IDC TECHNOLOGY SPOTLIGHT Sponsored by: DXC

Digitally Transforming the Retail and CPG Customer Experience January 2020

Written by: Alan Webber, Program Vice President, Customer Experience

Introduction Today's marketplace is hypercompetitive. Brands compete for attention, hoping that once they claim it, they can encourage the person or company paying attention into being a customer. Adding to the upheaval is the merging of the physical and digital channels. Unfortunately for many companies, if they can capture the attention of the customer, it is often lost crossing channels or because of poor experiences. Too many companies are not able to build a long-term multichannel relationship with the customer that results in sustained customer loyalty. The reason they are not able to build that long-term loyal relationship with the customer? Because the customer had a poor experience.

As products become less of a key to brand differentiation, the digital and physical experiences a customer receives from the first interaction to the last interaction are becoming more important. Today, the customer experience isn't just the responsibility of a single department or office; rather, it stretches across multiple channels and the totality of the customer journey and therefore the company. To remain competitive in this type of distributed channel hypermarket, organizations need to create compelling integrated customer experiences that not only reduce the friction between the company and the customer on all channels over the lifetime of the relationship but also continue to evolve with the customer over time.

This IDC Technology Spotlight discusses the challenge faced by retail and consumer packaged goods (CPG) organizations in digitally transforming the multichannel customer experience they provide through technologies, services, and organizational change.

This IDC Technology Spotlight discusses the challenge faced by retail and CPG organizations in improving their customer experience efforts in a hypercompetitive market and why improvements in customer-facing strategy and business processes backed by technology are necessary to maintain parity with the customer.

WHAT'S IMPORTANT CPG and retail customers are making more purchase choices based on their experience with a brand, including their multichannel interactions with employees, systems, and processes, rather than on the product itself. It is critical for companies to provide that differentiated experience, which requires an integrated multichannel solution of strategy, culture, business processes, and technology.

AT A GLANCE

Page 2 #US45747519

IDC TECHNOLOGY SPOTLIGHT Digitally Transforming the Retail and CPG Customer Experience

Today's Retail and CPG Experiences Don't Meet Digitally Transformed Customer Expectations Everyone has a less-than-stellar customer experience story to tell. It might involve the inability to complete a transaction online, a disconnect between the digital experience and the physical experience, a refusal to meet a guarantee or brand promise, failure to clearly communicate with the customer, or an employee who doesn't have the necessary information. The result of a poor customer experience, whether digital or physical, is often the same — customers have a lot of options to choose from, and they take their business somewhere else they believe there is an opportunity to receive a better customer experience.

A customer experience, whether digital or physical, comes down to the ability of a company to meet the needs, desires, and expectations of the customer. Often, these needs, desires, and expectations fall into three categories:

» Education. Whether in the digital or physical world, a customer often needs to or can be further educated about the product, the service, and even the business process.

» Ease. For a customer, whether in a physical location or a digital application, ease of use is critical. Often referred to as reducing friction during the customer interaction, it comes down to making the interaction more useful for the customer.

» Entertainment. Again, a customer wants the experience to be enjoyable while meeting the outcome he or she desires.

To meet the needs and expectations of customers, companies require a combination of strategy, business processes, technology, and corporate culture that focuses on understanding the cross-channel needs and wants of customers within the context of the product or service that they are providing. Companies have a hard a hard time meeting those expectations because they lack insight and understanding about customers, portray a lack of caring about customers in how the customers are treated, and fail to respond to the requests and efforts of the customers.

Why are the experiences that companies provide not up to customers' expectations? There can be many reasons, including poor handoffs between business processes, technology glitches or mistakes, or cultural issues. Most of these reasons, when considered from a customer perspective, can be grouped into three broad areas: lack of insight about the customer on behalf of the company, perceived lack of caring, and lack of responsiveness.

» Lack of insight about the customer. One of the biggest issues is that companies don't understand what customers want and why. Companies gather information about customers, but too often it is limited to just the basic information that is required to complete the transaction. When additional information about the customer is gathered, it is often not combined with other information about the customer along with higher-level information about the different aspects of the target market that the customer belongs to provide a more complete view. The result is that the company has little real and usable insight into customers and their needs and preferences.

» Lack of caring from the customer's perspective. The second category is a perceived lack of caring by the company. This is often the result of the lack of information and insight about the customer that comes across as a lack of understanding or caring. It could also just be a salesperson or a customer service agent who, for whatever reason, has to work within company policies and processes on a request or situation that is outside what those processes or policies were intended to handle. This often comes across to the customer as a lack of caring or understanding.

Page 3 #US45747519

IDC TECHNOLOGY SPOTLIGHT Digitally Transforming the Retail and CPG Customer Experience

» Lack of appropriate response to the customer by the company. The other general category of customer experience issues from a customer's perspective is a lack of responsiveness on behalf of the company. The reasons for this range from something as simple as a lost email to more complicated issues such as a gap in business processes where the request gets lost, more human and employee issues such as not understanding what the request from the customer was, and not being able to address the customer's request and ignoring it. However, the impression that results, again from the customer's perspective, is that the company is not responsive and therefore undeserving of the customer's business.

Though companies believe they are providing a good or better customer experience, the perception among customers is that they aren't. What can companies do to build a perception with their customers that they are focused on the experience they receive? They can optimize the customer-facing strategies, business processes, and technologies to have more insight about the customer, to demonstrate a higher level of care and understanding, and to be more responsive to the customer.

Control Has Shifted to the Transformed Customer Control over the customer engagement is shifting to the customer. Not too long ago, if customers wanted to purchase an item, they had to go to a store when the store was open. Now, customers can go online and find the item, check the reviews, find the lowest cost automatically, purchase the item, and have the item delivered to their door step or pick it up in a store in a couple of hours or a couple of days. More than at any time in history, customers have more information about the product, the vendor, and the marketplace and exert more control over the interaction. Most companies have been slow to adapt to this new customer-controlled world. It isn't enough to throw up a website, purchase an ecommerce capability, and buy a few ads on a social media channel any more than it was opening up a brick-and-mortar store on Main Street. Meeting customers where they are at requires a clear understanding of how the world has shifted. For companies, this means:

» Being where your customers are. Where there were once only one or two channels on which to engage with customers, now there are multiple channels and multiple variations of multiple channels. In addition, customers expect companies to be on the channels that they prefer. Opening new channels for customers requires investments in time, resources, and people. Yet this is where their customers are and where their customers want companies to be. It becomes a cost-benefit analysis for customers — if one company is not on the channel they want, do they switch channels or to another company that is?

» Making sure not to waste the customer's time. Customers and consumers are oversubscribed — their days are filled with more tasks than they can complete in the allotted time, and more tasks are being added. Time has become a very valuable and nonrenewable resource for customers. It falls on companies to realize this and architect customer experiences and customer engagements that meet the needs and requirements of customers while being as efficient as possible. This means reducing unnecessary steps, redundancies, and delays. If not, customers may choose to go somewhere else.

» Understanding that customer experience is about people. Customers on the other end of the interaction, whether B2B or B2C, are people with expectations on how they should be treated. Some of these expectations will be appropriate, and others will not. Customers come into relationships with a number of factors that affect how they perceive interactions with companies, but it is up to the companies to employ strategies, business processes, and technologies that acknowledge the people on the other end.

Page 4 #US45747519

IDC TECHNOLOGY SPOTLIGHT Digitally Transforming the Retail and CPG Customer Experience

Using Data, Analytics, and Intelligence to Maintain Parity with the Customer In any digitally transformed organization working with transformed customers, there is a layer of direct and contextual customer data that the brand holds. Using this data as the foundation, it is the intelligence and analysis capability that defines and powers the relationship between the organization and the customer. Organizations at the leading edge of engaging and relating to their digital and physical customers are using this data and analytical capabilities to focus on providing empathy at scale.

Empathy at scale, and more specifically cognitive empathy at scale, is the ability through the application of data, analytics, and intelligence technologies to better know at an individual level what customers might be thinking and how they potentially feel and then to be able to do this at scale or across a large percentage of the customer population. This might seem counterintuitive, employing emotionless data and technology to enable a more emotionally and connected relationship between the brand and the customer. To get to empathy at scale on both the physical channel and the digital channel requires the organization to have a level of customer focus and vision, to gather the necessary data about customers and analyze it, and then to align the ability of the organization to meet customer expectations with the appropriate customer interactions across channels.

How can an organization remain relevant during this period of digital upheaval? By relentlessly focusing on providing digital and physical experiences that are founded in a technologically enabled empathetic relationship. This means that everything needs to be customer focused, that the strategic direction needs to be in alignment with that customer focus, and that companies build an infrastructure and a customer-focused technological architecture that provides a pathway to communication and understanding toward empathy between the brand and the customer. But getting there will not be easy for organizations.

Optimizing to Keep Pace with Your Customers For companies to keep pace with where consumers and customers are going, they need to rethink what the customer relationship is and how to optimize their customer-facing strategies, business processes, and technologies across the stages of the customer journey to change the interaction with a customer from a transaction into a relationship. To accomplish this, companies need to consider the following:

» Eliminate barriers. A constant refrain from management consultants is that internal corporate silos need to be eliminated to improve organizational efficiency. However, when it comes to customers and the customer experience, it isn't about internal efficiency as much as it is about removing internal barriers that impede the customer progressing along the customer journey. These barriers can be business policies or processes that keep an employee from effectively assisting a customer or a corporate unwillingness to invest in the channels where their customers already are. To effectively do this requires an organization to take a hard look at how the customer experience journey looks from the customer's perspective and eliminate those internal barriers that become barriers for a customer.

» Remain agile. Tomorrow's customers will be different from today's customers. They will have different wants and desires. They will have different channel preferences, and they will have different expectations about what engagement on those channels will look like. They will have different ideas and concepts about what customer support and service is like, where it happens, and what the outcome of that support is. The company that will be successful in providing a differentiated customer experience will pay attention to how its customer segments are shifting today and where they will likely be tomorrow and then adjust its customer-facing strategies accordingly.

Page 5 #US45747519

IDC TECHNOLOGY SPOTLIGHT Digitally Transforming the Retail and CPG Customer Experience

» Employ data, analytics, and intelligence as a basis for differentiation. The key to providing a good experience for a customer is understanding the customer, and understanding only comes through data. Companies collect immense amounts of data about their customers and potential customers, yet only a small portion of the data is used to provide a personalized and empathetic customer experience. Too often it is held in disparate databases and systems that are not integrated across the enterprise and do not support a positive experience. Organizations need to rationalize their different databases and systems that hold customer data in an integrated customer data platform and marry this with externally sourced data about the customers and their cohort to create a truly personalized experience.

» Leverage technology as an enabler. Technology has always been a key component to the customer experience. As consumers and customers dive deeper into the technology pool, it will become only more important that companies adopt technologies that engage the customer and support the customer experience. This includes tools and technologies that customers directly interact with such as chatbots or web pages, technologies that employees use in their direct engagement with customers from customer relationship management systems to email outreach, and systems that seem removed from the customer interaction yet still impact the customer experience, such as finance and billing systems.

Considering DXC Customer experience has transformed from merely being a nice-to-have to a competitive differentiator in an increasingly competitive markets such as retail and CPG. But to transform how a brand provides a differentiated experience requires an integrated solution that includes strategy, business processes, and technology. DXC is an end-to-end IT services firm that specializes in delivering solutions that digitally transform organizations, including the experience that end-user companies provide to their customers. Specific to improving the customer experience, DXC's solutions generally fall into two BPS service areas:

» Customer Experience efforts. This area within DXC focuses on transforming the ways in which an organization interacts and engages with customers through best-in-class business practices, improving business processes, applying appropriate and leading technologies, and improving the capabilities of the organizational workforce.

» Agile Process Automation efforts. Technology innovation has provided organizations with the ability to intelligently automate many business processes. Through cloud and robotic processes automation backed by artificial intelligence, DXC can help companies reduce business disruptions and process breakdowns, diminish the number of human errors, and enhance how the organization engages with the customer.

Specific solutions that DXC offers for organizations looking to digitally transform their customer experience include:

» CX Transformation Services. DXC Transformation Services focus on understanding the needs of the end customer; defining what that experience needs to look like to meet the needs of the business, the employee, and the customer; and then creating and supporting the implementation of strategies and technologies that accomplish that outcome. This includes assessing changes that will provide rapid improvements and give the organization a foundation of success to build on, maturity assessments that benchmark against best-in-class customer operations, and automation assessments that identify ways that customer interactions can be automated, resulting in an improved customer experience and reduced costs.

Page 6 #US45747519

IDC TECHNOLOGY SPOTLIGHT Digitally Transforming the Retail and CPG Customer Experience

» Contact Center Transformation. Contact centers are often one of the primary connection and engagement points between an organization and a customer. They can also be one of the biggest problem areas between the organization and the customer because of agent attrition, lack of product knowledge, poor integration of data from multiple sources, the inability to solve the customer issue, and more. DXC's Contact Center Transformation solution focuses on digitally transforming the call center and optimizing both the employee experience and the customer experience. This includes advising clients on best-in-class strategies; assessing and optimizing contact center operations globally; implementing solutions that integrate digital, social, and mobile channels; and delivering cutting-edge technology via the cloud and software-as-a-service models.

» CX Digital Agent Services. It is critical to meet customers where they are, and sometimes it is better for a customer to be able to directly interact with an organization through a digital agent, chatbot, or other self-service channel that can provide the personalized experience that the customer expects. DXC can provide a full suite of customer-facing intelligent digital agents that are integrated with organizational systems that support multichannel customer self-service.

» CX Analytics and Intelligence Services. Capturing, curing, and managing data and deriving the right intelligence from the data require complex data management, data science, and data engineering services. DXC's analytics services provide a full suite of data services that harnesses the power of artificial intelligence and machine learning to create deep customer insights that are then utilized to create unique and personalized offers and experiences for the customer.

Challenges

The challenges that DXC currently faces in the expanding customer experience and customer support market include:

» Ownership of the customer experience. Customer experience is more of a business strategy than a department or a function or a technology. As a result, it is hard to nail down what role in a company is responsible for customer experience. In some companies, it is the CMO; in others, it is the head of customer service or the chief customer experience officer. Each role will have a different definition of what constitutes a customer experience solution. In a market where a sales enablement tool, a CRM solution, and a customer intelligence solution can be labeled customer experience solutions, it becomes more difficult to present the right solution to the right business owner that results in a better customer experience.

» Ever-changing technology landscape. As previously discussed, the increasing rate of change among consumers and customers means that solution providers for the companies that service those customers need to be continually and consistently checking the market, analyzing trends, investing in R&D, and bringing new capabilities to market that will allow their customers to remain on par with consumers.

» Customer privacy and consent. The recent implementation of the General Data Protection Regulation (GDPR) in the European Union gives consumers more control over what data is collected about them, how that data is maintained, and how that data is used. Yet this same data is important in correctly marketing to a customer, identifying the right product for the customer, and then supporting the customer after the sale. GDPR is likely only the initial foray into giving consumers more power over their data, and companies that provide customer experience solutions will have to stay in front of the privacy curve by providing solutions that thread that narrow space between how consumers want their data used and using that same data to provide the experience the customer expects.

Page 7 #US45747519

IDC TECHNOLOGY SPOTLIGHT Digitally Transforming the Retail and CPG Customer Experience

Conclusion To survive the ever-more competitive market, businesses need to transform the experience they offer to their customers. Yet few have the necessary internal expertise to undertake a transformation effort that focuses on transforming business processes, technologies, and people to provide that differentiated experience that customers are coming to expect. And when they do try it on their own, the result for both the business and the customer is often less than what was expected or needed. Organizations need to understand that there is nothing simple about providing a good customer experience and that it requires continuous learning and transformation supported by partners with expertise in renovating the different components of the customer experience.

About the Analyst

Alan Webber, Program Vice President, Customer Experience

Alan Webber is Program Vice President for Digital Strategy and Customer Experience. In this role, Alan leads IDC's Customer Experience research program and supports IDC's Chief Marketing Officer research efforts. Specific areas of research interest for Alan are the impact that technology changes have on how business and customers engage and interact, the digital transformation of the customer experience, and the impact of algorithms and analytics.

Page 8 #US45747519

IDC TECHNOLOGY SPOTLIGHT Digitally Transforming the Retail and CPG Customer Experience

MESSAGE FROM THE SPONSOR

DXC Helps Organizations Provide a Better Customer Experience and Business Bottom Line

Customer experience (CX) has evolved from being a performance indicator to drive revenue to the key competitive differentiator for a company's success. In fact, 77.5%* of companies recognize CX as the most important strategic performance measure of their business. (* Dimension Data Global Contact Centre Benchmarking Report 2016)

As the world's leading independent, end-to-end IT services company, DXC Technology leads digital transformations and CX Improvement efforts for clients by modernizing and integrating their mainstream IT, and by deploying digital solutions at scale to produce better customer experiences and business outcomes. The company's technology independence, global talent and extensive partner network enable 6,000 private and public sector clients in 70 countries to thrive on change.

The content in this paper was adapted from existing IDC research published on www.idc.com.

IDC Corporate USA

5 Speen Street Framingham, MA 01701, USA

T 508.872.8200

F 508.935.4015

Twitter @IDC

idc-insights-community.com

www.idc.com

This publication was produced by IDC Custom Solutions. The opinion, analysis, and research results presented herein are drawn from more detailed research and analysis independently conducted and published by IDC, unless specific vendor sponsorship is noted. IDC Custom Solutions makes IDC content available in a wide range of formats for distribution by various companies. A license to distribute IDC content does not imply endorsement of or opinion about the licensee.

External Publication of IDC Information and Data — Any IDC information that is to be used in advertising, press releases, or promotional materials requires prior written approval from the appropriate IDC Vice President or Country Manager. A draft of the proposed document should accompany any such request. IDC reserves the right to deny approval of external usage for any reason.

Copyright 2020 IDC. Reproduction without written permission is completely forbidden.