Leveraging Social Media to Optimize Sourcing-to-Shelf Processes

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Leveraging Social Media to Optimize Sourcing-to-Shelf Processes

  1. 1. • Cognizant 20-20 InsightsLeveraging Social Media to OptimizeSourcing-to-Shelf ProcessesAs Facebook, Twitter and other social tools go mainstream, retailers musttap these rich pools of consumer-generated data to make more strategicbuying, stocking and selling decisions. Executive Summary Thus, we believe retailers should take this existing dialog one step further and actively involve them Based on a survey of more than 2,000 shoppers, 1 in the product design and development process. we identified 10 megatrends transforming the retail industry. One trend we unearthed was the Retail Challenges and Opportunities in convergence of social media and product devel- ‘Source to Shelf’ opment. Before we analyze how these trends can benefit Retailers are learning to deal with a generation of retailers, we need to understand how the “source- consumers who not only demand instant gratifi- to-shelf” process has historically worked for cation but are also among the biggest consumers retailers and where the gaps lie between customer and generators of information. Moreover, they expectations and retailer operations. expect retailers to leverage all available infor- mation about them. For these consumers, Retailers have typically had to work around long product value and quality are not achieved by lead times, seasonal fluctuations and an inability detailed planning and product development in to react to customer demand within the selling silos. Instead, they prefer doing business with season. From a sourcing perspective, retail companies that are transparent and allow them buyers endured these challenges, along with their to actively participate in the product design and colleagues in the sourcing and product develop- development (PDD) process. ment functions. Today, however, buyers can incor- porate historical trends, customer insights and This white paper analyzes how retailers can future consumer demands surfaced by social leverage social media across the entire value media analytics into the company’s buying plan. chain, from sourcing through arrival on the shelf. Following creation of this buying plan, buyers Shoppers are already connecting with retailers generate initial orders and wait for products to and their products in innovative ways by interact- reach distribution centers and ultimately stores, ing on Facebook, sharing user-generated content, hoping that their instincts map with shopper creating viral videos, blogging and tweeting. buying behavior. cognizant 20-20 insights | january 2013
  2. 2. Traditional Buying Process Historical Focus Group Strategic Analysis Studies/Trends Intent Buying Plan & Virtual Sample Intent to Buy Range & Buyer Edits Buy Trip Sampling & Final Inwards & Commit Buys Final Approvals Shipments to StoresFigure 1Buying Process Challenges • Retailers are missing a potential opportunityA typical product development lifecycle is to creatively engage with consumers, resultingdepicted in Figure 1. This process inherently in the loss of a collaborative brand-buildingchallenges retailers to be relevant to consumers. opportunity.The challenges of the buying process include thefollowing: Getting it Right: A Proposed Approach to Leverage Social Media• Insufficient data for a proper look forward: Considering the challenges with the traditional >> Within fashion and other short lifecycle approach of product design, development and categories, the design and/or use of prod- promotions, the opportunities offered by social ucts can vary significantly from one season media can provide a handsome payoff. Social to the next. While product attributes have media can help retailers combat many of the yielded some success in forecasting de- aforementioned challenges, since it provides an mand, it is still a challenging endeavor. instant way of connecting with consumers. Figure 2 (next page) offers a basic construct that can >> The buying decision (what to buy and how help retail buying and planning organizations many to buy) is made based on historical more effectively leverage social media. analysis and future forecasts, while accom- modating long lead times for imported mer- Getting Started with Social Media chandise. Social media clearly helps retailers connect the >> Consumer engagement through focus dots of customer input and feedback on product groups and surveys is largely not reflective creation. However, the most difficult decision is of their current demands and needs. determining the right time and method to begin leveraging social media and setting proper expec- >> These challenges relegate the process to tations with consumers on how ongoing conversa- more of a push system. The retailer com- mits in advance to what to sell and pushes it tions will be translated into an improved shopping to the customer, then waits for the consum- experience. Hence, while a social presence is er’s reaction before sending some more almost mandatory for retailers these days, it is their way. When initial feedback is not posi- important to ensure this additional channel is tive, the items are instantly marked down, fully leveraged for business benefits. Here’s a leading to a reactionary cycle of events. basic checklist:• Thedegree of uncertainty over consumer • Continuous social conversations: Retailers acceptance of a product is quite high: must engage consumers all year round in PDD and promotional conversations. Sporadic >> More importantly, the current process also attempts to seek input will very quickly lose negates retailers’ ability to truly react to relevance with the customer. Social conversa- consumer feedback in the current season. cognizant 20-20 insights 2
  3. 3. A Phased Approach to Leveraging Social Media in PDD and Promotions 3 2 Becoming a social Building enterprise actionable social data 1 Beginning to leverage social mediaFigure 2 tions are an ongoing exercise, unlike the tradi- to see for themselves the value created from tional means of customer engagement, which their inputs. This will motivate them to engage are typically sequenced and pre-planned. with the brand over the long term. Threadless.com has opened its entire product design and development The top 250 Internet retailers are process to crowdsourcing. Its Web on Facebook, Twitter or Pinterest.2 site ensures consumers can score/ And 64% of the Interbrand Top 100 submit designs, participate in design retailers are on Google+.3 challenges and win awards. The entire process is clearly communicated to consumers online.• Continuity of physical and virtual experi- ences: It is important for in-store experiences • Scalability: As the number of consumers who to flow freely into social conversations and the participate in the PDD process and promotions online experience. Retailers should leverage increases, it is important to keep in mind that existing social media channels like Shopkick, this form of customer engagement must be Facebook, Foursquare and Pinterest to enable consistent and scalable. A scalable approach this in a much faster way than starting from will ensure long-term creative collaboration. the ground up. These channels should also be seamlessly integrated with the retailer’s Walmart has embarked on creating existing Web sites in order to ensure continuity store-specific Facebook pages in order of the customer experience across media and to better engage consumers and track channels. the company’s huge fan following. This ensures that its Facebook engagement is scalable beyond its Charming Charlie, a boutique fashion current reach and effect.4 retailer, encourages conversations around in-store experiences and Pinterest contests on its Facebook page. Build Actionable Social Data Most retailers embark on the social journey with a basic listening page on any of the existing• Mechanisms for customer engagement: It is social media brands such as Facebook and very important for retailers to have a process Twitter. However, even as these pages gather designed to solicit PDD input from consumers customer feedback and interaction, engagement and to incorporate their input into their sustenance is threatened if the retailer is not internal PDD process. Transparency is another perceived as acting on this information. Hence, key requirement. Consumers should be able cognizant 20-20 insights 3
  4. 4. it is important for retailers to have a definitive can be tested and measured. The value offramework for the data they want to collect and social sourcing can only be measured throughspecific insights that they want to derive from inclusion of the relevant data in the productthis data. development cycle.Typically, retailers that have been successful Build a Social Enterprisein disseminating social data take the following Involving the customer socially in businessactions: functions such as PDD and retail promotions inherently demands that the enterprise be more• Define specific business objectives. Are socially affable. This involves the following: you looking to improve an existing product or create a new one? Have consumers expressed a desire for a different product configuration • Social collaboration in regular business operations. Clearly, customer input should be then what you currently offer (e.g., available solicited all along the value chain of sourcing- in plus sizes or a new color palette)? You to-shelf. However, it is important for retailers will need to consult with key stakeholders to reverse-engineer their working terms with throughout the product development and mer- vendors as well, to enable them to incorpo- chandising process in order to establish and rate social feedback. This increases flexibility prioritize these objectives. Without identify- across the supply chain and makes it collab- ing specific business objectives, you may find orative. Many times, while a retailer is not in a yourself chasing a lot of “potential” solutions position to act on customer feedback, vendors that appear to have value but instead result in can make necessary changes to product design a waste of time and resources. and course-correct prior to shipping out the• Search across several social platforms and merchandise. Buyers can even ask consumers look to extract only relevant data. Your to rate new product offerings before bringing business objectives will define what you should new vendors onboard, thereby reducing the gain in the social ecosystem. By using sophisti- risk of having to wait for consumer reaction to cated text analytics tools and creating targeted ascertain the product’s potential. search streams across Facebook, Twitter and other social platforms, you will eliminate irrelevant chatter and noise and drill down to Walmart recently introduced the the sentiment that corresponds to your overall Orabrush brand of toothbrush, based goal of deriving value from social media. In on its popularity on YouTube and a addition, don’t limit your search to your own Facebook ad campaign targeted at the Walmart buyer. Walmart also ran social platform; apply the same qualifications a “Get on the Shelf” contest, whereby and rigor to the publically available informa- consumers were allowed to select the tion from your competitors’ social networks. products they wanted stocked in their neighborhood Walmart. BestBuy, Krogers, Chico’s, Kia and many other retailers are embarking on • Empower employees to act. Social media, by investments related to social sentiment its very nature, is instantaneous and trans- analysis. The findings are then integrated parent. Hence, it is important that retailers into their merchandising processes to empower employees to immediately act on ensure consumer sentiment is accounted information flows. This will mean changing for in their product offerings. internal operations, workflows and approval mechanisms within the business in order to truly leverage the social medium. The hidden• Once you’ve obtained the data and prioritized challenge is identifying experienced employees the outcomes that align with your business who are ”socially” comfortable. Additional objectives, the next step is to identify which training and focus will be required to create outcomes should be incorporated into your this social workforce, and technology can existing product development process. While be leveraged for managing and monitoring. it may be disruptive to your organization’s Retailers that are moving into the social current workflow, it is imperative that the construct are now creating new roles, such as results be included as part of PDD so that it sentiment analysts, social corporate responsi- cognizant 20-20 insights 4
  5. 5. Using Social Data in PDD Processes Crowdsourcing Team Social Help Force Sentiment Analysts Social Enterprise Create New Product Historical Product Product Product Selling & Analysis Concept Sampling Design Promotion Improve Existing Product Social Data Customer Data Product Data Experience Data • Demographic • Features • Shopping Experience • Psychographic • Pricing • Product Experience • Geographic • Other Attributes • Feedback & CommentsFigure 3 bility personnel and crowdsourcing teams, all • Creation of a social data construct that will of which will engage in PDD processes. enable the new PDD processes. Either can be leveraged in both new product BestBuy has a dedicated “Twelpforce” creation, as well as enhancement. of individuals who are empowered to act on problems that consumers tweet However, both avenues are fraught with about. This team consists of roughly challenges in working through the familiar 2,600 employees whose job is to resolve working processes within PDD. We propose the customer issues using Twitter as a following immediate actions to mitigate risks medium of conversation. while integrating the social medium within PDD:If retailers can embrace all of the above in their • Embark on including social media in PDD processes by means of a pilot, using a subsetsocial media strategies, we believe they can be of products (one brand/season) to activelymore successful in their social sourcing-to-shelf engage shoppers in the PDD process.journey. There are many nuances in this journeythat will be specific to the retailer. Thorough con- • Set up existing/new social media forums to:sideration of the customizations required will becritical to success. >> Get started with a product line that is gen- erated by these shopper engagements.Looking Ahead >> Build actionable social data.Clearly, social media has the potential to radically >> Identify the new “social enterprise/teams”improve product design and development and needed to sustain interactions with theseits impact across the entire retail value chain. As shoppers in the PDD processes.indicated in Figure 3, a retailer that is embarkingon including social data in this function can • During and after the duration of the pilot, measure and analyze the impact on sales,anticipate a two-fold change in its product design margin and customer connect changes affecteddevelopment cycle: by the use of social media, and benchmark these against past results.• Creation of organizations that leverage social media in the PDD process lifecycle. cognizant 20-20 insights 5
  6. 6. • Discuss results and potential for future We expect the results from these early pilots to expansion with your merchandising and be compelling and that most retailers will drive marketing teams. significant growth from improved use of social media in their sourcing-to-shelf processes.Footnotes1 “Changing Consumers & Technology: Ten Megatrends Transforming the Retail Landscape,” Cognizant Technology Solutions, November 2010, http://www.cognizant.com/retail/sitedocument/ten-megatrends- transforming-retail.pdf.2 “Top 250 Internet Retailers on Social Media,” Campalyst Blog, May 2012, http://blog.campalyst. com/2012/05/15/top-250-internet-retailers-on-social-media-q1-2012-infographic/.3 Adam Schoenfeld, “Google+ Month 6 Adoption and Engagement Report,” Simply Measured, May 8, 2012, http://simplymeasured.com/r/google-plus-month-6-brand-adoption-and-engagement-report/.4 Brennon Slattery, “Wal-Mart Makes Big Facebook Push: Offers ‘Rollback’ Price Alerts,” PC World, October 2011, http://www.pcworld.com/article/241713/walmart_launches_local_deals_facebook_page.html.References• George Guildford, “Four Ways Brands Can Use Social Media in New Product Launches,” Social Media Today, February 2011, http://socialmediatoday.com/george-guildford/268906/four-ways-brands-can- utilise-social-media-maximise-launch-new-products?ref=node_other_posts_by.• Jamie Mahoney and Marcos Corminas, “Accelerating Speed to Market for Proprietary Retail Brands,” Auxis, August 2009, http://www.auxis.com/about_us/experts/pdf/accelerating_speed_to_market_ for_proprietary_retail_brands.pdf.• Katy Daniells, “Diesel’s Real Life ‘Likes’ via QR Codes,” Digital Buzz blog, June 2011, http://www.digitalbuzzblog.com/diesels-real-life-likes-via-qr-codes/.• Artemis Berry, “How Under Armour and Warby Parker Win with Social Media,” blog.shop.org, March 2012, http://blog.shop.org/2012/03/01/how-under-armour-and-warby-parker-win-with-social-media/.• Emil Protalinski, “Facebook Contest: Around the World in 80 Clicks,” ZDNet, March 2012, http://www.zdnet.com/blog/facebook/facebook-contest-around-the-world-in-80-clicks/10028.• Richard Spiegel, “Three Ways to Benefit from Social Media Crowdsourcing,” Social Media Examiner, June 2011, http://www.socialmediaexaminer.com/3-ways-to-do-social-media-crowdsourcing/.• Michael Marchionda, “Crowdsourcing Spreading like Wildfire with Social Media,” Prescient Digital Media, http://www.prescientdigital.com/articles/web-2.0/crowdsourcing-spreading-like-wildfire-with- social-media/.• “Top Internet Retailers’ Facebook Presence Dwarfs Other SocNets,” Prescient Digital Media, May 2012, http://www.marketingcharts.com/direct/top-internet-retailers-facebook-presence-dwarfs- other-socnets-22081/. cognizant 20-20 insights 6
  7. 7. About the AuthorsPJ Walker is a Senior Manager with Cognizant Business Consulting’s Multichannel Business Practice.She has over 15 years of digital marketing, e-commerce and social analytics expertise across retail,consumer goods and travel and hospitality verticals. PJ has a B.A. from Emory University in Atlanta, GA.She can be reached at Parthy.Walker@cognizant.com.Mahalakshmi Rajagopalan is a Manager with Cognizant Business Consulting’s Retail Practice. She hasover seven years of experience in product/retail merchandising, retail marketing and operations. Shehas a master’s degree in apparel marketing and merchandising from the National Institute of FashionTechnology, India. She can be reached at Mahalakshmi.Rajagopalan@cognizant.com.Rachit Anand is a Consultant with Cognizant Business Consulting’s Retail Practice. He has three-plusyears of experience in the IT industry across ERP, consulting and business analysis. He has an MBAin operations and IT from the National Institute of Industrial Engineering, Mumbai, India. He can bereached at Rachit.Anand@cognizant.com.Sampath Jagannathan is a Consultant with Cognizant Business Consulting’s Retail Practice. He has sixyears of experience in ERP, procurement, inventory management, vendor collaboration and e-commerce.He has an MBA in retail supply chain management from Sam Walton College of Business. He can bereached at Sampath.Jagannathan@Cognizant.com.About CognizantCognizant (NASDAQ: CTSH) is a leading provider of information technology, consulting, and business process out-sourcing services, dedicated to helping the world’s leading companies build stronger businesses. Headquartered inTeaneck, New Jersey (U.S.), Cognizant combines a passion for client satisfaction, technology innovation, deep industryand business process expertise, and a global, collaborative workforce that embodies the future of work. With over 50delivery centers worldwide and approximately 150,400 employees as of September 30, 2012, Cognizant is a member ofthe NASDAQ-100, the S&P 500, the Forbes Global 2000, and the Fortune 500 and is ranked among the top performingand fastest growing companies in the world. Visit us online at www.cognizant.com or follow us on Twitter: Cognizant. World Headquarters European Headquarters India Operations Headquarters 500 Frank W. Burr Blvd. 1 Kingdom Street #5/535, Old Mahabalipuram Road Teaneck, NJ 07666 USA Paddington Central Okkiyam Pettai, Thoraipakkam Phone: +1 201 801 0233 London W2 6BD Chennai, 600 096 India Fax: +1 201 801 0243 Phone: +44 (0) 20 7297 7600 Phone: +91 (0) 44 4209 6000 Toll Free: +1 888 937 3277 Fax: +44 (0) 20 7121 0102 Fax: +91 (0) 44 4209 6060 Email: inquiry@cognizant.com Email: infouk@cognizant.com Email: inquiryindia@cognizant.com©­­ Copyright 2013, Cognizant. All rights reserved. No part of this document may be reproduced, stored in a retrieval system, transmitted in any form or by anymeans, electronic, mechanical, photocopying, recording, or otherwise, without the express written permission from Cognizant. The information contained herein issubject to change without notice. All other trademarks mentioned herein are the property of their respective owners.

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