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  1. 1. 2009 Kamaladevi B. 37 CUSTOMER EXPERIENCE MANAGEMENT IN RETAILING Kamaladevi B. Abstract Survival of fittest & fastest is the mantra of today’s business game. To compete successfully in this business era, the retailer must focus on the customer’s buying experience. To manage a customer’s experience, retailers should understand what “customer experience” actually means. Customer Experience Management is a strategy that focuses the operations and processes of a business around the needs of the individual customer. It represents a strategy that results in a win–win value exchange between the retailer and its customers. The goal of customer experience management is to move customers from satisfied to loyal and then from loyal to advocate. This paper focuses on the role of macro factors in the retail environment and how they can shape customer experiences and behaviors. Several ways (e.g., Brand, Price, Promotion, Supply Chain Management, Location, Advertising, Packaging & labeling, Service Mix, and Atmosphere) to deliver a superior customer experience are identified which should result in higher customer satisfaction, more frequent shopping visits, larger wallet shares, and higher profits. Kamaladevi B. - Customer Experience Management in Retailing
  2. 2. 38 Business Intelligence Journal January Introduction and customers. This information is feed back to the company in a self-calibrating system Just when companies are becoming that (in theory) makes optimal use of every comfortable with the idea of Customer opportunity to influence customer behavior. Relationship Management (CRM), a new Obviously these are overlapping term has emerged: Customer Experience approaches, and both have merit if designed Management (CEM). The two are similar and applied intelligently. Up until now in many ways, not least in that they are the spotlight has predominantly been on both difficult to define. Neither can be CRM, in part because it is technologically identified with a unique product or a specific impressive (as well as astonishingly technology; rather, they both comprise a expensive). Unfortunately, CRM has not group of applications, technologies and been nearly as effective as promised; analytics that orbit around a central premise. according to some estimates, from 50% to The premises of CRM and CEM are quite 70% of CRM initiatives fail to achieve their different, however, and are best understood goals. when compared side by side. As CRM is more widely used, its The idea at the center of CRM can weaknesses become more apparent. be stated in the following way: Every Analysts have become fond of noting that time a company and a customer interact, there is no R in CRM (some go so far as the company learns something about to say there is no C, either). The idea of the customer. By capturing, sharing, a “relationship” with customers seems analyzing and acting upon this information, hollow: CRM is very good at receiving, but companies can better manage individual not very good at giving. It asks customers customer profitability. Customer Experience to provide access and information without Management’s premise is almost the mirror telling them what they will get in return. It image. It says that every time a company pigeonholes customers based on past actions and a customer interact, the customer learns without informing them how to build a more something about the company. Depending advantageous profile. It prompts customers upon what is learned from each experience, to become more valuable to the company customers may alter their behavior in ways without promising greater value from the that affect their individual profitability. Thus, company. by managing these experiences, companies Furthermore, while CRM is fairly can orchestrate more profitable relationships effective at measuring its own successes, it with their customers. does not provide much information about In a sense, this is a classic nature vs. its failures. It can record when customers nurture argument. CRM uses profiling, respond positively to its automated micro-segmentation and predictive analyses prompting and prodding, but it doesn’t to identify each customer’s figurative genetic give much insight when customers do not structure. CRM thus uncovers the preferences respond in the predicted way. CRM is thus and propensities of customers so that they unable to determine whether failures are can be nudged towards optimal profitability. the result of faulty assumptions, incorrect Customer Experience Management, on the information or poor execution. It is also other hand, looks at the environment. It unable to tell how these “failed” interactions gathers and analyzes information about the affect the customer relationship; it treats all dynamics of interactions between companies failures as neutral, when in fact the fabric Business Intelligence Journal - January, 2010 Vol.3 No.1
  3. 3. 2009 Kamaladevi B. 39 of the relationship may have been weakened moving to a new, state-of-the- art warehouse or undermined by a poorly executed service facility in Delhi. encounter. CEM’s strengths lie in precisely the areas * Pizza hut where CRM is weak. By focusing on the experiences of customers and how those It recognises frequent callers and the experiences affect behavior, CEM examines context of their call enabling the customer both the quality of the company’s execution to be routed to the agent who can best fulfill and the efficiency of the result. It aligns their requirements, whether its a new order, customer needs with the company’s ability changes to an existing order or a status to fulfill those needs, leading to business inquiry on an existing order. relationships that are mutually beneficial and Pizza Hut operators can access up-to-date that both parties — company and customer information on its outlets in the catchment — are motivated to improve. area, enabling them to select the Pizza Hut store that can fulfill the customer order Examples of CEM quickest, thereby meeting its commitment to deliver hot pizza quickly. * “Best New Airline of the Year Award 2005” – Kingfisher airlines Conceptual Background Given by Centre for Asia Pacific Aviation Overview of literature on aspects of for its significant innovation and outstanding customer experience customer experience. For the first time in the Indian skies, Theme Study Kingfisher Airlines offers world-class in- Customer Experience Berry, Carbone, and Haeckel (2002); Sousa and flight entertainment with personal video Voss (2006); Gentile, Spiller, screens for every seat. There’s a wide and Noci (2007), Meyer and selection of 5 video channels and 10 audio Schwager (2007); Naylor et al. (2008); channels available on- board. Also on offer are extra-wide seats and spacious legroom, Customer Experience Chartrand, and Fitzsimons Driver Brand (2008); Ofir and Simonson delicious gourmet meals, international-class (2007); Keller and Lehmann cabin crew and a whole host of comforts and (2003); Lee and Rhee delights. Kingfisher Airlines also facilitates (2008); Gauri, Trivedi, and Grewal (2008). doorstep delivery of tickets on guest request. Price Ofir et al. (2008); Kopalle et al. (2009); Bronnenberg * Blue Dart Express Limited, South and Wathieu (1996); Wedel Asia’s largest integrated air express, and Zhang (2004); Dorotic, courier and logistics company Verhoef, and Bijmolt (2008); Gauri, Sudhir and Talukdar (2008); Noble and Phillips Their focus was on providing customers (2004). with quality service and an enhanced customer experience, they continued to upgrade and expand their infrastructure, by adding new facilities in Lucknow, Mumbai, Pune, Ahmedabad, Meerut and Jaipur, and Kamaladevi B. - Customer Experience Management in Retailing
  4. 4. 40 Business Intelligence Journal January Theme Study Major Factors Influencing Consumer Promotion Ailawadi et al. (2009); Van Buying Decision Process Heerde and Neslin (2008); Gijsbrechts, Campo, and Goossens (2003); Chiou-Wei On the consumer front, many people’s and Inman (2008); Lwin, savings have evaporated in the year 2008, Stanaland, and Miyazaki primarily because of the precipitous decline (2008). in stock prices, suffering real estate markets, Supply Chain Garg et al. (2005); Dant Management et al. (2009); Burkle and and increasing unemployment. Consumers Posselt (2009), Xu and Kim thus take greater care in what they buy, (2008), Neslin et al. (2006); where they buy, and how much they will Patricio, Fisk, and Falcao e Cunha (2008); Sousa and pay. Although hardly a sufficient silver Voss (2006); Verhoef, Neslin lining, researchers now have the opportunity and Vroomen (2007). to examine more thoroughly many of Location Durvasula, Sharma, and the issues discussed in the remainder of Andrews (2002); Ghosh and this introduction in a new light. How do Craig (2001); Gauri, Trivedi, and Grewal (2008); Xu and consumers react differently to brand, price, Kim (2008). promotions, supply chain management, Advertising Chaudhuri & Buck (2005); location, advertising, packaging, labeling, Petty & Cacioppo (2003); service mix & atmosphere in an economic Janoschka (2004); Fisher, Gainer, and Bristor (1997); crisis? Can retailers take certain actions to Goff et al. (1997). increase patronage, both before and during Packaging & labeling Koirala (2005); Kotler and a shopping experience? Does consumer Armstrong (2005); Young cherry picking change when consumers (2003); Jugger (1999); Luo face more difficult economic trade-offs? (2005); Wakefield and Baker (1998); White and Dahl Will consumers continue to embrace more (2006). expensive and higher quality private-label Service Mix Oliver (2001); Parasuraman, merchandise? How should retailers alter Zeithaml, and Berry (2004); their assortments? Should they continue Baker et al. (2002); Beatty et to experiment with new categories that al. (1996); Folkes and Patrick (2003); Meuter et al. (2005); previously appeared only in stores with Van Dolen, Dabholkar, and different retail formats? Will price elasticities de Ruyter (2007); Weijters et for substitute and complementary purchases al. (2007). differ during economic downturns? What Atmosphere Baron, Harris and Harris (2001); Kozinets et al (2002); innovative strategies might multi- channel Schmitt (1999); Baker et al. and online retailers use to gain greater shares (2002); Kaltcheva and Weitz of wallet? And how might retailers adjust (2006); Wakefield and Baker their global sourcing strategies and the way (1998). they work with and develop relationships Figure 1. Overview of literature on aspects of with their global vendors? These questions customer experience and many more depend on the major economic issues that confront consumers and the retailers they serve. Business Intelligence Journal - January, 2010 Vol.3 No.1
  5. 5. 2009 Kamaladevi B. 41 addition, Ofir and Simonson (2007) found Recognition Information Evaluation Purchase Purchase Factors Search that customer expectations (when stated prior Macro Need Post to a service encounter) have a significant effect on post purchase evaluations of the Brand x x x x shopping experience and the firm. This Price x x x x suggests that customer brand perceptions (of Promotion x the retailer), when primed prior to shopping Supply Chain experience, might significantly influence the x x x Management customer’s experience. It is also important Location x x x x to consider the reinforcing effects of the Advertising x x x customer’s experience and the brand over Packaging & labeling x x time. Prior research suggests that customer experience has a significant influence on Service Mix x x x x the customer’s overall perception of the Atmosphere x brand. In addition, Keller and Lehmann Figure 2. Macro Factors Influencing Consumer (2003) propose that the customer mindset Buying Decision Process (e.g., awareness, associations, attitude, attachment and activity) is the key driver of The Brand Experience brand performance (e.g., price premiums, price elasticities, market share, expansion The customer comes to a retailing success). environment with perceptions about two types of brands: the retail brand (e.g., Research Discussion Victoria’s Secret, Starbucks, Wal-Mart, Macy’s, Best Buy) and the manufacturer or There is much yet to learn about the service brand that is sold in the retail stores influence of brand perceptions on the (e.g., Verizon, Ralph Lauren, Tide, Dell, customer’s retail experience. There may private label brand). Here, the discussion is be asymmetric effects of brand perceptions about the retail brand customer experience, on customer experience. Consumers whose although the ideas put forth below could be first impression of a brand is negative can investigated in relation to the manufacturer be influenced by providing them with or service brand as well. non-comparative information, whereas consumers with positive first impressions of Background a brand are influenced more by comparative information. This suggests an area that is ripe Customers’ brand perceptions may for future research—namely, understanding influence their customer experience. Recent how a customer’s initial perceptions of a research has begun to investigate new aspects retail brand may influence distinct elements of this relationship. Specifically, Fitzsimons, of the customer’s subsequent experiences Chartrand, and Fitzsimons (2008) found with the brand, and how those experiences that the type of brand and consumers’ in turn may influence brand perceptions in perceptions of the brand can influence their the future. In addition, positive customer behavior. For example, consumers primed brand perceptions may influence customer to think of Apple behave more creatively experiences differently than negative than consumers primed to think of IBM. In customer brand perceptions. As such, future Kamaladevi B. - Customer Experience Management in Retailing
  6. 6. 42 Business Intelligence Journal January research could also investigate the extent to because retailers stock thousands of items, which strong (positive or negative) brand most of which are irrelevant to any given perceptions may have a significant effect on consumer. Furthermore, because different the customer’s experience. In addition to the consumers buy different market baskets, a direct effects of customer brand perceptions category or store that one customer perceives on customer experience, future research as high priced may seem low priced to another. could examine the extent to which customer Research suggests that retailers therefore brand perceptions may act as a moderator in should carry some high-priced merchandise influencing the effects of other determinants to extract rents from loyal customers and of customer experience. For example, some low-priced merchandise to attract new might brand perceptions (either retail or ones, but more work is needed in this area. manufacturer) moderate the effects of social Moreover, the emergence of discount stores environment, self-service technology, or carrying fashion products and luxury brands price on customer experience? can affect pricing in traditional retail chains (Kopalle et al. 2009). The Price Experience Previous pricing research regarding private labels versus national brands A lot rides on how a retailer sets its suggests asymmetric sales effects, such prices. The three other P’s create value for that higher price/higher quality brands the seller; the fourth P of price captures steal sales from lower price/lower quality value. In addition, this is the only P that brands when the higher tier reduces its price earns revenue for the retailer. When (Blattberg and Wisniewski 1989). In various retailers price a product or service too high, examinations of the different features consumers view it as a poor value and will of the private label/national brand and not buy. A price set too low may signal low price/sales interactions, asymmetric effects quality, poor performance, or other negative predominate (Allenby and Rossi 1991; attributes about the product or service. Bronnenberg and Wathieu 1996; Pauwels Although setting the “right” price is clearly and Srinivasan 2004; Sethuraman and an important retailing task, it is often treated Srinivasan 2002; Wedel and Zhang 2004). as an afterthought, partly because it remains These studies again focus on grocery and the least understood and therefore most drugstore formats, in which private-label difficult to manage task. prices generally are significantly lower than those of national brands. Further research Background should investigate the pricing aspects of private labels versus national brands Recent research demonstrates that a using premium private labels (Kumar and consumer’s store price image likely results Steenkamp 2007) and durable and fashion from a numerosity heuristic, such that the goods. greater the number of low priced products at a store, the lower is the price image among Research Discussion knowledgeable consumers (Ofir et al. 2008). Kopalle et al. (2009) concentrate on the A popular pricing strategy adopts interaction between pricing and competitive loss leaders, items priced at or below the effects in retailing, noting the difficulty of retailer’s cost. The preponderance of loss research into category and store level prices, leader activity in retail stores believes the Business Intelligence Journal - January, 2010 Vol.3 No.1
  7. 7. 2009 Kamaladevi B. 43 gaps in our knowledge about its impact minor impact on retailer profits; they also on traffic, sales, and profits. Although conclude that not all promotions have a store traffic increases and sales generally positive revenue impact for retailers though. increase for items used as loss leaders, these Rather, the profit impact is decidedly mixed. loss leaders may not influence the sales of other, non-promoted items, and their Background impact on profitability is questionable. A more definitive under- standing of how loss Literature on integrated marketing leaders affect the sales of non-promoted communications is vast, but research items and profitability would be very useful. pertaining to retailing is very specific. Research on online and multi channel Ailawadi et al. (2009) logically organize pricing takes a prominent place in modern this body of research into manufacturer academic journals, yet limited study promotion decisions, as it relates to retailers, addresses online pricing strategies. Much and retailer promotion, the manufacturer of this limited research focuses on customer primarily is interested in using promotions reactions to different pricing strategies and to enhance the performance of its brands, shipping fees, the role of infomediaries, whereas the retailer is interested in advertising revenues, channel interactions, enhancing their own performance (Van and personalized pricing schedules. Yet Heerde and Neslin 2008). Significant some of the issues described herein and research on trade promotions centers on the examined in brick-and-mortar store settings extent of the monetary savings passed on to would be useful pursuits in the virtual and consumers. Some controversy surrounds the multichannel world. For example, how might impact of pass-through trade promotions; online strategies differ from in-store strate- specifically, does a trade promotion from gies for similar merchandise and services? one manufacturer in a given period influence Should they differ across channels? Do the promotion of another manufacturer’s consumers behave differently online? What brand in the same period (e.g., Moorthy competitive behavior effects exist? 2005)? The accounting records pertaining to trade promotions remain inadequate for The Promotion Experience deriving a definite answer (Parvatiyar et al. 2005). Ailawadi et al. (2009) therefore Consumer promotions also take several suggest further research should exam- ine forms, including price promotions, loss how different types of trade promotions leaders, and in-store displays. Meta get funded, passed through, and perform. A analyses show that the immediate increase plethora of research investigates the impact in sales of a promoted item is substantial. of different types of promotions on sales and However, brand switching as a result of profits, including the composition of flyers consumer promotions is closer to 30–45 (Gijsbrechts, Campo, and Goossens 2003). percent, far less than previous estimates of approximately 80 percent. A consumer Research Discussion promotion, such as a loss leader, on one item should increase sales of other items Although most retail promotions and overall profits, yet empirical research emphasize price, studies often consider in this area is mixed. Consumer “cherry them in isolation. Yet price promotion picking” for special prices has a relatively coordination is a key driver of retailer Kamaladevi B. - Customer Experience Management in Retailing
  8. 8. 44 Business Intelligence Journal January profitability. Retailers and researchers alike Background need more information about the impact of coordinating price promotions within and Ganesan et al. (2009) examine several across categories and across retail formats important supply chain issues, including within a chain, such as Wal-Mart and global sourcing practices, multichannel Neighborhood Markets. The National brands routes to market, and relationship-based should be promoted more than private-label innovation. These authors note that with brands, because the national brands attract private-label merchandise, as opposed to customers’ attention and attract them to the national brands, the burden of ensuring that store. Yet retailers promote private-label merchandise production adopts corporate merchandise, because they generally earn socially responsible (CSR) policies, as well higher margins on private labels. as quality and safety control issues, rest Although the customer knows much with the retailer. And most of this sourcing about the sales bump caused by consumer is done globally today. Academic research promotions, they have a poorer understanding at the nexus of global sourcing and CSR is of the profit impact. Retailers’ increased somewhat sparse (e.g., Wagner, Lutz and emphasis on private-label merchandise Weitz 2008); more research might examine demands more work investigating the the circumstances in which customers will effectiveness of private-label promotions. pay more for merchandise produced in a It also seems important to identify win– socially responsible manner, particularly win promotions for manufacturers and during economic downturns. Ganesan et retailers. Because many purchase decisions al. (2009) also examine several issues for take place in brick and mortar stores and hierarchical multichannel relationships, in as new methods for reaching consumers in which both manufacturers and retailers sell stores emerge, more research should assess through multiple channels to consumers. the effectiveness of in-store promotions to As hierarchical multichannel relationships customers. develop, conflict can occur between the channel members, which must compete The Supply Chain Management with one another. Retailers can respond to Experience this competitive situation by taking direct action, such as refusing to sell products that Most of the researchers centers on what the supplier sells directly (Schoenbachler happens at the front-end of the retail store, and Gordan 2002), or looking for alternative supply chain management occurs at the ways to service customers (Vinhas and back end. For decades, retail supply chain Anderson 2005). A more positive approach and logistics issues seemed somehow less would pursue a channel structure with mutual important than other activities such as benefits, such as profit sharing (Neslin et promotion, pricing, or customer service. al. 2006; Yan 2008). Ganesan et al. (2009) But this erroneous perception no longer there- fore suggest that further research exists. Supply chain issues, from both the should attempt to increase our understanding more managerial partnering side and the of how hierarchical multichannel structures more technical operations side, have proven affect the participants’ relationships, their important sources of competitive advantage relative power, and their performance. for many retailers, particularly low-cost providers such as Wal-Mart and Zara. Business Intelligence Journal - January, 2010 Vol.3 No.1
  9. 9. 2009 Kamaladevi B. 45 Research Discussion has major ramifications for price, promotion, and merchandising decisions. Most recent retailing innovation initiatives seem to come from sustainability Background initiatives designed to improve the environment, healthcare, diversity, and Durvasula, Sharma, and Andrews sourcing. It investigates how relationships (2002) recommend STORELOC, a store between retailers and their suppliers may location model that incorporates managerial facilitate product or process innovations. judgment data in addition to consumer Specifically, when supply chain partners data. Because key managers participate exchange information, the relationship in the process, their buy into the outputs grows stronger, and the likelihood that of the location model increase, namely, valuable and important information gets the identification of the best retail sites for exchanged increases. However, the strength expansion. The key store attributes and of relational ties may play a more important their relationships with relative competitive role for process than for product innovations. strength can be estimated using varied When retailers have supply chain partners methods in this model, including conjoint or with diverse, rather than complementary, logit analysis. Another interesting location capabilities and resources, they are more problem involves understanding how to likely to innovate, because the information expand a franchisor distribution system acquired from these varied sources differs. optimally, because in some cases, that Finally, asymmetrical dependence between which is best for the franchisor may be at the retailer and its supply chain partners odds with the preferences of the individual should negatively affect innovations, franchisees. Ghosh and Craig (2001) because the weaker party guards against develop FRANSYS, a franchise distribution exploitation, while the stronger party tends system location model, to address this kind to exploit opportunities without worrying of problem. Another important issue related about negative partner perceptions. to locating franchises concerns the choice between multi unit franchisees (MUF) The Location Experience versus single unit franchisees (SUF) since the modal franchisee in the US is no longer Retailing academics and practitioners the stereotypic mom and pop single unit seem always to emphasize “location, operator, but a mini chain operator (Garg et location, location” as the key to success. An al. 2005; Kaufmann and Dant 1996). Some important research advance could consider recent evidence suggests that even though the role of travel time on consumers’ choices MUF may be preferred by franchisors of retail formats and the related retailing for reasons of rapid system growth, implications because consumers value their system-wide adaptation to competition, time, researchers should investigate what minimization of horizontal free-riding, and it might take, in terms of price savings and the strategic delegation of price or quantity deals, to attract consumers to a factory outlet choices to franchisees, it is the SUF that store (normally located some distance away) characterize their dyadic relationships with rather than a similar store in a conveniently their franchisors as more rela- tional and located mall. The location decision likely cooperative as compared to their MUF counterparts (Dant et al. 2009). Kamaladevi B. - Customer Experience Management in Retailing
  10. 10. 46 Business Intelligence Journal January Research Discussion the growth process, marketers recognized that the Internet was a medium for reaching The age of these models clearly shows, millions of potential customers. Since however, the need for more research into then, marketers have adapted value based location issues. With the greater availability advertising strategies to the Internet. of excellent geographical information systems (GIS), rich data are easily accessible. Background For example, GIS data supplemented with appropriate panel consumption data could Traditional consumer behavior literature enable empirical tests of a host of location would suggest that intense product models. More recent research highlights the information is vital for high involvement role of two key location factors: proximity product web sites, while entertainment to customers (measured in travel time) and content may be fit for low involvement proximity to other stores or agglomeration. product sites (Chaudhuri & Buck, 2005; For example, grocery stores appear to benefit Petty & Cacioppo, 2003). Additionally, from agglomeration with discount stores, but the primary reason for distinguishing Wal-Mart discount stores suffer reductions between high and low product involvement in revenues when they agglomerate with is that habit, intuition and convenience grocery stores. Prior research recognizes sometimes guide the actions of consumers several different retail formats, according to rather than rational considerations pricing (e.g., everyday low price vs. high/ (Lamb, 1996). There are various types low pro- motions), merchandise (wide of online advertising, including “emails, vs. narrow) and Internet presence (bricks, newsletters, screensavers, e-sponsoring, clicks, or bricks and clicks). Insights from asynchronous and synchronous chat groups, this area of inquiry suggest that bricks still infomercials, online games, and web sites” hold an advantage over clicks and are likely (Janoschka, 2004). Similar to other types of to dominate in certain categories, such as advertisements, web ads are paid or unpaid high end apparel and jewelry. Research form of communication aim at informing also shows that consumers may use the the existence of a product or service and/or different retail formats for different stages persuading consumers to take actions. And of the consumer decision process, such that Janoschka (2004) found one major difference the online store might be a great way to is that web ads are hyperlinks in nature, compare alternatives, but brick-and-mortar which enable activation by their users. They stores seem more suitable for purchases. A not only contain promotional messages on systematic understanding of the role of these themselves which tries to attract consumers’ different formats in the consumer decision attention, but also embedded with hyperlinks process and how retailers can best optimize and then point to a much greater information their multiple channels would be a fruitful pool, such as the corporation’s website. area of inquiry. Research Discussion The Advertising Experience The global online advertising industry Exponential growth in Internet hosts has witnessed the rapid emergence of social and personal computer adoption has led to networking sites and is growing rapidly dramatic increases in online activity. During despite the economic slowdown. The Business Intelligence Journal - January, 2010 Vol.3 No.1
  11. 11. 2009 Kamaladevi B. 47 growth of this industry is being driven by (e.g., molding society’s material wants) and increasing internet users, rising awareness media content (e.g., the information content and growing broadband subscription rate of ads). Advertiser concerns include ad and ecommerce, which is playing a key role agency concerns (e.g., self-regulation or the in this industry. In coming years online Ad ethical codes of ad agencies) and the voice/ spending is expected to overtake the TV tone of the ad (e.g., corporate advocacy or advertising market. comparative ads). Finally, legal concerns The industry is divided into various include the use of deception, advertising to segments but mainly three segments (search, children, and public service announcements display and classifieds) represent the whole (e.g., anti-drug or anti-cigarette ads). industry. Rich media is a new segment recently entered in the online Ad industry, The Packaging & Labeling caters to a small portion of the market Experience whereas search, display and classifieds serves almost 80% of the online Ad industry. Packaging plays a major role when There are various revenue models, out of products are purchased. After all, it is the which pay-per-impression and pay-per click first thing seen before making purchase are the most common among others. choices and it is widely regarded that over In terms of online Ad spending by 50 per cent of purchasing decisions are made geography, UK, Netherlands and the pan- at the shelf, or point of purchase. Therefore, European sector lead the market but in packaging which creates differentiation terms of internet Ad budget allocation and identity in the relatively homogenous France, Germany, Spain and Italy have consumer packaged goods industry is a strong presence. United States is the therefore highly important. most developed market for the advertising industry. In Canada, internet advertising Background accounted for almost one third of total advertising market. As a fifth ‘p’ of marketing, packaging The areas for future research are discussed refers to the activities of designing and here. The thirty-three items suggested by producing the container or wrapper for the fourteen academicians may be grouped a product. It may be primary, secondary, into types of ads, types of appeals, larger and shipping to perform the objectives as effects on society, advertiser concerns, and containment, protection, identification, legal concerns. Types of ads include ads for communication, promotion and product legal vices (e.g., ads for tobacco or alcoholic differentiation. Good packaging also beverages), ads for sex-related products (e.g., provide information based on truth, it must condom ads or ads for abortion services), be economical, attractive, convenient, and ads for health care and professional protective and transparent (Koirala, 2005). services (e.g., ads for personal care and A label is a simple tag attached to a product hygiene products or ads for professional or an elaborated designed graphic that is legal services). Types of appeals include the part of the package. It identifies, grade, the use of questionable appeals (e.g., fear or scribe and promote the product by providing negative appeals) and stereotypical appeals the information to the buyer. It may be brand (e.g., sexual or racial stereotyping). Larger labels, grade labels and descriptive labels effects on society include value formation (Kotler and Armstrong 2005). It is vitally Kamaladevi B. - Customer Experience Management in Retailing
  12. 12. 48 Business Intelligence Journal January important that when researching package incidents. Packaging is integral to boosting design that it is measured in the context perceptions of safety and will therefore be within which it is usually found (Young, an important part of more concerted efforts 2003). “The ‘right’ packaging solution is to regain consumer trust going forward. different for each brand. What is important is that it works when placed next to the The Service Mix Experience competition on the shelf” (Jugger, 1999). Customer service is the ability of an Research Discussion organization to constantly and consistently give the customer what they want and need. Packaging has a better reach than advertising does, and can set a brand apart Background from its competitors. It promotes and reinforces the purchase decision not only at Customer satisfaction is a key consequence the point of purchase, but also every time of service quality and can determine the the product is used. Packaging in different long-term success of a service organization serving sizes can extend a product into (Parasuraman, Zeithaml, and Berry 2004). In new target markets or help to overcome general, customer satisfaction is affected by cost barriers. Packaging can even drive customer expectation or anticipation prior to the brand choice (especially in the context receiving a service and can be approximated of children’s products). As the market by the following equation: Customer becomes more competitive and shelf space Satisfaction = Perception of Performance – is at a premium, products need to be able Expectations (Oliver 2000). When translated to stand out from the crowd and packaging to services, a distinction between service needs to provide more than just functional quality and customer satisfaction needs to benefits and information. Under time be made (Parasuraman, Zeithaml, and Berry pressure and in low involvement purchases, 2004). Furthermore, one must differentiate less time is spent looking at the detail and between service expectations and service information provided on packaging – this perceptions. is especially true in the FMCG category. While service expectations are a Research into packaging has found that combination of a customer’s predictions different packaging cues impact how a about what is likely to happen during a product is perceived. Often the packaging service transaction as well as the wants is perceived to be part of the product and it and desires of that customer, service can be difficult for consumers to separate perceptions can be defined as a customer’s the two (the concept of gestalt). Aspects global judgments or attitudes, which relate such as packaging colour, typography, to the superiority of a service (Oliver 2001; illustrations and graphics can influence how Parasuraman, Zeithaml, and Berry 2004). a product is perceived. Labeling should not be unnecessarily confusing or misleading in Research discussion order to hide the poor nutritional/ingredient profile of certain products. The decrease in A lot of companies are so preoccupied consumer confidence in food safety is not a with day-to-day operations, but if they result of the number of recalls, but instead the don’t have customers for life we’re going high-profile, long-lasting nature of the safety to go out of business. Many service Business Intelligence Journal - January, 2010 Vol.3 No.1
  13. 13. 2009 Kamaladevi B. 49 organizations, such as hotels, retail stores, Schmitt 1999). Sharma and Stafford (2000) and airlines, invest substantially in their suggest that customers have a higher need physical plant to provide a superior service to affiliate with salespeople working in nicer experience. However, little is known about retail environments or ‘prestige ambience how to design a servicescape to enhance the environments’– which should lead to an consumption experience. For example, it increase in the perceived level of credibility may be unsurprising to learn that research for the salesperson, and subsequently a has shown that pleasant music, compared higher likelihood to purchase. However, the with less pleasant music, is associated ‘prestige’ and ‘discount’ ambience stores with longer consumption times, shorter have been hard to define in the literature, time perceptions, less negative emotional with most researchers testing atmospherics reactions to waiting, more favorable attitudes in isolation, and not at a holistic perspective toward the physical environment, more (Turley and Milliman, 2000). positive attitudes toward service providers, and more favorable customer assessments, Research Discussion purchase intentions, and behavior. The future research should examine The Atmosphere Experience retail store environments where customer- salesperson relationships may exist Consumer spending behavior can to increase understanding in this area. be significantly influenced by the store Furthermore, customer service quality atmosphere and the customer mood. measures typically given when examining low Customers require a store layout that sales interaction stores should be compiled maximizes the number of products seen in conjunction with relationship selling and within the context of a customers’ need for other measures that influence the customer the product. Customers who experience experience to understand if relationship a form of personal control, whether in selling is necessary in these retail settings. orienting themselves to the store section Store atmospherics did have a significant they need to go to or in finding the products impact on customer expectations of the they want, generally feel good about the retail salesperson, but in behaviour only. A store. Good feelings lead to more purchases, higher perceived store ambience resulted in especially if products are presented within a higher expectations of a retail salesperson’s display that shows the potential usefulness behaviour, but a higher store atmosphere did of the product for them. not result in higher expectations of a retail salesperson’s credibility. Store atmospherics Background manipulate customer’s expectations of the retail salesperson behaviour, subsequently Store atmospherics have been at the affecting customer satisfaction if the retail centre of numerous discussions recently salesperson does not match expectations. as a means of creating a pleasurable Future research will be directed into consumption experience; engaging and the exploration of characteristics of the luring customers, with hopes that they salesperson and store atmospherics to will increase their likelihood to purchase, determine the optimal blend for certain store revisit and recommend to others (Baron, environments. Harris and Harris 2001; Kozinets et al 2002; Kamaladevi B. - Customer Experience Management in Retailing
  14. 14. 50 Business Intelligence Journal January 10 Best Practices to make the 3. Focusing on the most strategically Successful CEM important customers 1. Successful deployment requires the The starting point for the work is active and continuing involvement of collecting customer data to inform the leadership definition of a promise and design the new experience. The most frequent client Execution is the hardest part of creating response to this suggestion is “We already a customer experience because in order to have lots of customer data and research so deploy successfully they have to mobilize you don’t need to bother.” In reality whilst employees at all levels and align competing organizations undertake customer research agendas, functions and executives. This is and collect mountains of data, relatively not an easy task. Perhaps that is why that few know who their most profitable (not so many of the exemplars of Customer largest) customers are. The fact is that a Experience tend to be organizations led by few customers will typically represent the passionate founders or CEOs that see it as a significant proportion of the profit and these primary source of differentiation. Think of are the ones to focus improvement efforts Starbucks, Amazon, Southwest Airlines or on. Virgin and inevitably you quickly think of Howard Schultz, Jeff Bezos, Herb Kelleher 4. Finding out what these customers and Richard Branson. CEM can work just as truly value successfully and achieve startling results in large mature corporates too, but the need for Knowing who are the most profitable leadership is even greater. customers is all very well, but if they do not know what these customers value and 2. Ensuring cross-functional the three or four most important attributes ownership is vital which drive their intention to repurchase, cannot influence their behaviour. Without If the CEO or President recognizes that the answers to these questions they may it will take more than rhetoric to make a have data, but they do not have insight. difference, the next common mistake is A key component of a branded customer asking the Marketing VP, HR Director or experience is being differentiated in a Customer Service Executive to “fix the way that is valuable to target customers. problem.” The brand and the customer A key component of a branded customer experience must be owned collectively experience is being differentiated in a way by the senior management team. Each that is valuable to target customers. function has its particular part to play, but to be successful these three functions must 5. Being clear about what we stand operate as what we refer to as a “Triad” to for optimise resources, efforts and budgets to create an organization-wide strategy for In 2001, UK-based bank Barclays aired a delivering the brand. television advertisement called “Big Idea.” It was a beautifully crafted ad featuring Anthony Hopkins as a big shot businessman with a big house, a big car and a big meeting Business Intelligence Journal - January, 2010 Vol.3 No.1
  15. 15. 2009 Kamaladevi B. 51 to attend. The tagline was, “A big world training is bad. In fact there are some very needs a big bank.” The ad received a bronze good off-the-shelf programmes that really award at that year’s British Television help to improve customer-facing skills and Advertising Awards, but customers replied make service more consistent. with a less than enthusiastic, “big deal!” A key ingredient of successful branded The ad simply reinforced common customer training is to build executives into the process preconceptions about large banks that they so that they have an active role in cascading don’t care about the average person and are the message. Leaders have been trained as interested only in making as much money as champions of customer experience and are they can. leading its implementation. In the Polish market, 55 percent of executives feel that they have “defined a 8. Designing CEM before installing brand promise that differentiates us in the CRM systems eyes of their target customers” but only 35 percent “have mapped their customer At the peak of CRM hype, expenditure touchline to determine the key points of on CRM systems was estimated to have contact their customers have with us and increased from $20 billion in 2001 to $46 how their promise should be delivered at billion in 2004. Yet one survey by Gartner each.” This omission is quite common in research estimated that 55 percent of CRM their experience and takes us on to our next systems drove customers away and diluted point. Making a promise to the customers is earnings. This is because most CRM one thing, delivering it quite another. systems are installed without any thought about how they will be used to add value 6. Delivering the promise at every for the customer. These powerful systems touch point allow companies to collect knowledge about the customer that can be used to offer This is particularly true in today’s them products and services tuned to their economy. With the pressure on sales and particular needs and preferences. However, costs they have to make sure that every for many customers the acronym CRM effort is made delivering those things that stands for “Constantly Receiving Mail- customers value rather than things that shots” since many organizations (and banks they don’t. This means having an intimate are the worst) use them as a blunt instrument understanding of the customer experience to stalk, rather than woo, the customer and being intentional about designing it to through junk mail. Some software providers deliver value at the key touch-points. are now designing their products to support the customer experience and build CEM 7. Providing branded training to functionality into their call-centre products ensure that employees understand so that the agent is provided with all the the brand story information, tools and measures necessary to deliver the desired experience. Many organizations provide customer service training yet few are differentiated in the service they provide. The reason is that “vanilla” training creates “vanilla” service. This is not to say that all generic service Kamaladevi B. - Customer Experience Management in Retailing
  16. 16. 52 Business Intelligence Journal January 9. Measuring the customer appropriate measurement and rewards then experience it is unlikely to happen. Peter Drucker’s maxim that “what gets Conclusion measured gets managed” is still true today. Yet most organisations focus exclusively Customer Experience Management on end-results measures. Market share, is not, however, simply an old idea in a profitability and EPS growth are all vital new wrapper. In recent years a number of measures of business performance but they fundamental changes have occurred in are all lagging indicators—the result of the business environment that have led to differentiation, customer loyalty and brand the emergence of Customer Experience preference. The answer is to move up-stream Management as both a strategic discipline and measure and manage those activities that and a fast-growing industry, complete with deliver the required customer experience a wide array of tools and solution sets. The and drive customer advocacy. Market share, changes have been fueled by technological profitability and EPS growth are all vital advancements, which have expanded the measures of business performance but they range of services available to customers, and are all lagging indicators. simultaneously led to escalating customer Yet over 51 percent of the executives expectations. The result is that there are the organization surveyed reported that their now more services and products available organization did not have a scorecard to than at any time in the past, yet customer measure the customer experience. The mean satisfaction are on a downward slide. score for the statement “We have a scorecard Customer Experience Management can of indicators that provide leaders with help reverse that slide by providing efficient objective and timely feedback on how well business tools that make the interactions we are delivering against our promise” was between companies and customers more the lowest achieved in the survey scoring at rewarding for both parties. just 4.6 on their ten-point scale. Hope this article provide a broad-based overview of the various domains (e.g., 10. Aligning the organization with Brand, Price, Promotion, Supply Chain the customer experience Management, Location, Advertising, Packaging & labeling, Service Mix One of the lowest scoring items in the and Atmosphere) of the retail customer organization survey was “Leaders measure experience and in turn provide a research and monitor the quality of the customer catalyst for a plethora of important retailing experience.” As many respondents disagreed issues. Keeping customers in the next few with this statement as agreed with it. This years will be even more important than poor result was reinforced by the fact that making a sale. Shoppers are getting used to only 47 percent of respondents agreed those 50–75 percent off sale signs, and that with the statement “Our leaders reward is bad news for merchants who worry they employees who put customers first.” The will also have to quickly slash prices on fact is that unless there is a link between merchandise to attract customers. Retailers the desired business results, the customer will have to engage their customers every experience necessary to achieve it and day to create the long-term loyal advocates necessary to compete in these challenging Business Intelligence Journal - January, 2010 Vol.3 No.1
  17. 17. 2009 Kamaladevi B. 53 times. The most important thing is to be A Risk-Based Explanation,” Journal of able to identify ways to hold on to profitable Retailing, 84 (1), 39–47. customers. 10 Best Practices to make the Successful CEM have shown in this article Fay, Scott (2008), “Selling an Opaque to provide a great customer experience for Product Through an Intermediary: The retail shoppers. Case of Disguising One’s Product,” Journal of Retailing, 84 (1), 59–75. References Gremler, Dwayne D. and Kevin P. Gwinner (2008), “Rapport-Building Behaviors Gauri, Dinesh K., Debabrata Talukdar and Used by Retail Employees,” Journal of Brian Ratchford (2008), “Empirical Retailing, 84 (3), 308–24. Investigation of the Impact of Loss Leader Promotion on Store and Category Grewal, Dhruv, Anne L. Roggeveen and Performance in Grocery Industry,” Michael Tsiros (2008), “The Effect of Working Paper, Syracuse University. Compensation on Repurchase Intentions in Service Recovery,” Journal of Minakshi Trivedi and Dhruv Grewal (2008b), Retailing, 84 (4), 424–3. “Understanding the Determinants of Retail Strategy: An Empirical Analysis,” Koschat, Martin A. (2008), “Store Inventory Journal of Retailing, 84 (3), 256–67. Can Affect Demand: Empirical Evidence from Magazine Retailing,” Journal of Brooks, Charles M., Patrick J. Kaufmann Retailing, 84 (2), 165–80. and Donald R. Lichtenstein (2008), “Trip Chaining Behavior in Multi-Destination Kumar, V., Morris George and Joseph Shopping Trips: A Field Experiment Pancras (2008), “Cross-Buying in and Laboratory Replication,” Journal of Retailing: Drivers and Consequences,” Retailing, 84 (1), 29–38. Journal of Retailing, 84 (1), 15–27. Brown, Stephen (1989), “Retail Location Lee, Chang Hwan and Byong-Duk Rhee Theory: The Legacy of Harold Hotelling,” (2008), “Optimal Guaranteed Profit Journal of Retailing, 65 (4), 450–7. Margins for both Vendors and Retailers in the Fashion Apparel Industry,” Journal Brown, James R. and Rajiv Dant (2008a), of Retailing, 84 (3), 325–33. “On What Makes a Significant Contribution to the Retailing Literature,” Ofir, Chezy, Pryia Raghubir, Gili Brosh, Kent Journal of Retailing, 84 (2), 131–6. B. Monroe and Amir Heiman (2008), “Memory Based Store Price Judgments: Brown, James R. and Rajiv P. Dant (2008b), The Role of Knowledge and Shopping “Scientific Method and Retailing Experience,” Journal of Retailing, 84 (4), Research: A Retrospective,” Journal of 414–23. Retailing, 84 (1), 1–13. Bürkle, Thomas and Thorsten Posselt (2008), “Franchising as a Plural System: Kamaladevi B. - Customer Experience Management in Retailing
  18. 18. 54 Business Intelligence Journal January Wu (2008), “Global Media, Local Metaphor: Xu, Yunjie (Calvin) and Hee-Woong Television Shopping and Marketing- Kim (2008), “Order Effect and Vendor as-Relationship in America, Japan, and Inspection in Online Comparison Taiwan,” Journal of Retailing, 84 (1), Shopping,” Journal of Retailing, 84 (4), 119–2. 477–86. Business Intelligence Journal - January, 2010 Vol.3 No.1