1. Chapter 11 omni-channel strategy

2. Agenda Learning objectives Introduction
Key challenges of the omni-channel approach
The four pillars of an omni-channel strategy
Harnessing customer knowledge
Leveraging technology
Managing channel relationships

3. Agenda
Assessing channel performance
Take-aways

4. Learning Objectives
Understanding the challenges involved in creating a successful omni- channel strategy.
Defining the four pillars on which a successful omni-channel strategy rests.
Recognize the role of technology in creating successful omni-channel strategies.
Outline the tasks involved in assessing omni-channel performance.
Describe the need for seamlessness in an omni-channel context.

5. Introduction All channel members must have omni-channel strategy
Customers can slip through companies efforts otherwise
Information search, product evaluation, purchase or post-purchase efforts
The integration of customer’s ability to research, purchase, communicate, engage with, and consume a brand through a seamless customer experience across online, physical, mobile, and communication channels, makes managing those channels in tandem difficult
In order to be effective, all channel members must have an omni-channel strategy. Otherwise, customers can move through the companies channels without being directed in the way the company intended them to be. However, it is difficult to coordinate many channels simultaneously.

6. Example: a prototype omni-channel shopper (USA)
Neal is a 19-year old college student, shopping for a moderately priced, sporty- looking, but dressy watch. On Amazon Prime Day, he searched the site and found a nice Bulova watch at a fabulous price that he ordered promptly. But when he received it, Neal found the watch too heavy on the wrist, so he returned it. The experience left him hesitant to buy another watch online without trying it on first, so he visited a local Costco store, but nothing in its limited range of offerings appealed to him. Recalling that his family has long been loyal to Macy’s, he took a trip to the mall and found a Seiko watch at the department store he liked. While still in the store, he brought up the Amazon app on his smartphone and found the same watch, but for $120 less. He turned to the Macy’s salesperson and asked if the store would offer a price match, but the counter staffer indicated it would not and advised him to buy the watch from Amazon. He did so.

7. Introduction (cont.)
Managers and retailers often add channels disjointedly
T-Mobile
Stores receive $20 service fee, website does not
Encourages channels to act in self-interest
Levi-Strauss
Website/Company owned stores
Partnerships
JC Penney, Macy’s, and Kohl’s
Tracks customer journey online and off, integrating channel info.
Success means rich data about consumer wants, customer engagement, retail and e-commerce capabilities, and channel partners
Although seamless integration is paramount in omni-channel strategies, managers and retailers often add channels inconsiderately, drawing attention away from other channels rather than leveraging each other. T-Mobile is an example of this kind of disjointed adding of channels, where its website does not require the $20 service fee that purchasing in a store does. Levi-Strauss, on the other hand, is able to maintain a website and company owned stores while still not treading on the toes of its retail partnerships. They accomplish this by tracking the customers journey seamlessly on and offline, allowing the partnerships and channels to leverage each other to produce a rich snapshot of customers.

8. Example: Starbucks (china)
Starbucks counts China as its second largest market, behind the United States, where more than 3,400 restaurants dot the landscape in approximately 140 Chinese cities. In 2017, the largest Starbucks in the world opened in Shanghai. Unlike the nearly saturated U.S. market, China promises substantial room to grow, such that Starbucks plans to double the number of stores. The effort will not be without hurdles though; Starbucks faces touch competition from the Chinese startup Luckin Coffee. Launched in 2017, Luckin offers beverage delivery services, ordered via mobile apps, from its 660 stores throughout China. It took Starbucks nearly 12 years to open that many stores. Many Luckin stores only delivery and solely accept mobile payments, but its app allows customers to watch a livestream of their drink being prepared. In addition, its drinks cost approximately half of what Starbucks charges. Without a well-developed delivery system, Starbucks had to collaborate with the retail giant Alibaba to deliver beverage to Chinese consumers, though this partnership also has created a new potential channel, such that Hema supermarkets, run by Alibaba, may soon start hosting Starbucks delivery kiosks.

9. Key challenges of the omni-channel approach
Challenges vary based on sellers
Brick-and-mortar stores
Customers often ignore e-commerce channels
Online only
High cost of acquisition
Some respond by opening physical stores
Real Real maintains physical stores for fulfillment purposes
Integrates channels by holding items online when tried on physically
Repair and valuation services face-to-face
Challenges vary based on the type of seller, physical, online, etc. Mostly brick-and-mortar sellers have their e-commerce channels ignored because customers are unaware of them. Meanwhile, online only seller have high acquisition costs and may need to open some physical stores for fulfillment purposes. Real Real has done this, using physical stores for fulfillment while making sure in-store and online check-outs and carts are fully integrated.

10. Example: Walmart (USA/global)
Walmart sells more than 67 million items in its stores and online. Yet its online portfolio of approximately 19 million items is dwarfed by the 365 million items available on Amazon. Still, even as same-store sales have fallen flat, Walmart has achieved a significant boost in its e-commerce sales, prompting the retail giant to embrace its omni-channel future—and compete even harder against Amazon—through several notable moves. It acquired an Amazon competitor, Jet.com. It introduced a scan-and-go app that allows consumers to scan items as they place them in physical shopping carts, provide a mobile payment, and then simply show their receipts as they exit the store. To enhance the synergy between in-store and online shopping, Walmart requires its suppliers to deal with a single buyer, responsible for making purchase decisions for both e-commerce and in-store merchandise. Anticipating drastic changes to the overall shopping environment in the next few decades, Walmart aims to allow its mobile site to evolve into a personal sopping assistant that helps consumers make informed choices, wherever they might be. Then the brick-and-mortar stores can emerge as desirable, go-to locations, attracting shoppers by featuring compelling experience goods, such as restaurants, hair salons, healthcare services, demonstrations, and sampling. Taking the omni-channel even further, Walmart seeks to integrate consumers into the supply chain, by encouraging them to create original content and serve as beneficial influencers. Accordingly, Walmart’s omni-channel strategy highlights the ongoing need to develop better consumer analytics, especially those that can attribute sales to specific channels.

11. Key challenges of the omni-channel approach (cont.)
Should retailer’s target be the same online and offline?
Online presence allows physical stores to target outside of trade area
Might mean carrying different assortment online
Image of online presence may not match physical store
Manufacturers
Maintain partnerships while expanding customer sales
Might build own stores
Might build stores in stores
Contributes to customer journey through product info. online
An important question to ask is whether the same customers should be targeted through online channels as through physical ones. Some factors to consider are that online channels allow stores to draw in customers outside of their trade area, but they might need to sell a different assortment of goods and therefor the online presence may look quite different from the brick-and-mortar store. Moreover, manufacturers must build retail partnerships while still expanding its direct to customer sales. As such, they might build their own retail stores, or maybe stores within preexisting stores. Manufacturers are often now also expected to have product information available online.

12. The four pillars of an omni-channel strategy
Not all firms plan or want to be omni-channels
Completely digitized industries
Music
Publishing
Might become multi-channel instead
Automobile manufacturers
Online presence mostly informational
The four pillars
Harnessing customer knowledge
Leveraging technology
Managing channel relationships
Assessing channel performance
Not all firms will plan to be or want to be omni-channels. Some are already completely digitized, like music or publishing, while others, like the automobile industry, are mixed-channels. If a firm does want to succeed though omni-channeling, there are four pillars for success: harnessing customer knowledge, leveraging technology, managing channel relationships, and assessing channel performance.

13. Figure 11.1 Pillars of an Omni-Channel Strategy
Managing Channel Relationships
Harnessing Customer Knowledge
Assessing Channel Performance
Leveraging Technology

14. Harnessing Customer knowledge
Deep, data-driven understanding of customer
Marketers take info. From multiple sources
In-store visits, calls to customer service, loyalty program data, web and mobile visits, and social media
Must integrate data for use in segmentation
Customers move among channels
Consumers choose different channels at different purchase stages for various reasons
Many paths customers can take
Consumers who use more channels usually shop more
Customers showroom and webroom
Nordstrom lets customers use Instagram to shop
Much information grounded in data is necessary for omni-channeling to work. Marketers must collect this information from multiple sources, and must integrate it to create a clear picture of customers. Specifically, they must understand how customers use channels, and at what point in the purchasing process. Generally, customers who use more channels are ones who shop more, so keeping them satisfied is critical. Customers may webroom or showroom, or utilize social media in their buying processes. That is why it is important to know how and when customers use different channels. Nordstrom lets customers use Instagram to access shopping information, thus further allowing customers to buy the way they wan to buy.

15. Leveraging technology
Technology essentially enabled omni-channel age
Allows channel integration
Cost-efficient inventory management, synchronized inventory availability, and in-store pickup
Research tool for customers
Can facilitate shopping experience
Communication tool
Detailed product information, product comparison, and customized promotions
Many channels must be adopted
Web, mobile phone, social media, and games
Adjustments must be made
Cybersecurity, consumer privacy, secure transactions, up to date promotions, and delivery information
Technology is a main reason omni-channeling is possible. It allows for channel integration, researching, and communication that can help omni-channeling work efficiently. Examples of these could include synchronizing inventory availability between online and offline channels, facilitating shopping experiences online and customized promotions, just to name a few. Furthermore, multiple channels and necessary adjustments such as cybersecurity and real-time delivery info are also important.

16. Leveraging technology (cont.)
Health care industry
Fragmented and slow to change
Physician reviews
Video-chat with doctors
Electronic medical files
Mobile prescription refills
Wearable health monitors
Technology should be used in every purchase stage
Mobile payment (bypass check-out), e-coupons, click-and-collect, ordering home delivery
The health care industry, although they have been slow to implement this kind of technology, now offer many services such as online physician reviews, video-chats with doctors and mobile prescription refills that rely on leveraging technology. Ideally, technology should be utilized this way, in as many steps of the buying process as possible.

17. Leveraging technology (cont.)
Data analytics
Advanced personalization
Price optimization
Delivery efforts
Unique product bundle ideas
More efficient product organization
Limiting products in some channels to prevent endless aisles
Endless aisle: selling everything online
Large weights not worth shipping
Dynamic pricing
Jet.com’s smart cart
Predictive analytics for subscriptions
Leveraging technology also provides the benefit of data analytics, allowing for advanced personalization, unique product bundle ideas, prevention of endless aisles, and dynamic pricing. Regarding dynamic pricing, Jet.com’s smart carts allow real time price changes based on data analytics relating to where in the supply chain product is and what the customer is willing to accept.

18. Managing channel relationships
Managing relationships with channel partners
Distributors, retailers, franchise partners, etc.
Overcome organizational silos for good of whole
Audits should be done to prevent conflict of interest
Channels should be educated to understand role in company
Franchisees should be monitored real time with IT
Channel partners, as touched on previously, can include distributors, retailers or franchise partners. In any case, cohesion is necessary, and partners should be monitored to make sure there are no conflicts of interest and that everyone understands their role in the larger country.

19. Managing channel relationships
Managing relationships with channel partners
Distributors, retailers, franchise partners, etc.
Overcome organizational silos for good of whole
Audits should be done to prevent conflict of interest
Channels should be educated to understand role in company
Franchisees should be monitored real time with IT
Channel partners, as touched on previously, can include distributors, retailers or franchise partners. In any case, cohesion is necessary, and partners should be monitored to make sure there are no conflicts of interest and that everyone understands their role in the larger country.

20. Assessing channel performance
Three main categories of assessment
Utilization
How the customers utilize the different channels
Engagement
Store-driven
Recommendations by agents through algorithms
Customer-led
Time on social media, reviews, time spent on website or app
Conversion rates
How many visitors buy
Within an across channels
As for the last pillar, assessing channel performance has three main categories of assessment: Utilization, Engagement, and Conversion fees. Utilization is how customers use channels, engagement is how both stores and customers engage, measured in things such as recommendations by agents through algorithms implemented, time on social media and reviews left by customers. Finally, conversion rates are how many visitors to channels make purchases.

21. Figure 11.2 Measuring Omni-Channel Performance
Customer-Led Engagement
Figure 11.2 Measuring Omni-Channel Performance
Social Media
Phone
Word of Mouth
Time Spent
Touchpoints
Success
Store
Web
Phone
Mobile App
Social
Cross-Channel Conversion
Same Channel Conversion
Lifetime Value
RFM
Store-Driven Engagement
Recommendation Agents
Targeted Promotions

22. Example: home depot
Home Depot has embarked on an ambitious omni-channel strategy, investing upward of $5 billion in its initiatives. Notably, it plans to leverage the1.7 trillion data points it has collected, then integrate them with weather and consumer location data, to gain the capacity to target consumers by highlighting products that they are likely to find relevant and that are in proximity to where the consumer is located at each moment. By installing lockers outside stores, it hopes to improve its ability to cater to click-an-collect customers. With showroom locations and fulfillment centers, Home Depot also plans to reconfigure its delivery services. Using data that indicate 45 percent of online orders get picked up in store, and 85 percent of online order returns get processed inside stores, Home Depot also has designed the interaction to require customers to check in with a store associate, so that it can provide more guidance and potentially increase their satisfaction—but also gain an opportunity to engage in some cross-selling. For products rarely bought online, such as lawn mowers, Home Depot has located them right outside the store entrance, so even online shoppers can observe and investigate them when they come to collect their online purchases.

23. Take aways
As omni-channel strategy involves the successful delivery of a seamless experience across channels, including ability to synchronize the strengths of each channel to support all other channels that in turn share their strengths
A successful omni-channel strategy also demands deep understanding of the consumer journey—the path consumers take from information search to purchase.
Imagining an omni-channel strategy as a canopy, marketers should work to establish four strong pillars to hold it up: harnessing customer knowledge, leveraging technology, managing channel relationships, and assessing channel performance.
Consumer rights, including the recognition that not all consumers are the same and that different consumers value different things, must be integrated with a deep understanding and mastery of retail operations, along with advanced applications of novel technology.
An omni-channel strategy necessitates realigning the incentives of individual channels to make the channels work for the good of the whole.
Companies need metrics that acknowledge the holistic and cross-channel nature of the omni-channel experience.