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CUSTOMER EXPERIENCE MANAGEMENT IN RETAILING

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					2009                                               Kamaladevi B.                                                 37




           CUSTOMER EXPERIENCE MANAGEMENT IN
                       RETAILING




                                                  Kamaladevi B.




                                                       Abstract
       Survival of fittest & fastest is the mantra of today’s business game. To compete successfully in this
       business era, the retailer must focus on the customer’s buying experience. To manage a customer’s
       experience, retailers should understand what “customer experience” actually means. Customer
       Experience Management is a strategy that focuses the operations and processes of a business around
       the needs of the individual customer. It represents a strategy that results in a win–win value exchange
       between the retailer and its customers. The goal of customer experience management is to move
       customers from satisfied to loyal and then from loyal to advocate. This paper focuses on the role of
       macro factors in the retail environment and how they can shape customer experiences and behaviors.
       Several ways (e.g., Brand, Price, Promotion, Supply Chain Management, Location, Advertising,
       Packaging & labeling, Service Mix, and Atmosphere) to deliver a superior customer experience are
       identified which should result in higher customer satisfaction, more frequent shopping visits, larger
       wallet shares, and higher profits.




                             Kamaladevi B. - Customer Experience Management in Retailing
38                                                  Business Intelligence Journal                                    January




     Introduction                                                  and customers. This information is feed back
                                                                   to the company in a self-calibrating system
         Just when companies are becoming                          that (in theory) makes optimal use of every
     comfortable with the idea of Customer                         opportunity to influence customer behavior.
     Relationship Management (CRM), a new                              Obviously these are overlapping
     term has emerged: Customer Experience                         approaches, and both have merit if designed
     Management (CEM). The two are similar                         and applied intelligently. Up until now
     in many ways, not least in that they are                      the spotlight has predominantly been on
     both difficult to define. Neither can be                      CRM, in part because it is technologically
     identified with a unique product or a specific                impressive (as well as astonishingly
     technology; rather, they both comprise a                      expensive). Unfortunately, CRM has not
     group of applications, technologies and                       been nearly as effective as promised;
     analytics that orbit around a central premise.                according to some estimates, from 50% to
     The premises of CRM and CEM are quite                         70% of CRM initiatives fail to achieve their
     different, however, and are best understood                   goals.
     when compared side by side.                                       As CRM is more widely used, its
         The idea at the center of CRM can                         weaknesses become more apparent.
     be stated in the following way: Every                         Analysts have become fond of noting that
     time a company and a customer interact,                       there is no R in CRM (some go so far as
     the company learns something about                            to say there is no C, either). The idea of
     the customer. By capturing, sharing,                          a “relationship” with customers seems
     analyzing and acting upon this information,                   hollow: CRM is very good at receiving, but
     companies can better manage individual                        not very good at giving. It asks customers
     customer profitability. Customer Experience                   to provide access and information without
     Management’s premise is almost the mirror                     telling them what they will get in return. It
     image. It says that every time a company                      pigeonholes customers based on past actions
     and a customer interact, the customer learns                  without informing them how to build a more
     something about the company. Depending                        advantageous profile. It prompts customers
     upon what is learned from each experience,                    to become more valuable to the company
     customers may alter their behavior in ways                    without promising greater value from the
     that affect their individual profitability. Thus,             company.
     by managing these experiences, companies                          Furthermore, while CRM is fairly
     can orchestrate more profitable relationships                 effective at measuring its own successes, it
     with their customers.                                         does not provide much information about
         In a sense, this is a classic nature vs.                  its failures. It can record when customers
     nurture argument. CRM uses profiling,                         respond positively to its automated
     micro-segmentation and predictive analyses                    prompting and prodding, but it doesn’t
     to identify each customer’s figurative genetic                give much insight when customers do not
     structure. CRM thus uncovers the preferences                  respond in the predicted way. CRM is thus
     and propensities of customers so that they                    unable to determine whether failures are
     can be nudged towards optimal profitability.                  the result of faulty assumptions, incorrect
     Customer Experience Management, on the                        information or poor execution. It is also
     other hand, looks at the environment. It                      unable to tell how these “failed” interactions
     gathers and analyzes information about the                    affect the customer relationship; it treats all
     dynamics of interactions between companies                    failures as neutral, when in fact the fabric


                                       Business Intelligence Journal - January, 2010 Vol.3 No.1
2009                                                Kamaladevi B.                                                            39




       of the relationship may have been weakened                   moving to a new, state-of-the- art warehouse
       or undermined by a poorly executed service                   facility in Delhi.
       encounter.
          CEM’s strengths lie in precisely the areas                   * Pizza hut
       where CRM is weak. By focusing on the
       experiences of customers and how those                          It recognises frequent callers and the
       experiences affect behavior, CEM examines                    context of their call enabling the customer
       both the quality of the company’s execution                  to be routed to the agent who can best fulfill
       and the efficiency of the result. It aligns                  their requirements, whether its a new order,
       customer needs with the company’s ability                    changes to an existing order or a status
       to fulfill those needs, leading to business                  inquiry on an existing order.
       relationships that are mutually beneficial and                  Pizza Hut operators can access up-to-date
       that both parties — company and customer                     information on its outlets in the catchment
       — are motivated to improve.                                  area, enabling them to select the Pizza Hut
                                                                    store that can fulfill the customer order
       Examples of CEM                                              quickest, thereby meeting its commitment
                                                                    to deliver hot pizza quickly.
          * “Best New Airline of the Year Award
          2005” – Kingfisher airlines                               Conceptual Background

           Given by Centre for Asia Pacific Aviation                   Overview of literature on aspects of
       for its significant innovation and outstanding               customer experience
       customer experience.
           For the first time in the Indian skies,                            Theme                     Study

       Kingfisher Airlines offers world-class in-                   Customer Experience     Berry, Carbone, and
                                                                                            Haeckel (2002); Sousa and
       flight entertainment with personal video                                             Voss (2006); Gentile, Spiller,
       screens for every seat. There’s a wide                                               and Noci (2007), Meyer and
       selection of 5 video channels and 10 audio                                           Schwager (2007); Naylor et
                                                                                            al. (2008);
       channels available on- board. Also on offer
       are extra-wide seats and spacious legroom,                   Customer Experience     Chartrand, and Fitzsimons
                                                                    Driver Brand            (2008); Ofir and Simonson
       delicious gourmet meals, international-class                                         (2007); Keller and Lehmann
       cabin crew and a whole host of comforts and                                          (2003); Lee and Rhee
       delights. Kingfisher Airlines also facilitates                                       (2008); Gauri, Trivedi, and
                                                                                            Grewal (2008).
       doorstep delivery of tickets on guest request.
                                                                    Price                   Ofir et al. (2008); Kopalle
                                                                                            et al. (2009); Bronnenberg
          * Blue Dart Express Limited, South                                                and Wathieu (1996); Wedel
          Asia’s largest integrated air express,                                            and Zhang (2004); Dorotic,
          courier and logistics company                                                     Verhoef, and Bijmolt (2008);
                                                                                            Gauri, Sudhir and Talukdar
                                                                                            (2008); Noble and Phillips
          Their focus was on providing customers                                            (2004).
       with quality service and an enhanced
       customer experience, they continued to
       upgrade and expand their infrastructure, by
       adding new facilities in Lucknow, Mumbai,
       Pune, Ahmedabad, Meerut and Jaipur, and


                              Kamaladevi B. - Customer Experience Management in Retailing
40                                                    Business Intelligence Journal                                      January




                Theme                    Study
                                                                         Major Factors Influencing Consumer
     Promotion               Ailawadi et al. (2009); Van                 Buying Decision Process
                             Heerde and Neslin (2008);
                             Gijsbrechts, Campo, and
                             Goossens (2003); Chiou-Wei                 On the consumer front, many people’s
                             and Inman (2008); Lwin,                 savings have evaporated in the year 2008,
                             Stanaland, and Miyazaki
                                                                     primarily because of the precipitous decline
                             (2008).
                                                                     in stock prices, suffering real estate markets,
     Supply Chain            Garg et al. (2005); Dant
     Management              et al. (2009); Burkle and               and increasing unemployment. Consumers
                             Posselt (2009), Xu and Kim              thus take greater care in what they buy,
                             (2008), Neslin et al. (2006);           where they buy, and how much they will
                             Patricio, Fisk, and Falcao e
                             Cunha (2008); Sousa and
                                                                     pay. Although hardly a sufficient silver
                             Voss (2006); Verhoef, Neslin            lining, researchers now have the opportunity
                             and Vroomen (2007).                     to examine more thoroughly many of
     Location                Durvasula, Sharma, and                  the issues discussed in the remainder of
                             Andrews (2002); Ghosh and               this introduction in a new light. How do
                             Craig (2001); Gauri, Trivedi,
                             and Grewal (2008); Xu and               consumers react differently to brand, price,
                             Kim (2008).                             promotions, supply chain management,
     Advertising             Chaudhuri & Buck      (2005);           location, advertising, packaging, labeling,
                             Petty & Cacioppo      (2003);           service mix & atmosphere in an economic
                             Janoschka (2004);      Fisher,
                             Gainer, and Bristor   (1997);
                                                                     crisis? Can retailers take certain actions to
                             Goff et al. (1997).                     increase patronage, both before and during
     Packaging & labeling    Koirala (2005); Kotler and              a shopping experience? Does consumer
                             Armstrong (2005); Young                 cherry picking change when consumers
                             (2003); Jugger (1999); Luo              face more difficult economic trade-offs?
                             (2005); Wakefield and Baker
                             (1998); White and Dahl                  Will consumers continue to embrace more
                             (2006).                                 expensive and higher quality private-label
     Service Mix             Oliver (2001); Parasuraman,             merchandise? How should retailers alter
                             Zeithaml, and Berry (2004);             their assortments? Should they continue
                             Baker et al. (2002); Beatty et
                                                                     to experiment with new categories that
                             al. (1996); Folkes and Patrick
                             (2003); Meuter et al. (2005);           previously appeared only in stores with
                             Van Dolen, Dabholkar, and               different retail formats? Will price elasticities
                             de Ruyter (2007); Weijters et           for substitute and complementary purchases
                             al. (2007).
                                                                     differ during economic downturns? What
     Atmosphere              Baron, Harris and Harris
                             (2001); Kozinets et al (2002);
                                                                     innovative strategies might multi- channel
                             Schmitt (1999); Baker et al.            and online retailers use to gain greater shares
                             (2002); Kaltcheva and Weitz             of wallet? And how might retailers adjust
                             (2006); Wakefield and Baker
                                                                     their global sourcing strategies and the way
                             (1998).
                                                                     they work with and develop relationships
       Figure 1. Overview of literature on aspects of                with their global vendors? These questions
                   customer experience                               and many more depend on the major
                                                                     economic issues that confront consumers
                                                                     and the retailers they serve.




                                         Business Intelligence Journal - January, 2010 Vol.3 No.1
2009                                                                              Kamaladevi B.                                                     41




                                                                                                  addition, Ofir and Simonson (2007) found




                              Recognition

                                            Information



                                                          Evaluation


                                                                       Purchase



                                                                                  Purchase
                Factors




                                               Search
                                                                                                  that customer expectations (when stated prior
                Macro




                                 Need




                                                                                    Post
                                                                                                  to a service encounter) have a significant
                                                                                                  effect on post purchase evaluations of the
        Brand                     x             x           x            x
                                                                                                  shopping experience and the firm. This
        Price                     x             x           x            x
                                                                                                  suggests that customer brand perceptions (of
        Promotion                                           x
                                                                                                  the retailer), when primed prior to shopping
        Supply Chain                                                                              experience, might significantly influence the
                                                x           x            x
        Management
                                                                                                  customer’s experience. It is also important
        Location                                x           x            x           x
                                                                                                  to consider the reinforcing effects of the
        Advertising               x             x           x
                                                                                                  customer’s experience and the brand over
        Packaging         &
        labeling
                                                            x            x                        time. Prior research suggests that customer
                                                                                                  experience has a significant influence on
        Service Mix                             x           x            x           x
                                                                                                  the customer’s overall perception of the
        Atmosphere                                                       x
                                                                                                  brand. In addition, Keller and Lehmann
         Figure 2. Macro Factors Influencing Consumer                                             (2003) propose that the customer mindset
                    Buying Decision Process                                                       (e.g., awareness, associations, attitude,
                                                                                                  attachment and activity) is the key driver of
       The Brand Experience                                                                       brand performance (e.g., price premiums,
                                                                                                  price elasticities, market share, expansion
          The customer comes to a retailing                                                       success).
       environment with perceptions about two
       types of brands: the retail brand (e.g.,                                                      Research Discussion
       Victoria’s Secret, Starbucks, Wal-Mart,
       Macy’s, Best Buy) and the manufacturer or                                                      There is much yet to learn about the
       service brand that is sold in the retail stores                                            influence of brand perceptions on the
       (e.g., Verizon, Ralph Lauren, Tide, Dell,                                                  customer’s retail experience. There may
       private label brand). Here, the discussion is                                              be asymmetric effects of brand perceptions
       about the retail brand customer experience,                                                on customer experience. Consumers whose
       although the ideas put forth below could be                                                first impression of a brand is negative can
       investigated in relation to the manufacturer                                               be influenced by providing them with
       or service brand as well.                                                                  non-comparative information, whereas
                                                                                                  consumers with positive first impressions of
          Background                                                                              a brand are influenced more by comparative
                                                                                                  information. This suggests an area that is ripe
           Customers’ brand perceptions may                                                       for future research—namely, understanding
       influence their customer experience. Recent                                                how a customer’s initial perceptions of a
       research has begun to investigate new aspects                                              retail brand may influence distinct elements
       of this relationship. Specifically, Fitzsimons,                                            of the customer’s subsequent experiences
       Chartrand, and Fitzsimons (2008) found                                                     with the brand, and how those experiences
       that the type of brand and consumers’                                                      in turn may influence brand perceptions in
       perceptions of the brand can influence their                                               the future. In addition, positive customer
       behavior. For example, consumers primed                                                    brand perceptions may influence customer
       to think of Apple behave more creatively                                                   experiences differently than negative
       than consumers primed to think of IBM. In                                                  customer brand perceptions. As such, future


                                               Kamaladevi B. - Customer Experience Management in Retailing
42                                                 Business Intelligence Journal                                    January




     research could also investigate the extent to                because retailers stock thousands of items,
     which strong (positive or negative) brand                    most of which are irrelevant to any given
     perceptions may have a significant effect on                 consumer. Furthermore, because different
     the customer’s experience. In addition to the                consumers buy different market baskets, a
     direct effects of customer brand perceptions                 category or store that one customer perceives
     on customer experience, future research                      as high priced may seem low priced to another.
     could examine the extent to which customer                   Research suggests that retailers therefore
     brand perceptions may act as a moderator in                  should carry some high-priced merchandise
     influencing the effects of other determinants                to extract rents from loyal customers and
     of customer experience. For example,                         some low-priced merchandise to attract new
     might brand perceptions (either retail or                    ones, but more work is needed in this area.
     manufacturer) moderate the effects of social                 Moreover, the emergence of discount stores
     environment, self-service technology, or                     carrying fashion products and luxury brands
     price on customer experience?                                can affect pricing in traditional retail chains
                                                                  (Kopalle et al. 2009).
     The Price Experience                                             Previous pricing research regarding
                                                                  private labels versus national brands
         A lot rides on how a retailer sets its                   suggests asymmetric sales effects, such
     prices. The three other P’s create value for                 that higher price/higher quality brands
     the seller; the fourth P of price captures                   steal sales from lower price/lower quality
     value. In addition, this is the only P that                  brands when the higher tier reduces its price
     earns revenue for the retailer. When                         (Blattberg and Wisniewski 1989). In various
     retailers price a product or service too high,               examinations of the different features
     consumers view it as a poor value and will                   of the private label/national brand and
     not buy. A price set too low may signal low                  price/sales interactions, asymmetric effects
     quality, poor performance, or other negative                 predominate (Allenby and Rossi 1991;
     attributes about the product or service.                     Bronnenberg and Wathieu 1996; Pauwels
     Although setting the “right” price is clearly                and Srinivasan 2004; Sethuraman and
     an important retailing task, it is often treated             Srinivasan 2002; Wedel and Zhang 2004).
     as an afterthought, partly because it remains                These studies again focus on grocery and
     the least understood and therefore most                      drugstore formats, in which private-label
     difficult to manage task.                                    prices generally are significantly lower than
                                                                  those of national brands. Further research
        Background                                                should investigate the pricing aspects
                                                                  of private labels versus national brands
        Recent research demonstrates that a                       using premium private labels (Kumar and
     consumer’s store price image likely results                  Steenkamp 2007) and durable and fashion
     from a numerosity heuristic, such that the                   goods.
     greater the number of low priced products at
     a store, the lower is the price image among                      Research Discussion
     knowledgeable consumers (Ofir et al. 2008).
     Kopalle et al. (2009) concentrate on the                        A popular pricing strategy adopts
     interaction between pricing and competitive                  loss leaders, items priced at or below the
     effects in retailing, noting the difficulty of               retailer’s cost. The preponderance of loss
     research into category and store level prices,               leader activity in retail stores believes the


                                      Business Intelligence Journal - January, 2010 Vol.3 No.1
2009                                                Kamaladevi B.                                                      43




       gaps in our knowledge about its impact                       minor impact on retailer profits; they also
       on traffic, sales, and profits. Although                     conclude that not all promotions have a
       store traffic increases and sales generally                  positive revenue impact for retailers though.
       increase for items used as loss leaders, these               Rather, the profit impact is decidedly mixed.
       loss leaders may not influence the sales
       of other, non-promoted items, and their                         Background
       impact on profitability is questionable. A
       more definitive under- standing of how loss                      Literature on integrated marketing
       leaders affect the sales of non-promoted                     communications is vast, but research
       items and profitability would be very useful.                pertaining to retailing is very specific.
          Research on online and multi channel                      Ailawadi et al. (2009) logically organize
       pricing takes a prominent place in modern                    this body of research into manufacturer
       academic journals, yet limited study                         promotion decisions, as it relates to retailers,
       addresses online pricing strategies. Much                    and retailer promotion, the manufacturer
       of this limited research focuses on customer                 primarily is interested in using promotions
       reactions to different pricing strategies and                to enhance the performance of its brands,
       shipping fees, the role of infomediaries,                    whereas the retailer is interested in
       advertising revenues, channel interactions,                  enhancing their own performance (Van
       and personalized pricing schedules. Yet                      Heerde and Neslin 2008). Significant
       some of the issues described herein and                      research on trade promotions centers on the
       examined in brick-and-mortar store settings                  extent of the monetary savings passed on to
       would be useful pursuits in the virtual and                  consumers. Some controversy surrounds the
       multichannel world. For example, how might                   impact of pass-through trade promotions;
       online strategies differ from in-store strate-               specifically, does a trade promotion from
       gies for similar merchandise and services?                   one manufacturer in a given period influence
       Should they differ across channels? Do                       the promotion of another manufacturer’s
       consumers behave differently online? What                    brand in the same period (e.g., Moorthy
       competitive behavior effects exist?                          2005)? The accounting records pertaining
                                                                    to trade promotions remain inadequate for
       The Promotion Experience                                     deriving a definite answer (Parvatiyar et
                                                                    al. 2005). Ailawadi et al. (2009) therefore
          Consumer promotions also take several                     suggest further research should exam- ine
       forms, including price promotions, loss                      how different types of trade promotions
       leaders, and in-store displays. Meta                         get funded, passed through, and perform. A
       analyses show that the immediate increase                    plethora of research investigates the impact
       in sales of a promoted item is substantial.                  of different types of promotions on sales and
       However, brand switching as a result of                      profits, including the composition of flyers
       consumer promotions is closer to 30–45                       (Gijsbrechts, Campo, and Goossens 2003).
       percent, far less than previous estimates
       of approximately 80 percent. A consumer                         Research Discussion
       promotion, such as a loss leader, on one
       item should increase sales of other items                       Although most retail promotions
       and overall profits, yet empirical research                  emphasize price, studies often consider
       in this area is mixed. Consumer “cherry                      them in isolation. Yet price promotion
       picking” for special prices has a relatively                 coordination is a key driver of retailer


                              Kamaladevi B. - Customer Experience Management in Retailing
44                                                Business Intelligence Journal                                   January




     profitability. Retailers and researchers alike                  Background
     need more information about the impact of
     coordinating price promotions within and                        Ganesan et al. (2009) examine several
     across categories and across retail formats                 important supply chain issues, including
     within a chain, such as Wal-Mart and                        global sourcing practices, multichannel
     Neighborhood Markets. The National brands                   routes to market, and relationship-based
     should be promoted more than private-label                  innovation. These authors note that with
     brands, because the national brands attract                 private-label merchandise, as opposed to
     customers’ attention and attract them to the                national brands, the burden of ensuring that
     store. Yet retailers promote private-label                  merchandise production adopts corporate
     merchandise, because they generally earn                    socially responsible (CSR) policies, as well
     higher margins on private labels.                           as quality and safety control issues, rest
        Although the customer knows much                         with the retailer. And most of this sourcing
     about the sales bump caused by consumer                     is done globally today. Academic research
     promotions, they have a poorer understanding                at the nexus of global sourcing and CSR is
     of the profit impact. Retailers’ increased                  somewhat sparse (e.g., Wagner, Lutz and
     emphasis on private-label merchandise                       Weitz 2008); more research might examine
     demands more work investigating the                         the circumstances in which customers will
     effectiveness of private-label promotions.                  pay more for merchandise produced in a
     It also seems important to identify win–                    socially responsible manner, particularly
     win promotions for manufacturers and                        during economic downturns. Ganesan et
     retailers. Because many purchase decisions                  al. (2009) also examine several issues for
     take place in brick and mortar stores and                   hierarchical multichannel relationships, in
     as new methods for reaching consumers in                    which both manufacturers and retailers sell
     stores emerge, more research should assess                  through multiple channels to consumers.
     the effectiveness of in-store promotions to                 As hierarchical multichannel relationships
     customers.                                                  develop, conflict can occur between the
                                                                 channel members, which must compete
     The Supply Chain Management                                 with one another. Retailers can respond to
     Experience                                                  this competitive situation by taking direct
                                                                 action, such as refusing to sell products that
        Most of the researchers centers on what                  the supplier sells directly (Schoenbachler
     happens at the front-end of the retail store,               and Gordan 2002), or looking for alternative
     supply chain management occurs at the                       ways to service customers (Vinhas and
     back end. For decades, retail supply chain                  Anderson 2005). A more positive approach
     and logistics issues seemed somehow less                    would pursue a channel structure with mutual
     important than other activities such as                     benefits, such as profit sharing (Neslin et
     promotion, pricing, or customer service.                    al. 2006; Yan 2008). Ganesan et al. (2009)
     But this erroneous perception no longer                     there- fore suggest that further research
     exists. Supply chain issues, from both the                  should attempt to increase our understanding
     more managerial partnering side and the                     of how hierarchical multichannel structures
     more technical operations side, have proven                 affect the participants’ relationships, their
     important sources of competitive advantage                  relative power, and their performance.
     for many retailers, particularly low-cost
     providers such as Wal-Mart and Zara.


                                     Business Intelligence Journal - January, 2010 Vol.3 No.1
2009                                                 Kamaladevi B.                                                     45




          Research Discussion                                        has major ramifications for price, promotion,
                                                                     and merchandising decisions.
          Most recent retailing innovation
       initiatives seem to come from sustainability                     Background
       initiatives designed to improve the
       environment, healthcare, diversity, and                           Durvasula, Sharma, and Andrews
       sourcing. It investigates how relationships                   (2002) recommend STORELOC, a store
       between retailers and their suppliers may                     location model that incorporates managerial
       facilitate product or process innovations.                    judgment data in addition to consumer
       Specifically, when supply chain partners                      data. Because key managers participate
       exchange information, the relationship                        in the process, their buy into the outputs
       grows stronger, and the likelihood that                       of the location model increase, namely,
       valuable and important information gets                       the identification of the best retail sites for
       exchanged increases. However, the strength                    expansion. The key store attributes and
       of relational ties may play a more important                  their relationships with relative competitive
       role for process than for product innovations.                strength can be estimated using varied
       When retailers have supply chain partners                     methods in this model, including conjoint or
       with diverse, rather than complementary,                      logit analysis. Another interesting location
       capabilities and resources, they are more                     problem involves understanding how to
       likely to innovate, because the information                   expand a franchisor distribution system
       acquired from these varied sources differs.                   optimally, because in some cases, that
       Finally, asymmetrical dependence between                      which is best for the franchisor may be at
       the retailer and its supply chain partners                    odds with the preferences of the individual
       should negatively affect innovations,                         franchisees. Ghosh and Craig (2001)
       because the weaker party guards against                       develop FRANSYS, a franchise distribution
       exploitation, while the stronger party tends                  system location model, to address this kind
       to exploit opportunities without worrying                     of problem. Another important issue related
       about negative partner perceptions.                           to locating franchises concerns the choice
                                                                     between multi unit franchisees (MUF)
       The Location Experience                                       versus single unit franchisees (SUF) since
                                                                     the modal franchisee in the US is no longer
          Retailing academics and practitioners                      the stereotypic mom and pop single unit
       seem always to emphasize “location,                           operator, but a mini chain operator (Garg et
       location, location” as the key to success. An                 al. 2005; Kaufmann and Dant 1996). Some
       important research advance could consider                     recent evidence suggests that even though
       the role of travel time on consumers’ choices                 MUF may be preferred by franchisors
       of retail formats and the related retailing                   for reasons of rapid system growth,
       implications because consumers value their                    system-wide adaptation to competition,
       time, researchers should investigate what                     minimization of horizontal free-riding, and
       it might take, in terms of price savings and                  the strategic delegation of price or quantity
       deals, to attract consumers to a factory outlet               choices to franchisees, it is the SUF that
       store (normally located some distance away)                   characterize their dyadic relationships with
       rather than a similar store in a conveniently                 their franchisors as more rela- tional and
       located mall. The location decision likely                    cooperative as compared to their MUF
                                                                     counterparts (Dant et al. 2009).


                               Kamaladevi B. - Customer Experience Management in Retailing
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        Research Discussion                                      the growth process, marketers recognized
                                                                 that the Internet was a medium for reaching
        The age of these models clearly shows,                   millions of potential customers. Since
     however, the need for more research into                    then, marketers have adapted value based
     location issues. With the greater availability              advertising strategies to the Internet.
     of excellent geographical information
     systems (GIS), rich data are easily accessible.                 Background
     For example, GIS data supplemented with
     appropriate panel consumption data could                       Traditional consumer behavior literature
     enable empirical tests of a host of location                would suggest that intense product
     models. More recent research highlights the                 information is vital for high involvement
     role of two key location factors: proximity                 product web sites, while entertainment
     to customers (measured in travel time) and                  content may be fit for low involvement
     proximity to other stores or agglomeration.                 product sites (Chaudhuri & Buck, 2005;
     For example, grocery stores appear to benefit               Petty & Cacioppo, 2003). Additionally,
     from agglomeration with discount stores, but                the primary reason for distinguishing
     Wal-Mart discount stores suffer reductions                  between high and low product involvement
     in revenues when they agglomerate with                      is that habit, intuition and convenience
     grocery stores. Prior research recognizes                   sometimes guide the actions of consumers
     several different retail formats, according to              rather     than     rational  considerations
     pricing (e.g., everyday low price vs. high/                 (Lamb, 1996). There are various types
     low pro- motions), merchandise (wide                        of online advertising, including “emails,
     vs. narrow) and Internet presence (bricks,                  newsletters, screensavers, e-sponsoring,
     clicks, or bricks and clicks). Insights from                asynchronous and synchronous chat groups,
     this area of inquiry suggest that bricks still              infomercials, online games, and web sites”
     hold an advantage over clicks and are likely                (Janoschka, 2004). Similar to other types of
     to dominate in certain categories, such as                  advertisements, web ads are paid or unpaid
     high end apparel and jewelry. Research                      form of communication aim at informing
     also shows that consumers may use the                       the existence of a product or service and/or
     different retail formats for different stages               persuading consumers to take actions. And
     of the consumer decision process, such that                 Janoschka (2004) found one major difference
     the online store might be a great way to                    is that web ads are hyperlinks in nature,
     compare alternatives, but brick-and-mortar                  which enable activation by their users. They
     stores seem more suitable for purchases. A                  not only contain promotional messages on
     systematic understanding of the role of these               themselves which tries to attract consumers’
     different formats in the consumer decision                  attention, but also embedded with hyperlinks
     process and how retailers can best optimize                 and then point to a much greater information
     their multiple channels would be a fruitful                 pool, such as the corporation’s website.
     area of inquiry.
                                                                     Research Discussion
     The Advertising Experience
                                                                    The global online advertising industry
        Exponential growth in Internet hosts                     has witnessed the rapid emergence of social
     and personal computer adoption has led to                   networking sites and is growing rapidly
     dramatic increases in online activity. During               despite the economic slowdown. The


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2009                                                Kamaladevi B.                                                    47




       growth of this industry is being driven by                   (e.g., molding society’s material wants) and
       increasing internet users, rising awareness                  media content (e.g., the information content
       and growing broadband subscription rate                      of ads). Advertiser concerns include ad
       and ecommerce, which is playing a key role                   agency concerns (e.g., self-regulation or the
       in this industry. In coming years online Ad                  ethical codes of ad agencies) and the voice/
       spending is expected to overtake the TV                      tone of the ad (e.g., corporate advocacy or
       advertising market.                                          comparative ads). Finally, legal concerns
          The industry is divided into various                      include the use of deception, advertising to
       segments but mainly three segments (search,                  children, and public service announcements
       display and classifieds) represent the whole                 (e.g., anti-drug or anti-cigarette ads).
       industry. Rich media is a new segment
       recently entered in the online Ad industry,                  The Packaging              &     Labeling
       caters to a small portion of the market                      Experience
       whereas search, display and classifieds
       serves almost 80% of the online Ad industry.                     Packaging plays a major role when
       There are various revenue models, out of                     products are purchased. After all, it is the
       which pay-per-impression and pay-per click                   first thing seen before making purchase
       are the most common among others.                            choices and it is widely regarded that over
          In terms of online Ad spending by                         50 per cent of purchasing decisions are made
       geography, UK, Netherlands and the pan-                      at the shelf, or point of purchase. Therefore,
       European sector lead the market but in                       packaging which creates differentiation
       terms of internet Ad budget allocation                       and identity in the relatively homogenous
       France, Germany, Spain and Italy have                        consumer packaged goods industry is
       a strong presence. United States is the                      therefore highly important.
       most developed market for the advertising
       industry. In Canada, internet advertising                       Background
       accounted for almost one third of total
       advertising market.                                             As a fifth ‘p’ of marketing, packaging
          The areas for future research are discussed               refers to the activities of designing and
       here. The thirty-three items suggested by                    producing the container or wrapper for
       the fourteen academicians may be grouped                     a product. It may be primary, secondary,
       into types of ads, types of appeals, larger                  and shipping to perform the objectives as
       effects on society, advertiser concerns, and                 containment, protection, identification,
       legal concerns. Types of ads include ads for                 communication, promotion and product
       legal vices (e.g., ads for tobacco or alcoholic              differentiation. Good packaging also
       beverages), ads for sex-related products (e.g.,              provide information based on truth, it must
       condom ads or ads for abortion services),                    be economical, attractive, convenient,
       and ads for health care and professional                     protective and transparent (Koirala, 2005).
       services (e.g., ads for personal care and                    A label is a simple tag attached to a product
       hygiene products or ads for professional                     or an elaborated designed graphic that is
       legal services). Types of appeals include                    the part of the package. It identifies, grade,
       the use of questionable appeals (e.g., fear or               scribe and promote the product by providing
       negative appeals) and stereotypical appeals                  the information to the buyer. It may be brand
       (e.g., sexual or racial stereotyping). Larger                labels, grade labels and descriptive labels
       effects on society include value formation                   (Kotler and Armstrong 2005). It is vitally


                              Kamaladevi B. - Customer Experience Management in Retailing
48                                                 Business Intelligence Journal                                  January




     important that when researching package                      incidents. Packaging is integral to boosting
     design that it is measured in the context                    perceptions of safety and will therefore be
     within which it is usually found (Young,                     an important part of more concerted efforts
     2003). “The ‘right’ packaging solution is                    to regain consumer trust going forward.
     different for each brand. What is important
     is that it works when placed next to the                     The Service Mix Experience
     competition on the shelf” (Jugger, 1999).
                                                                     Customer service is the ability of an
        Research Discussion                                       organization to constantly and consistently
                                                                  give the customer what they want and need.
         Packaging has a better reach than
     advertising does, and can set a brand apart                      Background
     from its competitors. It promotes and
     reinforces the purchase decision not only at                    Customer satisfaction is a key consequence
     the point of purchase, but also every time                   of service quality and can determine the
     the product is used. Packaging in different                  long-term success of a service organization
     serving sizes can extend a product into                      (Parasuraman, Zeithaml, and Berry 2004). In
     new target markets or help to overcome                       general, customer satisfaction is affected by
     cost barriers. Packaging can even drive                      customer expectation or anticipation prior to
     the brand choice (especially in the context                  receiving a service and can be approximated
     of children’s products). As the market                       by the following equation: Customer
     becomes more competitive and shelf space                     Satisfaction = Perception of Performance –
     is at a premium, products need to be able                    Expectations (Oliver 2000). When translated
     to stand out from the crowd and packaging                    to services, a distinction between service
     needs to provide more than just functional                   quality and customer satisfaction needs to
     benefits and information. Under time                         be made (Parasuraman, Zeithaml, and Berry
     pressure and in low involvement purchases,                   2004). Furthermore, one must differentiate
     less time is spent looking at the detail and                 between service expectations and service
     information provided on packaging – this                     perceptions.
     is especially true in the FMCG category.                        While service expectations are a
     Research into packaging has found that                       combination of a customer’s predictions
     different packaging cues impact how a                        about what is likely to happen during a
     product is perceived. Often the packaging                    service transaction as well as the wants
     is perceived to be part of the product and it                and desires of that customer, service
     can be difficult for consumers to separate                   perceptions can be defined as a customer’s
     the two (the concept of gestalt). Aspects                    global judgments or attitudes, which relate
     such as packaging colour, typography,                        to the superiority of a service (Oliver 2001;
     illustrations and graphics can influence how                 Parasuraman, Zeithaml, and Berry 2004).
     a product is perceived. Labeling should not
     be unnecessarily confusing or misleading in                      Research discussion
     order to hide the poor nutritional/ingredient
     profile of certain products. The decrease in                    A lot of companies are so preoccupied
     consumer confidence in food safety is not a                  with day-to-day operations, but if they
     result of the number of recalls, but instead the             don’t have customers for life we’re going
     high-profile, long-lasting nature of the safety              to go out of business. Many service


                                      Business Intelligence Journal - January, 2010 Vol.3 No.1
2009                                                Kamaladevi B.                                                     49




       organizations, such as hotels, retail stores,                Schmitt 1999). Sharma and Stafford (2000)
       and airlines, invest substantially in their                  suggest that customers have a higher need
       physical plant to provide a superior service                 to affiliate with salespeople working in nicer
       experience. However, little is known about                   retail environments or ‘prestige ambience
       how to design a servicescape to enhance the                  environments’– which should lead to an
       consumption experience. For example, it                      increase in the perceived level of credibility
       may be unsurprising to learn that research                   for the salesperson, and subsequently a
       has shown that pleasant music, compared                      higher likelihood to purchase. However, the
       with less pleasant music, is associated                      ‘prestige’ and ‘discount’ ambience stores
       with longer consumption times, shorter                       have been hard to define in the literature,
       time perceptions, less negative emotional                    with most researchers testing atmospherics
       reactions to waiting, more favorable attitudes               in isolation, and not at a holistic perspective
       toward the physical environment, more                        (Turley and Milliman, 2000).
       positive attitudes toward service providers,
       and more favorable customer assessments,                     Research Discussion
       purchase intentions, and behavior.
                                                                       The future research should examine
       The Atmosphere Experience                                    retail store environments where customer-
                                                                    salesperson relationships may exist
          Consumer spending behavior can                            to increase understanding in this area.
       be significantly influenced by the store                     Furthermore, customer service quality
       atmosphere and the customer mood.                            measures typically given when examining low
       Customers require a store layout that                        sales interaction stores should be compiled
       maximizes the number of products seen                        in conjunction with relationship selling and
       within the context of a customers’ need for                  other measures that influence the customer
       the product. Customers who experience                        experience to understand if relationship
       a form of personal control, whether in                       selling is necessary in these retail settings.
       orienting themselves to the store section                    Store atmospherics did have a significant
       they need to go to or in finding the products                impact on customer expectations of the
       they want, generally feel good about the                     retail salesperson, but in behaviour only. A
       store. Good feelings lead to more purchases,                 higher perceived store ambience resulted in
       especially if products are presented within a                higher expectations of a retail salesperson’s
       display that shows the potential usefulness                  behaviour, but a higher store atmosphere did
       of the product for them.                                     not result in higher expectations of a retail
                                                                    salesperson’s credibility. Store atmospherics
          Background                                                manipulate customer’s expectations of the
                                                                    retail salesperson behaviour, subsequently
          Store atmospherics have been at the                       affecting customer satisfaction if the retail
       centre of numerous discussions recently                      salesperson does not match expectations.
       as a means of creating a pleasurable                         Future research will be directed into
       consumption experience; engaging and                         the exploration of characteristics of the
       luring customers, with hopes that they                       salesperson and store atmospherics to
       will increase their likelihood to purchase,                  determine the optimal blend for certain store
       revisit and recommend to others (Baron,                      environments.
       Harris and Harris 2001; Kozinets et al 2002;


                              Kamaladevi B. - Customer Experience Management in Retailing
50                                               Business Intelligence Journal                                   January




     10 Best Practices to make the                                  3. Focusing on the most strategically
     Successful CEM                                                 important customers

        1. Successful deployment requires the                      The starting point for the work is
        active and continuing involvement of                    collecting customer data to inform the
        leadership                                              definition of a promise and design the
                                                                new experience. The most frequent client
        Execution is the hardest part of creating               response to this suggestion is “We already
     a customer experience because in order to                  have lots of customer data and research so
     deploy successfully they have to mobilize                  you don’t need to bother.” In reality whilst
     employees at all levels and align competing                organizations undertake customer research
     agendas, functions and executives. This is                 and collect mountains of data, relatively
     not an easy task. Perhaps that is why that                 few know who their most profitable (not
     so many of the exemplars of Customer                       largest) customers are. The fact is that a
     Experience tend to be organizations led by                 few customers will typically represent the
     passionate founders or CEOs that see it as a               significant proportion of the profit and these
     primary source of differentiation. Think of                are the ones to focus improvement efforts
     Starbucks, Amazon, Southwest Airlines or                   on.
     Virgin and inevitably you quickly think of
     Howard Schultz, Jeff Bezos, Herb Kelleher                      4. Finding out what these customers
     and Richard Branson. CEM can work just as                      truly value
     successfully and achieve startling results in
     large mature corporates too, but the need for                 Knowing who are the most profitable
     leadership is even greater.                                customers is all very well, but if they do
                                                                not know what these customers value and
        2.   Ensuring          cross-functional                 the three or four most important attributes
        ownership is vital                                      which drive their intention to repurchase,
                                                                cannot influence their behaviour. Without
        If the CEO or President recognizes that                 the answers to these questions they may
     it will take more than rhetoric to make a                  have data, but they do not have insight.
     difference, the next common mistake is                     A key component of a branded customer
     asking the Marketing VP, HR Director or                    experience is being differentiated in a
     Customer Service Executive to “fix the                     way that is valuable to target customers.
     problem.” The brand and the customer                       A key component of a branded customer
     experience must be owned collectively                      experience is being differentiated in a way
     by the senior management team. Each                        that is valuable to target customers.
     function has its particular part to play, but
     to be successful these three functions must                    5. Being clear about what we stand
     operate as what we refer to as a “Triad” to                    for
     optimise resources, efforts and budgets to
     create an organization-wide strategy for                      In 2001, UK-based bank Barclays aired a
     delivering the brand.                                      television advertisement called “Big Idea.”
                                                                It was a beautifully crafted ad featuring
                                                                Anthony Hopkins as a big shot businessman
                                                                with a big house, a big car and a big meeting


                                    Business Intelligence Journal - January, 2010 Vol.3 No.1
2009                                                Kamaladevi B.                                                      51




       to attend. The tagline was, “A big world                     training is bad. In fact there are some very
       needs a big bank.” The ad received a bronze                  good off-the-shelf programmes that really
       award at that year’s British Television                      help to improve customer-facing skills and
       Advertising Awards, but customers replied                    make service more consistent.
       with a less than enthusiastic, “big deal!”                      A key ingredient of successful branded
       The ad simply reinforced common customer                     training is to build executives into the process
       preconceptions about large banks that they                   so that they have an active role in cascading
       don’t care about the average person and are                  the message. Leaders have been trained as
       interested only in making as much money as                   champions of customer experience and are
       they can.                                                    leading its implementation.
          In the Polish market, 55 percent of
       executives feel that they have “defined a                       8. Designing CEM before installing
       brand promise that differentiates us in the                     CRM systems
       eyes of their target customers” but only
       35 percent “have mapped their customer                          At the peak of CRM hype, expenditure
       touchline to determine the key points of                     on CRM systems was estimated to have
       contact their customers have with us and                     increased from $20 billion in 2001 to $46
       how their promise should be delivered at                     billion in 2004. Yet one survey by Gartner
       each.” This omission is quite common in                      research estimated that 55 percent of CRM
       their experience and takes us on to our next                 systems drove customers away and diluted
       point. Making a promise to the customers is                  earnings. This is because most CRM
       one thing, delivering it quite another.                      systems are installed without any thought
                                                                    about how they will be used to add value
          6. Delivering the promise at every                        for the customer. These powerful systems
          touch point                                               allow companies to collect knowledge
                                                                    about the customer that can be used to offer
          This is particularly true in today’s                      them products and services tuned to their
       economy. With the pressure on sales and                      particular needs and preferences. However,
       costs they have to make sure that every                      for many customers the acronym CRM
       effort is made delivering those things that                  stands for “Constantly Receiving Mail-
       customers value rather than things that                      shots” since many organizations (and banks
       they don’t. This means having an intimate                    are the worst) use them as a blunt instrument
       understanding of the customer experience                     to stalk, rather than woo, the customer
       and being intentional about designing it to                  through junk mail. Some software providers
       deliver value at the key touch-points.                       are now designing their products to support
                                                                    the customer experience and build CEM
          7. Providing branded training to                          functionality into their call-centre products
          ensure that employees understand                          so that the agent is provided with all the
          the brand story                                           information, tools and measures necessary
                                                                    to deliver the desired experience.
          Many organizations provide customer
       service training yet few are differentiated in
       the service they provide. The reason is that
       “vanilla” training creates “vanilla” service.
       This is not to say that all generic service


                              Kamaladevi B. - Customer Experience Management in Retailing
52                                                Business Intelligence Journal                                   January




        9.   Measuring         the      customer                 appropriate measurement and rewards then
        experience                                               it is unlikely to happen.

        Peter Drucker’s maxim that “what gets                    Conclusion
     measured gets managed” is still true today.
     Yet most organisations focus exclusively                       Customer Experience Management
     on end-results measures. Market share,                      is not, however, simply an old idea in a
     profitability and EPS growth are all vital                  new wrapper. In recent years a number of
     measures of business performance but they                   fundamental changes have occurred in
     are all lagging indicators—the result of                    the business environment that have led to
     differentiation, customer loyalty and brand                 the emergence of Customer Experience
     preference. The answer is to move up-stream                 Management as both a strategic discipline
     and measure and manage those activities that                and a fast-growing industry, complete with
     deliver the required customer experience                    a wide array of tools and solution sets. The
     and drive customer advocacy. Market share,                  changes have been fueled by technological
     profitability and EPS growth are all vital                  advancements, which have expanded the
     measures of business performance but they                   range of services available to customers, and
     are all lagging indicators.                                 simultaneously led to escalating customer
              Yet over 51 percent of the executives              expectations. The result is that there are
     the organization surveyed reported that their               now more services and products available
     organization did not have a scorecard to                    than at any time in the past, yet customer
     measure the customer experience. The mean                   satisfaction are on a downward slide.
     score for the statement “We have a scorecard                Customer Experience Management can
     of indicators that provide leaders with                     help reverse that slide by providing efficient
     objective and timely feedback on how well                   business tools that make the interactions
     we are delivering against our promise” was                  between companies and customers more
     the lowest achieved in the survey scoring at                rewarding for both parties.
     just 4.6 on their ten-point scale.                             Hope this article provide a broad-based
                                                                 overview of the various domains (e.g.,
        10. Aligning the organization with                       Brand, Price, Promotion, Supply Chain
        the customer experience                                  Management,        Location,     Advertising,
                                                                 Packaging & labeling, Service Mix
        One of the lowest scoring items in the                   and Atmosphere) of the retail customer
     organization survey was “Leaders measure                    experience and in turn provide a research
     and monitor the quality of the customer                     catalyst for a plethora of important retailing
     experience.” As many respondents disagreed                  issues. Keeping customers in the next few
     with this statement as agreed with it. This                 years will be even more important than
     poor result was reinforced by the fact that                 making a sale. Shoppers are getting used to
     only 47 percent of respondents agreed                       those 50–75 percent off sale signs, and that
     with the statement “Our leaders reward                      is bad news for merchants who worry they
     employees who put customers first.” The                     will also have to quickly slash prices on
     fact is that unless there is a link between                 merchandise to attract customers. Retailers
     the desired business results, the customer                  will have to engage their customers every
     experience necessary to achieve it and                      day to create the long-term loyal advocates
                                                                 necessary to compete in these challenging


                                     Business Intelligence Journal - January, 2010 Vol.3 No.1
2009                                                Kamaladevi B.                                                   53




       times. The most important thing is to be                        A Risk-Based Explanation,” Journal of
       able to identify ways to hold on to profitable                  Retailing, 84 (1), 39–47.
       customers. 10 Best Practices to make the
       Successful CEM have shown in this article                    Fay, Scott (2008), “Selling an Opaque
       to provide a great customer experience for                     Product Through an Intermediary: The
       retail shoppers.                                               Case of Disguising One’s Product,”
                                                                      Journal of Retailing, 84 (1), 59–75.
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       Bürkle, Thomas and Thorsten Posselt
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                                 Business Intelligence Journal - January, 2010 Vol.3 No.1

				
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