Slow & Steady

Mar 01, 2005 10:30 PM  By

There is a breakdown between the theory and the implementation of customer relationship management. The theory seems simple enough: Create a unique shopping experience for each customer based on extensive data analysis. After you collect information from multiple sources to identify buying patterns and preferences, combine product, pricing, seasonality, and channel analytics with traditional recency, frequency, and monetary value metrics to predict what and when specific customers will buy. Then you can ensure that every contact is timely, increasing response rates and profitability.

But the implementation — that’s quite a challenge. Customers are increasingly erratic, jumping from one channel to another. Each medium has its own systems, processes, and databases that may not integrate with those of other channels. It turns out that CRM is missing a key ingredient: multichannel logistics.

Recent surveys and buzz indicate that customers want to shop online, pick up at the store, and return to either location. Unfortunately, the logistics required to implement this process are mind-boggling. First, all systems must be integrated, so that the information is readily available at every location. Next, the processes have to be in place to make it easy for the customer and efficient for the company. Then, the database information must be analyzed to continue the evolution.

How are you supposed to do this? The key to successful multichannel implementation is starting small and doing it well. For instance, ordering online with store pickup sounds wonderful, but long lines and confused clerks can quickly alienate customers.

The same rule that applies to successful mail order marketing applies to implementing multichannel services: Test, test, test! Services, like promotions, should be targeted to individuals. For all the hype, you may find that the ability to pick up in a store product that was ordered online may not be that important to your audience. The information gained during the testing stage will prevent global errors that wreak havoc with customer retention and corporate profitability.

When your objective is to determine the optimal service solutions for specific customers, you need to understand shopping and service preferences. Analytics collected from your multiple channels and systems, along with good old customer research, will help you to identify the service enhancements most likely to improve sales and customer satisfaction. Perhaps most important, don’t offer any new services until you’ve got all the necessary processes in place.

The three phases of integration

Say you want customers to be able to pick up and return their orders in-store even if they ordered via catalog or the Web. In most cases, it’s easier to establish the returns processes than the pickup processes, so begin at the end: Develop a plan for receiving and processing returns at any point. As part of fleshing out and implementing the processes, you’ll need to answer the following questions:

  • How will the return value be calculated if the customer doesn’t have a receipt?
  • If the item is a gift, paid by credit card, will cash be refunded?
  • What happens to the returned product? Does it go on a shelf, or is it returned to the fulfillment center? If it goes on a shelf, what happens if the store doesn’t carry that particular product?

Once you test and implement returns, expand to in-store pickup. There are many variables to this option. J.C. Penney and Sears implemented a modified version years ago: Customers could place orders via mail, by phone, or at a catalog center, and then pick up the goods at a store several days later.

This method is an excellent starting point for companies moving toward seamless channel integration. Orders arrive at the store in self-contained packaging, to be transferred to the customer. Considerations when developing the plan should include:

  • Where will the orders be staged? Retail space is typically high ticket with little allocation for storage. The holiday season could create a staging nightmare if the orders exceed space allocation.
  • How will orders be taken in the store? If pickup service is available, customers will also expect to be able to place orders for merchandise that may not be available in the store.
  • How will sales and costs be allocated? The retail market is extremely competitive, even within companies. If the sales are allocated to the Web division while the costs remain with the store, there will be internal strife.
  • How will the customer orders be delivered to the store?
  • Will shipping and handling charges be reduced or waived?

The third stage is complete integration. Customers will be able via the Web or by phone to check the inventory in their local store, place an order, and pick it up within minutes. As you can imagine, the dynamics and challenges are extensive. Implementation requires inventory accuracy, on-demand management, and retail space for checkout. Customers expect that the product will be available and ready for pickup when they arrive. They do not want to wait while a clerk searches for the items. Full integration considerations should include:

  • How will order information be transmitted to the store? It must be sent immediately so that the items can be held for pickup.
  • How will orders be fulfilled? As soon as the order is confirmed, the information must be sent to the store and the item pulled. If the item is unavailable, then the customer must be notified at once.
  • Where will customers pick up their orders? A special checkout may be required to expedite the process.
  • What happens if there is a challenge with the fulfillment? How will the customer be notified? Will there be compensation for the inconvenience?

Navigation through the multichannel jungle requires extensive planning and testing before services are promoted to customers. Ensure that back-end operations are streamlined and effective, systems are integrated, and processes are fully functional. Failure to do so will cost you sales, customers, and profits.

Overcoming the logistical challenges and integrating all channels improves sales and service. It also enables you to profitably liquidate overstocks. If the systems are fully integrated, then obsolete inventory can be listed online and shipped from the various stores. Channel integration is filled with front- and back-end benefits. It doesn’t require a complete overhaul, only a systematic approach to challenge resolution. Now is the time to start. Happy channeling.


Debra Ellis is founder of Wilson & Ellis Consulting, a management, marketing, and operations consulting firm based in Barnardsville, NC.

Another case for kiosks

Generally speaking, in-store information regarding customers is limited because it is extremely challenging to capture shoppers’ movements and inquiries in a usable format. Installing Web kiosks within each store will improve data collection and sales. Clerks can direct customers to the kiosks when items are unavailable in the store. When managed properly, kiosks will improve service, salvage lost sales, help you to acquire new Web customers, and identify store challenges. The information captured can be used to improve merchandising, inventory management, shelf allocation, and systems integration.
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