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NINE STEPS TO “REALLY” KNOWING YOUR CUSTOMERS

CONSUMER INSIGHTS; RETAILER REFLECTIONS

By Lauren Freedman

President, the e-tailing group

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TABLE OF CONTENTS

Introduction 3

The Consumer Perspective 4

Merchant Reflections: Nine Steps to “Really” Knowing Your Customers 18

Step 1: Define What CRM Means to Your Organization 18

Step 2: Prioritize CRM 19

Step 3: Set a Clear Vision 20

Step 4: Create a Culture That Supports Needs 21

Step 5: Build an Integrated Strategy 22

Step 6: Test and Optimize a Range of Tactics 23

Step 7: Rethink Customer Acquisition 26

Step 8: Effectively Deal with Data 27

Step 9: Embrace Big Data 29

About the Companies 30

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I. INTRODUCTION

Understanding your customer is more complicated than ever, as consumer shopping patterns and device usage

have changed significantly, especially in the past few years. Consumers have become accustomed to personalized

shopping as more retailers take advantage of tools ranging from recommendation engines to remarketing to

triggered shopping cart abandonment emails. As a result, the ability to segment shoppers and deliver relevant and

engaging experiences has never been more important, or more possible. However, in order to do this, retailers

need shopper and customer data. All merchants face the same challenge of connecting with shoppers in order to

create loyalty and stand above the competition. The good news is that our research suggests that consumers will

readily share data with retailers when they feel connected, allowing retailers to create the desired personalized

experience. However, we also found consumers are skeptical about sharing this same data via mobile devices and

social channels. This skepticism should be monitored to understand what relates to consumer adoption of these

channels versus more specific privacy concerns with the channels themselves. This is an important finding as

accessible data is a requirement to understand consumer behavior and then to most effectively communicate to

both customers and prospects alike.

In this white paper, sponsored by MyBuys, we address the challenges of “really” knowing your shopper by

exploring the consumer perspective on personalization and data sharing via an online survey. We then incorporate

the merchant perspective through outreach to 20 merchants representing a cross-section of the retail community

and supplement these findings with highlights from our Annual Merchant Survey. Using a question and answer

format to shed light on the most interesting findings, we take you through nine steps to help you “really”

understand your shopper.

Just as there are countless ways to know your customer, there are many ways to market and meet their needs. A

variety of approaches to a cohesive CRM strategy will be shared and our hope is that you take away ideas and

inspiration to embrace a strong CRM strategy for your business. Through trial and testing you can better connect

with your customers and the contribution is sure to impact the bottom-line.

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II. THE CONSUMER PERSPECTIVE

Methodology

• In April 2012 an online survey was completed by 1,024 consumers; 51% male/49% female • Respondents were qualified as having shopped online four or more times during the past year; typically

spending $250 or more annually • 78% own a smartphone

Shopping Mindset

• Shoppers are active; 1 in 2 spend $750 or more annually • 55% shop online several times a months; 26% shop at least monthly

Demographics

31%

32%

37%

18-34

35-44

45+

What is your age?

4%

8%

14%

25%

17%

28%

4%

Under $25,000

$25,000-$35,000

$35,001-$50,000

$50,001-$75,000

$75,001-$100,000

More than $100,000

Prefer not to respond

Which of the following best represents your combined annual household income before taxes?

5

1%

9%

20%

39%

5%

25%

1%

Some high school or less

High school graduate

Some college, but no degree

College graduate

Some graduate school

Post-graduate degree

Prefer not to respond

What is the highest level of education that you have completed to date?

57%

16%

18%

5%

3%

1%

None

1

2

3

4 or more

Prefer not to respond

How many children age 18 years or younger do you have living at home with you?

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CONSUMER RESEARCH FINDINGS

A. The Top Line

Consumer Comfort

• Consumers are comfortable sharing with retailers with whom they are already connected • 1 in 2 consumers are willing to share information in hopes of getting a better shopping experience • Offers, brands and products bought will be readily shared with retailers • Existing merchandising and personalization, both onsite and via email, has set the stage for extending

these efforts.

Mobile/Social Dynamics • Concern about sharing personal information and shopping preferences via social networks is a factor • Only 1 in 3 consumers are comfortable sharing on mobile devices to receive an enhanced personal

experience • Consumers are becoming familiar with social log-in tools; though content with status quo, they may still

appreciate convenience benefits • Proliferation of devices means greater sensitivity regarding sharing shopper preferences

B. Consumer Comfort and Sharing

When consumers have a connection to a retailer, they are willing to share information. Shoppers are most

comfortable sharing with Amazon and other retailers with whom they are already connected. Given Amazon’s

dominant role in retail, it is not surprising to see that they top the list of companies with whom consumers express

such comfort. Loyalty programs are also a great way for retailers to get to know their customers and for shoppers

to share information that enables the retailer to better tailor merchandising and marketing. Even if the shopper

visits infrequently, retailers still see willingness to share information. Less than half of shoppers feel

very/somewhat comfortable sharing with eBay, Facebook, deal/flash sales sites or retailers with whom they have

never shopped.

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71%

69%

56%

49%

44%

43%

39%

28%

26%

Amazon

Retailers where I’m part of a loyalty program

Retailers I shop once in awhile

eBay

Local deal engines

Facebook

Comparison shopping engines

Retailers where I have never shopped

Flash sale sites

In general, how would you describe your comfort level regarding sharing shopping preferences (favorite brands, categories, products) with each of the following kinds of

companies? (Top-2 Very/Somewhat Comfortable)

1 in 2 consumers are willing to share information in hopes of getting a better shopping experience, particularly as

they understand that a tailored shopping scenario is typically more efficient. As many merchants have delivered on

the personalization promise, helping to deliver on the expectation that when shoppers provide such information

they will in fact receive a superior shopping experience. Should retailers misappropriate the information or fail to

deliver more personalized experiences, consumers may pull back on the scope of information they are willing to

share so a balancing act is advised to maintain shopper satisfaction.

57%

55%

44%

44%

44%

43%

40%

I am somewhat willing to share information with the retailers where I shop as I believe I will get a better shopping experience

I am mostly willing to share information with the retailers where I shop as I believe I will get a better shopping experience

I am nervous about sharing information with retailers where I shop as my privacy might be compromised

I am willing to share information in order to expedite my shopping experience on any given site

I am nervous about sharing information with retailers where I shop as my security might be compromised

I will share personal information with a retailer in return for a more personalized shopping experience

I am cautious about sharing information with some retailers yet have no problems sharing with my peers

Please rate your level of agreement with each of the following statements regarding sharing shopping preferences (favorite brands, categories, products) with retailers you frequent. (Top-2 Completely/Somewhat Agree)

Consumers are happy to share shopping preferences with retailers. Offers of interest, brand preferences and past

purchases are the types information consumers are most willing to share. Beyond that, providing information about

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other retail stores where the consumer has shopped, as well as other personal shopping information, is frowned upon

by just over half of consumers.

63%

61%

60%

46%

46%

Types of offers you prefer

Brands you buy

Products you purchase

Other stores where you shop

Patterns of shopping behavior

Thinking about the following kinds of shopping preferences (favorite brands, categories, products) you might share with a retailer, how would you describe your

willingness to share such information? (Top-2 Completely/Somewhat Agree)

Consumers are reluctant to let merchants share their shopping preferences with other retailers. This further

supports the fact that a trusted relationship with the retailer is central to a shopper’s willingness to share

information. 1 in 2 consumers (55%) will enable such sharing only once in a while or never.

Most of the time13%

Some of the time32%

Once inawhile24%

Never31%

Many retailers offer consumers the ability to share shopping preferences with other retailers and advertisers? How often do you allow merchants

to share that information?

Half of the consumers’ surveyed report receiving tailored merchandising based on past browsing/purchasing

onsite and via email. As a result of this personalization, loyalty programs are seeing growth as observed among the

100 merchants that the e-tailing group tracks each holiday season.

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53%

51%

45%

37%

37%

35%

34%

32%

The retailers where I shop offer promotions and merchandising tailored to my past purchasing and browsing behavior

I receive personalized emails from retailers based on my past browsing or buying behavior

Stores where I am part of a loyalty program typically deliver a more personalized shopping experience to me than those where I don’t participate in their programs

I buy more from retailers who personalize the shopping experience across all of their channels

I value retailers or brands more because they remember my buying and browsing behavior from all the channels where l shop

I purchase more from websites that suggest product based on past browsing or buying behavior

I purchase more from retailers who send me personalized emails based on my past browsing and buying behavior

I find it acceptable when retailers, where I have browsed their websites previewing product, attempt to sell me similar/like product across the web on content-related

sites

Please specify your level of agreement with a series of statements around personalization.(Top 2 Strongly agree/ Somewhat agree)

C. Sharing and Social

A social strategy should be part of any retailer’s marketing arsenal. Among survey respondents, 1 in 3 spends

significant time on Facebook and about half spends a limited amount of time on YouTube. Monitoring these

evolving channels is a must in coming years.

33%

13%

9%

7%

47%

57%

23%

18%

20%

30%

68%

75%

Facebook

YouTube

Twitter

Pinterest

How would you describe the amount of time you spend on social networks?

Significant time

Limited time

Never spend time

Due to the nature of social networks the survey found that almost 6 out of 10 consumers are hesitant about sharing personal information and shopper preferences with social media sites. Consumers do not express the same level of comfort with social networks that they have with retailers where relationships have been established. Social networks clearly have to prove themselves as “trusted partners.” There is little doubt that fears likely exist in exposure of information beyond established relationships.

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57%

38%

5%

Much more/somewhat more concerned

About the same level of concern

Somewhat less/not at all concerned

As opportunities abound to participate in social networks, how would you rate your level of concern in sharing personal information via such

means? (Top-2 Much more/ Somewhat more)

EG RECOMMENDATION: SHARING

Knowing the customer’s interest in connecting with trusted retailers, develop relationship building strategies

and personalize to promote two-way communication.

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D. Social Log-Ins

In order to explore other social avenues, we will address the evolving interest in social media from a log-in and messaging point-of-view.

Site Log-in

Consumers are becoming accustomed to seeing social logins on shopping sites. 60% of survey respondents

reported seeing social log-ins at least some of the time. Yet, sign-in via social log-in is limited with only 1 in 3 (36%)

having done so at least once.

Some of the time43%

Once in a while22%

Never18%

Most of the time17%

How frequently have you seen this type of login onshopping sites you frequent?

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None64%

1-221%

3 or more15%

At how many retailers have you signed in

via a social login over the past 3 months?

It appears that most shoppers are content with current retailer sign-in scenarios rather than pursing social options.

Shoppers have yet to see a significant value in switching to a social media login. In addition shoppers are skeptical

of social media log-ins as trust concerns are top-of-mind when social media comes into play.

48%

32%

29%

21%

15%

10%

I am satisfied with my current account information and don’t feel a need to also sign in via social means such as Facebook

I don't see any value for me in signing in using such a social login

I don't trust retailers will use this information in my best interest

I only want to share this information within the Facebook community

I don't frequent any of the sites that can be used for connecting via this manner

I haven’t seen it on the sites where I shop

What is keeping you from taking advantage of these kinds of social logins?Check all that apply.

The convenience of one password is shown to be the #1 benefit to social log-in. This may be an important

opportunity for social sites to capture consumer attention by convincing them to take advantage of the one

password convenience. We believe there is potential here as convenience can often trump even the strongest

concerns in the consumer’s mind.

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55%

33%

16%

8%

4%

I only have to remember one password.

Using one login allows me to store all of my profile information in one place

All of the information about my friends is now accessible as I’m shopping

Having my community’s information is ideal when gift giving

I spend a significant amount of time on Facebook so I want to have that information

available at all times

What do you perceive as the benefits to using social login?Check all that apply.

Social Integration Shoppers do not appear to be convinced of the value of integrated social media messaging as seen in this Blue Nile example. Only 1 in 3 consumers report being comfortable with sharing information for an upgraded social tie-in experience despite messaging that suggests that shoppers can “Connect with Facebook for a better experience.”

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29%

42%

29%

Extremely/somewhat comfortable

Mixed feelings

Somewhat/extremely uncomfortable

When you see a site such as Blue Nile that suggests the ability to personalize the experience including their messaging, how is your comfort zone and

subsequent interest in sharing information this way? (Top-2 Extremely/Somewhat)

Being able to see what is popular with the shopper’s friends on retail sites is desirable amongst just 1 in 5

shoppers, suggesting why there has been limited deployment among the retail community.

23%

40%

37%

Highly/somewhat desirable

Mixed bag

Somewhat/extremely undesirable

How desirable would it be for you to login to seewhat’s popular with your Facebook friends?

(Top-2 highly/Somewhat)

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Along similar lines, only 1 in 5 consumers find it highly/somewhat desirable to see pictures of their friends on retail

sites when shopping because they may be more focused on their own needs and therefore less socially inclined at

that point-in-time.

43%

35%

22%

Somewhat/extremely undesirable

Mixed bag

Highly/somewhat desirable

How do you feel about seeing pictures of your friends when shopping at Overstock or other retailers in order to facilitate shopping?

(Top-2 Highly/Somewhat Desirable)

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EG RECOMMENDATION: SOCIAL

It is too early to predict the role that social media might ultimately play relative to online shopping, so ongoing

monitoring of trust levels across an array of tactics is an advisable means to gauge consumer sentiment.

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The Mobile Factor

Mobile adoption has been fast and furious among shoppers. Retailers are seeing double-digit traffic coming to

their mobile sites, and strong revenues are confirming the trend. Our survey respondents indicate that 1 in 3 have

made at least one purchase on a mobile phone, with23% having made two or more purchases. They have

embraced mobile with spending and share-of-wallet alike.

None69%

2-5 purchases15%

1 purchase8%

6+ purchases8%

How many purchases have you made using yoursmartphone in the past 6 months?

Despite this growth, the increase in the number of devices means greater sensitivity regarding the sharing of

shopper information. Since shoppers do not know the impact of sharing such preferences via mobile, they appear

to be cautious, at least in these early stages.

52%

43%

5%

Much more/somewhat more concerned

About the same level of concern

Somewhat less/ not at all concerned

Now that you can access the Internet via a multitude of mobile devices has the level of concern or your sensitivity for sharing personal shopper preferences changed?

(Top-2 Much more/Somewhat more)

Mobile shoppers’ concern about geo-targeting is still a mixed bag at this early juncture as shoppers weigh its

conveniences against their personal privacy concerns. In the end, we foresee that shoppers will embrace mobile-

based localization services since coupons and customization by location will both save them time and simplify their

shopping experiences. Rewards and savings are highly desirable among the shopping community, often desirable

enough to trump shopper concerns.

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Mixed bag42%

Extremely undesirable

20%

Somewhat desirable

17%

Somewhat undesirable

14%

Highly desirable

7%

When logging onto your mobile device to browse or buy, what is your reaction when retailers ask if you want to have the site

tailored for your current location?

EG RECOMMENDATION: MOBILE

Considering mobile’s traction, it is important to educate shoppers about the convenience of localizing their

experiences (by customizing and personalizing it) to support strong relationships as these devices emerge and

power retail sales and omni-channel consumption.

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III: MERCHANT REFLECTIONS: 9 STEPS TO “REALLY” KNOWING YOUR SHOPPERS

Now, having heard consumer sentiment surrounding sharing information with retailers and their hesitancy to fully

support such information transfer relative to social and mobile, we will put forth the retail point-of-view relative to

CRM. In order to reveal multiple viewpoints from a cross-section of participating retailers we have utilized a

traditional question and answer format, combined with a series of retailer recommendations that we hope will

impact your CRM vision and more importantly its execution.

STEP 1: DEFINE WHAT CRM MEANS TO YOUR ORGANIZATION

Q. How are retailers defining CRM today?

A. Retailers define CRM in a variety of ways; however, regardless of how you define it, defining CRM should be the

first step. As one retailer relayed, “CRM is so broad we must remember to put it in context when defining what it

means to us.” This typically depends on where your company sits within the retail vertical and more specifically,

your CRM evolution. Tangentially, another retailer referenced loyalty, as she finds they often get bundled

together. Several retailers responded that CRM is about whatever it takes to care for their customers rather than a

focus on technology and tools. In the end it is safe to say that CRM is a strategy for handling and maintaining

customer data and relationships. Beginning with a classic dictionary definition of CRM should set the stage for the

remainder of this white paper:

“CRM (customer relationship management) is an information industry term for methodologies,

software and usually Internet capabilities that help an enterprise manage customer relationships

in an organized way. For example, an enterprise might build a database about its customers that

described relationships in sufficient detail so that management, salespeople, people providing

service, and perhaps the customer directly could access information, match customer needs with

product plans and offerings, remind customers of service requirements, know what other

products a customer had purchased, and so forth.”

Q. Who is driving CRM within the retail environment?

A. Retailers certainly value CRM initiatives, even at the highest levels of their organization. When asked, “Who

within your company is in charge of knowing your customers?” several retailers smartly suggested answers along

the lines of “all of us,” “we are all to a certain extent” or “we’re all marketers.” This mindset bodes well for

cultivating a corporate culture that supports putting customers first. Many noted that their “C” level executives

hold responsibility for their most cherished asset, working hand-in-hand with marketing to ensure superior

execution.

Ultimately, day-to-day responsibility appears to fall primarily on business leaders, where the marketing

department takes the lead along with supporting individuals at the Senior Vice President and Vice President levels.

Executives responsible for database marketing and customer insights reinforced the importance of gathering

customer knowledge to set future marketing direction. These individuals often manage research teams, data

modeling and web analytics organizations and typically are in charge of all customer insights across the

organization. When these roles do not exist or a CRM leader is not present, retailers cited this void as the crux of

why their CRM strategies have not achieved desired results; split roles across channels have also led to poor

performance.

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Often the first line of response for the customer, the customer service team assumes a principal role and as such

may have the purest insight into needs and wants; certainly toward concerns being voiced. One pureplay CEO

reported that he takes time each week to throw on headgear and fields calls, getting immediate feedback on

everything from free shipping to sales. He finds that establishing direct connections with the customer provides

their company a truer pulse without the need to rely on third-parties to solve consumer issues.

Changing social dynamics have also brought specialized individuals into the fold in order to understand the

implications of this new two-way communication channel, though most report being in the early stages relative to

best practices regarding capturing the social voice of the customer.

STEP 2: PRIORITIZE CRM

Prioritizing CRM within one’s organization came up in numerous interviews. Unfortunately for some CRM is simply

not a priority so there is no definitive planning. Speaking like a true direct marketer, one cataloger saw the value,

“Our customer is our greatest asset yet CRM ranks 7-10 on the priority scale and should be higher.” They have

extensive customer data available, feel they can never know too much and appreciate that the online world

provides even more information. The dilemma centers on how to best use this data to improve relationships with

the customer. Accordingly, at this online retailer, a concerted in-house effort has begun to retrain frontline call

center agents and enhance email correspondence to better communicate with customers, investing in those who

talk directly to customer.

Despite 60% of their business being online, another direct marketer noted that they do not have a clear CRM

agenda but this is just part of their plight along with separate data systems and a lack of vision. Some view CRM as

a serious discipline that needs to be managed in-house for ultimate control, while others find outsourcing a better

model given resource constraints and current internal skill sets. This suggests that there are many workable

models as long as the direction is clear and leadership present.

For those retailers where CRM is nonexistent or otherwise lacking, a CRM needs assessment is sometimes in the

works. Many have put out RFPs that include everything from system overhauls to outsourced needs and strategic

requirements. They report beginning to piece together the essential elements to execute a CRM program including

a centralized customer database. While today email platforms can handle automation, partners are being sought

to better define retail CRM strategies. Still struggling with its real definition, the approach will be that of a crawl,

walk, and then run model starting with setting an overarching strategy.

While CRM can be powerful, there are several CRM cynics who believe it will not work for their business models.

For one, where products have a long shelf-life, standard CRM models are not effective to resell the latest version;

instead efforts are being centered on lifestyle product extensions. Believing management of the customer via CRM

will not produce the desired results, a niche home pure play refuses to invest time or effort despite having an

assortment of 100,000 items. Their CMO reasons that their customers responds to products visually and viscerally

and are either in the market or not, so they have made a deliberate choice not to try CRM.

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STEP 3: SET A CLEAR VISION

Once that assessment has been completed, setting a vision for your organization should be an obvious next step.

Every retailer we spoke with expressed unique scenarios relative to going in-house and outsourcing with benefits

and limitations present under each model. Finding it difficult to manage the extensive amount of data being put

forth, some have chosen to outsource CRM technology. Knowing that they are unable to maintain competitive

technology sets and often lack resources to support future demands, several retailers are taking advantage of

technology partners like MyBuys to do the heavy CRM lifting. Despite being replete with data, this route averts

making an investment in a large system that could quickly become obsolete. For those investing in or upgrading

systems and people to meet desired corporate objectives, 3-5 year time frames are not unusual.

In most cases an integration of data across channels or evaluation of one’s current approach can help. Traditional

marketers are struggling to round out their current view of the customer with .com data. Those newer to the web

are adding click-tracking data to attain greater visibility into customer profiles. Of course, whenever people and

processes are involved, complications can ensue, mandating staff reorganizations.

Q. What is the vision for CRM among the retail community?

A. To facilitate putting one’s own business in context, our focus here will be on a cross-section of retailers and their

overarching visions which range from the simple to the sophisticated.

“CRM is less about tools and more about having a holistic methodology for taking care of our customers; we

don't see huge investments and work via an out-of-the-box CRM package. For us it’s basic retailing as our

‘crack’ staff already understands our customers and their behavior. Whether following up an email or simply

picking up the phone to instantly resolve a problem, we do whatever it takes.”

“Our vision is to recognize and serve the needs of our customer whenever and wherever he/she may be; we

attempt to weave that knowledge into our processes with a full view across all channels. It’s not just database

marketing but involves people, processes, technology and most importantly a customer-centric approach.”

“We have a lot of work to do and have issued an RFP for marketing database tools and integration with

existing systems; our goal is to marry offline with digital data from our analytics provider as well as our multi-

brand portal.”

“Our direct database does the heavy analysis but we would like to have a cross-channel, 360° view of what our

customers are doing in all channels to be able to cost-effectively market to them which means adding web

stats and social input to each respective customer record in the database.”

“We’re a 5 on a ten-scale and are aspiring to be a 10. CRM does allow us to embrace fact-based decision-

making so we are able to better understand multi-channel behavior tendencies, like where they live and the

stores shoppers frequent. Knowing the exponential value of a multi-channel customer and our deeper

adoption of .com, we can be forward thinking, leveraging customer analytics and our outsourced customer

database through dashboards that give us deeper views into this very desirable customer base.”

“In 2009 a conscious decision was made to evaluate rewards programs/credit card points because we were

not achieving desired results, plus there was a disconnect among our channels. We chose air miles and have

rolled out the program across the enterprise as with that currency increased visits and greater usage of the

card have resulted. We are fortunate to have all purchase information/demographics but also benefit from 22

years of data on prospective customers to do more targeting based on lifestyle, seeking young families who

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are a natural fit with our brand. This forward-looking vision also allows us to build-out models based on

customer information that can guide business units and suggest best practices. Under such a model we don't

have to do any development; our ability to create a universal customer profile is powerful as a result of this

two-year project. The knowledge gained has some country-centric qualities that can also be applied across our

global organization. In the end we will have one unique identifier across lifecycles and channels, available

around the world.”

“Our vision is to drive one-to-one communications based on purchase and behavior in real or near time and

we’re about 70% there. The challenge is less about CRM and more of a database issue due to our inability to

track household transactions. The business is not just about a single item you may purchase but more

importantly we want to understand overall behavior (remodeling vs. cleaning). Being multi-channel also

suggests a need for a 360° view across all things customers do (visit store, browse website, take in-home

measurements). Software data hygiene processes need to be improved and we’re also focused on reducing

cycle time to get real-time access to data.”

“It is our goal to be able to target segment members through marketing initiatives, regardless of channel or

affinities. The majority of our customers are coop member, so we are replete with data from purchase history

to product and channel preferences to brand affinities, all stored in data warehouses. Like others we struggle

with accessing that information and are working on processes to truly dig through and target efforts. We also

hope to understand if the behavior of new members matches participants as today both segments receive

similar treatment.”

“There is an opportunity to better understand the relationship beyond the transaction with information

available on website behavior, campaign response and anonymous prospect information. The chance to

develop customized offers and campaigns is compelling but this should be done in an integrated fashion.

Conceptually everyone understands, however, first we must fix the fundamentals as we have disparate

systems and numerous examples where two work streams are in place for customers which lacks alignment.”

STEP 4: CREATE A CULTURE THAT SUPPORTS NEEDS

Q. How do you create a CRM culture?

A. It is imperative to create a culture that believes in the customer while simultaneously formalizing a supporting

cast. Several cited lack of CRM leadership with no one in charge of the customer effort, lamenting that some within

their companies believe, “They only need to be pitching product versus being super customer focused.”

Having the underlying financial and manpower resources in place to effect what you want to do is paramount,

especially as some merchants mentioned the need for ROI to be attached to all investments.

Moving beyond standard direct campaigns, one merchant took important steps toward putting in place leadership on an executive team in the form of a CMO to consolidate brand marketing under one umbrella program and to channel their culture accordingly. They also hired a New York based agency to develop a stronger brand message. Knowing that they have three seconds to get out the message about their one-stop shopping value proposition, their end goal is getting customers into the store as their visit to conversion ratio is among the highest in the industry.

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One of the biggest challenges shared by a consumer product goods (and now multi-channel) brand is working

within the organization where today people are not capitalizing on existing data. Culture shifts must involve

evolving their mindset toward more data-driven decision-making. Especially, like several we spoke to, they have

limited or no staff to make sense of the available information, this means engaging everyone from senior

management down to those who believe in and use the data.

STEP 5: BUILD AN INTEGRATED STRATEGY

Q. What challenges are retailers facing that complicate taking full advantage of CRM?

A. Without a strong CRM scenario it can be challenging to deliver a seamless cross-channel experience. According

to the e-tailing group’s 1Q’ 2012 Merchant Survey, on average merchants rank their current cross-channel

experiences at 5.4 (out of a possible 10) for delivery of seamless shopping. Significant opportunity for elevation

exists, as just 10% of merchants have a seamless shopping experience in place. It will be interesting to assess the

improvement in another year as 46% indicate that they will be in a position to offer a seamless shopping

experience by the end of 2013.

15%

22%

27%

19%

3%

14%

10%

20%

26%

22%

6%

16%

Already have seamless shopping experience in place

This year

Next year

Not currently planned

Will always remain separate or siloed

Don’t know

What is your time frame for delivering a seamless shopping experience across sales channels (Internet/website, email, mobile, store, catalog, TV, social)?

2012

2011

A Single Integrated Brand Strategy is a Must

A savvy CRM executive candidly reported that they don’t act as a single brand so, unfortunately, are not delivering

an optimal customer experience. She attributed a lack of integration across channels as the root cause and shared

stories of misfiring promotional emails after gift recipients already received their order or sending out an

appropriate message to a consumer who may have just complained about a delivery problem. The lag time with

systems in a quick turnaround seasonal business exacerbates the problem though customer expectations remain

unchanged despite the circumstances.

Integration between channels that connects all customer data under one CRM engine was an overarching theme

repeated many times throughout interviews. Without a unified database, finding patterns in customer behavior or

segments becomes problematic. Whether it is the call center, the web or the retail channel, disconnects are

commonplace and manual integration is the rule rather than the exception. The challenges presented by

unsophisticated technology or outdated software is also at the core for a handful of retailers. A look at the

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merchants’ agreement with current statements of cross-channel initiatives sheds light on a world where focused

efforts must be set and visions put in place.

25

STEP 6: TEST AND OPTIMIZE A RANGE OF TACTICS

Merchants “strongly to somewhat” agree that consistent branding (74%), inventory (60%), and promotions (60%)

are germane to their cross-channel initiatives.

82%

70%

67%

65%

64%

59%

49%

40%

34%

23%

18%

Branding is consistently deployed across channels

Inventory is shared and similar across channels

IT directives are headed by one individual across the organization

Marketing and advertising programs are led by one team

Promotions are consistently marketed across channels

Management has a strategic cross-channel lens

Merchandising is a singularly focused initiative that sets direction for the entire company

Benchmark and KPIs are in place to measure cross-channel influencers and performance

Cross-channel compensation structures are in place

Offer in-store pickup

Finding product in-store via product locators is in place

Rate your level of agreement with each of the following statementsrelative to your company’s current integration of cross-channel initiatives.

(Top-2 Strongly/Somewhat Agree)

Q. What are you doing in 2012 to know your customers better?

A. There are many initiatives in play by retailers in support of knowing their customers. Here we will begin with the

tried and true, then examine those beyond the basics. We recommend that each company evaluate and learn from

the lessons shared by the many retailers interviewed.

From the anecdotal to more specific tactical feedback, for many it starts with onsite surveys post-purchase. The

general sentiment is that they are helpful and something can always be gleaned to advance the customer

experience. As one merchant emphasized, “Retailers need to draw the curtains back and listen to their

customers.” Others accomplish gathering information via advisory boards and more formal forums including focus

groups. A cataloger has a consumer advisory panel consisting of 200 customers whom they ask to complete 4-5

tasks a year with a range of depth to the efforts including sending out a sample of product to seek creative input.

Those active on Amazon report getting a lot of information on products/services two weeks post-order which

serves as a good gauge of their customer service from how they did on the front-end to more back-end delivery

aspects. Additional online opportunities include the ability to see website comments via question and answer, and

to leverage testimonials by means of this two-way channel.

Tying into a cross-channel mindset, several multi-channel players capture the online voice-of-customers by using

store receipts with survey links often tied to sweepstakes. One store executive described a monumental effort

including massive amounts of information with 33,000 customer files derived from store intercepts. They leverage

these to help with strategizing after hearing what shoppers say about the store and their respective shopping

experiences, following along on the customer’s journey to understand any roadblocks in the process. Believing

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strongly in a rigorous process to connect with the customer, they also complete customer surveys post-visit and

print out store receipts with links to urls for customers to share sentiments.

Embrace Social

There has been a large increase in the amount of data, particularly from social media, accompanied by significant

noise forcing retailers to sift through reams of information to uncover valuable nuggets. While one can always

collect additional data, many do not find it all to be helpful. One company in particular stated, “No one has cracked

the code on how to tap into social media at this point in time.” Others expressed similar sentiments.

Social is just another means of getting to know more about your customers’ experiences and connections with

your brand. For several, that starts with the ability to learn and integrate information from reviews as part of the

overall site experience. There is enthusiasm among retailers when they discover that by using these tools,

customers can cost-effectively become advocates for brands.

One retailer boldly commented, “We'll communicate anyway we can.” A two-way communication channel is

clearly now a reality where inquiries come in via all channels including social. More customer follow-up is a must to

smartly handle service issues rather than accepting a lack of communication with any given customer. CRM

strategies are even being established through thank you cards for past purchasing to improve customer retention.

Facebook is definitely in the forefront of social dynamics as interviewees shared the number fans amassed with

some seeing an evolution in activity. Retailers also reported deepening Twitter activity and leveraging technologies

like Radiant Six to listen better socially. No discussion of social would be complete without Pinterest where

merchants are certainly testing the water. Lastly, just as surveys are utilized post-purchase, social provides

opportunities for information gathering from surveys on blogs or through Facebook. The real upside comes from

the ability to make adjustments based on information shared by the use of this engaged customer base.

Cross-channel Execution

There are opportunities to “localize” experiences when social relationships stem from one’s neighborhood store

instead of a corporate entity. Furthermore, investing in stores means upgrading POS systems to give store

associates a 360° perspective of the customer. These associates can then take in-store information, including

sophisticated wardrobing data, up a notch by leveraging database-driven consumer profiles where integrated

systems serve as the catalyst. Being able to take advantage of such databases means store associates must be

trained to accurately complete POS data so that a single customer record is as complete as possible. As tablets

proliferate, retailers can merge the strength of the data with the powerful visual of the product experience seen

through these devices.

Q. Beyond knowing your customers what tools are you taking advantage of to get to know prospects?

A. Some claim not to be worried about prospects, but others see high abandonment rates and seek intelligence to

tap into this potential audience, gleaned through login prospects. While customers are critical of performance,

retailers only convert a small percentage, so we thought it would be germane to explore techniques being used to

bolster those efforts.

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55%

45%

40%

39%

36%

36%

35%

25%

22%

Triggered shopping cart abandonment emails

Retargeting

Personalized product recommendations on the product page

Personalized product recommendations via email

Personalized product recommendations in the shopping cart

Recently viewed product

Longer-term customer lifecycle email personalization

Home page personalized based on past browse and buy behavior

Longer-term customer lifecycle onsite personalization

Given the array of personalization tactics available to you, how would you describe the success of each tactic from an ROI perspective?

(Top-2 Very/Somewhat Successful)

Smart sellers are doing as much as they can, from triggered cart abandonment emails to remarketing, to propel

conversion. To make these efforts pay off, retailers are testing everything from visualizing assortments to free

shipping deployment time to incentives such as percent off or sweepstakes, with the only downside not being able

to send to a larger audience pool. Positively, conveying quality buyer assurance through customer service

messaging helps to communicate conversion-centric messages.

The hope for loyalty-driven retailers is to understand the mind of the nonmember and their potential value. As

new prospects continually come into the fold, learning the cost and dynamics that help to grow their businesses

should yield results.

One toy retailer leveraged email by targeting messaging in key areas where they have not hit their penetration

goals. Aggressive email campaigns fueled through registration programs were cited as well where one multi-

channel merchant was happy to share $5 off the next purchase with prospects. Testing was conducted onsite and

by direct mail, believing that it should result in a transaction downstream. Faced with eroding margins, merchants

are more interested in making investments to acquire customers this way.

Based on our interviews, merchants go to a great deal of trouble to understand potential customers. A department

store led a sophisticated research effort on new customers in an effort to understand lapsed customers and how

to get them back. They tried every imaginable approach and found that creative solutions garnered via

sweepstakes and a special event delivered more engaged prospects than any other means.

Beyond the Basics

Merchants shared so many ways to tap into the customer and intellectually they know what works, but CRM helps

solidify choices. Beyond the basics we must touch upon honing in on the right assortment. Content too has been

an area of focus. One cataloger, trusting that inspiration derived from amazing photos and recipes along with

building out a community for their customers, delivers results so they will invest accordingly.

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STEP 7: RETHINK CUSTOMER ACQUISTION

Acquiring new customers is the lifeblood of growth. Particularly for niche retailers, finding customers that match a

specific profile can be difficult. One home office merchant has a high ticket business and, when they reach the

right customers, can be rewarded with a 20% response rate. They recently hired a consultant and are in the

process of building models to more effectively prospect as Google paid search is no longer delivering effectively.

Specific categories present unique challenges. For example, products purchased with limited frequency make

assortment building the order of the day which complicates the use of data. One single category seller, who just

does not believe the CRM payoff will be there, has been careful not to go down that path. He is aware that

collecting and analyzing data does not come inexpensively and would require commitment of money, internal

resources and time.

Sometimes challenges can be self-inflicted. One frustrated merchant explained that, although very familiar with

individual customer needs, to date they had been unable to effectively segment shoppers into groups.

Factoring in Personalization

Personalization has been an industry topic over the past 10 years but segmentation dominates the merchant

mindset as most seek to carve out unique segments that fit a common profile and talk to them in an appropriate

manner.

63%

61%

61%

46%

32%

27%

23%

Our view of personalization is centered on segmentation of shopping groups or types rather than a true one-to-one vision

We are very deliberate in our personalization strategies, ensuring that we don’t degrade our brand in any way

We will test a range of strategies to understand which perform well and fit best with our brand vision

We are very deliberate in our personalization strategies, ensuring that we don’t offend our customers in any way

We are pursuing a one-to-one personalization strategy

We will pursue personalization but will request our customers’ permission before employing strategies

We allow consumers to self-profile their behavior type which we then target accordingly

Thinking about the potential and pitfalls of personalization, please indicateyour level of agreement with each of the following statements.

(Top-2 Completely/Somewhat Agree)

CRM is the ideal tool for personalization to drive direct and traditional marketing campaigns. Several retailers

spoke of advancements in being able to better personalize email campaigns by customer segment and lifestyle;

serving up new arrivals versus a mass blast. Though list sizes may pale in comparison, they are better able to make

the messaging relevant to the customer.

One company, on the hunt for both B2B and B2C opportunities, is looking for new assortments to fill the pipeline

via unique niches. This pureplay is tracking quotations at a much more granular level where the ability to tie back

to customers that requested quotes and then overlay that with requested inquiries should produce prospects to

pursue.

Another multi-channel merchant will try and identify the duns number and occupation along with the firm size and

potential project budget by looking at a broad sweep of information from warranty, household, and tender

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matching data. Several catalogers discussed usage of coop databases modeled to find prospects that will convert.

They have tested these onsite, as well as to drive prospects to the site via retargeting. To date, they have seen the

greatest success on the site. Email is also working well for a home/gift cataloger. They use it to serve as a reminder

regarding a forthcoming catalog with subsequent offers in one and three weeks for a follow-up push.

STEP 8: EFFECTIVELY DEAL WITH DATA

Data is instrumental in development and management of CRM strategies and unfortunately merchants are not

always in the best position to respond and reap the rewards.

44%

41%

36%

31%

30%

29%

29%

27%

24%

Existing data allows us to effectively segment our customers

We currently utilize our customer data on a fairly frequent basis to impact marketing initiatives (daily/weekly)

Our customer information is robust

Our data allows us to tie real-time customer information into future marketing initiatives

Our data is very accessible for both associates and senior management

Current data is delivered in a digestible format

We have processes in place to use data smartly to personalize the shopping experience onsite and via email

Our current internal resources are sufficient to effectively interpret and act on existing data

We currently receive a 360-degree view of the customer

When thinking about your ability to access the right data to successfully market to customersand prospects, please indicate your level of agreement on the following aspects.

(Top-2 Strongly/Somewhat Agree)

Data challenges are pervasive. While many companies have a plethora of data, it frequently is not in the best

condition to utilize effectively. Retailers do not trust data that is out of sync, making reworking essential. As

customer files age, cleaning data and developing outreach programs to reactivate customers is beneficial. Data

hygiene is an issue faced by every retailer and keeping data clean can be overwhelming. For some, that means

appends where the list of tactics and means being employed is as varied as the merchants. That can include adding

demographics or psychographics such as gender and household income. Lifestyle profiling and understanding

where and how to bring social into the mix is a timely factor. Tightening up data and migration from an ESP into

one’s existing CRM system, all the while maintaining the source of data, was also on the mind of one retailer to

ensure a successful integration.

While a manufacturer has their database set up with reports coming from a series of sources, their challenge is

that it exists at only a point-in-time so they are not continuously feeding in new information. Therefore, they do

not benefit from this data as its static nature means limited exporting and marketing opportunities. On the upside,

they think they are on the cusp of taking advantage of this information with an upcoming append to fill-in

customer gaps as their data sources seem unlimited and a more workable approach is on the horizon.

One retailer expressed a need to “lasso the data and use it in a way that’s meaningful.” This can include everything

from personalizing one’s dashboards to harnessing the manpower to creatively interpret the data in pursuit of

better results. Focusing on data that is actionable came to light. A selection of attributes that matter to one’s

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business is advised as paying to process useless data is not prudent. While more data may mean more analytical

opportunities, collecting data for the sake of having more would not be wise. This further exacerbates resource

issues and has pushed some to seek out agencies to do the deep-dive analysis. For a multi-channel merchant that

can get access to astronomical amounts of data with many levels of granularity, rather than a matter of resources,

it is a focus on prioritization and a desire to capture issues at the store level and how best to integrate across

channels. In their words, “We always have an appetite beyond what we can support and where it can be

productive we will find the people.”

Inability to mine data effectively to determine marketing niches and proactively target market was duly noted too.

Most retailers we spoke with would agree that they should get better at using their data and make smarter

decisions about what data warrants their attention. Once that information is synthesized, sharing it internally to

frame marketing decisions is advised. One department store retailer acknowledged that they have a steward of

CRM but making data actionable and integrating it for holistic technology and processes is time consuming.

Systems can pose problems in accessing data where technology roadblocks exist, making it difficult to integrate

data across all channels in a unified way.

Timeliness of data is always a factor, particularly for retailers that operate in very seasonal businesses. Nirvana for

one large multi-channel home retailer would be the ability to do real-time analysis by taking advantage of mobile

localization to best anticipate customer wants and needs. They would know purchases across the enterprise

(online and in-store) along with shoppers’ navigation paths. Upon checkout they would be able to quickly

remarket, suggesting the next likely thing the customer would buy. Taking advantage of project checklists, short-

term needs could be accommodated via online pickup in-store.

In order to gain a cross-channel picture some retailers admit that they must upgrade their analysis and improve

their understanding and internal acceptance of their audience. Discussion of attribution was on the minds of

several companies as they sought to be smarter about pulling that information together and ultimately trusting the

findings. Such multi-channel attribution continues to interest everyone but especially catalogers who wish to find

the right balance of catalog/web marketing to maintain and grow current business levels via the most cost-

effective means.

Q. Is having a single customer profile prominent among retailers?

A. Almost half the merchants we spoke with have chosen to have a single profile, with name and email the

apparent default. Merchants debate the value of having a single profile, mindful that eventually they will need to

segment by groups. The information housed in that profile received the greatest discussion as retailers seek to gain

a better handle on buyer type (B2B/B2C), product level buys, as well as pre and post-purchase data. One sporting

goods retailer has specifically chosen to have multiple profiles (age, children, stage of life and length of

membership); they focus on all four, generally targeting active newcomers who are 23% of the pool. Another

lamented that they do not have a ready-view to different parts of their organization despite some pockets of good

data. They currently divide customers into eight segments by age, channel affinity and multi-channel loyalty,

adjusting their marketing and their messaging accordingly.

One’s state and approach often depends on how a retailer begins this process, current business tools in use, and

their vision for the future. Some retailers reported that a historical precedence has been set with the information

in one channel stronger than all others. A clear view of the data may even reside at external partners, which limits

internal control. Retailers are often more sophisticated about email where profiles are strong while the

ecommerce portion of their business may be lacking. Householding challenges are holding some back while others

regret that CRM records cannot be leveraged by the retail channel.

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With the increase in demand for data, many are looking to evolve methodologies that today are far from ideal.

Resources are a concern for every business, no matter the size and a desire to be more intelligent in regards to

data. Some will tackle this internally but a number will likely rely on third-parties. It appears to be a balancing act,

assessing one’s resources but at the same time understanding how outside partners could mesh with existing

systems.

STEP 9: EMBRACE BIG DATA

Q. Is the concept of Big Data (tools, processes and procedures allowing an organization to create, manipulate

and manage very large data sets and storage facilities) on your radar screen?

A. Almost half of the merchants we interviewed were familiar with big data. Their perspective on data in general is

that it is powerful, but overwhelming to process large amounts of information. No one disputed that more

attention is being paid to this very topical issue. Some are addressing it internally while others acknowledge that

their partners are embracing it as part of solution trending. The proliferation of data is already a challenge and the

amount of data to be collected problematic, however, social has now added new dynamics, further complicating

matters.

For some, more sophisticated collection is the starting point and they have begun with structured data such as

what you pay. Unstructured data (products/brands you prefer, social commentary, surveys) also merit attention as

collection is core to big data where iteration lies in capturing this information. One retailer specifically commented

that despite being part of a direct organization, they should be using more data and would welcome a

Salesforce.com of business intelligence interface as an invaluable asset.

Another global retailer mentioned development of models that all stores use which would enable a higher level of

performance. Citing a need to be more balanced in their efforts, one merchant went from having virtually no data

three months ago to accessing a substantial amount by relying on Google Analytics. As retailers continue to build

customer databases, data becomes overwhelming and a service to massage that data and provide insights could

be beneficial. This might include click-tracking onsite that will allow retailers to know more; others will rely on

vendors to assist in those efforts.

STRIVE FOR A SOPHISTICATED MARKETING STRATEGY

Reflecting on these findings, all retailers need to be forward thinking and strive for a more sophisticated strategy.

Taking advantage of industry tools to build more sophisticated data bases and collecting the right information for

one’s business is just the beginning.

Being able to massage that data and interpret it in the context of one’s current business will allow retailers to be

more intelligent about the way they market, capitalizing on data as the cornerstone of those efforts. Both online

and store channels can be the beneficiaries of better understanding their customers. Segmentation and

sophistication will become part of their vision and a move toward more personalized experiences, driven via data,

will be the culminating result.

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ABOUT THE COMPANIES

About the e-tailing group

the e-tailing group is a niche e-commerce consultancy that helps merchants deliver the right customer experience

on their websites and across all of their channels while adeptly assisting technology companies to create and

execute go-to-market strategies that simultaneously educate the retail community and deliver cost-effective

thought leadership and lead generation. For more background about our research or for additional information on

the e-tailing group, inc. please contact Lauren Freedman via email at LF@e-tailing.com, by phone to 773-975-7280

or visit the e-tailing group website www.e-tailing.com.

About MyBuys

MyBuys is the leader in cross-channel personalization for retailers and consumer brands. They attract, engage,

convert and re-engage consumers by capturing insights from each individual’s actions; they then apply patent-

pending personalization algorithms to predict the products each consumer would most likely purchase. MyBuys

presents these products to consumers in a coordinated manner across every point of interaction: on web sites,

through email, via display ads, on mobile devices, within social sites and through direct mail. Underlying the

MyBuys personalization engine is a big data repository representing over 200M consumer profiles and 100

terabytes of data, which the company uses to deliver real-time product recommendations. More than 400 retailers

and consumer brands partner with MyBuys to increase their sales, and the company was named one of the fastest

growing private companies (#114) in the U.S. by Inc. Magazine for 2011. Visit www.mybuys.com for more

information.