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5 ways mobile has changed retail forever

Smartphones are transforming so many aspects of marketing. Brick and mortar retail is no exception. Many retailers started taking mobile seriously when consumers began using phones to compare prices and get product information right in store aisles. At first, stores feared the phone, thinking it would send customers en masse to pure-play internet sellers that had lower overhead — and lower prices.

Nowadays, though, many retailers view mobile as a massive opportunity for growing sales and customer loyalty. But whether friend or foe, it’s clear that mobile has driven massive changes in how retailers go to market.

Here are five of the most important changes.

Prioritizing loyalty over acquisition

More and more of the world’s most sophisticated retailers are upending their fundamental marketing strategies — shifting from an approach aimed primarily at acquisition to one more focused on getting current shoppers to buy more. It’s long been known that driving incremental purchases from buyers is 80-90 percent cheaper than finding a new first-time buyer. Even so, most retailers spent vastly more money on acquiring new customers than creating richer and more personal experiences for their loyalists.

As far as loyalty marketing goes, most retailers used to operate from the perspective that once won, customers should be easy to keep. Many also believed that investing resources on existing customers would lead to subsidizing purchases the retailer would get anyway.

As a result, acquisition program budgets were often 9-10 times as large as retention or continuity marketing budgets. Broad door-buster sales were designed to attract the promiscuous shopper that didn’t choose a retailer out of preference or habit. TV and print schedules focused on attracting broad demographics instead of focusing in on the people that bought regularly with a certain retailer. In fact, many retailers used one-size-fits-all email and print blasts as the alpha and omega of their customer marketing efforts.

That’s changed in a big way. Some progressive retailers have completely flipped those dynamics, recognizing that mobile and to a lesser extent online can enable more personal and effective customer communications that drive strong incremental sales. If you want a great example, look no further than Macy’s — those folks are masters at this.

Phones have become the center of loyalty points programs, personalized discount offers, virtual and personalized roto ads, and the like. They can enrich a buyer’s experiences both inside and outside the store. They can also make consumers feel appreciated and valued. And because the phone is almost always with the consumer, they are far more trackable and accountable than old-school retail tactics.

Dramatically upping investments in data-driven marketing

Long before so many consumers were armed with iPhones and Galaxys, retailers had begun the process of collecting rich data to develop individual profiles of consumers. Club cards and the like were designed to help retailers better understand each shopper so that (eventually) they could create more loyal customer relationships and new data-based revenue streams.

Many of us, however, were surprised by how little was done with all that data during the first years of these initiatives. For years, it seemed as if retailers were collecting huge amounts of information that they could leverage, but they generally didn’t. Broadly targeted postal circulars and email blasts remained the norm for most chains.

However, that’s no longer the case, and smartphones played a key role in that transformation. They raised the urgency of more segmented store marketing because they gave consumers lots more opportunities to buy the things they needed. Stores could no longer expect the consumer to find what they might like; rather, what they might like needed to go to consumer.

Smartphones also increased the potential ROI from individualized messaging. By putting information in the consumer’s hand as they shopped, they made such messaging far more impactful. Instead of having to peruse the Sunday circular or visit a website to download offers, they could simply fire up an app.

Brick and mortar is moving to dynamic pricing

Retailers used to come in two “flavors” — High-Low and Everyday Low Price (EDLP). High-low stores provided great deals on a relatively small number of deeply discounted items, hoping that once in the door, customers would purchase non-discounted items to make up for lost profits. Alternatively, EDLP stores promised low overall prices and a lower total bill than if you shopped in high-lows.

These days, those kinds of simplistic pricing strategies are disappearing as stores deploy technologies to dynamically change pricing based upon current sales figures, inventory, and changes in competitive prices.

  • RFID tags and beacons and helping drive down the cost of dynamic pricing so that retailers can ensure they compete well with online-only sellers.
  • New companies are now offering low-cost electronic shelf tags that enable retailers to match or beat online prices…on the fly.

Certainly, the mobile phone was the catalyst for all this change. By enabling consumers to review prices and alternatives in the aisle, phones brought transparency to shopping in the same way that it has so many other life tasks.

Convenient fulfillment networks

One key advantage that brick-and-mortar retailers have over pure-play internet or mobile companies is their network of physical stores. While having such stores does significantly increase costs, it also provides a network of places where online and mobile customers can pick up purchases — and get them more quickly than waiting for UPS. Best Buy, for example, can often get a new laptop you order online into your hands on the same day — significantly faster than most retailers could even dream of doing so. Its customers can also pick up goods on their own schedules instead of having to be at home whenever an Amazon delivery would come through.

I am convinced that the smartphone with the key driver here — by enabling people to order things for pickup when they were out and about, smartphones gave greatly increased relevance to these fulfillment services.

Now, many retailers — especially the big box chains — offer teams and areas dedicated solely to same day pickup of online orders. Think what a cultural change this sort of thing required. Retailers once thought of the aisles and displays in their stores as essential selling environments. They wanted people in the aisles where they could be “closed,” enticed to spend more, or encouraged to purchase related items. Mobile and online changed the location of shopping for millions of people — folks who would rather buy what they want and just pick it up on their way home.

Retailers could have hid heads in the sand over this development. But rather, they turned the development into a new strength in their battle against digital only retailers. Faster delivery has become an important plus for brick-and-mortar.

Of course, the online-only retailers are responding in turn with experiments in same-day delivery.

Content originators, aggregators, and distributors

As mobile has shifted where and how purchase decisions are made, retailers have responded in intriguing ways. As so many purchase decisions now begin online, savvy retailers have devoted more and more of their resources to content development and marketing. By eliminating the need for the consumers to look elsewhere for rich product information, these retailers have increased the likelihood of both online and offline purchases.

Who hasn’t had their vacuum clear purchase decision influenced by star ratings they found with their iPhone? What cook hasn’t thrown additional ingredients into a cart based upon a recipe they found with their phone while shopping in-store? You get the idea. Retailers have also leveraged content as a way of turning in-aisle showrooming into a means of closing a sale.

Conclusion

Is this a sort of modern David-and-Goliath story, where the tiny phone has pummeled the big box? Well, it could have gone down that way, and for a while many worried it would. But retailers have proven their flexibility, turning phones into business drivers. Instead of being slain by Android and iOS Davids, they brought them onboard to help fight the battle for increased sales.

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