IBM Presentation at Oracle Retail Loyalty Dinner

IBM Corporation 2010

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The New Retail Imperative The New Retail Imperative –– Blinding Self Interest Meets Optimistic AltruismBlinding Self Interest Meets Optimistic Altruism

What a long strange trip its been

The way customers reach us used to simple.

We’d advertise and promote

They’d come

We’d serve them well

They’d leave happy

They’d return

But the current market, the current media and the current customer have left us with lots of potential directions, and a not just a bit of uncertainty


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potential directions, and a not just a bit of uncertainty

So, we’ve done extensive consumer and business research to inform our thinking


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Retail Consumer Perspective

Marketing, Sales and Service Executive Perspectives

Focused on what specifically will drive the business and the consumers

you serve forward now and in the upcoming years

The conversation

The relationship:

It can be exclusive, or inclusive But it must be real, active and personal

The navigation systems:

It’s a store locator,

The current situation can be summed up across three forces


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The moment

The devices It’s a store locator, price arbitrageur, communications device, record keeper, budget tracker and opinion obtainer. In the palm of your hand

The experience:The thrill of perfect fitting pants or a 3/8” wrench that fits just as well. The coupon perfectly timed. The delight of a surprise bonus

Conversion begins in the conversation, that you have, that they have

The conversation

Facebook is fast becoming the medium of choice, followed by twitter

(or whatever will replace it) and a myriad of ways for customers to

communicate with each other and with brands


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Baileys Baileys hopes you had a relaxing festive break! We’d love to hear how you will you be celebrating New Year- are you throwing a party, or snuggling up on the sofa with Baileys Irish Cream? Baileys desea que tengas un relajante descanso durante las fiestas. Nos encantaría saber cómo vas a celebrar el Año Nuevo, ¿tienes ...

However, there is the good, the bad and the ugly out there

The conversation You can’t necessarily control it, but you MUST manage it

My dissatisfaction with Home Depot And finally, fast resolution…


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Consumers expect a value exchange for following a retailer

ReasonRank

Being able to trial new products (free samples)

Receiving preferred consumer status*

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Most important reasons for ‘following’ a retailer


7 Source: IBM Institute for Business Value Analysis, Retail 2010, n=32,087

Note: *’preferred status’ referred to things such as access to special promotions or advance sales notices

Influencing product development or changes

Providing feedback to retailer on customer service or store experience

Learning news or industry trends

Interacting with other consumers

Sharing feedback and reviews with people in my social network

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In the current world, marketers must

understand...

You no longer control the media.

You create embassies of digital content,


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distributed by brand ambassadors that you enable.

You no longer simply buy media.

You earn it from your customers.When they participate, they provide and deliver

value to your brand through their interactions.

And everyone is rushing to attach a value to each Facebook Fan

$3.60 -vs- $2,000


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Media value on impressions

Sales value based on e-commerce

http://www.adweek.com/aw/content_display/news/digital/e3iaf69ea67183512325a8feefb9f969530

http://www.risnews.com/ME2/dirmod.asp?sid=&nm=&type=Blog&mod=View+Topic&mid=67D6564029914AD3B204AD35D8F5F780&tier=7&id=8A3FC4F205BE4CD183DDD2C988C8AF01

Don’t overlook the concept of “games” as a means of engagement

The conversationDoes the customer understand what 22.8 cubic feet really is? No.

But she understands how many gallons of milk, heads of lettuce

and pints of ice cream that is…


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Zynga social gaming

Zynga retail model –game cards

Apps and App Stores abound – and it’s not about games

The devices The app is a reality: Loyalty cards that are easy to manage, payments

that you bump phones to deliver, price arbitrage and grocery listings


11 http://148apps.biz/app-store-metrics/?mpage

Grocery IQPayPalCardStar

Device enabled shopping is the next big thing, you can start and end there

TV

Computer

TV

Computer

Phone

Phone

Store

Store

“I love Alicia’s suit on The Good

Wife. Wonder where I get that

…and they shorten the skirt?”

“The new bathroom fixtures all

seem to have the same look, I

want to see them in person”

Phone

Phone


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Phone

Store

Computer

Phone

TV

Store

Computer

TV

“Honey, the last storm broke the

outside light. Get a new one, but

make sure it fits.”

“Hey, do you think this dress

makes my thighs look big? I love

the color.”

Phone

Phone

But device enabled shopping still needs to protect the online mission

Content Differentiation, Functional

Standardization

Content Differentiation,Functional

Differentiation

2 4Exclusive content

in a simplified

application with

basic functionality.

Content drives

Exclusive content

delivered with

robust functions and

multiple

opportunities for

Differentiation relies on having both robust content supported

with relevant functionality that is easy-to use and engaging.

“Interesting finds” “Fun and Cool”

The devices


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Content Syndication, Functional Syndication

Content Syndication, Functional

Differentiation

Standardization Differentiation

Generally available

content in a simple

application with

basic functionality

to maintain a

revenue stream at

lowest total cost

Generally available

content delivered

with robust

functions and

multiple

opportunities for

engagement

1 3

Content drives

revenue model

opportunities for

engagement

“The basics” “Great shopping”

The customer experience is now experienced in a series of moments

The MomentWhether shopping through a device, or asking a friend’s opinion

on a item through Facebook, or tweeting about a great find, each

moment is a little customer victory


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And time sensitivity is commanding new influence in purchases


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Products

• Offers a variety of products

• Consistently has products available

• Offers better quality products

• Provides product information such as where a product originates or product make up (caloric, allergens, materials used [organic])

Convenience

• Makes shopping easier by having tools you can use to check prices, locate products and self-checkout

• Has convenient hours, parking, location

• Allows me to shop in multiple ways (e.g. in store, online, via mobile phone)

• Provides services that make my life easier

We analyzed the relationship between what consumers believe to be most

important and what areas retailers need to make the most improvement

The Moment


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Store Experience

• Provides a consistent experience in store, online or through a mobile phone

• Provides a pleasant and enjoyable atmosphere in which to shop

• Provides a store/ website layout that makes it easy to find things

Price/ Promotion

• Has everyday low prices

• Has great sales

• Offers me discounts specifically for the things that I buy

• Has a frequent shopper program with easily obtained rewards

• Offers me various options to provide me with greater value

Social Responsibility

• Contributes a percentage of what I spend to local causes (e.g. local schools, local charities)

• Works to minimally impact the environment

• Values its employees

Customer Service

• Has knowledgeable store employees

• Has store employees willing to help me in my shopping process

• Makes it easy for me to find help

• Has store employees that understand my preferences

Source: IBM Institute for Business Value Analysis,

Retail 2010

Consumers’ priorities point to Price/Promotion and Product

improvements as the areas that require the greatest focus

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Improvement

Intelligent Consumers’ Priorities are highly focused at the intersection

of product and price.

Products

Convenience

Low Importance/

High Improvement

High Importance/High Improvement

Both importance and

improvement scores

are ≥ 100

The Moment


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75

100

75 100 125

Impact Score - Importance

Impact score -

Improvement

Source: IBM Institute for Business Value Analysis, Retail 2010, n=32085

Convenience

Store Experience

Price/ Promotion

Social Responsibility

Customer ServiceHigh Importance/

Low Improvement

Low Importance/

Low Improvement

** **Category Area

Importance Score

Improvement Score

Gap

Price / Promotion Offers me discounts specifically for the things that I buy 112.43 123.10 -10.67

Products Consistently has products available 113.53 111.76 1.77

Price / Promotion Offers me various options to provide me with greater value 111.54 108.95 2.59

Products Offers better quality products 114.88 111.92 2.96

Offering personalized discounts and ensuring product availability are

the top areas where retailers need to focus


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Source: IBM Institute for Business Value Analysis, Retail 2010, n=32085

Products Offers better quality products 114.88 111.92 2.96

Price / Promotion Has everyday low prices 115.22 111.85 3.37

Price / Promotion Has great sales 108.73 104.93 3.80

Products Offers a variety of products 113.38 100.63 12.75

Areas in which the Improvement score and Importance score are both over

100 are the areas that retailers need to focus on first… consumers are saying

that these areas are important AND need the most improvement

Anchor Hot House Visualize

Customer

Experience

Customer Experience

Blueprint, Customer

Experience Prototype

“Big Ideas”

Workshops

1 Test big Ideas

“Durability”

Workshops

2 Test Cust Scenarios & Journeys

Customer

Testing

The conversation

• Media

• Engagement

• Measurement

IBM’s Approach addresses the three areas of effort across three

key dimensions


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Business

Innovation

Technology

Leadership

High Level Business

Design Value Case

and Roadmap

Component

Architecture

Prototype Evaluation 3 4

Impact on Operating Model

Legacy Dependencies

Gather and Prioritize Requirements

Stake-

holder

feedback

The moment

The devices

• Channel connected

• Channel independent

• Just in time engagement

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IBM Presentation at Oracle Retail Loyalty Dinner

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