MIAMI BEACH – In today’s highly competitive marketplace, perhaps the best way to obtain – and maintain – a competitive advantage is by going the extra mile to develop truly loyal customers. So how can convenience retailers do that? The first step is to move from being product-centric to customer-centric, said presenters at the NACS Leadership Forum in yesterday’s session on “Customer-Centricity.”
What is customer-centricity? According to Peter Fader, professor of marketing at the Wharton School at the University of Pennsylvania and author of Establishing Competitive Advantage Through Customer-Centricity, the strategy aligns a company’s development and delivery of its products and services around the current and future needs of a select set of customers, in order to maximize their long-term financial value to the firm.
“Go beyond a sale to actually activate a customer and they’ll be loyal and advocate for your brand,” said Fader. He acknowledged that the traditional product-centric model is developing a series of cracks, which is leading to the need for a large-scale move away from that model toward a customer-driven one. Convenience retailers are uniquely positioned for this transition, because they already have a unique relationship with their customers.
However, Fader emphasized, focusing on the customer doesn’t mean that a company should focus on every customer. It’s essential to create a responsive and intimate relationship, not with all customers, but with the right customers. And those “right” customers are not based on past purchase history, but rather on future purchases and interactions. “Twenty percent of customers are the truly valuable ones. You need to figure out who they are and cater to them,” said Fader. “There’s so much profit locked up in the really good customers, but stores haven’t done a good job of finding them. But it’s now possible – and in many cases, a competitive imperative – to do this.”
DJ Saul, CMO and managing director for iStrategy Labs, discussed ways that technology can be used to augment the customer-centric strategy. Like Fader, Saul emphasized that not all customers are equal, so companies should focus their resources on the right customers. For example, Millennials, who represent 20% of the population with $200 billion in buying power. These consumers have a healthy skepticism of advertising, and they want to “co-create” with the companies they buy from.
And of course, as Saul pointed out, we also know that Millennials are inextricably tied to their devices. “Unlocking the power of smartphones and all the data that comes with it is key to understanding and marketing to this group,” he said.
Saul cited recent examples from companies like Starbucks, whose new mobile ordering app uses geo-fencing technology to automatically send an order when the customer is within a certain distance of their regular Starbucks location. Earlier this year, Pizza Hut launched a test app that tracks where users look, and for how long, on a digital pizza menu. These examples are just the beginning of how technology is used to better understand and cater to customers.
“Smarter products plus more data equals smarter marketers,” said Saul, who predicted that offline customer intelligence will mesh with online intelligence. Among his other predictions: same day (or even same hour) delivery will be ubiquitous, thanks to drones, with brick and mortar stores used as distribution centers. “Companies should continue to research, experiment and invent the products and services that you actually know people want,” he said. “And then let those inventions tell you what to do next.”
Sheila Power, executive vice president and managing director for U.K.-based consultancy 5one, spoke about her experience with BP Retail in Europe. “They wanted to put the customer at the heart of BP Retail,” she said. To achieve this goal, they helped the company better understand their customers, optimize their retail alliances and holistically plan in-store promotional efforts.
Among the examples Power cited was a partnership between BP Retail and Marks & Spencer Simply Food in the United Kingdom. After an initial test in a handful of stores, BP concluded that the collaboration was successful, but expensive. To better assess the ROI, they analyzed store-level POS data, discovering that consumers weren’t simply switching their purchases from the BP brand to Simply Food, but were buying more overall. This allowed the company to move forward confidently, knowing that the approach was successfully addressing customer needs.
Another way that 5one helped BP address customer needs was to streamline promotional efforts. A survey of one store showed that on a given day, a dozen different promotions were going on, of which only about 30% were really having a noticeable effect on overall category sales. “Think about the customer experience, not just the product,” said Power, explaining that the level of promotions was simply overwhelming for customers.
For a retailer perspective on customer-centricity, read the NACS Daily article “An Adventurous Approach to Customer Loyalty,” describing Maverik’s efforts to better understand and engage their customers.
The NACS Leadership Forum is an annual, invite-only event, bringing together retailers and suppliers to provide thought leadership that is relevant to the convenience and fuel retailing industry, while strengthening existing relationships and building new business relationships. The event is taking place this week in Miami Beach. Read the NACS Daily article, “Culture Is King,” for more on Wednesday’s session featuring Wawa President and CEO Chris Gheysens and OXXO CEO Eduardo Padilla.