When I ask retail CEOs about their top objectives, I often hear them say: “we want to put the customer at the center of everything we do.” This sounds easy, but it is increasingly difficult. Years ago, when I was a merchant for a retailer with a small chain of stores, I could walk the selling floor and ask our loyal customers for feedback. With 500 or 1000 stores, a rapidly growing e-commerce channel, and millions of customers, this is no longer possible.
An entire category of Voice of the Customer (VoC) tools has arisen to address this challenge, and these tools can help retailers shape their in-store experience, pricing strategies, and product offerings. However, even with the vast amount of data and analytical tools at an executive’s fingertips, there are still enormous missed opportunities. While many retailers in the fashion, apparel and footwear industry have embraced them, other industries are far behind the curve. There is a misconception that these tools are best applied to fashion, whereas in reality they can be applied to virtually every product sector.
A 2018 study by Kalypso, a leading consulting firm, found that 59% of retailers are currently investing in VoC tools or plan to invest in such tools over the next 12 months. At First Insight, we are seeing dramatic growth in this area. In retail, clearly the trend is toward adoption of these tools. However, this is not the case in other industries.
The auto industry is a good example of one that lacks VoC tools. Many consumers travel long distances to purchase a used car. In fact, one of our employees recently drove an hour to buy a used Mazda3, when a Mazda dealership was only a few miles from her home. If local dealerships used VoC tools to determine the demand for specific car models in the area, as well as the prices consumers are willing to pay, they could sell cars to local customers more successfully—leading to higher product turnover rates and higher profits.
One could argue that purchasing a car is very different from purchasing a shirt… but is it?
In 1919, John Dewey created the Consumer Decision Making Process to show the psychological process a customer moves through before making a purchase. It goes as follows: The consumer recognizes a need or problem, she/he conducts an information search, and once all the information is gathered he evaluates his alternatives. He then purchases what he deems to be the best alternative. Afterwards, he exhibits post-purchase behavior by expressing either satisfaction or dissatisfaction. Every purchase, regardless of whether it is a car or a shirt, goes through these steps.
Yes, there are a few differences. Since a car is a more expensive purchase, it appears as a riskier decision to most consumers. They will spend more time in the information search and evaluation of alternatives steps. They will go online and research different car models’ safety ratings, fuel efficiency, and many other attributes. Perhaps they might even look to expert opinions in Consumer Reports, or speak to a car expert they trust. Once they have narrowed down their top choices, they will visit dealerships, conduct test drives, and of course look under the hood. If it fits their budget and expectations, they will fill out a thick stack of paperwork and complete the lengthy purchase process.
On the other hand, when buying a shirt, the consumer will spend much less time deciding. She/he could surf the web for comparable alternatives, read reviews, and consider the prices. Simpler yet, the customer could go to a store, look at the shirts available, the prices, and perhaps try them on. It is safe to say this decision process could be completed in less than hour. Even though it takes less time to purchase a shirt than a car, both consumers will move through the same decision process. Because of this, Voice of the Customer tools are valuable in both purchases.
If car dealerships knew what their customers were looking for and what they valued, they could align their product offerings to fit these needs. VoC tools could be used to detect the most highly demanded cars in the region and focus on purchasing these models at used car auctions. They could also identify cars with the lowest demand, and subsequently offer lower trade-in credits to sell these at lower prices. For instance, local dealerships could have stocked up on used Mazda3s had they known they were in high demand among their target consumers in the region. Or, if our employee had found her ideal Mazda3, but in a green/brown color she disliked, she may have still purchased it had the price been interesting enough for her to value it based on need.
The bottom line is that a lot of money is being left on the table in many industries. Studies have shown that 80-85% of fast-moving consumer products fail, and over 50% of new products fail in general. By using Voice of the Customer tools, companies are able to better identify the value of their offerings, maximize their margins through correct pricing, and satisfy their customers. In companies that conduct new product development, VoC tools can be used to create new products that customers love and are likely to succeed. A world where customers do not have to travel far to buy their ideal used car and where they consistently are presented with new products they love is no longer a pipe dream. If retailers and brands structure and listen to the voice of their customer, it can be our reality.
We are getting closer. At the NRF Big Show in January you could sense the buzz in the air as retail leaders discussed the importance of putting customers at the core of all a business does. By listening to them and incorporating them into all aspects of the business, retailers like Chico’s FAS and rue21 are improving their customer experience and satisfaction—leading to greater profits. In the panel I moderated, rue21’s Chief Analytics Officer Dr. Mark Chrystal explained that simply knowing your customer is not enough; practical application is needed. By combining customer segmentation with VoC analytics, rue21 was able to move both its top and bottom lines significantly. The same opportunity is available to those in other industries.
In the Age of Data, retailers need to investigate and see for themselves the value they can bring to their organizations through VoC tool utilization. The days of guessing are behind us. Analytics-informed purchasing and pricing decisions are happening every day with the use of these tools. As history shows us, those who fail to evolve and innovate in how they listen to and act upon the voice of their customer will be left behind.
