The Potential of Geolocation for Revolutionizing Retail
Traditional brick-and-mortar retail stores have many disadvantages when competing against online counterparts. Online stores are always open and are available anywhere, have “endless aisles” and can use digital tools to personalize offers to customer preferences. Nevertheless, physical stores do offer customers a number of significant benefits, including immediacy, personal service, and the ability to offer a truly immersive experience. Recently, however, leading physical stores have discovered that they can also harness the power of powerful digital marketing tools and integrate them directly into the in-store experience. New technology promises to allow retailers to beat online players at their own game, transforming the customer experience and dramatically improving their positioning.
One of the most exciting areas of development is the marrying of mobile apps, location sensing technologies (e.g., GPS), and data analytics to improve the in-store experience for customers. Location sensing technologies in retail typically involve customers using the retailer’s app, or a third-party app, and ceding permission to track their location in return for a better experience or reward. The customer’s location can be determined through the phone’s GPS capability — or more accurately within the store via WiFi, light-based triangulation or beacons. (Beacons are hardware transmitters installed around the store that wirelessly communicate with mobile devices within a narrow area such as a specific department or aisle.)
Many retailers, from Macy’s to Walgreens, are already experimenting with location-sensing technologies, with most of the focus to date on navigation, location based promotional offers, and reviews of nearby products. However, this is just the tip of the iceberg. One particularly promising untapped opportunity is pairing a customer’s location with “in-the-moment” feedback to generate more granular performance and satisfaction information that retailers can use in a variety of ways.
For example, a retailer might ask for customer feedback on interactions with sales associates and then use the results to rate employee performance. Employees would then be able to see how specific activities impact their scores, providing a highly visible incentive to improve. Armed with consumer feedback, the retailer can also create a “heat map” of its entire enterprise that would help pinpoint problems or opportunity areas at multiple points throughout the customer journey.
Heat map data can then be used to compare stores and departments (or theoretically, even create rankings of employees) which all could be used to optimize the retail experience for particular customer segments. By using this information to make rapid course corrections, personalize customer interactions and continuously improve customer intimacy, retailers can begin to match the adaptive agility seen in the online world.
Exciting as the possibilities are, retailers face two important hurdles in deploying in-the-moment feedback tools embedded in their mobile apps. First is getting customers to download and use their apps in the first place. Second is convincing enough representative consumers to take the time to interact.
We conducted some proprietary research that showed that while a majority of smart phone owners use their devices to assist in purchases, consumers are only willing to give precious screen real-estate to a handful of retail apps. That means the retailer’s app must contain functionality that’s compelling enough to convince consumers to download it and use it in the store. For example, Home Depot solved a major customer pain point — difficulty finding items without the assistance of a store employee — by developing an app with store-specific navigation.
Other reasons to use a retailer’s app might include privileged discounts on purchases, convenient payment capabilities, additional loyalty program incentives or the ability to simply summon a sales assistant for help from one’s phone. The features emphasized need to be appropriate to the specific retailer and create a compelling reason to keep coming back to the app.
The next challenge is convincing customers to enter into a two-way conversation with the retailer since the richest data will likely come from feedback that is provided while the in-store experience is occurring. Because the data is collected using the consumer’s own device, the retailer can tie behavior and feedback into other Big Data sets such as transaction and loyalty data, as well as demographic and segment information about the customer. While many customers will either not opt in or will choose not to share data due in part to privacy concerns, even a relatively small sample can provide striking insights if it covers enough foot traffic over a given time period. The best place to start is with devoted customers, but our experience suggests that by finding the right reward (such as discount or loyalty points), stores can convince a significant portion of customers to participate. Of course, even with this quid-pro-quo, it must be exceptionally easy for consumers to provide feedback; the interface within the app itself must be seamless.
In-the-moment feedback can help the retailer personalize the shopping experience, ratchet up the level of customer engagement or even rescue a lost sale. At the aggregate level, the retailer will gain insights into where and how breakdowns occur so that they can make fixes much more rapidly. They can also identify where things are going right, allowing for more rapid dissemination of best practices and new ideas across stores and departments. Too many retailers today track their satisfaction and promoter scores without a diagnostic of what is driving them, or a remedy for repairing or improving them. The digital tools we describe here deliver this elixir. By building a heat-map infrastructure, retailer CXOs can move from a qualitative soft science to a disciplined approach that uses management tools to propose actionable recommendations.
Today’s brick-and-mortar retailers are in an arms race with pure-play online competitors for the hearts and minds of customers. With the newly found ability of digital tools to gather in-the-moment feedback, physical retailers can focus on continuous innovation and improvement, offering their customers an increasingly personalized experience that comprises the best of both worlds. The technical tools already exist; tomorrow’s winning retailers will be the ones that most cleverly frame their strategies and build their analytics infrastructure in order to exploit them.