IBM SoftwareSmarter Commerce

Smarter commerce for consumer electronicsRedefining the value chain in the age of the connected consumer

2 Smarter commerce for consumer electronics

When we talk about the world becoming increasingly inter-connected, instrumented and intelligent, the most ubiquitous example is the smartphone. It collects and disseminates data while its users are at home and on the go, likely serving up just as much—if not more—dynamic, socially driven information as static, always-there web content. And other consumer elec-tronics companies are deep in the revolution of smarter prod-ucts, providing not just one-dimensional devices but entire customer experiences.

With the accessibility, mass volume and easy sharing of informa-tion, a new consumer emerges—one who is empowered and has taken control of the relationship between buyers and sellers. Today’s electronics consumers are enabled by technology and social media in highly mobile smartphones, tablets and countless consumer products with Internet connectivity, near-instantly sharing information with the world as they search for the best deals and highest value. They review manufacturers, distributors and retailers alike, sharing both positive and negative experi-ences, and may even trust each other’s recommendations more than manufacturers’ websites or marketing campaigns when determining what and where they buy products. Customers can make or break brands with a few keystrokes and clicks of a mouse, emerging as advocates or detractors. This new kind of consumer is creating a different dynamic between buyer and seller and dictating how businesses must interact with them, all the while growing expectations for high-quality service and performance, competitive pricing, and quick delivery and prod-uct returns.

Consumer electronics today: Industry challenges and opportunitiesThe demand cycle is only one component of the challenges man-ufactures face as volatile marketplace forces disrupt the consumer electronics industry. The cost of developing and manufacturing new electronics continues its rapid climb. Large investments in licensing new technologies and maintaining expert development teams are required for designing and qualifying products that address ever-higher demands for performance, functionality, communication, reliability and power consumption. And build-ing next-generation fabrication facilities has become a multi-billion dollar investment. At the same time that costs go up, profit windows shorten as demands for new innovations con-tinually replace existing technology.

Many of today’s consumers care less about the consumer elec-tronic device itself and more about the experience it delivers. As such, manufacturers must shift their thinking from developing and building devices to creating experiences. For example, they should focus less on selling TVs than on crafting a personalized entertainment, advertisement and shopping experience. Rather than simply selling a picture-taking device, camera manufactur-ers also need to be in the business of creating and sharing mem-ories. Instead of just selling home appliances, manufacturers also need to tout how their products simplify and “green” people’s lives. This transformation from merely manufacturing devices to creating experiences is made possible by advancements in technology and device interconnectivity. However, such tech-nology is paired with a deeper level of development, manufac-turing and supply chain complexity.

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Because different component suppliers may be required for each product release or when suppliers offer improved pricing or a new function for an existing component, the supply chain must be reconfigured to accommodate the changes. At the same time, companies have merged and consolidated to pursue economies of scale, fill product gaps or acquire new technologies—leaving newly united organizations with disparate, nonstandardized sys-tems and processes at a time when it is critical to collaborate on designs, procurement and distribution as quickly as possible to meet demand for the next best product.

With ongoing volatility, complexity and increasingly empowered customers, consumer electronics companies need a new path forward. At IBM, we call that path smarter commerce.

Smarter commerce: shifting focus to the customerA smarter approach to commerce starts with embracing empow-ered consumers and placing them at the center of your opera-tions. While customer focus is not a new idea, truly making it happen on a smarter planet requires electronics manufacturers to discover, gather and act on insights generated through social commerce. This approach helps companies more effectively market, sell and service their products as well as better align their supply chains—resulting in improved margins, new rev-enue streams, better efficiency and improved outcomes across the value chain.

What is smarter commerce?

Smarter commerce is a strategic approach that places the customer at the center of business operations. In turn, busi-ness results and benefits naturally emerge:

• Getmoreoutoftheinsightgeneratedthroughcustomerinteractions

• Capitalizeonsocialandmobilecommerce• Synchronizethevaluechaintodeliverconsistentandpre-

dictable outcomes• Improvecollaborationandvisibilityforyourcustomersand

partners• Drivegrowthbyenhancing,extendingandredefiningthe

valueyouprovidetoconsumers

The commerce cycleA smarter commerce approach helps manufacturers more eas-ily manage and quickly adapt their buy, market, sell and service processes to center decisions and actions around the customer. It can increase the value companies generate from their custom-ers and partners by using customer insight to drive an enhanced and personalized experience and can offer new levels of company differentiation, potentially leading to greater customer loyalty, revenue and margin growth, and agility.

4 Smarter commerce for consumer electronics

A smarter commerce approach can help transform and improve efficiency at each stage of the commerce cycle: buy, market, sell and service.

Buy—Optimize supplier and partner interactions based on changes in shopping and buying behavior from across the sup-ply chain. Generate new and differentiating customer value by reconsidering partner roles and relationships.

Market—Deliver timely and personalized engagement across multiple touchpoints by using deep insights about customers gleaned, in large part, from the global conversations taking place online.

Sell—Facilitate customer and partner engagement so they can collaborate across touchpoints using the interaction method—such as person-to-person, digital, social or mobile—of their preference.

Service—Enable streamlined customer service across customer interactions and channels, and anticipate customers’ behavior and take action to keep them loyal.

To achieve this depth of personalization in a four-part customer-centric process, smarter commerce focuses on two key busi-ness imperatives to support the empowered customer: create consumer-driven buying experiences and develop adaptive supply chain networks.

Buy

Sell

MarketService Customer

Figure 1: A smarter commerce approach can help transform and improve efficiency at each stage of the commerce cycle.

Consumer-driven buying experiencesToday’s consumers are empowered—perhaps more than ever before—so it’s imperative to align the buying process itself with what they want. This alignment can be thought of as an “out-side in” way of driving corporate processes because it doesn’t start with a business’s internal processes and work outward to determine what customers can have and how they can have it.

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A 360-degree view of the customerBusinesses have access to smarter commerce solutions that can provide insight and a 360-degree view into the customer life cycle—well beyond what happens at the time of purchase. This visibility can help a company influence preferences when a con-sumer is thinking about a new purchase. And after the purchase, companies can enhance loyalty by treating customers with first-class service—in the way they expect to be treated—after the sale.

I am interested in the product.

I made thepurchase.

I wish I could do …

I need help.

How do I use this?

Is it time to buya new one?

Figure 2: With smarter commerce, you can guide sales, shape the demand for electronics and simplify complex ordering. Improved customer segmentationWith insights from a 360-degree view of the customer, companies can more precisely delineate marketable customer segments—beyond typical demographics- or psychographics-based segmen-tation. Deeper insight enables businesses to segment customers based on actual customer behaviors and sentiments expressed in various online or social media venues. Smarter commerce solu-tions not only make it easier to capture and analyze customer data from such venues but also automate responses in line with that better segmentation, which would practically be impossible to do manually.

For example, with traditional data capture approaches, you might identify a few distinct customer segments. Manually developing online campaigns for four or five segments is not too onerous a task. But with dramatically improved target segmentation, you could have hundreds or thousands of “microsegments.” This increased insight is practically useless unless you have the capac-ity to act on it, making automation a necessity.

Real-time customer personalizationAdditionally, deeper customer insight can help businesses intel-ligently decide what to present to customers at the time of an online or phone-based purchase. “Next best action” recommen-dation technology adjoins the real-time behavior of a customer with that customer’s buying history and interaction preferences to determine which cross- and up-sell products to offer. The goal is to sell solutions—however the buyer defines them—and not just products. The key to doing so is making the process as seam-less and natural-feeling to the customer as possible.

The consumer electronics manufacturer has to think about cross-channel selling differently than the retailer, which deals directly with the end consumer. Typically, only a small percentage of the manufacturer’s business will be direct to the consumer. Most often, consumer sales occur through their channel partners, such as retail companies, meaning manufacturers don’t have detailed point of sale data by store. However, you can use the customer insights you have gleaned from marketing analytics applied to social media to develop more compelling offers and terms for your channel partners. These insights can also help you offer channel partners better information on how to increase their own sales.

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Automated configuration and entitlements rules If you sell highly configured products and services, then one challenge you may have is in enabling your salespeople, your channel partners and your end customers to accurately, reliably and quickly configure an order and the associated terms of shipping, installation, packaging and more. For many compa-nies, this is an error-prone and costly manual process—one filled with numerous exceptions that consume scarce time and money to resolve. With a smarter approach to commerce, you can automate configuration and entitlements rules, signifi-cantly reducing huge amounts of manual exception process-ing and delivering the product according to the service level agreements you have established.

By using insight to create a customer-driven buying experience, consumer electronics manufacturers can shorten sales cycles; increase customer acquisition rates and loyalty; and reduce sell-ing, general and administrative costs per converted lead.

Adaptable supply chain networksWhile smarter commerce is about refining the knowledge of and response to individual customers, it’s also about optimizing stra-tegic, tactical and operational planning across the supply chain. A smarter approach to commerce can help you adapt your sup-ply chain processes so you can provide an optimal solution to customers based on their priorities and your capabilities at a reduced cost to you.

Many manufacturers have reasonably good processes around sales and operation planning, but these processes and many others are seldom optimized with advanced technology. Smarter commerce solutions optimize processes through better collaboration and insight across the enterprise, better enabling you to align your supply chain with customer wants. For example, better collabora-tion and insight across the supply chain can inform you of how much inventory to have and where to have it.

Improved ecosystem visibilityIn a survey of chief supply chain officers by IBM, the number one challenge mentioned was that of visibility.1 The problem of visibility has grown more acute over the years as supply chains have grown in complexity—in number of trading partners, prod-uct and service offerings, channel and distribution partners, logis-tics disruption risks, and so on. A smarter commerce approach can improve visibility and supply chain transparency to connect the commerce ecosystem, helping you minimize risk to your busi-ness and to the fulfillment of your customers’ orders.

Figure 3: A smarter commerce approach can help you connect functions across enterprises so you become aware of potential disruptions and under-stand overall supply chain performance as well as contributors to, and root causes of, risks.

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Better asset recovery ratesReturned products are an increasingly important issue to con-sumer electronics manufacturers. Returns are often initiated by a channel partner, such as a retailer or distributor, and sometimes processed by a third party, such as a logistics service provider or a repair depot. For many companies, the return process lacks technology and process sophistication, relying mostly on man-ual steps. Smarter commerce solutions can help consumer elec-tronics companies gain visibility into returns to improve the consistency and speed of determining the disposition of returns (repair, replace and so forth) and boost the asset recovery rate for returned goods.

Creating adaptive supply chain networks that align with and can deliver on customer expectations can help you optimize inven-tory and cash flow; reduce logistics cost; achieve higher on-time, in-full performance; and facilitate more scalable and efficient business-to-business trading partner collaboration.

IBM for smarter commerceFor more than 100 years, IBM has been offering comprehensive, integrated solutions that are flexible, open and able to provide positive business outcomes to businesses of nearly every kind. Our comprehensive smarter commerce solutions span both the buy and sell sides of commerce, helping you place your cus-tomer at the center of your operations using social business capabilities, collaborative processes and business analytics. Our integrated products and capabilities are industry focused, and our business analytics offerings enable you to gain a single view of the customer and track the customer’s behavior across chan-nels and touchpoints. To handle the increased need for storage and computing power generated by new demands and devices, IBM offers workload-optimized software and servers tailored to address those requirements.

Smarter commerce in consumer electronics—how it really worksSmarter commerce is more than just an idea—when applied, it provides real business results. The proof is how IBM helped these consumer electronics companies transform their approach to commerce by focusing on the customer.

• FCI, a leading European electrical connectors manufacturer, is using commerce solutions from IBM to extend its catalog and electronic commerce capabilities to its customers and dis-tributors. FCI has been able to increase its capacity to handle rising volumes from new government institutions, enabling rapid growth. In the process, it has also reduced operating costs by US$1 million each year.

• Jabil Circuit implemented an IBM-based unified integration platform that helps reinforce commercial interaction standards and customer service levels to improve supply chain visibility, enhance business efficiencies and boost customer service.

• SMA Solar Technology, with help from IBM consulting and IBM WebSphere® Commerce software, created a business-to-business online marketplace for its clients. The online marketplace provides a common platform for SMA and its clients to automate the entire ordering process, including placing orders, exchanging order status information and pro-viding product information.

For more informationTo learn more about smarter commerce for consumer elec-tronics from IBM, contact your IBM representative or IBM Business Partner, or visit: ibm.com/smartercommerce

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1 IBM, The Smarter Supply Chain of the Future: Insights from the Global Chief Supply Chain Officer Study, October 2010.

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