and information customer experience. needed to focus on customers. For example, U.K. retailer Marks & Spencer developed a • Product innovation collaboration: Customer screening process with SHL, a provider of insights are shared and leveraged with objective people assessment techniques. This vendors, partners and third parties in new process helps ensure new hires possess the product development processes. qualities that the retailer deems important for • Product and service personalization: success in a specific role.11 Products and services can be fitted for a market of one based on customer prefer- The key components to develop associate ences, needs and profitability. commitment include: • Agile sales team: Employees are provided with career planning capabilities based on personal and life-stage objectives.

10 IBM Global Business Services • Cognitive-based change management: Organizational alignment Innovative strategies are used to create In a customer focused retail organizational change and break away from enterprise, all areas of the traditional thinking and behaviors. company collaborate seamlessly in order to satisfy • Role alignment: Skills, competencies and customer needs. This capability also requires personality fit required to match employees retailers to consider the addition of new with customer objectives are clearly identi- roles in the organization, such as a customer fied and articulated. champion or a data analyst who can represent • Personal customer commitment: Each the customer voice across the enterprise. customer-facing employee is given the moti- vation and tools to sustain a customer focus. Organization alignment has the following components: • Knowledge management and continuous learning: Employees leverage and share • One mind, one company: Visions, missions best practices across the chain and engage and corporate culture are aligned around in ongoing learning activities. customer strategies and communicated throughout the organization. • Parallel interest and rewards: Personal interests and motivations related to job role • Segment-influenced operating model: are aligned, and customer focused metrics Departments, divisions and the organization are used to measure success. are redefined around customer segments. • Executive and management alignment: Creating a top-notch sales team All levels of management are in step with Turning associates To support its brand promise for superior service, customer focused initiatives. into well-equipped The Container Store builds associate commitment • Cross-functional collaboration: Departments, advocates is key to into the core of the business. First, it hires self- functional areas and channels collaborate motivated, team-oriented people with a passion converting shoppers. across existing silos to deliver the desired for customer service. Second, it provides 241 And, by building customer experience. hours of formal training in the first year of accountability into employment, versus the industry average of 8 • Customer leadership and alignment: Top- the organization, hours. Third, it employs a full-time sales trainer level executive leadership is in place that customer satisfaction in each store and pays employees higher than advocates for and has authority to serve the industry average. This dedication to its sales customer. becomes everyone’s team has resulted in turnover rates of only 10 • Customer focused metrics: Customer priority. percent (as compared to the industry average of metrics are used along with traditional 110 percent), a consistent top listing on Fortune metrics to manage performance and guide Magazine’s 100 Best Companies to Work For and incentives. annual revenue growth rates of 20 percent.12

11 Turning shoppers into advocates Organizing around the customer • Information integration: Customer data, To support its focus on tailored offerings such as transaction history, preferences, and discussed earlier, Wal-Mart has announced profiles, is integrated across channels in an several organizational changes in the past year. event-driven, near realtime manner. These include: adding new departments for brand • Information architecture and business intel- management, category marketing and customer ligence: A robust data warehouse, along insights; moving executives to markets around with a single view of the customer, customer the country to be closer to customers; and giving data integration and business intelligence field staff more authority over what products to engines supports customer analytics and carry and providing them with a support team that insights. follows trends in fashion, food and electronics.13 • Application integration: Applications that support activities such as merchandise Customer whim can Technology and business integration planning, forecasting, assortments, promo- change at any is essential for the customer tions and the like have ready access to moment; business focused retail enterprise customer data during pre-season and in- and IT integration New IT capabilities are required for retailers season planning. to become customer focused enterprises can provide the – changes in processes and people alone In addition, an IT architecture that is based business with the will not be sufficient. For many retailers, the on a services orientation can help retailers ability to notice existing IT architecture is inflexible and has achieve their goals by designing IT capabilities as discrete services that can be integrated the shift and evolved to a point that it doesn’t easily support their customer objectives. and repurposed to address new and changing the flexibility to requirements. Within such an environment, respond to it. To transform the shopping experience, retailers can move ahead with their customer customer focused retailers place the strategies without having to rip apart existing customers’ interests squarely in the center of IT systems or start from scratch. their IT architecture (see Figure 5) and develop the following capabilities: • Capability integration: Systems across the various channels (e.g., store, Web, call center, etc.) are integrated so that key capabilities, such as order placement, status inquiries and returns, are enabled across these channels.

12 IBM Global Business Services FIGURE 5. Customer focused retail IT architecture.

Web e-Mail Kiosks POS Product lifecycle Financial and Phone Catalog Mobile management and merchandise manufacturing planning Transactional Cross channel correlation of history all customer transactions Customer order Category, management assortment and space planning Enterprise data Single view of the warehouse customer repository Customer service Demand forecasting management and replenishment Customer and store Unified fulfillment, DC, Promotions, events shopper view logistics operations and markdowns Supplier management and Store and labor collaboration planning Shopper Shopper analytics insights Transportation, fleet Store operations management and training

Inventory Unified content management management

HR, financial and operations systems Catalog and call Web channel Store systems center systems systems and e-Store and devices

Customer relationship Inventory and distribution Merchandising Business administration Source: IBM Global Business Services. Store and channel operations

Where do you begin? traditionally focused its efforts on driving This journey toward becoming a customer efficiencies in operational areas now seeks focused enterprise is game-changing and to take a more sophisticated approach to transformational, requiring total focus and its segmentation strategies to create more commitment across the entire business model. tailored assortments. On the other hand, The path for each retailer will depend on a mid-market retailer that has focused its its value proposition and existing customer customer efforts on segmentation strategies strategies. The starting points will be different. might now look to create greater consis- For example, a mass-market retailer that has tency in cross-channel merchandising and marketing.

13 Turning shoppers into advocates The first step for retailers is to review their • Build accountability for the customer experi- desired customer experience against their ence into all departments and levels of the existing operational capabilities and build a organization so that customer satisfaction is strategic roadmap that focuses on the priorities everyone’s responsibility. that matter most to their customers and that • Provide adequate support, training and enables them to achieve their specific goals. incentives to develop committed associ- As you begin your journey, consider the ates and adjust staffing models to meet the following strategic actions: needs of your core customers. • Know who your most important customers • Put in place the required IT capabilities to are and have a clear understanding of what create a single view of the customer and defines a successful shopping experience operationalize customer insights. for them. • Review all customer touchpoints across all • Incorporate segmentation strategies that go your channels and adjust them so that they are connected and can enable near realtime To stand out in a deeper than demographics and geography to include lifestyle, psychographics, communications. crowded marketplace, shopping occasions or profitability to under- • Update your information systems so that retailers need stand several dimensions of your customers. business logic can be shared across the customer advocates, • Understand the profitability of each of enterprise. not just shoppers. your top customer segments by individual Becoming more customer focused is a customer and have the capabilities to multiyear journey that will require executive calculate lifetime value. sponsorship in order to orchestrate the • Leverage customer insights beyond changes required in culture, organization, marketing into key areas such as merchan- processes and technology. It is a vital strategy dising, customer service and store/channel for all retailers and the means for turning operations so that the customer perspective shoppers into advocates and creating a is embedded into the day-to-day operations sustainable, differentiated advantage. Leading of the company. retailers are already moving forward. The time • Help ensure that customer data is available to get started is now. and shared across the organization to help eliminate the silos that prevent a common understanding of the desired customer experience.

14 IBM Global Business Services About the authors Key contributors Herb Kleinberger is a Partner and Global Fred Balboni, Partner and Global Retail Retail Strategy Leader and has over 25 years Industry Leader, IBM Global Business Services of experience consulting with retailers on Bob Keseley, Partner and Americas Retail strategy, operations and technology. He works Industry Leader, IBM Global Business Services with clients to evaluate and transform their operations, organizations and systems in About IBM Global Business Services order to improve customer service and profit- With business experts in more than 160 ability. Mr. Kleinberger is a frequent speaker countries, IBM Global Business Services at industry conferences and has coauthored provides clients with deep business, process, several thought leadership papers related to and industry expertise across 17 industries, retail future business and IT trends, customer- using innovation to identify, create, and deliver centric retailing and use of radio frequency value faster. We draw on the full breadth of IBM identification in retail. His responsibilities capabilities, standing behind our advice to include client relationship and leadership of help clients innovate and implement solutions the retail strategy practice within IBM Global designed to deliver business outcomes with Business Services. He can be reached at far-reaching impact and sustainable results. [email protected]. References Melody Badgett is a Senior Managing 1 Consultant at IBM. Melody has been with the Heffernan, Robert and Steve LaValle. IBM Institute for Business Value for over four “Advocacy in the customer focused enter- years as the CRM Global Lead, the Value prise: The next generation of CRM Done Infusion Global Lead for the Distribution Sector, Right.” IBM Global Business Services. April and recently as the Retail Industry Lead. You 2006. can reach Melody at [email protected]. Maureen Stancik Boyce, PhD, is the Distribution Sector Team Leader for the IBM Institute for Business Value. She brings 13 years of Strategy Consulting experience in Retail, CP and T&T. She can be reached at [email protected].

15 Turning shoppers into advocates 2 “Tesco Market Share Rises to 31.4% in UK 6 Levinson, Meridith. “A season on the brink”. Grocery Market.” Dow Jones Newswires. CIO Magazine. December 2005. Oct 19, 2006; Spethmann, Betsy. “Loyalty’s 7 “Most of Consumer Electronics Purchases Royalty.” PROMO Magazine, March 2004; Influenced by Internet Research, Finds CEA- Rohwedder, Cecile. “Know thy customer: Yahoo! Study.” Business Wire. October 23, How Tesco is taking on Wal-Mart, and 2006. winning – Mining shopping data as retailers 8 face off around the world.” The Wall Street 24-minute in-store pickup promotion on Journal Asia, June 7, 2006. circuitcity.com 9 3 JC Penney Annual Report 2005; “FTD.com Dawn vonBechmann, Vice President of leads online retailers in September conver- Multi-Channel Experience at Circuit City sion rate, study says.” Internet Retailer. Stores, Inc., was a featured speaker at shop. October 24, 2005; “jcpenney.com Surpasses org’s Moving Forward conference in January $1 Billion in Annual Sales.” JC Penney Press 2006. http://www.shop.org/firstlook06/ Release. January 17, 2006, speakers.asp#dvb 10 4 Kontzer, Tony. “Extreme Makeover -- If your Zimmerman, Ann. “Thinking Local To Boost Web site has a 2001 style, it’s time for a Sales, Wal-Mart Drops One-Size-Fits- new look. Here’s what five companies are All Approach.” The Wall Street Journal. doing to improve their sites.” Information September 7, 2006. Week. Nov 21, 2005.; Presentation by Paul 11“Marks & Spencer innovates to get the right Gaffney, Executive Vice President Supply people and get them fast.” SHL. 2004. Chain, Staples, Inc. at A.G. Edwards Retailing http://www.shl.com/SHL/en-int/Clients/ Conference, January 21, 2006; Krol, Carol. Case_Studies/Case_Study_List/marks-and- “Staples preps easier e-commerce site; spencer.htm Office supplies giant revamps Web site to 12 “Top-shelf employees keep Container match customers’ catalog experience.” B to Store on track.” DSN Retailing. March 8, B, March 2005. 2004; “Creating the Customer Dance.” 5 “Stop & Shop grocery drives sales and Presentation by Kip Tindell, CEO, The boosts customer loyalty with IBM Personal Container Store at the VNU Fine Jewelry Shopping Assistant.” IBM. January 13, 2005. CEO Summit. February 21, 2006. http://www-306.ibm.com/software/success/ cssdb.nsf/CS/BHAN-68LPYH?OpenDocume nt&Site=default

16 IBM Global Business Services 13 Zimmerman, Ann. “Thinking Local To Boost Sales, Wal-Mart Drops One-Size-Fits- All Approach.” The Wall Street Journal. September 7, 2006; Berner, Robert. “Fashion Emergency At Wal-Mart; Shoppers are ignoring the racks. Can the chain change its style-challenged image?” Business Week. July 31 2006.

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