Retailers Use Tech To Change Customer Relationships

Ralf Kern

Digital technologies are changing the way retailers and customers think about products. Even something as simple as a pair of sneakers can be reimagined today using complex interconnected technologies and analytics.

Welcome to the “outcome economy”

Much of this transformation is due to different expectations by customers. Today they want a more meaningful relationship with retailers. Instead of focusing solely on the look and feel of a product, they will judge success based on outcomes. How they use, consume, or participate in a product or service increasingly shapes their loyalty and repeat business.

Retailers are leveraging technology to respond to this “outcome economy.” With advances in smart, connected technology, retailers can deliver on these emergent customer expectations.

Defining the Internet of Things

The key driver is the Internet of Things (IoT).

The IoT refers to devices connected to each other using sensors, software and wireless technology. These smart devices collect, store, and send data on performance and maintenance. They connect to large databases, often based in the cloud.

In analyzing these large data sets, sophisticated tools let retailers better understand customer usage and change product design and marketing as a result.

New technologies and different customer expectations are changing the face of retail. Let’s take a look at a footwear example to show how these interrelated trends converge.

Connected footwear on the run

Busy business executives often need to squeeze exercise in where and when they can. Long hours and travel demands often limit spare time before and after work and while on the road. Running is a good option for many of them.

This limited time leads to several footwear questions. How do they shop for new accessories or other clothing needed for a run? When it comes time to buy a new pair of running shoes, how will they know? How does shopping work into compressed free time and hectic schedules?

Sneakers for tomorrow

Imagine an integrated set of technologies that answer all those questions.

The next generation of shoes is loaded with technology. These shoes have sensors that detect and measure shoe pressure based on the user’s gait, weight, and speed. When shoe tread fails to provide the right support or grip to provide a healthy workout, the shoes will “know.”

When the shoes are wearing out, our running executive gets a notification, perhaps with access to a report on the miles run, average speed, distance, and tread wear. She’s offered a promotional deal at the time for a new purchase.

Cross-selling emails, app notifications, or tweets are generated to offer her the right gear from running jackets and shorts to headbands and socks. Based on geolocation data stored on the sensors, more gear is offered, whether it’s running gloves if she’s in a colder climate or raingear if in a wet area.

All this add-on revenue potential is possible with predictive analysis and nimble marketing associated with the wearable technology, user-provided demographics, and past purchases.

For the consumer, loyalty is rewarded. The relationship she has with the retailer is not just the sneakers, but the value gained by the data she has allowed to be collected and shared. This company knows her.

Integrating the pillars

There are five pillars in digital technology today: mobile, social, cloud, video, and Big Data. As stand-alone, siloed processes, they deliver value, but far less than their full potential.

The next generation of retail will see business processes that work horizontally through all five areas. This is largely because consumers are already there. They cross-navigate a relationship across media channels.

The consumer experience won’t stop with the channels. To respond, retailers need to align other processes like supply chain management and customer service with the consumer experience. Doing so will deliver promised products and services. Not doing so risks that a competitor is.

Running in the right direction

Let’s return to our running executive to see how it can work in practice. The runner is in a cab when she gets an email suggesting a new accessory to go with her suggested new shoes. The marketing language calls out her past purchases and the data she’s recently received on performance. There’s a discount or other deal embedded in a call to action link.

Stuck at the next traffic light, she accepts the deal and buys the shoes and suggested accessory. Stored address and payment information speed up the transaction and before the light turns green she’s checked out and gotten a confirmation email with expected delivery information and tracking information.

On the back end, processes are set in motion. The shoes and accessory are immediately sourced. Order management software directs a warehouse picker and alert the shipping department. Labels and receipts are printed. Inventories for products and packing supplies are automatically adjusted.

Perhaps as importantly, the customer’s loyalty points are adjusted and an email is generated. It will be sent at a prescribed time several hours after the customer opens the order shipment confirmation email.

A separate email is generated to be sent when the package is delivered. It includes information about the order and loyalty points gained. It includes a link to the closest local store and offers to have future orders sent there, if the customer chooses.

What’s next?

It’s not just a sneaker. In the future, this busy executive can expect to hear about more new trends in footwear. Laces that self-tighten, 3D-printed products, fire-starting boots and shoes that can receive Twitter messages are in varying stages of development.

This digital technological boom is part of what some are calling the “4th Industrial Revolution.” Savvy companies are finding that their business models, processes, and customer relationships are changing. This new paradigm requires new thinking about the way products are made for and used by consumers. Retailers that embrace digital transformation, smart technology, and new customer relationships will be off and running.

Learn more about digital transformation in retail.

Ralf Kern

About Ralf Kern

Ralf Kern is the Global Vice President, Business Unit Retail, at SAP, responsible for the future direction of SAP’s solution and global Go-to-Market strategy for Omnicommerce Retail, leading them into today’s digital reality.