Multi-channel Business Intelligence

How understanding customer behaviour builds business value in a multi-channel world.

Introduction

Strategies for multi-channel integration, multi-channel marketing and building a consolidated, single customer view have become increasingly important as the business model operated by many organisations migrate to become truly multi-channel. By multi-channel integration we mean turning customer activity data – store, online, loyalty card, catalogue, telephone, email, etc., into very refi ned and “relevant” information which helps the organisation understand how its customers are interacting and purchasing across channels and how to shape the business to be increasingly fl exible to customer demand.

Consumer’s increased knowledge, sophistication and expanded choices, have led to a ramp-up in consumer power, forcing organisations continuously to develop their business strategy around consumer power within an increasingly multi-channel world.

The development of a multi-channel operation will often depend on the start point, but in most cases organisations will have started with a single channel and then added separate additional channels, before fi nally integrating these channels into a single go-to-market framework.

1.

Business and Technology Drivers Today, multi-channel integration is the key driver for many organisations as it delivers two important elements of a successful strategy: Reach and Convenience. By reach we mean physical, geographic coverage and the ability to reach as many potential consumers as possible. Reach has traditionally underpinned the concept of the high street chain, with large chains ensuring a reach which meant that, for example, 80% of their target population lived within a 20 mile radius of a store, or that banks had branches in high income areas. By convenience, we mean giving customers the best possible experience in terms of simplicity of searching, browsing ordering and acquiring products or services. Over time, convenience will ultimately mean that an organization becomes the automatic choice for consumers for a particular product or service and may allow it greater “share of life” options too. Tesco, for example, now offer home delivery of groceries, as well as white goods, banking, insurance, travel, telephony, utilities, music downloads and fl owers, taking its “share of life”, well away from the traditional role of food retailer. The CEO of any large organization, retailer, bank, or travel company will tell you that reach and convenience are critical to success and that a multi-channel strategy is central to achieving this.

Multi-channel Integration – Finally a Mass Market Possibility Channels to market have traditionally developed with separate growth profi les and separate management structures and as a result the core data that drives a true multi-channel strategy has been locked in a plethora of back-end systems, making it either too complex, too costly or just plain impossible to build a multi-channel view of the business – until now.

There are three key drivers that have now made this a commercial reality: consumer demand for channel choice; the commercial risks of not understanding customers across all channels whilst competitors do; and the technical ability to achieve a multi-channel platform for the fi rst time; Consequently in 2008, 76% of FTSE 100 companies stated that they have a strategic goal to integrate their multi-channel data assets in order to understand buyer behaviour across multi channels.The core drivers for developing a multi-channel model are:

A. TECHNOLOGY

Open Architecture: Allowing data to be shared across different platforms and environments.

Data Transfer Protocol: Allowing data to be passed between databases automatically, in order to create a common data store for critical multi-channel data.

Increased Data Processing speeds: Allowing systems to load, query and model large amounts of data in real-time.

Reducing Memory and Storage Costs: Allowing an organisation’s data

Via Telephone

Delivered toHome

Delivered toWork

Via Store

• Home Delivery• Ring & Reserve

• Home Delivery• Click & Collect

• 95% Coverage• Home Delivery• Quick Pay Kiosks

• Text & Take home• Home Delivery

Via Internet Via Store Via Mobile

Integrated Multichannel

Separate Channels

Retail Division

Mail OrderDivision

Web Team

Single Channel

Shop Catalogue Web

assets to be stored in a data mart for access by the business, rather than being held on backup tape.

Broadband Connectivity: 50% of UK Homes now have high-speed broadband connectivity, allowing faster internet access and therefore allowing organisations to provide a much richer online experience for consumers.

Sophisticated Data Modelling and Analytics Software: Having access to data and high-speed processing is irrelevant unless the data can be turned into actionable information. Sophisticated data discovery and analytics technology is signifi cantly easier to use today and most systems provide marketing and business interfaces which allows these systems to be used more pervasively throughout the business. Data can be profi led and used to build segmentations for marketing and business development.

Multi-channel Analytics: Driving Empowered Marketing

B. MARKET DEMAND DRIVERS

Empowered Consumers: Consumers today have more access to information pre-purchase than ever before. Whilst 85% of sales are still transacted offl ine, the online channel is increasingly signifi cant in the purchasing process. It is estimated that 60% of purchases in the UK are now infl uenced directly by the online channel, with the fi gure rising in direct proportion to the cost of the product or service i.e. The more expensive the product or service, the more important the online channel becomes.

High Service Expectations: If a consumer has purchased from an organisation in the past, they will expect that organization to know them and the more frequently and the greater value that they spend, the more they expect that organization to know their likes and dislikes. In the 1980’s and 1990’s this concept became known as “Customer Relationship Management” (CRM) and today, in the online era, the concept is known as personalization. Putting all the knowledge an organization has about an individual into one place and profi ling that data against similar purchasers, can become very powerful in matching service expectations.

High Convenience Expectations: Allowing customers to purchase online and collect in-store, purchase online and return in-store, or

to redeem in-store coupons or loyalty card points online are all becoming expectations of consumers today. Similarly, consumers with a traditional high street bank current account, expect to access and administer this online.

Channel Blurring & Loyalty to Successful Multi-channel Brands: There is increasing evidence that consumers are blurring the traditional online, store and catalogue demarcations that separated brands and that they are now buying into brands themselves, becoming a consumer of a particular brand rather than a shopper in its stores, a shopper online or catalogue purchaser This means that to win in the future, brands must understand and shape the business around this multi-channel loyalty.

C. COMMERCIAL DRIVERS Identifying and protecting “Multi-channel Super Consumers”: Within any multi-channel organisations data, an increasing number of customers can be identifi ed who use multiple channels to make a purchase. These “multi-channel super consumers” are increasingly important as there is growing evidence that the more channels a consumer uses, the more they will spend with that organization. Further, multi-channel customers shop more frequently and now represent 40% of all consumers. Most retailers, therefore, know that these multi-channel “super shoppers” are critical to future success and are trying to do three things with them:

• Work out who they are within their own data and how to keep them. • Work out how to turn more of their existing customers into super shoppers.• Target competitors super shoppers and turn them into their own.

Building Barriers to Entry Through Retention Programmes Profi ling and segmenting consumers according to their multi-channel buyer behaviour allows organisations to build retention strategies that help lock out competitors. Using loyalty schemes which build across channels, redemption campaigns that offer higher discounts for utilizing your lowest cost channel, or allowing customers an online account where they can administrate all their buying activity, regardless of channel, will build barriers to entry against competitors.

Profi ling and Segmenting Offers: Segmenting users into groups based on activity, e.g. product purchased, product value, seasonality, etc. and then profi ling groups of users who match this activity, will allow very targeted marketing campaigns to be generated, with a signifi cantly higher purchase conversion rate than non-profi led campaigns. For example, a wine company profi led all customers who had purchased premium sparkling wines, but never purchased champagne, with an offer for its house champagne. This had a 20% premium on the sparkling wine these customers usually purchased. By replacing one bottle of sparkling wine with the house champagne in each case and then backing this up with a mail and email campaign,

2.

Old world marketing

Extrapolation of data from a few separate sources based on a small sample of customers

Nielsen / AGB Customer researchShopping surveysAdvertising awareness studiesDistribution & sales information

New world marketing

Mining the explosion of granular data collected digitally from huge numbers of individual customers

Loyalty cards Web analytics Analysis of ISP logs Customer relationship systemsE-mail marketing

the conversion rate from sparkling wine to champagne was measured at one buyer in six.

Targeting New Opportunities: Understanding consumer behaviour across channels and how consumers engage with new technological initiatives, can offer new opportunities for organisations. The development of “click and collect”, whereby items can be searched by store region and then purchased and reserved online for collection in store, has allowed one particular high street retailer with high stock availability within its in-store warehouses, to capture a large number of “cash rich – time poor” shoppers of a much higher socio-economic banding than its core market. In fact many of these click and collect individuals had never previously used the high street operation and may still never do so. It is the direct effect of the multi-channel model that has led to this additional revenue effect.

Drivers of Multi-channel Integration

Developing Multi-channelIntegration

Whilst developing a true multi-channel environment, the process of linking back-end stock control and ERP systems to front end online ordering and transactional systems is complex. However, there are a number of steps which will ensure that a multi-channel “mind-set” exists allowing this goal to be achieved. The 10 point plan below, will help this to happen.

Get Board level Sponsorship: It is critical that ownership of the multi-channel strategy resides at Board level. Approval of the budget and plan is not enough, there needs to be ownership and advocacy at Board level too.

Build a Team with Authority to make Fundamental Changes in the Business: A multi-departmental team with strong leadership, will be required to make multi-channel integration a reality and a commercial success. There will be push-back from the various silos that currently exist in the business and which have their own procedures, business systems and marketing strategies. Opening these up around a common architecture is critical to success.

3.

Demand Drivers

• Empowered consumers.• High service expectations.• High convenience expectations.• Channel blurring and increasing loyalty to successful multi-channel brands.

Commercial Drivers

• Protecting multi-channel super shoppers.• Building barriers to entry through retention programmes.• Segmentation and profi ling offers.• Targeting new opportunities e.g. A/B1s using “time saver” channels. Technology Drivers

• Open architectures.• Data transfer protocols.• Processing speeds.• Reduced memory/storage costs.• Broadband/connectivity.• Sophisticated data modelling and analytics S/W.

Technology- Consumer- Organisation

Revenue- Growth- Protection

MarketDemand

Set Objectives About What the Business Wants to Achieve: There may be clear objectives for this. For example, a motor insurance organisation migrating more business online from an expensive call centre operation or a mail order company using one large catalogue moving to a series of smaller “niche catalogues” targeting customers with a specifi c buyer profi le, with fulfi lment through an online interface and offers sent through email campaigns. Other objectives may be simply responding to consumer demand for choice in order and fulfi lment channel, or simply trying to maintain market share through increased reach and convenience. One thing is clear – the clearer the objectives, the greater the chance of success.

Understand How Multi-channel the Organisation can be: A pure play online retailer, such as Amazon, will never build a high street infrastructure and high street retailers, such as Tesco will never sell purely online. The key for high street retailers is to shape the business correctly (hence the rise of the Director of Multi-channel Operations in most large retailers) so that the online presence enhances the high street offering, increasing sales across the business, rather than cannibalising store sales through an internet channel. Store loyalty cards, which can be used on and offl ine, are excellent sources of data for tracking this. Interestingly, some high street retailers with transactional websites, now give online purchasers vouchers which can only be redeemed in store, whilst others give high street purchasers discounted e-vouchers, which can only be redeemed online. Organisations with clear multi-channel vision and the ability to execute that vision, have been surprised at near instantaneous take-up of their model with customers requesting even more technology-led innovation.

Audit the Channel Data you have (Customers and Orders), Where it is Held and How Easy it is to Access: Most organizations do not have a lack of data, they have a lack of visibility and access to that data. Most channels to market have traditionally developed with separate growth profi les and separate management structures and as a result the core data that drives a true multi-channel strategy has been locked in a plethora of back-end systems, making it either too complex, too costly or just plain impossible to build a multi-channel view of the business. It is critical to audit all the data assets of the organization, establishing the ease of access to it, how and when it is refreshed and updated, and establishing its value. Once this is achieved, any gaps should be identifi ed and either statistical sampling methods used to close these or new systems developed to capture this if it is critical to success. Cleanse & De-dupe the Core Data Assets and Federate into a Core-data Store: To drive change and value within the organization, data must be placed into a fl exible, “multi-channel data mart” where it can be accessed and profi led to mine the value.

• extracting data from source operational or archive systems which are the primary source of data for the data warehouse.

1.

2.

3.

4.

5.

6.

• transforming the data - which may involve cleaning, fi ltering, validating and applying business rules. • loading the data into a data warehouse or any other database or application that houses data.

This extraction, translation and loading process (ETL) needs to be automated to the highest degree as manual processes will complicate, slow and corrupt the process. To a major degree, the success of the insight and value the project is dependent upon how well the ETL process works.

Profi le the Data Against Key Attributes to Build Increasingly Sophisticated Segmentations for Use by the Business: Using data discovery and analytics tools which sit on top of the core data store, profi les and segmentations can be built which give huge insight into the channel activity of customers. The analysis below, for example, shows which customers added products to an online basket, which they then abandoned, but then went on to purchase via another channel.

Measure, Analyse, Report, Question, Refi ne: Make sure that the effectiveness of multi-channel integration is measured against the Key Performance Indicators (KPI’s) that drive the business and demonstrate success. Marketing and/or business analysts should analyse the results and search for insight within the data. Sending these KPI’s and reports across the organisation will force questions to be asked around many of the fi ndings, allowing the process to be refi ned and become ever more meaningful and valuable to the business. Many organisations also augment internal analysis with the services of specialist marketing organisations to interpret and understand the data; These organisations can bring huge insight and are impartial, not carrying the history of then organisation, as many employees would do.

4.

7.

8.

10.

Send the Analysis, Segmentations and Profi les to the Relevant Marketing Teams for Campaign Building: The profi led data now becomes “active” and forms the basis of marketing campaigns. Depending on the profi les, this can be utilised for customer acquisition, retention or re-activation campaigns if customers have lapsed and become inactive. Understanding the customer from a unique and common architecture allows the direct and indirect effect of all campaigns to be understood and the likelihood of each customer to respond and purchase can be calculated. Over time, an inventory of all marketing campaigns by channel will be built, allowing the effectiveness and “return on marketing spend” to be calculated for each channel and each campaign, allowing the multi-channel marketing budget to become highly effective and effi cient.

9.

Finally, Never Stop Applying Learnings, Listening to Customers and Pushing Technological Change: The growth trajectory of multi-channel integration means that as fast as one organisation fi nds a unique opportunity, such as click and collect; order online, return to store; or online redemption of offl ine offers’, other organisations will copy it. Success in the future will be based on technological change being used to respond to consumer demand for convenience and translating this into major revenue opportunities for the organisation, particularly turning as many single channel shoppers into multi-channel shoppers as possible. This will be the catalyst for success in the multi-channel future.

Jan-07

30,000

29,646

16,645 13,00125,00020,00015,00010,0001,000

Visitors in BasketArea

Total Visitors that Bought (all channels)

Visitors that didnot buy

Web Order

Telephone

Mail Order

Outbound Call

Total Non-web channels

Jan-07

11,24212,000

10,000

8,000

6,000

4,000

2,000

3,143

2,080

180

5,403

Online Visitors to the basket area of the site

Sales by channel of customer who added to the online basket

+44 (0) 1235 838 581+44 (0) 1235 838 501

sales@site-intelligence.co.ukwww.site-intelligence.co.uk

tfew

Site Intelligence LtdHarwell Innovation Centre

173 Curie AvenueHarwell Science and Innovation Campus

Didcot, Oxon, OX11 0QG