Retailers Seek Omni-channel CX with Digital Customer Engagement Strategies

There may not be another industry in quite as much tumult as retail at this moment. As we analyze in our HfS Retail Customer Engagement Services Blueprint, the retail space is bifurcated: bricks-and-mortar legacy retailers pivoting to omni-channel and online sales (some much more successfully than others) and digital disruptors that have built their businesses around an online commerce platform that has satisfied many consumer needs for seamless and intuitive shopping experiences. Regardless of the category, the role of customer engagement service providers has never been more important or more complicated.

We show data from various studies over the last year, as well as interviews with 20 buyers specific to the providers that we have highlighted in the Blueprint.

Customer engagement services support the front office of the Digital OneOffice

In our next Blueprint on this space, we look at how service providers are supporting services across the front office value chain (see Exhibit 1). Customer engagement services as we’ve defined them span the front office of a retail organization, including marketing, sales, and e-commerce support and development. While a good amount of these services still reflect traditional contact center and customer service operations, there are some more interesting value-added services being performed across the value chain, such as content design and channel analytics. Both pure-play BPO companies and larger ITO and consulting companies play in this market. Often, in particular for higher value services, the enabling technologies such as cognitive computing and analytics have a key role in delivering services and making them more intelligent—ultimately supporting a more nimble and customer-centric front office that knows its customers and can exceed their expectations to become more competitive.

Exhibit 1: Retail customer engagement services value chain

Source: HfS Research, 2018

As companies increasingly look to cognitive tech as an investment that can not only reduce costs but also improve experiences and create new revenue streams, the HfS Digital OneOffice as defined in Exhibit 2 provides the framework to help with achieving those outcomes. In a few months’ time, we won’t be talking as much about automation and digital technology; the conversation will have moved on to the critical “value levers” for operations and how they can become embedded in the operations platforms of new generation organizations. We will be talking a lot more about OneOffice, where an integrated support operation has the digital capabilities to enable its organization to dynamically meet customer demand—as and when that demand happens. OneOffice is realized when the needs and experiences of the customer are front and center to the entirety of business operations. The old barriers between corporate operations functions (often referred to as “front office” and “back office”) are dissolved, and the constraints of legacy ERP systems are minimized. This, in turn, allows the business to invest in digital technologies and capabilities that enable it to cater proactively to its customers’ needs at the forefront of the market. This provides for greater flexibility, enabling a rapid response if these needs change unexpectedly.

The Digital OneOffice is the framework for digital customer experience and for the creation of an intelligent, unified office to enable it. “Digital” describes the design, implementation, and use of interactive channels that drive customer engagement with the enterprise (namely mobile, social, text, and chat). “OneOffice” describes the enabling technologies for this (such as cognitive automation and streamlined, targeted analytics) that drive real-time predictive capabilities and an engaging digital experience for all stakeholders—customers, partners, and employees alike.

The Digital OneOffice is where an organization’s people, intelligence, processes, and infrastructure all come together as an integrated unit with a set of unified business outcomes tied to exceeding customer expectations. In short, OneOffice is the end game, where the digital organization can work in real-time to cater to all of its clients, both internal and external.

Customer engagement services span across the front office and provide the strategy and support for the customer-first aspect of our Digital OneOffice concept.

Exhibit 2: The Digital OneOffice

Retailers have a laser focus on creating engaging digital customer experiences

In a recent study on cognitive investments, we learned that retail C-Suite executives are much more focused on the impact of cognitive technology for creating customer experiences than are C-Suite executives in other industries. An overwhelming 86% of respondents viewed the primary impact of cognitive technologies as creating engaging customer experiences versus the cross-industry average of 38% (see Exhibit 3), taking second rank to “investing in new technology.” We can theorize that leaders in other industries seem to have a view of looking at technology as a silver bullet to keep operations functioning while retailers seem to take a more customer-centric view of the impact of digital technology, which shows what a keen focus they are taking on supporting that digital customer experience we describe in the OneOffice.

Exhibit 3: Retailers are focused on creating engaging customer experiences

Source: HfS Research, 2018, 100 total C-Suite executives, 14 retail and e-commerce C-Suite executives

The reality is that many of these services engagements have not yet pivoted to incorporating as much of cognitive, automated, and digital technology as the OneOffice warrants. There will be a maturing of customer engagement services on the horizon as these retailers hone in on creating greater digital customer engagement. This is a pivotal time for buyers and services providers to look toward the OneOffice as the endgame to base their partnerships around. This is the very essence of OneOffice—simplifying data flows, bringing the customer and operation together, and aligning talent with achieving defined outcomes in order to be more competitive, which is more important than ever to today’s retailers.

Retailers, more than other industries, are viewing personalization at the forefront of investments this year. As shown in Exhibit 4, 29% of retailers ranked micro-targeting customers and customization of products to meet customer requirements as their top digital business imperative for 2018, compared to only 7% of the overall respondents. The analytics capabilities of many service providers in this space are poised to help provide the accessible and actionable data that retailers can use to create this kind of personalization. The ability to target customers with personalization and customized offers and ads lends itself to some of the most important business imperatives for retailers, which include brand affinity and loyalty.

Exhibit 4: Retailers are focused on personalization and customization

Source: HfS Research, 2018, 100 total C-Suite executives, 14 retail and e-commerce C-Suite executives

During the Blueprint buyer interviews, we found it is common to blend traditional FTE-focused services with those leveraging cognitive and automation in support of digital customer engagements. As such, buyers have a mix of requirements from services providers. While standard capabilities for cheaper labor and greater efficiency are still present, the need for technology capabilities and thought leadership is increasing. Here are a few of the key themes we heard from services buyers:

• Talent development needs are at an all-time high. Buyers discussed the need for talent to understand both business process and technology components, underscoring the service provider requirement for solid knowledge management, training, and recruiting. Retail clients seeking to support customized customer experiences are thinking about how their partners interact with the customer, whether through content and design or customer support—the skills of the people supporting that customer experience need to reflect the ability to understand the customer and their expectations.
• Flexibility—the basic ingredient and the most important element. For many retailers we spoke to, flexibility is still their most important requirement from service providers. The seasonality of the retail business reflects holidays and times of year, and providers need to be able to manage the peak-season approach. For customer engagement services, this often means having the intelligence to forecast volumes and demand as well as the resources to support that. Retailers are looking to their service providers to be not only like “UBER when we need a ride” but also proactive about ideas for how to better flex for demand.
• Commercial constructs are holding back outside-the-box thinking. Many retail engagements are not designed to help clients transform their businesses to support the OneOffice ideal. When the deals are constructed toward lowering costs and driving efficiencies, the service provider is not incentivized to have a more innovative approach. While it might be prescriptive to have a contract that is focused solely on production metrics and SLAs, it would help to have commercial engagements that incentivize the service providers to bring more ideas and innovation to their retail clients.
• Omni-channel is the biggest design challenge for all retailers. Whether native digital players or traditional brick and mortars, all retailers are trying to crack the code on omni-channel operations. Consumers don’t buy in a single channel. They are looking at many things, both digital and traditional; they will go to a store to touch and feel a product while they also look to Amazon for reviews and ratings. This is driving the convergence of the front office in order to cater for the digital customer experience. For example, it is marketing’s job to make sure that the products get in front of consumers, but a customer support person on the phone should have a big picture view of the competitive landscape and a strong understanding of the products. Retail buyers are looking for their service provider partners to have not just the operations capability to support this, but also the vision for what the omni-channel journey should look like.
• The role of cognitive and digital technology will change the way that providers and buyers engage. As Figures 3 and 4 show, cognitive and digital initiatives are some of the top priorities for retailers in the coming year. These investments will require a redesign of customer engagement and the requirements needed to meet customer expectations along the journey to OneOffice. As the retail space has bifurcated, so will the engagements supporting customer experience—many will continue on the FTE-focused cost-cutting path, whereas others that are more focused on pivoting digital customer experiences will foster more collaborative and outcome-focused services engagements.

Advice for retail buyers

Retail customer engagement services buyers must do the following in order to ensure successful engagements:

• Carefully consider the structure of commercial engagements. Commercial engagements should acknowledge the need to react to changing customer expectations and business model shifts as a result of omni-channel design. For example, in customer service, if call-complexity shifts—often to longer, more technical interactions—there is not enough flexibility in the contract to pivot the engagement to profitably support it. Both service providers and buyers need to work through this exercise as partners. Retail buyers we spoke to strongly suggested that someone involved in the business aspect of customer operations should contribute to the design of the contract.
• As the retail market bifurcates, so will the service providers that support them. Look for service providers with a portfolio including both ecommerce native retailers and traditional retailers, as there are lessons to be learned from both ends of the spectrum. Also look to service providers with design capabilities across industries—there is often some outside-the-box thinking that can be generated from comparing to other business sectors.
• When it comes to experimenting with cognitive and digital technology, spend time defining the business problem you’re trying to solve or outcome you’re trying to achieve. Many companies right now are experimenting with and testing as many tools as possible in the spirit of not being left behind or trying to stay ahead of the curve. Before launching any kind of tech initiative, it is imperative to define and outline the problems you’re trying to solve rather than just seeking out the next shiny new object.
• Think about the experience you’re trying to create for customer engagement. Amid all the hype about omni-channel and digital technology, it can be easy to lose sight of what you’re trying to accomplish. Taking a design-led approach to customer engagement will help to create experiences that generate loyalty. Design thinking is one method that can promote customer centricity and design frictionless customer experience. In addition to reaching across organizational siloes, services buyers also need to get out of their comfort zones when it comes to a human-centric design thinking approach both internally and with service providers. Seek out providers that have a holistic view of the customer experience.
• Find the right blend of automated and human touchpoints to meet customer expectations.Many of the service providers in this market have expertise around designing the right blend of human and self-service or automated interaction—for example, how to know when to escalate the interaction and pivot from a bot to a human. This will be increasingly critical as automated messaging matures with chatbots and virtual agents.
• Use accessible and actionable data to understand customer expectations. Don’t just provide clients with actionable customer data, also arm front-office employees with autonomy to make decisions by having data at their fingertips (with some built-in rules for guidance and standards). 

To remain competitive, retailers must align the entire organization to customer-centricity in the way we describe in OneOffice. Break out of the legacy mindsets and siloes to align the whole organization to the customer—and look for service providers that also take this approach. While it’s important to create a front office that caters to the digital customer experience, this is a pervasive culture shift that puts people at the center of business design across the entire organization.