As a consultant in Esri’s Professional Services group and in his own consulting firm prior to joining Esri, Eric Pollard has worked with many of the world’s largest companies. Over the years, he has seen some of those companies struggle to understand who and where their core customers are.
In this latest installment of WhereNext‘s Think Tank series, Pollard talks with Brian Cross, director of Professional Services, about:
- What it means to define a company’s core customers
- The state of unified commerce
- How big data and location can guide a sales strategy
- How companies can find customers they didn’t know how to reach
Brian Cross: As part of our series on macrotrends in business, we want to talk today about unified commerce and omnichannel commerce. Those terms are certainly the buzz in your space, Eric. Can you describe what they mean?
Eric Pollard: Unified commerce is essentially the evolution of what was first called omnichannel. It’s a way of looking at a company’s various sales and marketing channels and unifying those into a single strategy. Marketing channels could be print marketing, billboard or sign placements, mobile ads, or email newsletters, to name a few. Sales channels might be brick-and-mortar stores, factory or outlet stores, digital apps, or e-commerce sites.
Customer targeting has been around for a long time. What's new is that we have big data about specific segments of the population—where they are and how they behave. That's a boon to businesses.
In the past, retailers viewed these channels almost as separate business entities, and operated them mostly independent of one another. That made internal operations inefficient and created an inconsistent consumer experience across the brand.
With the unified commerce approach, companies can more accurately determine exactly who the customer is for each channel; where they live, work, and play; and how best to engage with them.
Cross: Why is that important? Why now?
Pollard: With the advent of digital shopping and e-commerce, mobile device usage, and varied store formats, the era of a one-size-fits-all approach to consumers is over. Department stores have shown us that trying to be everything to everybody without having a targeted focus is no longer a sound business plan.
As niche customer shopping experiences are becoming the new normal, unified commerce is helping companies plan their merchandizing, marketing, and operations. You just need to look at the retail headlines to see the obvious end game if you don’t start to engage in this type of strategy. And it starts with better understanding of the customer.
Defining the Core
Cross: The companies we work with tend to be good at understanding themselves—the products they sell, where and how they operate, their assets and supply chains. But frankly, a lot of them are just starting to realize that they need to better understand their customers.
Pollard: Absolutely. Up until this point, companies have done a good job of understanding how their own assets fit into corporate strategy, but they haven’t fully understood where their customers are located and how they’re interacting with the company through all kinds of channels.
Cross: Let’s get more specific. What does it mean to really understand a customer?
Pollard: The cornerstone of unified commerce is understanding how and where—how customers behave, and where to find them.
But before companies can do that, they need to define their core customers. Customer profiles, or personas, describe the type of customer more likely to shop or engage with each individual sales channel. For example:
- The core customer for the online store might be young singles living in rural locations.
- The core customer for a downtown flagship store could be urban singles or newly married couples who work in the downtown core and shop during lunch.
- And the core customer for a mobile device app might be millennial singles who live and work in the city center.
Each of those core customers represents a segment of the population. By tailoring a marketing campaign’s content, style, and location to those profiles, a marketing executive can effectively reach the maximum number of potential customers in each channel. Collectively, this process is referred to as unified commerce.
There's a lot of efficiency to be gained by not wasting time, resources, or effort on channels that are not going to satisfy the needs of the core customer in that given area.
More Nuanced Targeting
Cross: You’re basically talking about a company segmenting the types of people who buy its services and goods. Haven’t companies been doing that kind of targeting for a long time?
Pollard: It is a form of targeting, but it’s a little different than what we’ve seen. In the past, a company might have defined its core customer as a certain age range, one gender or another, with household income above a certain amount. While those demographics helped a company understand part of a customer profile, today’s core customer profile doesn’t end there.
Companies with strong unified commerce strategies include psychographics in their core customer profiles. That helps them understand things like which brands customers shop, how they prefer to interact with businesses, what type of complementary businesses they interact with, and more.
Psychographics includes other behavioral patterns, too. Does the core customer go to work downtown, stop for coffee on the way home, prefer Apple or Android devices? A lot of that information is new. You can think of it as the big data of our digital transformation—from our smartphones, our purchases, the social media accounts we keep. That information gives companies a better understanding of how their core customers spend their money and time, and how they interact with the world around them. It’s really about figuring out the entire picture of the core customer.
Cross: And some companies haven’t really considered location in that equation. They’re still thinking, I sell to soccer moms. Well, soccer moms in the city behave differently than suburban soccer moms, who behave differently from soccer moms who live in a rural town.
Pollard: Right. Companies that are using location analytics can pinpoint core profiles and see how they behave and spend differently in different geographies. So a retailer who understands its core customer might choose, in a particular geography, to market on billboards because the core customer is a commuter in that area, and many of them work in the business district where the retailer has a brick-and-mortar store.
In another geography, the retailer might use digital ads on social media to reach the core customer, because they’re checking Facebook or Snapchat or Twitter as they walk through downtown. Then there’s a different engagement campaign for someone who’s in a rural town and will probably order from an online outlet.
Instead of using a ubiquitous approach across all those customers, you’re targeting based on behavior and geography. Companies with unified commerce strategies are already doing this with geographic information system [GIS] technology.
What’s in It for the Business
Cross: What are the benefits of a well-executed unified commerce strategy?
Pollard: First and foremost, unified commerce ensures that customers enjoy a seamless shopping experience, no matter what age they are, where they live, or how they want to interact with the company.
The core goal of unified commerce is to be able to provide a product or service in the most convenient and effective way to the intended customers, thereby increasing sales and engagement.
For the business, the goal is efficiency and optimization. By determining where the majority of consumers are located in each channel, companies can relocate resources and assets, close poorly located facilities, and determine overall demand within a market. [Explore a complimentary market report on any US location of your choosing.]
In other words, companies that know the where and how of their core customers can optimize spending and resource allocation because they’ll no longer be wasting marketing budget or maintaining sales channels that aren’t suitable for their core customers.
Cross: And that leads to increased sales, lower costs. . .
Pollard: Yes, and better consumer sentiment. That’s left out a lot of times. It isn’t always easy to spot on the bottom line, but when a company meets its customers’ needs and customers feel that the company really understands them, they often become lifelong customers.
In today’s world, it’s easier than ever to open a pop-up shop or an online store. The barriers to entry in the retail marketplace are much lower than they’ve ever been. If your company doesn’t understand its customer, somebody else is going to figure them out.
Reality Check: Struggling toward Unified Commerce
Cross: The concept seems pretty clear, but I think it would be helpful if you could give us a tangible example of how it’s playing out in the real world, with companies you’ve worked with.
Pollard: Actually, you’d be surprised how many world-class organizations we work with that do not understand their core customers and haven’t considered a unified commerce strategy when they’re thinking about their overall business.
That said, there are examples of companies starting to implement this kind of strategy. One is a well-known, multinational apparel manufacturer based in the United States that is just beginning to understand the where and how of its customers and operations. The company is starting to put its assets on a map along with its customers, and analyze the relationship between the two.
The manufacturer has a few distinct product categories, and executives wanted to see how and where the company interacted with customers in each category. Once they started to map out those interactions, they noticed some trends and patterns—like who was buying where, and how. That helped the company create a different core customer profile for each product type—and then work on different ways of engaging with those customers.
With the core customer profiles, executives are beginning to look for expansion opportunities within certain geographic markets. GIS technology helped them find pockets of opportunity in specific locations—places where GIS identified people who were likely to purchase. That helped executives plan their expansion and growth for the year.
Today, when companies make a decision, they don't have the luxury of trusting assumptions. Executives need to scientifically prove why they should place a store in a particular market or advertise through a specific channel.
Cross: The bottom line is for retailers and other organizations that sell goods to consumers, they must understand their buyers—where they are and what their behaviors are—and then apply that to decisions about how the company operates, where to open physical locations, how to merchandise, where to advertise, and more. It’s basically a form of predictive analysis that gives a company very prescriptive plans to impact sales and customer satisfaction.
How to Get Started
Cross: Not every business has the resources of a Fortune 500 company, and I think many regional or even single-location businesses want to better understand their customers and apply some of these principles. What’s your advice on how an organization should get started?
Pollard: There are a lot of advanced things companies can do, but a very simple thing they can start with is an understanding of where they are and where their customers are. With the help of location platforms that are easy to stand up, companies can plot out their location or locations and really start to discover their core customer profile for different locations. A lot of the companies we work with start with a simple ZIP code tool. [Visit the Explore Your Neighborhood page for more information.]
That simple exercise alone can give an executive a sense of the psychographic and demographic information available and help them begin to match their channels with core customer segments.
The next step a company can take to improve their understanding of customers and business decision-making is to perform a core customer profile analysis. This allows a company to begin identifying appropriate channels and create a customer landscape for each channel, consisting of the core customer segments, competitive and complementary business locations, and additional market intelligence.
And it’s important to note that creating customer profiles for different channels is not a “one and done” operation. Those segments of the population shift over time and location and need to be kept up-to-date.
Cross: On the other end of the scale, it seems that companies that are really good at unified commerce figure out a treatment, to use a term from agriculture, for a certain type of sales channel or marketing channel. Maybe they see that a suburban area with a certain profile really responds well to a certain marketing campaign. That company can then identify locations across the region or country that have a very similar makeup of demographics and psychographics, and apply that treatment in those locations, with predictable results.
Pollard: Right. Those companies are good at leveraging technology to look for analogous situations. They use past behavior to predict the future behavior of those core customer segments.
Once those companies really get advanced at doing this, they get into forecasting methods, where they’re able to figure out down to a pretty precise number what they will be able to do in the market, how they’ll perform based on how many core customers are within proximity to a location or based on a marketing campaign within a specific area.
What they know that some other companies don’t know is that it’s no longer an assumption game. Now, with a true location strategy and access to big data, companies have the scientific analysis to get significantly better results.
(Learn more about the digital transformation of business.)