After a tumultuous 2016, this year does not look like it will be any less unpredictable. With Brexit negotiations having been set in motion, combined with continued consumer uncertainty and rising costs, brands and retailers need to think carefully about where they focus in order to protect their margins.
We recently brought together three experts - economist Alex Hamilton of Retail Week, psychologist Kate Nightingale of Style Psychology, and futurologist Matt Gee of Isobar – to discuss the future of retail in the context of this uncertainty.
One of the key messages from the debate was around the importance of focusing on the customer. Indeed, whilst being customer-centric is important at the best of times, it becomes even more vital as retailers enter these unchartered waters. Here we take a look at some of the key lessons around customer-centricity from the debate.
Focus on building trust
Our psychologist Kate highlighted the behavioural changes that are often seen among consumers during times of uncertainty. ‘What’s interesting psychologically about the uncertainty is that we – as consumers – are trying to reach out to things that make us feel safe and secure; that’s usually childlike behaviour and things that are a little nostalgic in a sense, like vinyl music, vintage clothing and so on.’
So how can retailers respond? According to Kate, they should focus on building trust with their customer base. ‘But then certainty from retailers really comes from building relationships, because if you build trust by building relationships, then people will be able to feel more secure buying from you.’
The other panellists agreed that there have been a fundamental shift in the notion of value. As our economist Alex pointed out, ‘Consumers have redefined the way in which they see value. I think that retailers need to understand that consumers are looking for value when they spend. They're spending less on retail, so therefore to try and get that share of wallet they need to be a lot more focused at what they do. In a nutshell, for me, it's all around value and retailers trying to define a strong value proposition to draw consumer spend.’
Clearly articulate your value proposition
Formulating and articulating a clear value proposition is central to building trust amongst customers. And value is no longer just about price, but about providing something unique and useful for shoppers. Our futurologist, Matt Gee, highlighted the importance of brand purpose.
‘Brand purpose forms the basis of ”value” in the consumer’s mind, and I think that comes really strongly into play at times of uncertainty. We've seen it in historical cycles in the past and I think both retailers and consumers are feeling this. So buying into more than product becomes a more important decision-making process.'
Kate, however, pointed out that many retail companies are unclear as to what that purpose is. 'Most brands have a confused identity. The problem stems from internal goals; when you’re profit-led it’s difficult to stand for anything. As Matt said earlier, people don’t buy products, they join brands – that is about lifestyle, identity, experience; it is a relationship with the brand.’
Once you've established your value proposition, ensure you communicate it at every opportunity. Think about every touch point you have with your customers and ask yourself – how does this communicate our brand value? Innocent does an excellent job of this. Their value proposition in central on the homepage and evidence of how this is ‘lived and breathed’ is ubiquitous - from their use of food-grade recycled packaging to the names of the smoothie flavours themselves.
Prioritise based on potential impact on CX
With limited resources and conflicting priorities, retailers must prioritise initiatives that will deliver measurable improvement to the customer experience.
Alex supported this idea, 'In terms of what we can do for the customers and the customer experience and how that links commercially, I understand that retailers - they have a list of 20 things they want to do for example, and they can do one or two of those things. So it's prioritising and working out which one you're going to do.'
But how can retailers actually go about prioritising projects? Matt advised identifying and addressing pain points in the customer journey in order to add real value – both in the digital and physical spaces.
'Beyond convenience you could walk into almost any retailer, any store environment, and you will find a number of pain points in that journey. Just like we do with digital, where we optimise the path to transaction and try and remove as many barriers as possible, we need to do that in physical spaces. That is going to help deliver business performance.’
You can find the full report here.
By Annabel Thorburn, director of consulting at eCommera
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