Do You Know Who Your Consumer Is?

LONDON, United Kingdom — 'Wine o'clock' browsing from your iPad in London, an impulse buy made on your mobile phone in Los Angeles, a purchase returned to a flagship store in Shanghai. It isn't easy keeping tabs on today's increasingly mobile and digital consumers, who now interact with brands and retailers across a dizzying array of touchpoints.

According to Bain’s 2014 Global Luxury Study, more than 50 percent of all luxury goods spending takes place outside the home countries of consumers. Meanwhile, according to a recent report by McKinsey, nearly half of luxury goods buying decisions are influenced by what consumers hear or see online, on retailer sites and beyond. And in the data trails left by consumer interactions, brands and retailers are trying to piece together a unified ‘single view’ of individual customers across devices and geographies.

“All the digital activity going on has created an avalanche of data out there,” says Maher Masri, partner and co-leader of McKinsey's digital marketing practice for North America, citing sources like “purchase history, service interaction, website navigation behaviour and social media conversations.” If companies can combine this kind of ‘first-party’ data with insights gleaned from third-party sources — and make sense of it all — they can, in theory, much more effectively target their marketing and customer service.

“The thing that companies are trying to do is identify customer signals to trigger a marketing activity,” explains Masri. “If you go to a retailer’s website, put something in the cart and don’t buy it, that is a very simple signal. The retailer should be able to retarget you through various marketing tactics, either display [advertising] or email or social, to remind you to come back and buy it.” Companies employing these tactics report a 10 to 20 percent lift in revenue, according to the report “Cracking the Digital Shopper Genome,” co-written by Masri and Gadi BenMark, a senior expert at McKinsey.

“Usually, greater sales are the biggest benefit. Maybe, at times, higher [profit] margins,” says Sucharita Mulpuru-Kodali, vice president and principal analyst at Forrester. “I think it's also important in a high-service environment because you want to be rewarded for your patronage. If you are a high spender, you want to be treated well,” she continues. Indeed, in an increasingly commoditised market, where product selection is no longer enough to differentiate one retailer from another, exceptional customer service is crucial.

“Every retailer I have interacted with is thinking about this in one way, shape or form. But it is hard to do. That is what makes it a strategic advantage,” adds Masri. “When you do it well, a single view can create an amazing experience for the customer and a lot of commercial success.”

“As retail is going through this massive period of disruption, to know your consumer and to make it easy for them means [customer] retention. It is more than just a transaction metric; it becomes playing the long game,” adds Bransten.

"We have been talking about a single view of customers for a long time. To be really seeing it come together and see people really moving their IT and marketing budgets against it in an aggressive way, hearing board members and chief executives of big retailers say that this is their mandate is incredibly exciting," says Shelley Bransten, head of retail and consumer products at Salesforce, a leading global customer relations management service provider, who was previously vice president of CRM at Gap Inc.

Not long ago, storing large data sets was prohibitively expensive. Making sense of the data was also challenging. “Technology barriers were the main problem in combining insights across different elements of the organisation,” according to Masri and Gadi BenMark’s McKinsey report. “Yet those barriers are starting to fall.”

"Those leading the way are in omnichannel retail and connecting the dots between digital and physical," says Bransten. "We see the shift occurring quicker in smaller retailers with 150 to 200 stores. They are leading the pack. I look at some of our customers, whether it is a Macy's or even a John Lewis and a single view is front and centre in terms of their IT investment and their mindset. Burberry have made the integration of the physical and digital a key part of their fashion strategy."

BenMark and Masri advocate a disciplined system of collecting and organising insights: “The customer decision journey, charting a customer’s behavioural pathways and attitudes at each stage of a purchase journey; digital channel preferences, identifying how customers interact with a brand across apps, email, social media and video; product affinity, what consumers spend their time online browsing, combined with their purchase history; the response to offers; and, finally, life moments and context, such as having a child or moving house.”

“It's expensive and time consuming to have a robust customer management database, but it's possible,” says Mulpuru-Kodali. “It's difficult to know what someone has browsed on a mobile device and has purchased on a desktop. Attribution across devices, marketing channels or even store channels is still very rudimentary.”

When building a 360-degree view of their customers, Masri advises brands and retailers not to rush. “We see a common pitfall of companies trying to build the perfect data set before taking action. However, that is the wrong approach. It is better to iteratively test and iteratively build what you need in a more agile manner. The first question is, ‘Can we identify the customer?’ Even getting a unique identifier for each customer might be the first problem to solve.”

Bransten is quick to add that a ‘less is more’ approach works best when leveraging customer data for targeted marketing. “What you cannot do is deluge a consumer with information and just close them down. The customer doesn’t want to get to that place where the retailer is constantly asking whether they want this or that.”

What companies should do, according to Masri and BenMark’s report, is create teams of people that oversee the total user journey of a consumer. “These teams create a customer-segment profit-and-loss overlay on top of existing channel- or product-centric ones.”

But not everyone is wholly convinced of the ROI of such efforts. “Some of this could be highly overrated. Recency, frequency and monetary value is often enough to create marketing programmes [that are] still powerful today — without more detailed customer information,” says Mulpuru-Kodali.

What’s more, a true single customer view remains elusive, even for the most sophisticated retailers. “There are retailers who are working faster and harder than others, but I don’t think anybody is there. I don’t even think Amazon is there,” adds Bransten.