Case Study Retail
Maximizing the economic impact of CX in Retail
Retailers, whether high frequency, mass, specialty or big box continue their battle for market share. It has become more and more evident that consumer expectations of a frictionless experience have not waned within retail and shoppers are looking to be “wowed” by their experience with a brand. A 2020 study conducted by The Verde Group and Wharton Baker Retailing Center found that influential “wow” shopping experiences in retail can lift purchase intent by up to 60% depending on the retail category. The challenge for most retailers is to understand and deliver the right experiences that will have the greatest impact on ROI and drive customer loyalty.
Client Background
The Client is a leading high frequency North American retailer who had committed to improving customer experience as a key priority given their decline in market share. Despite best intentions, their efforts to date had minimal impact on improving market share and the shopper experience remained fraught with friction. The Client struggled to cut through their mass amounts of customer research and data to truly understand where they should prioritize and invest in their experience.
Specifically, they sought to understand:
- What are the specific areas of friction in the shopping experience that create the greatest customer relationship risk?
- What is the economic impact of those problems across the franchise?
- Are there differences at a customer segment or store level?
- How could they address the priority problems at both a strategic and local level?
How We Helped
The Client, like many retailers, had been conducting CX research and analysis for some time. Given that they had seen minimal results, the leadership team at the Client sought out The Verde Group to help them “unstick” their CX strategy and explore alterative approaches. They demonstrated a great deal of managerial courage and an openness to taking a different, less conventional approach to understanding the drivers of customer loyalty. Working together, the Client and The Verde Group invested time in aligning around a common vision for a new, more innovative, more impactful approach to measuring CX and the implications of that approach at both a strategic and local level. Given the Client operated a loyalty program, they challenged The Verde Group to leverage both research and customer data.
Our Revenue at Risk Solution
Revenue@Risk® analysis is a unique, proprietary analytic methodology that quantifies the financial impact of customer problems to answer these key business questions:
- Which experiences matter most to the recurring revenue and profit potential of my business?
- Which CX moments of truth are causing the greatest risk to my top line?
- What specific CX actions should I prioritize to improve my market share?
The Verde Group worked alongside the Client to innovate the Revenue@Risk® analysis by marrying The Verde Group’s proprietary research method with the Client’s loyalty program customer data. This integration focussed on understanding which negative shopper experiences had the greatest impact on decreased spend and share of wallet overall. Further, by integrating loyalty data, the analysis modelled out those negative experiences and their economic impact at a customer segment and store level. This analysis enabled stores to act locally and on a 1:1 basis to mitigate potential problems.
Key Insights
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The most damaging overall problems for The Client spanned product, price and service:
- The store did not offer competitive weekly specials
- The overall selection of product was limited
- It took too long to find the item I wanted
- The store did not offer locally sourced products
- The store atmosphere was unappealing
- I can purchase the exact same quality produce elsewhere for less
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Customers are not created equal. The top most damaging problems varied in ranking by segment:
- The top tier customer segment held a very different view of the most damaging customer problems. They did not consider the store not offering competitive weekly specials to be a top problem, and rather they ranked purchasing the exact same quality product elsewhere as their most damaging problem, followed by you have to wait too long at the meat counter.
- The lowest tier customer segment felt the most damaging problem to be that no one at the deli counter asked if they could assist you when you needed help followed by you had to wait at the meat counter.
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Problems are not created equal:
- The chart below demonstrates the significant economic impact of CX Friction. The financial risk and impact is substantial for the high value segment when comparing those who did not have a damaging problem vs those who did. On average, over $1000 of revenue is at risk for each high value customer who experienced a damaging problem.
- As well, the analysis showed that while some problems were common to most stores, there were damaging problems that differed by store.
Impact and Outcomes
The analysis had a profound impact on The Client’s approach to measuring and understanding CX and in planning for customer experience improvements. The analysis provided clarity on the most damaging problems and drove clear action planning both strategically and at a local store level. As well, this work enabled The Client to validate the importance of their loyalty program and extract more value from its data as a key strategic input for developing clear and specific customer experience improvement opportunities.
CX insights were Predictable and Actionable at a 1:1 and Store Level
- Given the analysis enabled the research survey sample to be married with customer loyalty data, The Client had information that predicted with up to 90% accuracy which specific shopper had experienced a high impact problem.
- The data enabled an understanding of the most significant problems at store level and which customers were experiencing the problems at that store.
- The Client now had the information on hand to act locally and on a 1:1 basis to prioritize and fix shopper problems.
Customer Experience Plays a Pivotal Role in Driving Results
- The analysis revealed that there is significant payoff to improving the customer experience.
- The economic opportunity associating with solving negative customer experiences was more than $200 M per annum, representing a significant opportunity for market share growth and customer retention.
- The data guided the executive team in understanding potential revenue improvement both at customer and store level, with detail on which stores, and which customers were most at risk.
Customer Experience is Everyone’s Job
- The leadership team recognized that improving CX needed to occur both strategically and locally and across all key retail departments.
- Action planning took place with both the executive team as well as store managers to enable both a corporate and local plan to emerge.
- Frontline training was initiated across stores and CX ambassadors were introduced at select stores with the highest occurrence of problems.
- Customer KPIs were established and tracked regularly across the organization to drive accountability for improvement.