Unlock Customer Obsession By Tying Features To Business Outcomes

Executive Summary

Retailers once relied on assortment, low costs, and widespread distribution to win customer loyalty, but retail success today requires customer obsession — operations that use insights and engagement from customer relationships to create a virtuous cycle. To put customers at the heart of operations, marketers need features and functionality in their technology solutions (MarTech) that enable them to add value within the path to purchase. Moreover, these solutions must add value at an individual level, resulting in business outcomes like higher customer lifetime value and revenue growth. Retailers who fail to tie functionality to positive customer and business outcomes will inevitably make false assumptions about their customers’ preferences, and likely fall behind in the pursuit of customer obsession.

In October 2018, Listrak commissioned Forrester Consulting to evaluate how features, functionality, and positive business outcomes relate to customer obsession using Forrester’s Customer Obsessed Assessment (COA). Forrester conducted an online survey of 200 retail organizations in North America targeting decision makers in e-Commerce and marketing. We also conducted an online survey of 502 monthly online shoppers in North America to explore this topic. We found that while most retail marketers feel their firm embodies customer obsession, very few have the hallmarks — and customers have noticed. Retailers that optimize their marketing cloud mix to learn more about the customer and drive business results have a powerful advantage over the rest.

Retailers can have all the features and functionality they want, but unless they tie them directly to business outcomes, they’ll fail to deliver on customer obsession.

KEY FINDINGS

• ‍Customer-obsessed marketing is rare — and it’s leading to gaps in business outcomes. While 94% of retailers agree their firm“embodies customer obsession, only 9% qualify as being customer obsessed under Forrester’s COA. In part due to overconfidence, retailers have failed to optimize key marketing features and so have fallen short on customer expectations and potential revenue.‍
• Retail marketers struggle to win because business outcomes are not their top consideration. The ability to improve business outcomes is only the fifth most important criteria for MarTech decisions. Moreover, only 20% of firms make outcomes the deciding factor for a MarTech purchase. Worryingly, features and functionality rank consistently higher.‍
• Retailers should better tie features and functionalities to business outcomes. To close the opportunity gap at their nextMarTech solution selection, retailers should apply customer-obsessed best practices: discussing desired business outcomes with vendors and placing a greater emphasis on outcomes over functionality. This results-focused strategy can lead to benefits like revenue growth and improved customer satisfaction.

Customer-Obsessed Marketing Determines Retail Success — But It’s Rare

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The benefits of customer obsession are extensive. Customer-obsessed companies have the largest median three-year sales growth, higher margin performance, and happier employees. The new imperative for customer obsession is driven by customer expectations for high quality, relevant communications that add value to their daily lives. In our surveys, we found:

• ‍Consumers are happy to be contacted by retailers, as long as communications are tailored. In fact, consumers are more likely to shop frequently with those retailers and more likely to establish loyalty with those retailers (See Figure 1). These high expectations for personalization require from retailers more than traditional segmentation based on single data points like age, gender, or purchase history, which point to a past need, rather than a current intent.‍
• Retailers are missing out on revenue gains that stem from true customer obsession. Overall, retailers feel their efforts toward customer obsession have resulted in greater efficiency (63%), better innovation (58%), and improved customer satisfaction scores (49%). Yet, only 18% have seen revenue growth — the most important business metric — as a result of their pursuit of customer obsession.‍
• Retailers are not nearly as customer obsessed as they believe. When asked, 94% of retailers we surveyed agreed with the statement, “My company embodies customer obsession.” However, the tally of their answers to Forrester’s Customer Obsession Assessment reveals a shocking misconception: Only 9% of those we surveyed qualify as being customer-obsessed firms. More accurately, retailers in our study fall into three groups: Customer-Novice (the low group), Customer-Focused (those in the middle that are making progress), and Customer-Centric (those who are customer-obsessed, as well as those that are quickly closing in) (see Figure 2).

Retailers that can leverage their marketing technology to engage and delight customers will find success in the age of the customer. Retailers believe they are already customer-obsessed — so why aren’t they seeing results?

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CONSUMER EXPERIENCES REVEAL THE GAP BETWEEN MARKETING EXECUTION AND POTENTIAL FOR RESULTS

As customers’ expectations have risen and changed rapidly in recent years, so too has marketing technology evolved to keep up. Today, retailers are evaluating marketing features and functionality unheard often years ago, i.e., tools that are designed to learn, analyze, and optimize communications. Despite advancements, most retailers rely on traditional tools like shopping cart/browse abandonment and transactional messaging (implemented at 70% and 69% of firms respectively).

The importance of transactional emails has grown since GDPR — in many cases, they may be the only opportunity to deepen customer relationships over email.

If retailers doggedly depend on traditional features, have they maximized the results they’re receiving? To find out, we surveyed consumers about their experiences with cart abandonment, browse abandonment, and transaction emails. We found glaring gaps in both execution and personalization of these features, including:

• ‍Cart-reminder emails are common and effective, but there’s more potential for results. Most consumers who had abandoned an online cart would quickly receive an email reminding them to return (82%).Consumers agree the emails made them more likely to return, but only 61% said the email contained other useful recommendations. This is a missed opportunity to further engage, delight, and entice customers.‍
• Browse-abandon emails are even more effective than cart reminders, but far less common. Forty-three percent of consumers who had recently abandoned a browse did not receive a reminder to return. Retailers that don’t send reminders are losing out: 79% of consumers who received the email agree it made them more likely to return — more so than cart-reminder emails.‍
• Transactional emails are indispensable. They’re also a lost opportunity. Nearly 90% of customers opened an email confirming are cent purchase, 91% of whom always open similar emails. However, only 66% say they received more relevant emails post-purchase, and only 59% say the email contained useful recommendations. Retailers are missing a remarkably reliable opportunity to increase the value of their relationship with active customers.

It’s clear that even the most common features — the workhorses of digital marketing — have untapped value. As a result, many retailers have a gap in potential revenue and may not know it.

Marketing Features Are Too Rarely Tied To Business Outcomes

The gap between the features that retailers have implemented and the potential for positive business outcomes has unfortunate explanations:

• ‍The ability to improve business outcomes factors remarkably low into MarTech purchasing criteria. Less than a quarter of decision makers consider how technology solutions impact business outcomes a critical point (see Figure 3). While other attributes like scalability and adequate support are important, they should be secondary to producing results. However, nearly twice as many marketers prioritized a technology’s scalability over its effectiveness.‍
• Shockingly, only one in five respondents rank business outcomes as the most important factor in selecting a MarTech solution. Not only was it ranked lower in importance, but the ability to improve business outcomes was outranked by features and functionality; features rank No. 1 in importance in the purchasing process for over half of firms, while the same is true of business outcomes at only 20% of firms (see Figure 4).

The obvious question becomes: What good are features without business outcomes? We found that retailers are not prioritizing correctly because they’re unaware of how poorly their marketing efforts are measured. Eighty-four percent say it is somewhat or very easy to tie features to business outcomes, but only half say they measure the most basic metric of incremental performance (or lift). This suggests a worrying issue: retailers may only think it’s easy to tie features to outcomes because they are not correctly measuring outcomes.

To further investigate how business outcomes should factor into investment decisions, we looked more closely at Customer-Centric retailers. We found:

• ‍Better measurement is a hallmark of customer obsession. We found that Customer-Centric retailers are more likely than Customer Novice firms to track key metrics, including, customer lifetime value (CLV), acquisition, engagement, and conversion. If more retailers rigorously tracked their performance, they’d better understand what they lose when they either implement the wrong mix of features or don’t optimize existing ones.‍
• Customer-Centric retailers are more satisfied with the out come of their investments. With better measurement comes the improved ability to implement the right mix of features and drive results. So it follows that Customer-Centric firms are also more satisfied than Customer-Novice firms with the features they have implemented. For example, 65% of Customer-Centric firms are very satisfied with their transactional messaging’s ability to improve business outcomes, compared to just 13% of Customer-Novice firms. Given the tremendous opportunity we observed in transactional messaging from the consumer survey, it’s likely that Customer-Centric firms are better at optimizing features beyond implementation.

BEING CUSTOMER-OBSESSED MEANS MAKING BUSINESS OUTCOMES THE TOP CONSIDERATION FOR MARTECH

A key strategy of CustomerCentric retailers moving forward is discussing desired business outcomes with vendors.

Customer-Centric firms are leaders in retail because: 1) they’re more likely to measure their success correctly and 2) their better-informed strategy leads to higher satisfaction with the business outcomes that features drive. Why? Because Customer-Centric firms are better at putting business outcomes at the top of the list of criteria when making decisions about their marketing stack. In fact, nearly twice as many Customer-Centric firms than Customer-Novice firms rank business outcomes as No.1 in importance in the decision-making process.

Do It Right The Next Time: Tie Evaluations To Outcomes

The lack of measuring marketing, by the outcomes of individual features, misleads marketers and gives them a false impression of success and no clear link to business outcomes. Recall that 94%of retailers in our study believe that their firm embodies customer obsession, when actually fewer than 10% are Customer-Obsessed. This means that nearly all retailers today have a lot to learn from the more customer-obsessed firms in their industry. To close the opportunity gap, retailers should learn best practices from Customer-Centric firms and better tie features and functionalities to business outcomes, beginning with the vendor selection process through to optimization. We found:

• ‍Customer-Centric firms seek to improve their MarTech solution selection. Overall, many retailers agree they’re missing out. Those that we surveyed said that if they could do their most recent RFP over again, they would: 1) set up a better strategy to measure the success of their technology; 2) discuss desired business outcomes with their vendor; and 3) place a greater emphasis on business outcomes over functionality (see Figure 5). However, what’s more telling is the higher proportion of Customer-Centric firms compared to the Novice firms that say they would discuss desired business outcomes with vendors (54% versus 30%) and place a greater emphasis on business outcomes over functionality (46% versus 30%). This means Customer-Centric firms are not going to take their pedal off the gas and those still early in their journey are going to fall further behind if they remain overconfident.‍
• Tying features to business outcomes is a targeted path to major benefits. Retailers overall, feel that being better able to tie features to outcomes delivers better innovation (54%), revenue growth (48%),greater efficiency (47%), product improvement (46%), and improved customer satisfaction (44%). It’s a strategy that puts business results where it should be: the No. 1 priority in purchase decisions.