Sterling Commerce, which provides software for sharing data across organizations, recently (well, last August) published “The Four Rules for Ensuring Customer Loyalty in a Competitive Retail Climate” available here (registration required).
You won’t be surprised that all four rules relate to sharing data. But this perspective does lead to past the usual corporate boundaries towards the complete customer experience. In particular, “New Rule #1” (“It’s still all about the product”) recommends that retailers partner with other companies to expand their offerings. This lets them increase sales without investing in added inventory or services. “Consumers don’t really care how many partners or systems the retailer is using... They only want to deal with one entity—the retailer of choice...the customers expects [sic] the retailer to make the whole experience seamless.”
This is a more radical position than it may seem. Although Sterling’s immediate point is simply that retailers can sell more things if they work with partners, the paper is really proposing that the retailer accept primary responsibility for the entire customer experience for the products it sells. What makes this radical is that the manufacturer would traditionally take that role. If the product breaks, the retailer should fix or replace it; if the customer has questions, they should call the retailer not the manufacturer or installer. Taken to its logical extreme, this implies the retailer would be responsible for advertising the products (to set appropriate customer expectations) and participate in design and development as well (to ensure quality and usability).
I’m not pointing out these extensions to ridicule the notion. Quite the contrary: I think it’s a great idea. One example that Sterling uses is construction of a home theater. Who better than an electronics retailer to take over the entire process of picking components, installing them, training users, servicing and ultimately updating the system over time? Perhaps there could be a regular replacement program similar to new-every-two-year cell phone or auto leasing contracts. Why shouldn’t the theater be branded by the retailer rather than the makers of the individual components? Some of this already happens: when I recently bought a High Definition TV, the salesperson ordered an upgrade to my cable service right from her sales terminal. But a more formal and comprehensive program would bring in additional sales during the initial installation, improve the chances of adding lucrative service contracts, and ensure repeat business.
The flip side of this is the store would be taking a bigger risk. If a product failed, the store would be responsible for ensuring customer satisfaction even if the manufacturer did not. And as the store took over responsibility for more elements of the customer experience, there would be more things to fail. This would force the store to be more careful about the products and service suppliers it partners with. That’s a great thing from a consumer point of view but a bit frightening for the store. Of course, we can expect the added risk and quality control overhead to be built into prices, so presumably consumers would have the choice of whether to pay for the smoother and simpler experience. (In fact, they already have this choice in home theaters, since they can purchase from specialist firms who offer exactly this sort of comprehensive service.) Stores would also likely be careful about which products they absorbed in this fashion: it makes sense for home theaters, but probably not for toasters.
In case you’re wondering, the other three rules are valid if less stimulating. Rule #2 stresses the importance of cross-channel integration, such as in-store pickup of online orders. Rule #3 recommends better in-store inventory systems to avoid apparent stock-outs (when the inventory actually is present but no one on the sales floor knows about it). Rule #4 offers the global advice to “Create a WOW experience” by creating “sustainable advantage...based on adaptability” through a “foundation for constant improvement.” That sounds intriguing but it quickly descends to the rather mundane example of cross-channel returns.
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