Description
Survival of fittest & fastest is the mantra of today's business game. To compete successfully in this business era, the retailer must focus on the customer's buying experience. To manage a customer's experience, retailers should understand what "customer experience" actually means. Customer Experience Management is a strategy that focuses the operations and processes of a business around the needs of the individual customer.
2009 37
CUSTOMER EXPERIENCE MANAGEMENT IN
RETAILING
Kamaladevi B.
Abstract
Survival of fittest & fastest is the mantra of today’s business game. To compete successfully in this
business era, the retailer must focus on the customer’s buying experience. To manage a customer’s
experience, retailers should understand what “customer experience” actually means. Customer
Experience Management is a strategy that focuses the operations and processes of a business around
the needs of the individual customer. It represents a strategy that results in a win–win value exchange
between the retailer and its customers. The goal of customer experience management is to move
customers from satisfied to loyal and then from loyal to advocate. This paper focuses on the role of
macro factors in the retail environment and how they can shape customer experiences and behaviors.
Several ways (e.g., Brand, Price, Promotion, Supply Chain Management, Location, Advertising,
Packaging & labeling, Service Mix, and Atmosphere) to deliver a superior customer experience are
identified which should result in higher customer satisfaction, more frequent shopping visits, larger
wallet shares, and higher profits.
Kamaladevi B. - Customer Experience Management in Retailing
Kamaladevi B.
Business Intelligence Journal - January, 2010 Vol.3 No.1
38 Business Intelligence Journal January
Introduction
Just when companies are becoming
comfortable with the idea of Customer
Relationship Management (CRM), a new
term has emerged: Customer Experience
Management (CEM). The two are similar
in many ways, not least in that they are
both diffcult to defne. Neither can be
identifed with a unique product or a specifc
technology; rather, they both comprise a
group of applications, technologies and
analytics that orbit around a central premise.
The premises of CRM and CEM are quite
different, however, and are best understood
when compared side by side.
The idea at the center of CRM can
be stated in the following way: Every
time a company and a customer interact,
the company learns something about
the customer. By capturing, sharing,
analyzing and acting upon this information,
companies can better manage individual
customer proftability. Customer Experience
Management’s premise is almost the mirror
image. It says that every time a company
and a customer interact, the customer learns
something about the company. Depending
upon what is learned from each experience,
customers may alter their behavior in ways
that affect their individual proftability. Thus,
by managing these experiences, companies
can orchestrate more proftable relationships
with their customers.
In a sense, this is a classic nature vs.
nurture argument. CRM uses profling,
micro-segmentation and predictive analyses
to identify each customer’s fgurative genetic
structure. CRM thus uncovers the preferences
and propensities of customers so that they
can be nudged towards optimal proftability.
Customer Experience Management, on the
other hand, looks at the environment. It
gathers and analyzes information about the
dynamics of interactions between companies
and customers. This information is feed back
to the company in a self-calibrating system
that (in theory) makes optimal use of every
opportunity to infuence customer behavior.
Obviously these are overlapping
approaches, and both have merit if designed
and applied intelligently. Up until now
the spotlight has predominantly been on
CRM, in part because it is technologically
impressive (as well as astonishingly
expensive). Unfortunately, CRM has not
been nearly as effective as promised;
according to some estimates, from 50% to
70% of CRM initiatives fail to achieve their
goals.
As CRM is more widely used, its
weaknesses become more apparent.
Analysts have become fond of noting that
there is no R in CRM (some go so far as
to say there is no C, either). The idea of
a “relationship” with customers seems
hollow: CRM is very good at receiving, but
not very good at giving. It asks customers
to provide access and information without
telling them what they will get in return. It
pigeonholes customers based on past actions
without informing them how to build a more
advantageous profle. It prompts customers
to become more valuable to the company
without promising greater value from the
company.
Furthermore, while CRM is fairly
effective at measuring its own successes, it
does not provide much information about
its failures. It can record when customers
respond positively to its automated
prompting and prodding, but it doesn’t
give much insight when customers do not
respond in the predicted way. CRM is thus
unable to determine whether failures are
the result of faulty assumptions, incorrect
information or poor execution. It is also
unable to tell how these “failed” interactions
affect the customer relationship; it treats all
failures as neutral, when in fact the fabric
2009 39
of the relationship may have been weakened
or undermined by a poorly executed service
encounter.
CEM’s strengths lie in precisely the areas
where CRM is weak. By focusing on the
experiences of customers and how those
experiences affect behavior, CEM examines
both the quality of the company’s execution
and the effciency of the result. It aligns
customer needs with the company’s ability
to fulfll those needs, leading to business
relationships that are mutually benefcial and
that both parties — company and customer
— are motivated to improve.
Examples of CEM
* “Best New Airline of the Year Award
2005” – Kingfisher airlines
Given by Centre for Asia Pacifc Aviation
for its signifcant innovation and outstanding
customer experience.
For the frst time in the Indian skies,
Kingfsher Airlines offers world-class in-
fight entertainment with personal video
screens for every seat. There’s a wide
selection of 5 video channels and 10 audio
channels available on- board. Also on offer
are extra-wide seats and spacious legroom,
delicious gourmet meals, international-class
cabin crew and a whole host of comforts and
delights. Kingfsher Airlines also facilitates
doorstep delivery of tickets on guest request.
* Blue Dart Express Limited, South
Asia’s largest integrated air express,
courier and logistics company
Their focus was on providing customers
with quality service and an enhanced
customer experience, they continued to
upgrade and expand their infrastructure, by
adding new facilities in Lucknow, Mumbai,
Pune, Ahmedabad, Meerut and Jaipur, and
moving to a new, state-of-the- art warehouse
facility in Delhi.
* Pizza hut
It recognises frequent callers and the
context of their call enabling the customer
to be routed to the agent who can best fulfll
their requirements, whether its a new order,
changes to an existing order or a status
inquiry on an existing order.
Pizza Hut operators can access up-to-date
information on its outlets in the catchment
area, enabling them to select the Pizza Hut
store that can fulfll the customer order
quickest, thereby meeting its commitment
to deliver hot pizza quickly.
Conceptual Background
Overview of literature on aspects of
customer experience
Theme Study
Customer Experience Berry, Carbone, and
Haeckel (2002); Sousa and
Voss (2006); Gentile, Spiller,
and Noci (2007), Meyer and
Schwager (2007); Naylor et
al. (2008);
Customer Experience
Driver Brand
Chartrand, and Fitzsimons
(2008); Ofr and Simonson
(2007); Keller and Lehmann
(2003); Lee and Rhee
(2008); Gauri, Trivedi, and
Grewal (2008).
Price Ofr et al. (2008); Kopalle
et al. (2009); Bronnenberg
and Wathieu (1996); Wedel
and Zhang (2004); Dorotic,
Verhoef, and Bijmolt (2008);
Gauri, Sudhir and Talukdar
(2008); Noble and Phillips
(2004).
Kamaladevi B. - Customer Experience Management in Retailing
Kamaladevi B.
Business Intelligence Journal - January, 2010 Vol.3 No.1
40 Business Intelligence Journal January
Theme Study
Promotion Ailawadi et al. (2009); Van
Heerde and Neslin (2008);
Gijsbrechts, Campo, and
Goossens (2003); Chiou-Wei
and Inman (2008); Lwin,
Stanaland, and Miyazaki
(2008).
Supply Chain
Management
Garg et al. (2005); Dant
et al. (2009); Burkle and
Posselt (2009), Xu and Kim
(2008), Neslin et al. (2006);
Patricio, Fisk, and Falcao e
Cunha (2008); Sousa and
Voss (2006); Verhoef, Neslin
and Vroomen (2007).
Location Durvasula, Sharma, and
Andrews (2002); Ghosh and
Craig (2001); Gauri, Trivedi,
and Grewal (2008); Xu and
Kim (2008).
Advertising Chaudhuri & Buck (2005);
Petty & Cacioppo (2003);
Janoschka (2004); Fisher,
Gainer, and Bristor (1997);
Gof et al. (1997).
Packaging & labeling Koirala (2005); Kotler and
Armstrong (2005); Young
(2003); Jugger (1999); Luo
(2005); Wakefeld and Baker
(1998); White and Dahl
(2006).
Service Mix Oliver (2001); Parasuraman,
Zeithaml, and Berry (2004);
Baker et al. (2002); Beatty et
al. (1996); Folkes and Patrick
(2003); Meuter et al. (2005);
Van Dolen, Dabholkar, and
de Ruyter (2007); Weijters et
al. (2007).
Atmosphere Baron, Harris and Harris
(2001); Kozinets et al (2002);
Schmitt (1999); Baker et al.
(2002); Kaltcheva and Weitz
(2006); Wakefeld and Baker
(1998).
Figure 1. Overview of literature on aspects of
customer experience
Major Factors Influencing Consumer
Buying Decision Process
On the consumer front, many people’s
savings have evaporated in the year 2008,
primarily because of the precipitous decline
in stock prices, suffering real estate markets,
and increasing unemployment. Consumers
thus take greater care in what they buy,
where they buy, and how much they will
pay. Although hardly a suffcient silver
lining, researchers now have the opportunity
to examine more thoroughly many of
the issues discussed in the remainder of
this introduction in a new light. How do
consumers react differently to brand, price,
promotions, supply chain management,
location, advertising, packaging, labeling,
service mix & atmosphere in an economic
crisis? Can retailers take certain actions to
increase patronage, both before and during
a shopping experience? Does consumer
cherry picking change when consumers
face more diffcult economic trade-offs?
Will consumers continue to embrace more
expensive and higher quality private-label
merchandise? How should retailers alter
their assortments? Should they continue
to experiment with new categories that
previously appeared only in stores with
different retail formats? Will price elasticities
for substitute and complementary purchases
differ during economic downturns? What
innovative strategies might multi- channel
and online retailers use to gain greater shares
of wallet? And how might retailers adjust
their global sourcing strategies and the way
they work with and develop relationships
with their global vendors? These questions
and many more depend on the major
economic issues that confront consumers
and the retailers they serve.
2009 41
Figure 2. Macro Factors Infuencing Consumer
Buying Decision Process
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Brand x x x x
Price x x x x
Promotion x
Supply Chain
Management
x x x
Location x x x x
Advertising x x x
Packaging &
labeling
x x
Service Mix x x x x
Atmosphere x
The Brand Experience
The customer comes to a retailing
environment with perceptions about two
types of brands: the retail brand (e.g.,
Victoria’s Secret, Starbucks, Wal-Mart,
Macy’s, Best Buy) and the manufacturer or
service brand that is sold in the retail stores
(e.g., Verizon, Ralph Lauren, Tide, Dell,
private label brand). Here, the discussion is
about the retail brand customer experience,
although the ideas put forth below could be
investigated in relation to the manufacturer
or service brand as well.
Background
Customers’ brand perceptions may
infuence their customer experience. Recent
research has begun to investigate new aspects
of this relationship. Specifcally, Fitzsimons,
Chartrand, and Fitzsimons (2008) found
that the type of brand and consumers’
perceptions of the brand can infuence their
behavior. For example, consumers primed
to think of Apple behave more creatively
than consumers primed to think of IBM. In
addition, Ofr and Simonson (2007) found
that customer expectations (when stated prior
to a service encounter) have a signifcant
effect on post purchase evaluations of the
shopping experience and the frm. This
suggests that customer brand perceptions (of
the retailer), when primed prior to shopping
experience, might signifcantly infuence the
customer’s experience. It is also important
to consider the reinforcing effects of the
customer’s experience and the brand over
time. Prior research suggests that customer
experience has a signifcant infuence on
the customer’s overall perception of the
brand. In addition, Keller and Lehmann
(2003) propose that the customer mindset
(e.g., awareness, associations, attitude,
attachment and activity) is the key driver of
brand performance (e.g., price premiums,
price elasticities, market share, expansion
success).
Research Discussion
There is much yet to learn about the
infuence of brand perceptions on the
customer’s retail experience. There may
be asymmetric effects of brand perceptions
on customer experience. Consumers whose
frst impression of a brand is negative can
be infuenced by providing them with
non-comparative information, whereas
consumers with positive frst impressions of
a brand are infuenced more by comparative
information. This suggests an area that is ripe
for future research—namely, understanding
how a customer’s initial perceptions of a
retail brand may infuence distinct elements
of the customer’s subsequent experiences
with the brand, and how those experiences
in turn may infuence brand perceptions in
the future. In addition, positive customer
brand perceptions may infuence customer
experiences differently than negative
customer brand perceptions. As such, future
Kamaladevi B. - Customer Experience Management in Retailing
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Business Intelligence Journal - January, 2010 Vol.3 No.1
42 Business Intelligence Journal January
research could also investigate the extent to
which strong (positive or negative) brand
perceptions may have a signifcant effect on
the customer’s experience. In addition to the
direct effects of customer brand perceptions
on customer experience, future research
could examine the extent to which customer
brand perceptions may act as a moderator in
infuencing the effects of other determinants
of customer experience. For example,
might brand perceptions (either retail or
manufacturer) moderate the effects of social
environment, self-service technology, or
price on customer experience?
The Price Experience
A lot rides on how a retailer sets its
prices. The three other P’s create value for
the seller; the fourth P of price captures
value. In addition, this is the only P that
earns revenue for the retailer. When
retailers price a product or service too high,
consumers view it as a poor value and will
not buy. A price set too low may signal low
quality, poor performance, or other negative
attributes about the product or service.
Although setting the “right” price is clearly
an important retailing task, it is often treated
as an afterthought, partly because it remains
the least understood and therefore most
diffcult to manage task.
Background
Recent research demonstrates that a
consumer’s store price image likely results
from a numerosity heuristic, such that the
greater the number of low priced products at
a store, the lower is the price image among
knowledgeable consumers (Ofr et al. 2008).
Kopalle et al. (2009) concentrate on the
interaction between pricing and competitive
effects in retailing, noting the diffculty of
research into category and store level prices,
because retailers stock thousands of items,
most of which are irrelevant to any given
consumer. Furthermore, because different
consumers buy different market baskets, a
category or store that one customer perceives
as high priced may seem low priced to another.
Research suggests that retailers therefore
should carry some high-priced merchandise
to extract rents from loyal customers and
some low-priced merchandise to attract new
ones, but more work is needed in this area.
Moreover, the emergence of discount stores
carrying fashion products and luxury brands
can affect pricing in traditional retail chains
(Kopalle et al. 2009).
Previous pricing research regarding
private labels versus national brands
suggests asymmetric sales effects, such
that higher price/higher quality brands
steal sales from lower price/lower quality
brands when the higher tier reduces its price
(Blattberg and Wisniewski 1989). In various
examinations of the different features
of the private label/national brand and
price/sales interactions, asymmetric effects
predominate (Allenby and Rossi 1991;
Bronnenberg and Wathieu 1996; Pauwels
and Srinivasan 2004; Sethuraman and
Srinivasan 2002; Wedel and Zhang 2004).
These studies again focus on grocery and
drugstore formats, in which private-label
prices generally are signifcantly lower than
those of national brands. Further research
should investigate the pricing aspects
of private labels versus national brands
using premium private labels (Kumar and
Steenkamp 2007) and durable and fashion
goods.
Research Discussion
A popular pricing strategy adopts
loss leaders, items priced at or below the
retailer’s cost. The preponderance of loss
leader activity in retail stores believes the
2009 43
gaps in our knowledge about its impact
on traffc, sales, and profts. Although
store traffc increases and sales generally
increase for items used as loss leaders, these
loss leaders may not infuence the sales
of other, non-promoted items, and their
impact on proftability is questionable. A
more defnitive under- standing of how loss
leaders affect the sales of non-promoted
items and proftability would be very useful.
Research on online and multi channel
pricing takes a prominent place in modern
academic journals, yet limited study
addresses online pricing strategies. Much
of this limited research focuses on customer
reactions to different pricing strategies and
shipping fees, the role of infomediaries,
advertising revenues, channel interactions,
and personalized pricing schedules. Yet
some of the issues described herein and
examined in brick-and-mortar store settings
would be useful pursuits in the virtual and
multichannel world. For example, how might
online strategies differ from in-store strate-
gies for similar merchandise and services?
Should they differ across channels? Do
consumers behave differently online? What
competitive behavior effects exist?
The Promotion Experience
Consumer promotions also take several
forms, including price promotions, loss
leaders, and in-store displays. Meta
analyses show that the immediate increase
in sales of a promoted item is substantial.
However, brand switching as a result of
consumer promotions is closer to 30–45
percent, far less than previous estimates
of approximately 80 percent. A consumer
promotion, such as a loss leader, on one
item should increase sales of other items
and overall profts, yet empirical research
in this area is mixed. Consumer “cherry
picking” for special prices has a relatively
minor impact on retailer profts; they also
conclude that not all promotions have a
positive revenue impact for retailers though.
Rather, the proft impact is decidedly mixed.
Background
Literature on integrated marketing
communications is vast, but research
pertaining to retailing is very specifc.
Ailawadi et al. (2009) logically organize
this body of research into manufacturer
promotion decisions, as it relates to retailers,
and retailer promotion, the manufacturer
primarily is interested in using promotions
to enhance the performance of its brands,
whereas the retailer is interested in
enhancing their own performance (Van
Heerde and Neslin 2008). Signifcant
research on trade promotions centers on the
extent of the monetary savings passed on to
consumers. Some controversy surrounds the
impact of pass-through trade promotions;
specifcally, does a trade promotion from
one manufacturer in a given period infuence
the promotion of another manufacturer’s
brand in the same period (e.g., Moorthy
2005)? The accounting records pertaining
to trade promotions remain inadequate for
deriving a defnite answer (Parvatiyar et
al. 2005). Ailawadi et al. (2009) therefore
suggest further research should exam- ine
how different types of trade promotions
get funded, passed through, and perform. A
plethora of research investigates the impact
of different types of promotions on sales and
profts, including the composition of fyers
(Gijsbrechts, Campo, and Goossens 2003).
Research Discussion
Although most retail promotions
emphasize price, studies often consider
them in isolation. Yet price promotion
coordination is a key driver of retailer
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Business Intelligence Journal - January, 2010 Vol.3 No.1
44 Business Intelligence Journal January
proftability. Retailers and researchers alike
need more information about the impact of
coordinating price promotions within and
across categories and across retail formats
within a chain, such as Wal-Mart and
Neighborhood Markets. The National brands
should be promoted more than private-label
brands, because the national brands attract
customers’ attention and attract them to the
store. Yet retailers promote private-label
merchandise, because they generally earn
higher margins on private labels.
Although the customer knows much
about the sales bump caused by consumer
promotions, they have a poorer understanding
of the proft impact. Retailers’ increased
emphasis on private-label merchandise
demands more work investigating the
effectiveness of private-label promotions.
It also seems important to identify win–
win promotions for manufacturers and
retailers. Because many purchase decisions
take place in brick and mortar stores and
as new methods for reaching consumers in
stores emerge, more research should assess
the effectiveness of in-store promotions to
customers.
The Supply Chain Management
Experience
Most of the researchers centers on what
happens at the front-end of the retail store,
supply chain management occurs at the
back end. For decades, retail supply chain
and logistics issues seemed somehow less
important than other activities such as
promotion, pricing, or customer service.
But this erroneous perception no longer
exists. Supply chain issues, from both the
more managerial partnering side and the
more technical operations side, have proven
important sources of competitive advantage
for many retailers, particularly low-cost
providers such as Wal-Mart and Zara.
Background
Ganesan et al. (2009) examine several
important supply chain issues, including
global sourcing practices, multichannel
routes to market, and relationship-based
innovation. These authors note that with
private-label merchandise, as opposed to
national brands, the burden of ensuring that
merchandise production adopts corporate
socially responsible (CSR) policies, as well
as quality and safety control issues, rest
with the retailer. And most of this sourcing
is done globally today. Academic research
at the nexus of global sourcing and CSR is
somewhat sparse (e.g., Wagner, Lutz and
Weitz 2008); more research might examine
the circumstances in which customers will
pay more for merchandise produced in a
socially responsible manner, particularly
during economic downturns. Ganesan et
al. (2009) also examine several issues for
hierarchical multichannel relationships, in
which both manufacturers and retailers sell
through multiple channels to consumers.
As hierarchical multichannel relationships
develop, confict can occur between the
channel members, which must compete
with one another. Retailers can respond to
this competitive situation by taking direct
action, such as refusing to sell products that
the supplier sells directly (Schoenbachler
and Gordan 2002), or looking for alternative
ways to service customers (Vinhas and
Anderson 2005). A more positive approach
would pursue a channel structure with mutual
benefts, such as proft sharing (Neslin et
al. 2006; Yan 2008). Ganesan et al. (2009)
there- fore suggest that further research
should attempt to increase our understanding
of how hierarchical multichannel structures
affect the participants’ relationships, their
relative power, and their performance.
2009 45
Research Discussion
Most recent retailing innovation
initiatives seem to come from sustainability
initiatives designed to improve the
environment, healthcare, diversity, and
sourcing. It investigates how relationships
between retailers and their suppliers may
facilitate product or process innovations.
Specifcally, when supply chain partners
exchange information, the relationship
grows stronger, and the likelihood that
valuable and important information gets
exchanged increases. However, the strength
of relational ties may play a more important
role for process than for product innovations.
When retailers have supply chain partners
with diverse, rather than complementary,
capabilities and resources, they are more
likely to innovate, because the information
acquired from these varied sources differs.
Finally, asymmetrical dependence between
the retailer and its supply chain partners
should negatively affect innovations,
because the weaker party guards against
exploitation, while the stronger party tends
to exploit opportunities without worrying
about negative partner perceptions.
The Location Experience
Retailing academics and practitioners
seem always to emphasize “location,
location, location” as the key to success. An
important research advance could consider
the role of travel time on consumers’ choices
of retail formats and the related retailing
implications because consumers value their
time, researchers should investigate what
it might take, in terms of price savings and
deals, to attract consumers to a factory outlet
store (normally located some distance away)
rather than a similar store in a conveniently
located mall. The location decision likely
has major ramifcations for price, promotion,
and merchandising decisions.
Background
Durvasula, Sharma, and Andrews
(2002) recommend STORELOC, a store
location model that incorporates managerial
judgment data in addition to consumer
data. Because key managers participate
in the process, their buy into the outputs
of the location model increase, namely,
the identifcation of the best retail sites for
expansion. The key store attributes and
their relationships with relative competitive
strength can be estimated using varied
methods in this model, including conjoint or
logit analysis. Another interesting location
problem involves understanding how to
expand a franchisor distribution system
optimally, because in some cases, that
which is best for the franchisor may be at
odds with the preferences of the individual
franchisees. Ghosh and Craig (2001)
develop FRANSYS, a franchise distribution
system location model, to address this kind
of problem. Another important issue related
to locating franchises concerns the choice
between multi unit franchisees (MUF)
versus single unit franchisees (SUF) since
the modal franchisee in the US is no longer
the stereotypic mom and pop single unit
operator, but a mini chain operator (Garg et
al. 2005; Kaufmann and Dant 1996). Some
recent evidence suggests that even though
MUF may be preferred by franchisors
for reasons of rapid system growth,
system-wide adaptation to competition,
minimization of horizontal free-riding, and
the strategic delegation of price or quantity
choices to franchisees, it is the SUF that
characterize their dyadic relationships with
their franchisors as more rela- tional and
cooperative as compared to their MUF
counterparts (Dant et al. 2009).
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46 Business Intelligence Journal January
Research Discussion
The age of these models clearly shows,
however, the need for more research into
location issues. With the greater availability
of excellent geographical information
systems (GIS), rich data are easily accessible.
For example, GIS data supplemented with
appropriate panel consumption data could
enable empirical tests of a host of location
models. More recent research highlights the
role of two key location factors: proximity
to customers (measured in travel time) and
proximity to other stores or agglomeration.
For example, grocery stores appear to beneft
from agglomeration with discount stores, but
Wal-Mart discount stores suffer reductions
in revenues when they agglomerate with
grocery stores. Prior research recognizes
several different retail formats, according to
pricing (e.g., everyday low price vs. high/
low pro- motions), merchandise (wide
vs. narrow) and Internet presence (bricks,
clicks, or bricks and clicks). Insights from
this area of inquiry suggest that bricks still
hold an advantage over clicks and are likely
to dominate in certain categories, such as
high end apparel and jewelry. Research
also shows that consumers may use the
different retail formats for different stages
of the consumer decision process, such that
the online store might be a great way to
compare alternatives, but brick-and-mortar
stores seem more suitable for purchases. A
systematic understanding of the role of these
different formats in the consumer decision
process and how retailers can best optimize
their multiple channels would be a fruitful
area of inquiry.
The Advertising Experience
Exponential growth in Internet hosts
and personal computer adoption has led to
dramatic increases in online activity. During
the growth process, marketers recognized
that the Internet was a medium for reaching
millions of potential customers. Since
then, marketers have adapted value based
advertising strategies to the Internet.
Background
Traditional consumer behavior literature
would suggest that intense product
information is vital for high involvement
product web sites, while entertainment
content may be ft for low involvement
product sites (Chaudhuri & Buck, 2005;
Petty & Cacioppo, 2003). Additionally,
the primary reason for distinguishing
between high and low product involvement
is that habit, intuition and convenience
sometimes guide the actions of consumers
rather than rational considerations
(Lamb, 1996). There are various types
of online advertising, including “emails,
newsletters, screensavers, e-sponsoring,
asynchronous and synchronous chat groups,
infomercials, online games, and web sites”
(Janoschka, 2004). Similar to other types of
advertisements, web ads are paid or unpaid
form of communication aim at informing
the existence of a product or service and/or
persuading consumers to take actions. And
Janoschka (2004) found one major difference
is that web ads are hyperlinks in nature,
which enable activation by their users. They
not only contain promotional messages on
themselves which tries to attract consumers’
attention, but also embedded with hyperlinks
and then point to a much greater information
pool, such as the corporation’s website.
Research Discussion
The global online advertising industry
has witnessed the rapid emergence of social
networking sites and is growing rapidly
despite the economic slowdown. The
2009 47
growth of this industry is being driven by
increasing internet users, rising awareness
and growing broadband subscription rate
and ecommerce, which is playing a key role
in this industry. In coming years online Ad
spending is expected to overtake the TV
advertising market.
The industry is divided into various
segments but mainly three segments (search,
display and classifeds) represent the whole
industry. Rich media is a new segment
recently entered in the online Ad industry,
caters to a small portion of the market
whereas search, display and classifeds
serves almost 80% of the online Ad industry.
There are various revenue models, out of
which pay-per-impression and pay-per click
are the most common among others.
In terms of online Ad spending by
geography, UK, Netherlands and the pan-
European sector lead the market but in
terms of internet Ad budget allocation
France, Germany, Spain and Italy have
a strong presence. United States is the
most developed market for the advertising
industry. In Canada, internet advertising
accounted for almost one third of total
advertising market.
The areas for future research are discussed
here. The thirty-three items suggested by
the fourteen academicians may be grouped
into types of ads, types of appeals, larger
effects on society, advertiser concerns, and
legal concerns. Types of ads include ads for
legal vices (e.g., ads for tobacco or alcoholic
beverages), ads for sex-related products (e.g.,
condom ads or ads for abortion services),
and ads for health care and professional
services (e.g., ads for personal care and
hygiene products or ads for professional
legal services). Types of appeals include
the use of questionable appeals (e.g., fear or
negative appeals) and stereotypical appeals
(e.g., sexual or racial stereotyping). Larger
effects on society include value formation
(e.g., molding society’s material wants) and
media content (e.g., the information content
of ads). Advertiser concerns include ad
agency concerns (e.g., self-regulation or the
ethical codes of ad agencies) and the voice/
tone of the ad (e.g., corporate advocacy or
comparative ads). Finally, legal concerns
include the use of deception, advertising to
children, and public service announcements
(e.g., anti-drug or anti-cigarette ads).
The Packaging & Labeling
Experience
Packaging plays a major role when
products are purchased. After all, it is the
frst thing seen before making purchase
choices and it is widely regarded that over
50 per cent of purchasing decisions are made
at the shelf, or point of purchase. Therefore,
packaging which creates differentiation
and identity in the relatively homogenous
consumer packaged goods industry is
therefore highly important.
Background
As a ffth ‘p’ of marketing, packaging
refers to the activities of designing and
producing the container or wrapper for
a product. It may be primary, secondary,
and shipping to perform the objectives as
containment, protection, identifcation,
communication, promotion and product
differentiation. Good packaging also
provide information based on truth, it must
be economical, attractive, convenient,
protective and transparent (Koirala, 2005).
A label is a simple tag attached to a product
or an elaborated designed graphic that is
the part of the package. It identifes, grade,
scribe and promote the product by providing
the information to the buyer. It may be brand
labels, grade labels and descriptive labels
(Kotler and Armstrong 2005). It is vitally
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48 Business Intelligence Journal January
important that when researching package
design that it is measured in the context
within which it is usually found (Young,
2003). “The ‘right’ packaging solution is
different for each brand. What is important
is that it works when placed next to the
competition on the shelf” (Jugger, 1999).
Research Discussion
Packaging has a better reach than
advertising does, and can set a brand apart
from its competitors. It promotes and
reinforces the purchase decision not only at
the point of purchase, but also every time
the product is used. Packaging in different
serving sizes can extend a product into
new target markets or help to overcome
cost barriers. Packaging can even drive
the brand choice (especially in the context
of children’s products). As the market
becomes more competitive and shelf space
is at a premium, products need to be able
to stand out from the crowd and packaging
needs to provide more than just functional
benefts and information. Under time
pressure and in low involvement purchases,
less time is spent looking at the detail and
information provided on packaging – this
is especially true in the FMCG category.
Research into packaging has found that
different packaging cues impact how a
product is perceived. Often the packaging
is perceived to be part of the product and it
can be diffcult for consumers to separate
the two (the concept of gestalt). Aspects
such as packaging colour, typography,
illustrations and graphics can infuence how
a product is perceived. Labeling should not
be unnecessarily confusing or misleading in
order to hide the poor nutritional/ingredient
profle of certain products. The decrease in
consumer confdence in food safety is not a
result of the number of recalls, but instead the
high-profle, long-lasting nature of the safety
incidents. Packaging is integral to boosting
perceptions of safety and will therefore be
an important part of more concerted efforts
to regain consumer trust going forward.
The Service Mix Experience
Customer service is the ability of an
organization to constantly and consistently
give the customer what they want and need.
Background
Customer satisfaction is a key consequence
of service quality and can determine the
long-term success of a service organization
(Parasuraman, Zeithaml, and Berry 2004). In
general, customer satisfaction is affected by
customer expectation or anticipation prior to
receiving a service and can be approximated
by the following equation: Customer
Satisfaction = Perception of Performance –
Expectations (Oliver 2000). When translated
to services, a distinction between service
quality and customer satisfaction needs to
be made (Parasuraman, Zeithaml, and Berry
2004). Furthermore, one must differentiate
between service expectations and service
perceptions.
While service expectations are a
combination of a customer’s predictions
about what is likely to happen during a
service transaction as well as the wants
and desires of that customer, service
perceptions can be defned as a customer’s
global judgments or attitudes, which relate
to the superiority of a service (Oliver 2001;
Parasuraman, Zeithaml, and Berry 2004).
Research discussion
A lot of companies are so preoccupied
with day-to-day operations, but if they
don’t have customers for life we’re going
to go out of business. Many service
2009 49
organizations, such as hotels, retail stores,
and airlines, invest substantially in their
physical plant to provide a superior service
experience. However, little is known about
how to design a servicescape to enhance the
consumption experience. For example, it
may be unsurprising to learn that research
has shown that pleasant music, compared
with less pleasant music, is associated
with longer consumption times, shorter
time perceptions, less negative emotional
reactions to waiting, more favorable attitudes
toward the physical environment, more
positive attitudes toward service providers,
and more favorable customer assessments,
purchase intentions, and behavior.
The Atmosphere Experience
Consumer spending behavior can
be signifcantly infuenced by the store
atmosphere and the customer mood.
Customers require a store layout that
maximizes the number of products seen
within the context of a customers’ need for
the product. Customers who experience
a form of personal control, whether in
orienting themselves to the store section
they need to go to or in fnding the products
they want, generally feel good about the
store. Good feelings lead to more purchases,
especially if products are presented within a
display that shows the potential usefulness
of the product for them.
Background
Store atmospherics have been at the
centre of numerous discussions recently
as a means of creating a pleasurable
consumption experience; engaging and
luring customers, with hopes that they
will increase their likelihood to purchase,
revisit and recommend to others (Baron,
Harris and Harris 2001; Kozinets et al 2002;
Schmitt 1999). Sharma and Stafford (2000)
suggest that customers have a higher need
to affliate with salespeople working in nicer
retail environments or ‘prestige ambience
environments’– which should lead to an
increase in the perceived level of credibility
for the salesperson, and subsequently a
higher likelihood to purchase. However, the
‘prestige’ and ‘discount’ ambience stores
have been hard to defne in the literature,
with most researchers testing atmospherics
in isolation, and not at a holistic perspective
(Turley and Milliman, 2000).
Research Discussion
The future research should examine
retail store environments where customer-
salesperson relationships may exist
to increase understanding in this area.
Furthermore, customer service quality
measures typically given when examining low
sales interaction stores should be compiled
in conjunction with relationship selling and
other measures that infuence the customer
experience to understand if relationship
selling is necessary in these retail settings.
Store atmospherics did have a signifcant
impact on customer expectations of the
retail salesperson, but in behaviour only. A
higher perceived store ambience resulted in
higher expectations of a retail salesperson’s
behaviour, but a higher store atmosphere did
not result in higher expectations of a retail
salesperson’s credibility. Store atmospherics
manipulate customer’s expectations of the
retail salesperson behaviour, subsequently
affecting customer satisfaction if the retail
salesperson does not match expectations.
Future research will be directed into
the exploration of characteristics of the
salesperson and store atmospherics to
determine the optimal blend for certain store
environments.
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10 Best Practices to make the
Successful CEM
1. Successful deployment requires the
active and continuing involvement of
leadership
Execution is the hardest part of creating
a customer experience because in order to
deploy successfully they have to mobilize
employees at all levels and align competing
agendas, functions and executives. This is
not an easy task. Perhaps that is why that
so many of the exemplars of Customer
Experience tend to be organizations led by
passionate founders or CEOs that see it as a
primary source of differentiation. Think of
Starbucks, Amazon, Southwest Airlines or
Virgin and inevitably you quickly think of
Howard Schultz, Jeff Bezos, Herb Kelleher
and Richard Branson. CEM can work just as
successfully and achieve startling results in
large mature corporates too, but the need for
leadership is even greater.
2. Ensuring cross-functional
ownership is vital
If the CEO or President recognizes that
it will take more than rhetoric to make a
difference, the next common mistake is
asking the Marketing VP, HR Director or
Customer Service Executive to “fx the
problem.” The brand and the customer
experience must be owned collectively
by the senior management team. Each
function has its particular part to play, but
to be successful these three functions must
operate as what we refer to as a “Triad” to
optimise resources, efforts and budgets to
create an organization-wide strategy for
delivering the brand.
3. Focusing on the most strategically
important customers
The starting point for the work is
collecting customer data to inform the
defnition of a promise and design the
new experience. The most frequent client
response to this suggestion is “We already
have lots of customer data and research so
you don’t need to bother.” In reality whilst
organizations undertake customer research
and collect mountains of data, relatively
few know who their most proftable (not
largest) customers are. The fact is that a
few customers will typically represent the
signifcant proportion of the proft and these
are the ones to focus improvement efforts
on.
4. Finding out what these customers
truly value
Knowing who are the most proftable
customers is all very well, but if they do
not know what these customers value and
the three or four most important attributes
which drive their intention to repurchase,
cannot infuence their behaviour. Without
the answers to these questions they may
have data, but they do not have insight.
A key component of a branded customer
experience is being differentiated in a
way that is valuable to target customers.
A key component of a branded customer
experience is being differentiated in a way
that is valuable to target customers.
5. Being clear about what we stand
for
In 2001, UK-based bank Barclays aired a
television advertisement called “Big Idea.”
It was a beautifully crafted ad featuring
Anthony Hopkins as a big shot businessman
with a big house, a big car and a big meeting
2009 51
to attend. The tagline was, “A big world
needs a big bank.” The ad received a bronze
award at that year’s British Television
Advertising Awards, but customers replied
with a less than enthusiastic, “big deal!”
The ad simply reinforced common customer
preconceptions about large banks that they
don’t care about the average person and are
interested only in making as much money as
they can.
In the Polish market, 55 percent of
executives feel that they have “defned a
brand promise that differentiates us in the
eyes of their target customers” but only
35 percent “have mapped their customer
touchline to determine the key points of
contact their customers have with us and
how their promise should be delivered at
each.” This omission is quite common in
their experience and takes us on to our next
point. Making a promise to the customers is
one thing, delivering it quite another.
6. Delivering the promise at every
touch point
This is particularly true in today’s
economy. With the pressure on sales and
costs they have to make sure that every
effort is made delivering those things that
customers value rather than things that
they don’t. This means having an intimate
understanding of the customer experience
and being intentional about designing it to
deliver value at the key touch-points.
7. Providing branded training to
ensure that employees understand
the brand story
Many organizations provide customer
service training yet few are differentiated in
the service they provide. The reason is that
“vanilla” training creates “vanilla” service.
This is not to say that all generic service
training is bad. In fact there are some very
good off-the-shelf programmes that really
help to improve customer-facing skills and
make service more consistent.
A key ingredient of successful branded
training is to build executives into the process
so that they have an active role in cascading
the message. Leaders have been trained as
champions of customer experience and are
leading its implementation.
8. Designing CEM before installing
CRM systems
At the peak of CRM hype, expenditure
on CRM systems was estimated to have
increased from $20 billion in 2001 to $46
billion in 2004. Yet one survey by Gartner
research estimated that 55 percent of CRM
systems drove customers away and diluted
earnings. This is because most CRM
systems are installed without any thought
about how they will be used to add value
for the customer. These powerful systems
allow companies to collect knowledge
about the customer that can be used to offer
them products and services tuned to their
particular needs and preferences. However,
for many customers the acronym CRM
stands for “Constantly Receiving Mail-
shots” since many organizations (and banks
are the worst) use them as a blunt instrument
to stalk, rather than woo, the customer
through junk mail. Some software providers
are now designing their products to support
the customer experience and build CEM
functionality into their call-centre products
so that the agent is provided with all the
information, tools and measures necessary
to deliver the desired experience.
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Business Intelligence Journal - January, 2010 Vol.3 No.1
52 Business Intelligence Journal January
9. Measuring the customer
experience
Peter Drucker’s maxim that “what gets
measured gets managed” is still true today.
Yet most organisations focus exclusively
on end-results measures. Market share,
proftability and EPS growth are all vital
measures of business performance but they
are all lagging indicators—the result of
differentiation, customer loyalty and brand
preference. The answer is to move up-stream
and measure and manage those activities that
deliver the required customer experience
and drive customer advocacy. Market share,
proftability and EPS growth are all vital
measures of business performance but they
are all lagging indicators.
Yet over 51 percent of the executives
the organization surveyed reported that their
organization did not have a scorecard to
measure the customer experience. The mean
score for the statement “We have a scorecard
of indicators that provide leaders with
objective and timely feedback on how well
we are delivering against our promise” was
the lowest achieved in the survey scoring at
just 4.6 on their ten-point scale.
10. Aligning the organization with
the customer experience
One of the lowest scoring items in the
organization survey was “Leaders measure
and monitor the quality of the customer
experience.” As many respondents disagreed
with this statement as agreed with it. This
poor result was reinforced by the fact that
only 47 percent of respondents agreed
with the statement “Our leaders reward
employees who put customers frst.” The
fact is that unless there is a link between
the desired business results, the customer
experience necessary to achieve it and
appropriate measurement and rewards then
it is unlikely to happen.
Conclusion
Customer Experience Management
is not, however, simply an old idea in a
new wrapper. In recent years a number of
fundamental changes have occurred in
the business environment that have led to
the emergence of Customer Experience
Management as both a strategic discipline
and a fast-growing industry, complete with
a wide array of tools and solution sets. The
changes have been fueled by technological
advancements, which have expanded the
range of services available to customers, and
simultaneously led to escalating customer
expectations. The result is that there are
now more services and products available
than at any time in the past, yet customer
satisfaction are on a downward slide.
Customer Experience Management can
help reverse that slide by providing effcient
business tools that make the interactions
between companies and customers more
rewarding for both parties.
Hope this article provide a broad-based
overview of the various domains (e.g.,
Brand, Price, Promotion, Supply Chain
Management, Location, Advertising,
Packaging & labeling, Service Mix
and Atmosphere) of the retail customer
experience and in turn provide a research
catalyst for a plethora of important retailing
issues. Keeping customers in the next few
years will be even more important than
making a sale. Shoppers are getting used to
those 50–75 percent off sale signs, and that
is bad news for merchants who worry they
will also have to quickly slash prices on
merchandise to attract customers. Retailers
will have to engage their customers every
day to create the long-term loyal advocates
necessary to compete in these challenging
2009 53
times. The most important thing is to be
able to identify ways to hold on to proftable
customers. 10 Best Practices to make the
Successful CEM have shown in this article
to provide a great customer experience for
retail shoppers.
References
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Brian Ratchford (2008), “Empirical
Investigation of the Impact of Loss
Leader Promotion on Store and Category
Performance in Grocery Industry,”
Working Paper, Syracuse University.
Minakshi Trivedi and Dhruv Grewal (2008b),
“Understanding the Determinants of
Retail Strategy: An Empirical Analysis,”
Journal of Retailing, 84 (3), 256–67.
Brooks, Charles M., Patrick J. Kaufmann
and Donald R. Lichtenstein (2008), “Trip
Chaining Behavior in Multi-Destination
Shopping Trips: A Field Experiment
and Laboratory Replication,” Journal of
Retailing, 84 (1), 29–38.
Brown, Stephen (1989), “Retail Location
Theory: The Legacy of Harold Hotelling,”
Journal of Retailing, 65 (4), 450–7.
Brown, James R. and Rajiv Dant (2008a),
“On What Makes a Signifcant
Contribution to the Retailing Literature,”
Journal of Retailing, 84 (2), 131–6.
Brown, James R. and Rajiv P. Dant (2008b),
“Scientifc Method and Retailing
Research: A Retrospective,” Journal of
Retailing, 84 (1), 1–13.
Bürkle, Thomas and Thorsten Posselt
(2008), “Franchising as a Plural System:
A Risk-Based Explanation,” Journal of
Retailing, 84 (1), 39–47.
Fay, Scott (2008), “Selling an Opaque
Product Through an Intermediary: The
Case of Disguising One’s Product,”
Journal of Retailing, 84 (1), 59–75.
Gremler, Dwayne D. and Kevin P. Gwinner
(2008), “Rapport-Building Behaviors
Used by Retail Employees,” Journal of
Retailing, 84 (3), 308–24.
Grewal, Dhruv, Anne L. Roggeveen and
Michael Tsiros (2008), “The Effect of
Compensation on Repurchase Intentions
in Service Recovery,” Journal of
Retailing, 84 (4), 424–3.
Koschat, Martin A. (2008), “Store Inventory
Can Affect Demand: Empirical Evidence
from Magazine Retailing,” Journal of
Retailing, 84 (2), 165–80.
Kumar, V., Morris George and Joseph
Pancras (2008), “Cross-Buying in
Retailing: Drivers and Consequences,”
Journal of Retailing, 84 (1), 15–27.
Lee, Chang Hwan and Byong-Duk Rhee
(2008), “Optimal Guaranteed Proft
Margins for both Vendors and Retailers
in the Fashion Apparel Industry,” Journal
of Retailing, 84 (3), 325–33.
Ofr, Chezy, Pryia Raghubir, Gili Brosh, Kent
B. Monroe and Amir Heiman (2008),
“Memory Based Store Price Judgments:
The Role of Knowledge and Shopping
Experience,” Journal of Retailing, 84 (4),
414–23.
Kamaladevi B. - Customer Experience Management in Retailing
Kamaladevi B.
Business Intelligence Journal - January, 2010 Vol.3 No.1
54 Business Intelligence Journal January
Wu (2008), “Global Media, Local Metaphor:
Television Shopping and Marketing-
as-Relationship in America, Japan, and
Taiwan,” Journal of Retailing, 84 (1),
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doc_129439946.pdf
Survival of fittest & fastest is the mantra of today's business game. To compete successfully in this business era, the retailer must focus on the customer's buying experience. To manage a customer's experience, retailers should understand what "customer experience" actually means. Customer Experience Management is a strategy that focuses the operations and processes of a business around the needs of the individual customer.
2009 37
CUSTOMER EXPERIENCE MANAGEMENT IN
RETAILING
Kamaladevi B.
Abstract
Survival of fittest & fastest is the mantra of today’s business game. To compete successfully in this
business era, the retailer must focus on the customer’s buying experience. To manage a customer’s
experience, retailers should understand what “customer experience” actually means. Customer
Experience Management is a strategy that focuses the operations and processes of a business around
the needs of the individual customer. It represents a strategy that results in a win–win value exchange
between the retailer and its customers. The goal of customer experience management is to move
customers from satisfied to loyal and then from loyal to advocate. This paper focuses on the role of
macro factors in the retail environment and how they can shape customer experiences and behaviors.
Several ways (e.g., Brand, Price, Promotion, Supply Chain Management, Location, Advertising,
Packaging & labeling, Service Mix, and Atmosphere) to deliver a superior customer experience are
identified which should result in higher customer satisfaction, more frequent shopping visits, larger
wallet shares, and higher profits.
Kamaladevi B. - Customer Experience Management in Retailing
Kamaladevi B.
Business Intelligence Journal - January, 2010 Vol.3 No.1
38 Business Intelligence Journal January
Introduction
Just when companies are becoming
comfortable with the idea of Customer
Relationship Management (CRM), a new
term has emerged: Customer Experience
Management (CEM). The two are similar
in many ways, not least in that they are
both diffcult to defne. Neither can be
identifed with a unique product or a specifc
technology; rather, they both comprise a
group of applications, technologies and
analytics that orbit around a central premise.
The premises of CRM and CEM are quite
different, however, and are best understood
when compared side by side.
The idea at the center of CRM can
be stated in the following way: Every
time a company and a customer interact,
the company learns something about
the customer. By capturing, sharing,
analyzing and acting upon this information,
companies can better manage individual
customer proftability. Customer Experience
Management’s premise is almost the mirror
image. It says that every time a company
and a customer interact, the customer learns
something about the company. Depending
upon what is learned from each experience,
customers may alter their behavior in ways
that affect their individual proftability. Thus,
by managing these experiences, companies
can orchestrate more proftable relationships
with their customers.
In a sense, this is a classic nature vs.
nurture argument. CRM uses profling,
micro-segmentation and predictive analyses
to identify each customer’s fgurative genetic
structure. CRM thus uncovers the preferences
and propensities of customers so that they
can be nudged towards optimal proftability.
Customer Experience Management, on the
other hand, looks at the environment. It
gathers and analyzes information about the
dynamics of interactions between companies
and customers. This information is feed back
to the company in a self-calibrating system
that (in theory) makes optimal use of every
opportunity to infuence customer behavior.
Obviously these are overlapping
approaches, and both have merit if designed
and applied intelligently. Up until now
the spotlight has predominantly been on
CRM, in part because it is technologically
impressive (as well as astonishingly
expensive). Unfortunately, CRM has not
been nearly as effective as promised;
according to some estimates, from 50% to
70% of CRM initiatives fail to achieve their
goals.
As CRM is more widely used, its
weaknesses become more apparent.
Analysts have become fond of noting that
there is no R in CRM (some go so far as
to say there is no C, either). The idea of
a “relationship” with customers seems
hollow: CRM is very good at receiving, but
not very good at giving. It asks customers
to provide access and information without
telling them what they will get in return. It
pigeonholes customers based on past actions
without informing them how to build a more
advantageous profle. It prompts customers
to become more valuable to the company
without promising greater value from the
company.
Furthermore, while CRM is fairly
effective at measuring its own successes, it
does not provide much information about
its failures. It can record when customers
respond positively to its automated
prompting and prodding, but it doesn’t
give much insight when customers do not
respond in the predicted way. CRM is thus
unable to determine whether failures are
the result of faulty assumptions, incorrect
information or poor execution. It is also
unable to tell how these “failed” interactions
affect the customer relationship; it treats all
failures as neutral, when in fact the fabric
2009 39
of the relationship may have been weakened
or undermined by a poorly executed service
encounter.
CEM’s strengths lie in precisely the areas
where CRM is weak. By focusing on the
experiences of customers and how those
experiences affect behavior, CEM examines
both the quality of the company’s execution
and the effciency of the result. It aligns
customer needs with the company’s ability
to fulfll those needs, leading to business
relationships that are mutually benefcial and
that both parties — company and customer
— are motivated to improve.
Examples of CEM
* “Best New Airline of the Year Award
2005” – Kingfisher airlines
Given by Centre for Asia Pacifc Aviation
for its signifcant innovation and outstanding
customer experience.
For the frst time in the Indian skies,
Kingfsher Airlines offers world-class in-
fight entertainment with personal video
screens for every seat. There’s a wide
selection of 5 video channels and 10 audio
channels available on- board. Also on offer
are extra-wide seats and spacious legroom,
delicious gourmet meals, international-class
cabin crew and a whole host of comforts and
delights. Kingfsher Airlines also facilitates
doorstep delivery of tickets on guest request.
* Blue Dart Express Limited, South
Asia’s largest integrated air express,
courier and logistics company
Their focus was on providing customers
with quality service and an enhanced
customer experience, they continued to
upgrade and expand their infrastructure, by
adding new facilities in Lucknow, Mumbai,
Pune, Ahmedabad, Meerut and Jaipur, and
moving to a new, state-of-the- art warehouse
facility in Delhi.
* Pizza hut
It recognises frequent callers and the
context of their call enabling the customer
to be routed to the agent who can best fulfll
their requirements, whether its a new order,
changes to an existing order or a status
inquiry on an existing order.
Pizza Hut operators can access up-to-date
information on its outlets in the catchment
area, enabling them to select the Pizza Hut
store that can fulfll the customer order
quickest, thereby meeting its commitment
to deliver hot pizza quickly.
Conceptual Background
Overview of literature on aspects of
customer experience
Theme Study
Customer Experience Berry, Carbone, and
Haeckel (2002); Sousa and
Voss (2006); Gentile, Spiller,
and Noci (2007), Meyer and
Schwager (2007); Naylor et
al. (2008);
Customer Experience
Driver Brand
Chartrand, and Fitzsimons
(2008); Ofr and Simonson
(2007); Keller and Lehmann
(2003); Lee and Rhee
(2008); Gauri, Trivedi, and
Grewal (2008).
Price Ofr et al. (2008); Kopalle
et al. (2009); Bronnenberg
and Wathieu (1996); Wedel
and Zhang (2004); Dorotic,
Verhoef, and Bijmolt (2008);
Gauri, Sudhir and Talukdar
(2008); Noble and Phillips
(2004).
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40 Business Intelligence Journal January
Theme Study
Promotion Ailawadi et al. (2009); Van
Heerde and Neslin (2008);
Gijsbrechts, Campo, and
Goossens (2003); Chiou-Wei
and Inman (2008); Lwin,
Stanaland, and Miyazaki
(2008).
Supply Chain
Management
Garg et al. (2005); Dant
et al. (2009); Burkle and
Posselt (2009), Xu and Kim
(2008), Neslin et al. (2006);
Patricio, Fisk, and Falcao e
Cunha (2008); Sousa and
Voss (2006); Verhoef, Neslin
and Vroomen (2007).
Location Durvasula, Sharma, and
Andrews (2002); Ghosh and
Craig (2001); Gauri, Trivedi,
and Grewal (2008); Xu and
Kim (2008).
Advertising Chaudhuri & Buck (2005);
Petty & Cacioppo (2003);
Janoschka (2004); Fisher,
Gainer, and Bristor (1997);
Gof et al. (1997).
Packaging & labeling Koirala (2005); Kotler and
Armstrong (2005); Young
(2003); Jugger (1999); Luo
(2005); Wakefeld and Baker
(1998); White and Dahl
(2006).
Service Mix Oliver (2001); Parasuraman,
Zeithaml, and Berry (2004);
Baker et al. (2002); Beatty et
al. (1996); Folkes and Patrick
(2003); Meuter et al. (2005);
Van Dolen, Dabholkar, and
de Ruyter (2007); Weijters et
al. (2007).
Atmosphere Baron, Harris and Harris
(2001); Kozinets et al (2002);
Schmitt (1999); Baker et al.
(2002); Kaltcheva and Weitz
(2006); Wakefeld and Baker
(1998).
Figure 1. Overview of literature on aspects of
customer experience
Major Factors Influencing Consumer
Buying Decision Process
On the consumer front, many people’s
savings have evaporated in the year 2008,
primarily because of the precipitous decline
in stock prices, suffering real estate markets,
and increasing unemployment. Consumers
thus take greater care in what they buy,
where they buy, and how much they will
pay. Although hardly a suffcient silver
lining, researchers now have the opportunity
to examine more thoroughly many of
the issues discussed in the remainder of
this introduction in a new light. How do
consumers react differently to brand, price,
promotions, supply chain management,
location, advertising, packaging, labeling,
service mix & atmosphere in an economic
crisis? Can retailers take certain actions to
increase patronage, both before and during
a shopping experience? Does consumer
cherry picking change when consumers
face more diffcult economic trade-offs?
Will consumers continue to embrace more
expensive and higher quality private-label
merchandise? How should retailers alter
their assortments? Should they continue
to experiment with new categories that
previously appeared only in stores with
different retail formats? Will price elasticities
for substitute and complementary purchases
differ during economic downturns? What
innovative strategies might multi- channel
and online retailers use to gain greater shares
of wallet? And how might retailers adjust
their global sourcing strategies and the way
they work with and develop relationships
with their global vendors? These questions
and many more depend on the major
economic issues that confront consumers
and the retailers they serve.
2009 41
Figure 2. Macro Factors Infuencing Consumer
Buying Decision Process
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Brand x x x x
Price x x x x
Promotion x
Supply Chain
Management
x x x
Location x x x x
Advertising x x x
Packaging &
labeling
x x
Service Mix x x x x
Atmosphere x
The Brand Experience
The customer comes to a retailing
environment with perceptions about two
types of brands: the retail brand (e.g.,
Victoria’s Secret, Starbucks, Wal-Mart,
Macy’s, Best Buy) and the manufacturer or
service brand that is sold in the retail stores
(e.g., Verizon, Ralph Lauren, Tide, Dell,
private label brand). Here, the discussion is
about the retail brand customer experience,
although the ideas put forth below could be
investigated in relation to the manufacturer
or service brand as well.
Background
Customers’ brand perceptions may
infuence their customer experience. Recent
research has begun to investigate new aspects
of this relationship. Specifcally, Fitzsimons,
Chartrand, and Fitzsimons (2008) found
that the type of brand and consumers’
perceptions of the brand can infuence their
behavior. For example, consumers primed
to think of Apple behave more creatively
than consumers primed to think of IBM. In
addition, Ofr and Simonson (2007) found
that customer expectations (when stated prior
to a service encounter) have a signifcant
effect on post purchase evaluations of the
shopping experience and the frm. This
suggests that customer brand perceptions (of
the retailer), when primed prior to shopping
experience, might signifcantly infuence the
customer’s experience. It is also important
to consider the reinforcing effects of the
customer’s experience and the brand over
time. Prior research suggests that customer
experience has a signifcant infuence on
the customer’s overall perception of the
brand. In addition, Keller and Lehmann
(2003) propose that the customer mindset
(e.g., awareness, associations, attitude,
attachment and activity) is the key driver of
brand performance (e.g., price premiums,
price elasticities, market share, expansion
success).
Research Discussion
There is much yet to learn about the
infuence of brand perceptions on the
customer’s retail experience. There may
be asymmetric effects of brand perceptions
on customer experience. Consumers whose
frst impression of a brand is negative can
be infuenced by providing them with
non-comparative information, whereas
consumers with positive frst impressions of
a brand are infuenced more by comparative
information. This suggests an area that is ripe
for future research—namely, understanding
how a customer’s initial perceptions of a
retail brand may infuence distinct elements
of the customer’s subsequent experiences
with the brand, and how those experiences
in turn may infuence brand perceptions in
the future. In addition, positive customer
brand perceptions may infuence customer
experiences differently than negative
customer brand perceptions. As such, future
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42 Business Intelligence Journal January
research could also investigate the extent to
which strong (positive or negative) brand
perceptions may have a signifcant effect on
the customer’s experience. In addition to the
direct effects of customer brand perceptions
on customer experience, future research
could examine the extent to which customer
brand perceptions may act as a moderator in
infuencing the effects of other determinants
of customer experience. For example,
might brand perceptions (either retail or
manufacturer) moderate the effects of social
environment, self-service technology, or
price on customer experience?
The Price Experience
A lot rides on how a retailer sets its
prices. The three other P’s create value for
the seller; the fourth P of price captures
value. In addition, this is the only P that
earns revenue for the retailer. When
retailers price a product or service too high,
consumers view it as a poor value and will
not buy. A price set too low may signal low
quality, poor performance, or other negative
attributes about the product or service.
Although setting the “right” price is clearly
an important retailing task, it is often treated
as an afterthought, partly because it remains
the least understood and therefore most
diffcult to manage task.
Background
Recent research demonstrates that a
consumer’s store price image likely results
from a numerosity heuristic, such that the
greater the number of low priced products at
a store, the lower is the price image among
knowledgeable consumers (Ofr et al. 2008).
Kopalle et al. (2009) concentrate on the
interaction between pricing and competitive
effects in retailing, noting the diffculty of
research into category and store level prices,
because retailers stock thousands of items,
most of which are irrelevant to any given
consumer. Furthermore, because different
consumers buy different market baskets, a
category or store that one customer perceives
as high priced may seem low priced to another.
Research suggests that retailers therefore
should carry some high-priced merchandise
to extract rents from loyal customers and
some low-priced merchandise to attract new
ones, but more work is needed in this area.
Moreover, the emergence of discount stores
carrying fashion products and luxury brands
can affect pricing in traditional retail chains
(Kopalle et al. 2009).
Previous pricing research regarding
private labels versus national brands
suggests asymmetric sales effects, such
that higher price/higher quality brands
steal sales from lower price/lower quality
brands when the higher tier reduces its price
(Blattberg and Wisniewski 1989). In various
examinations of the different features
of the private label/national brand and
price/sales interactions, asymmetric effects
predominate (Allenby and Rossi 1991;
Bronnenberg and Wathieu 1996; Pauwels
and Srinivasan 2004; Sethuraman and
Srinivasan 2002; Wedel and Zhang 2004).
These studies again focus on grocery and
drugstore formats, in which private-label
prices generally are signifcantly lower than
those of national brands. Further research
should investigate the pricing aspects
of private labels versus national brands
using premium private labels (Kumar and
Steenkamp 2007) and durable and fashion
goods.
Research Discussion
A popular pricing strategy adopts
loss leaders, items priced at or below the
retailer’s cost. The preponderance of loss
leader activity in retail stores believes the
2009 43
gaps in our knowledge about its impact
on traffc, sales, and profts. Although
store traffc increases and sales generally
increase for items used as loss leaders, these
loss leaders may not infuence the sales
of other, non-promoted items, and their
impact on proftability is questionable. A
more defnitive under- standing of how loss
leaders affect the sales of non-promoted
items and proftability would be very useful.
Research on online and multi channel
pricing takes a prominent place in modern
academic journals, yet limited study
addresses online pricing strategies. Much
of this limited research focuses on customer
reactions to different pricing strategies and
shipping fees, the role of infomediaries,
advertising revenues, channel interactions,
and personalized pricing schedules. Yet
some of the issues described herein and
examined in brick-and-mortar store settings
would be useful pursuits in the virtual and
multichannel world. For example, how might
online strategies differ from in-store strate-
gies for similar merchandise and services?
Should they differ across channels? Do
consumers behave differently online? What
competitive behavior effects exist?
The Promotion Experience
Consumer promotions also take several
forms, including price promotions, loss
leaders, and in-store displays. Meta
analyses show that the immediate increase
in sales of a promoted item is substantial.
However, brand switching as a result of
consumer promotions is closer to 30–45
percent, far less than previous estimates
of approximately 80 percent. A consumer
promotion, such as a loss leader, on one
item should increase sales of other items
and overall profts, yet empirical research
in this area is mixed. Consumer “cherry
picking” for special prices has a relatively
minor impact on retailer profts; they also
conclude that not all promotions have a
positive revenue impact for retailers though.
Rather, the proft impact is decidedly mixed.
Background
Literature on integrated marketing
communications is vast, but research
pertaining to retailing is very specifc.
Ailawadi et al. (2009) logically organize
this body of research into manufacturer
promotion decisions, as it relates to retailers,
and retailer promotion, the manufacturer
primarily is interested in using promotions
to enhance the performance of its brands,
whereas the retailer is interested in
enhancing their own performance (Van
Heerde and Neslin 2008). Signifcant
research on trade promotions centers on the
extent of the monetary savings passed on to
consumers. Some controversy surrounds the
impact of pass-through trade promotions;
specifcally, does a trade promotion from
one manufacturer in a given period infuence
the promotion of another manufacturer’s
brand in the same period (e.g., Moorthy
2005)? The accounting records pertaining
to trade promotions remain inadequate for
deriving a defnite answer (Parvatiyar et
al. 2005). Ailawadi et al. (2009) therefore
suggest further research should exam- ine
how different types of trade promotions
get funded, passed through, and perform. A
plethora of research investigates the impact
of different types of promotions on sales and
profts, including the composition of fyers
(Gijsbrechts, Campo, and Goossens 2003).
Research Discussion
Although most retail promotions
emphasize price, studies often consider
them in isolation. Yet price promotion
coordination is a key driver of retailer
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44 Business Intelligence Journal January
proftability. Retailers and researchers alike
need more information about the impact of
coordinating price promotions within and
across categories and across retail formats
within a chain, such as Wal-Mart and
Neighborhood Markets. The National brands
should be promoted more than private-label
brands, because the national brands attract
customers’ attention and attract them to the
store. Yet retailers promote private-label
merchandise, because they generally earn
higher margins on private labels.
Although the customer knows much
about the sales bump caused by consumer
promotions, they have a poorer understanding
of the proft impact. Retailers’ increased
emphasis on private-label merchandise
demands more work investigating the
effectiveness of private-label promotions.
It also seems important to identify win–
win promotions for manufacturers and
retailers. Because many purchase decisions
take place in brick and mortar stores and
as new methods for reaching consumers in
stores emerge, more research should assess
the effectiveness of in-store promotions to
customers.
The Supply Chain Management
Experience
Most of the researchers centers on what
happens at the front-end of the retail store,
supply chain management occurs at the
back end. For decades, retail supply chain
and logistics issues seemed somehow less
important than other activities such as
promotion, pricing, or customer service.
But this erroneous perception no longer
exists. Supply chain issues, from both the
more managerial partnering side and the
more technical operations side, have proven
important sources of competitive advantage
for many retailers, particularly low-cost
providers such as Wal-Mart and Zara.
Background
Ganesan et al. (2009) examine several
important supply chain issues, including
global sourcing practices, multichannel
routes to market, and relationship-based
innovation. These authors note that with
private-label merchandise, as opposed to
national brands, the burden of ensuring that
merchandise production adopts corporate
socially responsible (CSR) policies, as well
as quality and safety control issues, rest
with the retailer. And most of this sourcing
is done globally today. Academic research
at the nexus of global sourcing and CSR is
somewhat sparse (e.g., Wagner, Lutz and
Weitz 2008); more research might examine
the circumstances in which customers will
pay more for merchandise produced in a
socially responsible manner, particularly
during economic downturns. Ganesan et
al. (2009) also examine several issues for
hierarchical multichannel relationships, in
which both manufacturers and retailers sell
through multiple channels to consumers.
As hierarchical multichannel relationships
develop, confict can occur between the
channel members, which must compete
with one another. Retailers can respond to
this competitive situation by taking direct
action, such as refusing to sell products that
the supplier sells directly (Schoenbachler
and Gordan 2002), or looking for alternative
ways to service customers (Vinhas and
Anderson 2005). A more positive approach
would pursue a channel structure with mutual
benefts, such as proft sharing (Neslin et
al. 2006; Yan 2008). Ganesan et al. (2009)
there- fore suggest that further research
should attempt to increase our understanding
of how hierarchical multichannel structures
affect the participants’ relationships, their
relative power, and their performance.
2009 45
Research Discussion
Most recent retailing innovation
initiatives seem to come from sustainability
initiatives designed to improve the
environment, healthcare, diversity, and
sourcing. It investigates how relationships
between retailers and their suppliers may
facilitate product or process innovations.
Specifcally, when supply chain partners
exchange information, the relationship
grows stronger, and the likelihood that
valuable and important information gets
exchanged increases. However, the strength
of relational ties may play a more important
role for process than for product innovations.
When retailers have supply chain partners
with diverse, rather than complementary,
capabilities and resources, they are more
likely to innovate, because the information
acquired from these varied sources differs.
Finally, asymmetrical dependence between
the retailer and its supply chain partners
should negatively affect innovations,
because the weaker party guards against
exploitation, while the stronger party tends
to exploit opportunities without worrying
about negative partner perceptions.
The Location Experience
Retailing academics and practitioners
seem always to emphasize “location,
location, location” as the key to success. An
important research advance could consider
the role of travel time on consumers’ choices
of retail formats and the related retailing
implications because consumers value their
time, researchers should investigate what
it might take, in terms of price savings and
deals, to attract consumers to a factory outlet
store (normally located some distance away)
rather than a similar store in a conveniently
located mall. The location decision likely
has major ramifcations for price, promotion,
and merchandising decisions.
Background
Durvasula, Sharma, and Andrews
(2002) recommend STORELOC, a store
location model that incorporates managerial
judgment data in addition to consumer
data. Because key managers participate
in the process, their buy into the outputs
of the location model increase, namely,
the identifcation of the best retail sites for
expansion. The key store attributes and
their relationships with relative competitive
strength can be estimated using varied
methods in this model, including conjoint or
logit analysis. Another interesting location
problem involves understanding how to
expand a franchisor distribution system
optimally, because in some cases, that
which is best for the franchisor may be at
odds with the preferences of the individual
franchisees. Ghosh and Craig (2001)
develop FRANSYS, a franchise distribution
system location model, to address this kind
of problem. Another important issue related
to locating franchises concerns the choice
between multi unit franchisees (MUF)
versus single unit franchisees (SUF) since
the modal franchisee in the US is no longer
the stereotypic mom and pop single unit
operator, but a mini chain operator (Garg et
al. 2005; Kaufmann and Dant 1996). Some
recent evidence suggests that even though
MUF may be preferred by franchisors
for reasons of rapid system growth,
system-wide adaptation to competition,
minimization of horizontal free-riding, and
the strategic delegation of price or quantity
choices to franchisees, it is the SUF that
characterize their dyadic relationships with
their franchisors as more rela- tional and
cooperative as compared to their MUF
counterparts (Dant et al. 2009).
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Research Discussion
The age of these models clearly shows,
however, the need for more research into
location issues. With the greater availability
of excellent geographical information
systems (GIS), rich data are easily accessible.
For example, GIS data supplemented with
appropriate panel consumption data could
enable empirical tests of a host of location
models. More recent research highlights the
role of two key location factors: proximity
to customers (measured in travel time) and
proximity to other stores or agglomeration.
For example, grocery stores appear to beneft
from agglomeration with discount stores, but
Wal-Mart discount stores suffer reductions
in revenues when they agglomerate with
grocery stores. Prior research recognizes
several different retail formats, according to
pricing (e.g., everyday low price vs. high/
low pro- motions), merchandise (wide
vs. narrow) and Internet presence (bricks,
clicks, or bricks and clicks). Insights from
this area of inquiry suggest that bricks still
hold an advantage over clicks and are likely
to dominate in certain categories, such as
high end apparel and jewelry. Research
also shows that consumers may use the
different retail formats for different stages
of the consumer decision process, such that
the online store might be a great way to
compare alternatives, but brick-and-mortar
stores seem more suitable for purchases. A
systematic understanding of the role of these
different formats in the consumer decision
process and how retailers can best optimize
their multiple channels would be a fruitful
area of inquiry.
The Advertising Experience
Exponential growth in Internet hosts
and personal computer adoption has led to
dramatic increases in online activity. During
the growth process, marketers recognized
that the Internet was a medium for reaching
millions of potential customers. Since
then, marketers have adapted value based
advertising strategies to the Internet.
Background
Traditional consumer behavior literature
would suggest that intense product
information is vital for high involvement
product web sites, while entertainment
content may be ft for low involvement
product sites (Chaudhuri & Buck, 2005;
Petty & Cacioppo, 2003). Additionally,
the primary reason for distinguishing
between high and low product involvement
is that habit, intuition and convenience
sometimes guide the actions of consumers
rather than rational considerations
(Lamb, 1996). There are various types
of online advertising, including “emails,
newsletters, screensavers, e-sponsoring,
asynchronous and synchronous chat groups,
infomercials, online games, and web sites”
(Janoschka, 2004). Similar to other types of
advertisements, web ads are paid or unpaid
form of communication aim at informing
the existence of a product or service and/or
persuading consumers to take actions. And
Janoschka (2004) found one major difference
is that web ads are hyperlinks in nature,
which enable activation by their users. They
not only contain promotional messages on
themselves which tries to attract consumers’
attention, but also embedded with hyperlinks
and then point to a much greater information
pool, such as the corporation’s website.
Research Discussion
The global online advertising industry
has witnessed the rapid emergence of social
networking sites and is growing rapidly
despite the economic slowdown. The
2009 47
growth of this industry is being driven by
increasing internet users, rising awareness
and growing broadband subscription rate
and ecommerce, which is playing a key role
in this industry. In coming years online Ad
spending is expected to overtake the TV
advertising market.
The industry is divided into various
segments but mainly three segments (search,
display and classifeds) represent the whole
industry. Rich media is a new segment
recently entered in the online Ad industry,
caters to a small portion of the market
whereas search, display and classifeds
serves almost 80% of the online Ad industry.
There are various revenue models, out of
which pay-per-impression and pay-per click
are the most common among others.
In terms of online Ad spending by
geography, UK, Netherlands and the pan-
European sector lead the market but in
terms of internet Ad budget allocation
France, Germany, Spain and Italy have
a strong presence. United States is the
most developed market for the advertising
industry. In Canada, internet advertising
accounted for almost one third of total
advertising market.
The areas for future research are discussed
here. The thirty-three items suggested by
the fourteen academicians may be grouped
into types of ads, types of appeals, larger
effects on society, advertiser concerns, and
legal concerns. Types of ads include ads for
legal vices (e.g., ads for tobacco or alcoholic
beverages), ads for sex-related products (e.g.,
condom ads or ads for abortion services),
and ads for health care and professional
services (e.g., ads for personal care and
hygiene products or ads for professional
legal services). Types of appeals include
the use of questionable appeals (e.g., fear or
negative appeals) and stereotypical appeals
(e.g., sexual or racial stereotyping). Larger
effects on society include value formation
(e.g., molding society’s material wants) and
media content (e.g., the information content
of ads). Advertiser concerns include ad
agency concerns (e.g., self-regulation or the
ethical codes of ad agencies) and the voice/
tone of the ad (e.g., corporate advocacy or
comparative ads). Finally, legal concerns
include the use of deception, advertising to
children, and public service announcements
(e.g., anti-drug or anti-cigarette ads).
The Packaging & Labeling
Experience
Packaging plays a major role when
products are purchased. After all, it is the
frst thing seen before making purchase
choices and it is widely regarded that over
50 per cent of purchasing decisions are made
at the shelf, or point of purchase. Therefore,
packaging which creates differentiation
and identity in the relatively homogenous
consumer packaged goods industry is
therefore highly important.
Background
As a ffth ‘p’ of marketing, packaging
refers to the activities of designing and
producing the container or wrapper for
a product. It may be primary, secondary,
and shipping to perform the objectives as
containment, protection, identifcation,
communication, promotion and product
differentiation. Good packaging also
provide information based on truth, it must
be economical, attractive, convenient,
protective and transparent (Koirala, 2005).
A label is a simple tag attached to a product
or an elaborated designed graphic that is
the part of the package. It identifes, grade,
scribe and promote the product by providing
the information to the buyer. It may be brand
labels, grade labels and descriptive labels
(Kotler and Armstrong 2005). It is vitally
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important that when researching package
design that it is measured in the context
within which it is usually found (Young,
2003). “The ‘right’ packaging solution is
different for each brand. What is important
is that it works when placed next to the
competition on the shelf” (Jugger, 1999).
Research Discussion
Packaging has a better reach than
advertising does, and can set a brand apart
from its competitors. It promotes and
reinforces the purchase decision not only at
the point of purchase, but also every time
the product is used. Packaging in different
serving sizes can extend a product into
new target markets or help to overcome
cost barriers. Packaging can even drive
the brand choice (especially in the context
of children’s products). As the market
becomes more competitive and shelf space
is at a premium, products need to be able
to stand out from the crowd and packaging
needs to provide more than just functional
benefts and information. Under time
pressure and in low involvement purchases,
less time is spent looking at the detail and
information provided on packaging – this
is especially true in the FMCG category.
Research into packaging has found that
different packaging cues impact how a
product is perceived. Often the packaging
is perceived to be part of the product and it
can be diffcult for consumers to separate
the two (the concept of gestalt). Aspects
such as packaging colour, typography,
illustrations and graphics can infuence how
a product is perceived. Labeling should not
be unnecessarily confusing or misleading in
order to hide the poor nutritional/ingredient
profle of certain products. The decrease in
consumer confdence in food safety is not a
result of the number of recalls, but instead the
high-profle, long-lasting nature of the safety
incidents. Packaging is integral to boosting
perceptions of safety and will therefore be
an important part of more concerted efforts
to regain consumer trust going forward.
The Service Mix Experience
Customer service is the ability of an
organization to constantly and consistently
give the customer what they want and need.
Background
Customer satisfaction is a key consequence
of service quality and can determine the
long-term success of a service organization
(Parasuraman, Zeithaml, and Berry 2004). In
general, customer satisfaction is affected by
customer expectation or anticipation prior to
receiving a service and can be approximated
by the following equation: Customer
Satisfaction = Perception of Performance –
Expectations (Oliver 2000). When translated
to services, a distinction between service
quality and customer satisfaction needs to
be made (Parasuraman, Zeithaml, and Berry
2004). Furthermore, one must differentiate
between service expectations and service
perceptions.
While service expectations are a
combination of a customer’s predictions
about what is likely to happen during a
service transaction as well as the wants
and desires of that customer, service
perceptions can be defned as a customer’s
global judgments or attitudes, which relate
to the superiority of a service (Oliver 2001;
Parasuraman, Zeithaml, and Berry 2004).
Research discussion
A lot of companies are so preoccupied
with day-to-day operations, but if they
don’t have customers for life we’re going
to go out of business. Many service
2009 49
organizations, such as hotels, retail stores,
and airlines, invest substantially in their
physical plant to provide a superior service
experience. However, little is known about
how to design a servicescape to enhance the
consumption experience. For example, it
may be unsurprising to learn that research
has shown that pleasant music, compared
with less pleasant music, is associated
with longer consumption times, shorter
time perceptions, less negative emotional
reactions to waiting, more favorable attitudes
toward the physical environment, more
positive attitudes toward service providers,
and more favorable customer assessments,
purchase intentions, and behavior.
The Atmosphere Experience
Consumer spending behavior can
be signifcantly infuenced by the store
atmosphere and the customer mood.
Customers require a store layout that
maximizes the number of products seen
within the context of a customers’ need for
the product. Customers who experience
a form of personal control, whether in
orienting themselves to the store section
they need to go to or in fnding the products
they want, generally feel good about the
store. Good feelings lead to more purchases,
especially if products are presented within a
display that shows the potential usefulness
of the product for them.
Background
Store atmospherics have been at the
centre of numerous discussions recently
as a means of creating a pleasurable
consumption experience; engaging and
luring customers, with hopes that they
will increase their likelihood to purchase,
revisit and recommend to others (Baron,
Harris and Harris 2001; Kozinets et al 2002;
Schmitt 1999). Sharma and Stafford (2000)
suggest that customers have a higher need
to affliate with salespeople working in nicer
retail environments or ‘prestige ambience
environments’– which should lead to an
increase in the perceived level of credibility
for the salesperson, and subsequently a
higher likelihood to purchase. However, the
‘prestige’ and ‘discount’ ambience stores
have been hard to defne in the literature,
with most researchers testing atmospherics
in isolation, and not at a holistic perspective
(Turley and Milliman, 2000).
Research Discussion
The future research should examine
retail store environments where customer-
salesperson relationships may exist
to increase understanding in this area.
Furthermore, customer service quality
measures typically given when examining low
sales interaction stores should be compiled
in conjunction with relationship selling and
other measures that infuence the customer
experience to understand if relationship
selling is necessary in these retail settings.
Store atmospherics did have a signifcant
impact on customer expectations of the
retail salesperson, but in behaviour only. A
higher perceived store ambience resulted in
higher expectations of a retail salesperson’s
behaviour, but a higher store atmosphere did
not result in higher expectations of a retail
salesperson’s credibility. Store atmospherics
manipulate customer’s expectations of the
retail salesperson behaviour, subsequently
affecting customer satisfaction if the retail
salesperson does not match expectations.
Future research will be directed into
the exploration of characteristics of the
salesperson and store atmospherics to
determine the optimal blend for certain store
environments.
Kamaladevi B. - Customer Experience Management in Retailing
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Business Intelligence Journal - January, 2010 Vol.3 No.1
50 Business Intelligence Journal January
10 Best Practices to make the
Successful CEM
1. Successful deployment requires the
active and continuing involvement of
leadership
Execution is the hardest part of creating
a customer experience because in order to
deploy successfully they have to mobilize
employees at all levels and align competing
agendas, functions and executives. This is
not an easy task. Perhaps that is why that
so many of the exemplars of Customer
Experience tend to be organizations led by
passionate founders or CEOs that see it as a
primary source of differentiation. Think of
Starbucks, Amazon, Southwest Airlines or
Virgin and inevitably you quickly think of
Howard Schultz, Jeff Bezos, Herb Kelleher
and Richard Branson. CEM can work just as
successfully and achieve startling results in
large mature corporates too, but the need for
leadership is even greater.
2. Ensuring cross-functional
ownership is vital
If the CEO or President recognizes that
it will take more than rhetoric to make a
difference, the next common mistake is
asking the Marketing VP, HR Director or
Customer Service Executive to “fx the
problem.” The brand and the customer
experience must be owned collectively
by the senior management team. Each
function has its particular part to play, but
to be successful these three functions must
operate as what we refer to as a “Triad” to
optimise resources, efforts and budgets to
create an organization-wide strategy for
delivering the brand.
3. Focusing on the most strategically
important customers
The starting point for the work is
collecting customer data to inform the
defnition of a promise and design the
new experience. The most frequent client
response to this suggestion is “We already
have lots of customer data and research so
you don’t need to bother.” In reality whilst
organizations undertake customer research
and collect mountains of data, relatively
few know who their most proftable (not
largest) customers are. The fact is that a
few customers will typically represent the
signifcant proportion of the proft and these
are the ones to focus improvement efforts
on.
4. Finding out what these customers
truly value
Knowing who are the most proftable
customers is all very well, but if they do
not know what these customers value and
the three or four most important attributes
which drive their intention to repurchase,
cannot infuence their behaviour. Without
the answers to these questions they may
have data, but they do not have insight.
A key component of a branded customer
experience is being differentiated in a
way that is valuable to target customers.
A key component of a branded customer
experience is being differentiated in a way
that is valuable to target customers.
5. Being clear about what we stand
for
In 2001, UK-based bank Barclays aired a
television advertisement called “Big Idea.”
It was a beautifully crafted ad featuring
Anthony Hopkins as a big shot businessman
with a big house, a big car and a big meeting
2009 51
to attend. The tagline was, “A big world
needs a big bank.” The ad received a bronze
award at that year’s British Television
Advertising Awards, but customers replied
with a less than enthusiastic, “big deal!”
The ad simply reinforced common customer
preconceptions about large banks that they
don’t care about the average person and are
interested only in making as much money as
they can.
In the Polish market, 55 percent of
executives feel that they have “defned a
brand promise that differentiates us in the
eyes of their target customers” but only
35 percent “have mapped their customer
touchline to determine the key points of
contact their customers have with us and
how their promise should be delivered at
each.” This omission is quite common in
their experience and takes us on to our next
point. Making a promise to the customers is
one thing, delivering it quite another.
6. Delivering the promise at every
touch point
This is particularly true in today’s
economy. With the pressure on sales and
costs they have to make sure that every
effort is made delivering those things that
customers value rather than things that
they don’t. This means having an intimate
understanding of the customer experience
and being intentional about designing it to
deliver value at the key touch-points.
7. Providing branded training to
ensure that employees understand
the brand story
Many organizations provide customer
service training yet few are differentiated in
the service they provide. The reason is that
“vanilla” training creates “vanilla” service.
This is not to say that all generic service
training is bad. In fact there are some very
good off-the-shelf programmes that really
help to improve customer-facing skills and
make service more consistent.
A key ingredient of successful branded
training is to build executives into the process
so that they have an active role in cascading
the message. Leaders have been trained as
champions of customer experience and are
leading its implementation.
8. Designing CEM before installing
CRM systems
At the peak of CRM hype, expenditure
on CRM systems was estimated to have
increased from $20 billion in 2001 to $46
billion in 2004. Yet one survey by Gartner
research estimated that 55 percent of CRM
systems drove customers away and diluted
earnings. This is because most CRM
systems are installed without any thought
about how they will be used to add value
for the customer. These powerful systems
allow companies to collect knowledge
about the customer that can be used to offer
them products and services tuned to their
particular needs and preferences. However,
for many customers the acronym CRM
stands for “Constantly Receiving Mail-
shots” since many organizations (and banks
are the worst) use them as a blunt instrument
to stalk, rather than woo, the customer
through junk mail. Some software providers
are now designing their products to support
the customer experience and build CEM
functionality into their call-centre products
so that the agent is provided with all the
information, tools and measures necessary
to deliver the desired experience.
Kamaladevi B. - Customer Experience Management in Retailing
Kamaladevi B.
Business Intelligence Journal - January, 2010 Vol.3 No.1
52 Business Intelligence Journal January
9. Measuring the customer
experience
Peter Drucker’s maxim that “what gets
measured gets managed” is still true today.
Yet most organisations focus exclusively
on end-results measures. Market share,
proftability and EPS growth are all vital
measures of business performance but they
are all lagging indicators—the result of
differentiation, customer loyalty and brand
preference. The answer is to move up-stream
and measure and manage those activities that
deliver the required customer experience
and drive customer advocacy. Market share,
proftability and EPS growth are all vital
measures of business performance but they
are all lagging indicators.
Yet over 51 percent of the executives
the organization surveyed reported that their
organization did not have a scorecard to
measure the customer experience. The mean
score for the statement “We have a scorecard
of indicators that provide leaders with
objective and timely feedback on how well
we are delivering against our promise” was
the lowest achieved in the survey scoring at
just 4.6 on their ten-point scale.
10. Aligning the organization with
the customer experience
One of the lowest scoring items in the
organization survey was “Leaders measure
and monitor the quality of the customer
experience.” As many respondents disagreed
with this statement as agreed with it. This
poor result was reinforced by the fact that
only 47 percent of respondents agreed
with the statement “Our leaders reward
employees who put customers frst.” The
fact is that unless there is a link between
the desired business results, the customer
experience necessary to achieve it and
appropriate measurement and rewards then
it is unlikely to happen.
Conclusion
Customer Experience Management
is not, however, simply an old idea in a
new wrapper. In recent years a number of
fundamental changes have occurred in
the business environment that have led to
the emergence of Customer Experience
Management as both a strategic discipline
and a fast-growing industry, complete with
a wide array of tools and solution sets. The
changes have been fueled by technological
advancements, which have expanded the
range of services available to customers, and
simultaneously led to escalating customer
expectations. The result is that there are
now more services and products available
than at any time in the past, yet customer
satisfaction are on a downward slide.
Customer Experience Management can
help reverse that slide by providing effcient
business tools that make the interactions
between companies and customers more
rewarding for both parties.
Hope this article provide a broad-based
overview of the various domains (e.g.,
Brand, Price, Promotion, Supply Chain
Management, Location, Advertising,
Packaging & labeling, Service Mix
and Atmosphere) of the retail customer
experience and in turn provide a research
catalyst for a plethora of important retailing
issues. Keeping customers in the next few
years will be even more important than
making a sale. Shoppers are getting used to
those 50–75 percent off sale signs, and that
is bad news for merchants who worry they
will also have to quickly slash prices on
merchandise to attract customers. Retailers
will have to engage their customers every
day to create the long-term loyal advocates
necessary to compete in these challenging
2009 53
times. The most important thing is to be
able to identify ways to hold on to proftable
customers. 10 Best Practices to make the
Successful CEM have shown in this article
to provide a great customer experience for
retail shoppers.
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Business Intelligence Journal - January, 2010 Vol.3 No.1
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