Winning over the digitally empowered consumer

Long gone are the days when shopping involved sifting through merchandise at a store. Today's consumer has unlimited access to information and can instantly share it with the world. Enabled by technology, shoppers know how to get exactly what they want, when they want it.

Consider the speed at which social media has been adopted by consumers and businesses alike: there are more than 900 million active users on Facebook; every day, there are 340 million Tweets sent; Pinterest is now cited to be the third most popular social network in the U.S.

Additionally, the proliferation of mobile devices and their increasing use as a primary form of connecting to business networks is positioning the smart phone as the next generation of IT. There are more than five billion mobile devices in the world, compared to only 2 billion computers. Mobile transactions are expected to grow 40 times by 2015.

Based on IBM's recent Consumer Study 2012, with more extensive information from more sources than ever before, consumers expect to engage with merchants when and how they want, online and on the go. About 64 per cent of consumers make a purchase because of a digital experience. Consumers shopping on mobile devices shop more frequently and spend more. They can build “communities of we” and share opinions—positive or negative—about their retail experience, whether with an on-line or bricks and mortar store, with thousands or even millions of others, making or breaking a business with the click of a mouse. In short, they are making shopping ‘social’ and they are influencing each other’s shopping decisions.

In this landscape, retailers are feeling extreme pressure to be where their customers are in the digital world. The fact that this hub of activity is increasingly located inside a social media or social networking site creates a challenge for retailers as they struggle with how to better reach and engage with customers.

Further, our research underscores a perception gap between marketers and their customers about why their customers interact with their brand, specifically through social media. Customers cite tangible value— convenience and discounts—as the top two social media activities they seek out from their trusted brands. Just feeling connected to or interacting with a brand is not enough for customers. They are also looking for a more personalized shopping experience.

Not surprisingly, according to a first of its kind, cross-industry study we did of more than 350 Chief Marketing Officers around the world, 82 percent say they plan to increase their use of social media over the next three to five years.

Another recent study that we have conducted amongst 1,709 CEOs around the world (IBM CEO Study 2012) indicates that 57% of the CEOs see the Social Media is one of the top 3 ways of interacting with the consumer – ranking higher than traditional media and advertising, which drops to the last spot in the ranking of most important forums to engage consumers.

The good news, for Canadian retailers, is our data indicates retailers are gaining trust among shoppers here. We also see a growing movement among consumers to use social media to build communities with others who share their interests and tastes, and who consume the same. These strangers then help the consumer make more relevant discoveries and satisfying purchases.

Simply stated, retailers are gaining traction as they begin to gain trust – which is the strongest driver of both advocacy and spend. The key is retailers must monitor consumer dialogue and sentiment on how well they are faring. Retailers who listen and engage in these dialogues will be best-positioned to build trust and loyalty by addressing consumers’ evolving expectations.

Increasingly, retailers are responding and using sophisticated analytics to gain insight and adjust marketing messages to individuals, rather than mass-targeting vague demographic groups. They are reevaluating products and reaching audiences based on direct feedback from consumers who are judging them by what they do and what they say -- from price comparisons via mobile devices, to comments on blogs about a company's sustainability practices or new advertising slogan.

For example, Lee Jeans is using business analytics to improve the online shopping experience for consumers who visit their web site, studying how well certain items sell, what's in stock and what consumers are saying on Facebook and other social media channels. The company can move products around the site based on popularity and availability.

Staples wanted to improve the customer’s online experience, a major customer touch point considering they have the second-largest Internet retail revenue in the world, with $10.2 billion in 2010 sales, which comprises 42 percent of their total revenue. They have adopted technology that enables them to send customized messages according to customers’ unique attributes. These can range from whether or not they are a first-time user of the site, to which zip code they reside in, to past purchasing behavior.

Closer to home, Montreal-based Yellow Pages Group has gained predictive insights by using web analytics to follow the activities of millions of site visitors, tracking every page visit, search and click-through that happens throughout each day. This information helps them improve the user experience with more direct paths to merchant listings, and helps them give merchants the optimal placement on pages to attract the customers most likely to click through, or to attract growing groups of consumers such as mobile app users.

Finally, SHOP.CA, Canada’s just-launched and largest online eCommerce marketplace, recognizes the power of the plugged-in consumer and is using advanced analytics to serve and study the way site visitors use the web, email, phone and social networks to research and buy from its million-item online inventory.

SHOP. CA will piece together information about visitors to their emarketplace – from posts and online and mobile purchases – to help engage them in a unique shopping experience, and build loyalty and a sense of community.

Its incentive strategy, SHOP.CA Rewards^TM, is a unique loyalty program offering cash back for both purchases and activities that generate a purchase, such as sharing a link to a favourite product with a friend, or posting reviews to social media sites such as Facebook and Twitter.

Technology creates a new level of convenience and new triggers for shopping, even when consumers are not expecting to shop, and consumers are open-minded. Products, price and promotions are still the foundation of the relationship between retailer and consumer and quality, variety and value are still important. However, retailers have the opportunity to win over the consumer through relevancy and personalization.

Social media can offer retailers a way to do that, and an accompanying competitive advantage, provided they are attentive to the digital conversations which can provide rich insight into the influences and drivers of individual consumer behaviour, and provided they can position themselves as a trusted source by being present and actively engaged in social media themselves.

Pinar Cardwell is an Associate Partner in the IBM Global Business Services Retail Practice focusing on the strategy and transformation services areas. Pinar provides consulting services to assist her clients in identifying and solving business issues primarily in the areas of operations and supply chain management.

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