Inside Jobs, October 24, 2007

Inside Jobs, October 17, 2007

Three Key Cross-Channel Trends

If you’ve listened to your customers – or attended a retail industry conference - over the past five years, then you know that cross-channel retailing continues to be a hot topic. Not only are more and more Americans going online, but a growing percent of them use the Internet to research and purchase products. Retailers can no longer fudge their online experience; customer expectations for online customer service levels are also rising.

All businesses should take note. Although the impact of cross-channel buying behaviors is most prevalent in the retail industry, it is a trend that will increasingly impact all businesses in nearly every industry.

1. More Consumers Are Going Online

In the late 1990’s, the era of irrational exuberance was in full form. Internet companies of all kinds promised to change the world with their latest e-product, e-exchange, or e-service. You may recall that stock prices for just about any e-Business climbed to unprecedented (and apparently unfounded) heights. It all came crashing down as the now infamous dot-com bubble burst.

Although many investors turned their backs on dot-com companies as a result, consumers did not; the number of people surfing and shopping online has continued to climb. Today, an impressive 73% of adult Americans use the Internet, according to the Pew Internet Project. Not only is the total number of on-line surfers steady and growing, but the amount of time they spend online is also increasing. Those numbers will only continue to increase as today’s well-connected teenagers grow into tomorrow’s prospective customers. Today’s teenagers age 12-17 are even more connected than their adult counterparts, with 87% of teenagers going online according to the Pew Internet Project.

The importance of the Internet in everyday life also continues to climb. From product research to social networking or from news & entertainment to health care research, today’s consumers are increasingly looking to the online channel. It’s becoming hard to avoid it. In 2007, 47% of adult Americans have a broadband Internet connection at home, according to the Pew Internet Project. Most working adults have a computer on their desk that can access the Internet, and many mobile telephones now have web access on their tiny screens. Furthermore, Wi-Fi connections are becoming as common as your local Starbuck’s store and cable operators continue to look for ways to integrate Internet access with traditional television service.

Any business that turned their back on the Internet as a result of the dot-com collapse in 2001 has in effect, turned their back on their customers. Although many early dot-com businesses collapsed, some in spectacular fashion, it has not dissuaded the lure of the online experience. As more potential customers are going online, businesses should take note. Without a viable Internet presence, your business is missing out.

Key Trend: If you think you can afford to ignore the Internet channel; think again. 73% of adult Americans, and 87% of teenagers, are online today.

2. More Are Using The Internet to Research and Shop

As more and more adults are going online, a growing percent of them use the Internet to research and purchase products. Over 70% of all online consumers use the Internet to research products, according to Forrester Research. That translates into $400 Billion of store sales – or 16% of total retail sales – that are directly influenced by the web as consumers research online and buy offline; a trend that is forecast to grow at a compounded annual rate of 17% through 2012 according to Forrester Research.


The influence of the Internet on retail transactions could have an even bigger impact. By 2009, 41% of all U.S. retail transactions will be influenced by online experiences, according to Jupiter Research.

The Fortune 500™ rankings are further proof that the Internet should be a strategic channel for any retailer. Pure Internet companies Amazon and eBay have passed some well known traditional retailers in the rankings. According to Fortune’s 2007 rankings, Amazon has passed notables Barnes & Noble, Borders, and Limited in total revenues. eBay has passed other well-known brands including Bed Bath & Beyond, Molson Coors, and Ross Stores.

Regardless of how you slice it, the impact of the Internet on retail transactions will make up a sizeable component of how consumers research and buy products.

Key Trend: Consumers are increasingly using the Internet channel to research and purchase products. Over 70% of all online consumers use the Internet to research products. By 2009, 41% of all U.S. retail transactions will be influenced by online experiences.

3. Expectations are Rising

As adults become more comfortable with the Internet, their expectations for their online experience are increasing. In fact, 85% of adults expect their online service levels to be the same as offline, an increase of 3% from the prior year, according to a survey conducted by Tealeaf. If those service level expectations aren’t met, 40% of online consumers will abandon their transactions entirely or turn to a competitor according to the Tealeaf survey.

The online world has also become a key influencer in purchasing decisions. An impressive 43% of American adults identified online information as the most powerful influencer of their purchase decisions according to a report published by Accenture.

The large majority of adults now expect to be able to choose from a multiple shopping channels. In fact, 80% of consumers feel that it is important to have a choice of shopping in multiple channels when choosing a retailer, according to a Sterling Commerce survey. The survey also found that 90% said it was important to be able to return an item purchased online in a physical store; underlying the importance of cross-channel integration to the consumer.

While the retail industry seems to have embraced the Internet with online catalogs, promotions, and interactive product selectors, other industries should take note. The impact of the Internet on buying decisions is here to stay. Here at ClearBrick, we anticipate that cross-channel integration will become an increasingly important element in other industries as well. The highly fragmented health care industry – for example – will likely see an increasing demand for integrated online and offline services including scheduling, diagnosis, insurance claims, and the holy grail of health care - medical records.

Key Trend: Customers’ expectations for shopping across multiple channels is increasing.

• 85% of adults expect their online service levels to be the same as offline.
• 43% identified online information as the most powerful influencer of their purchase decision.
• 80% feel it is important to have a choice of shopping across multiple channels when choosing a retailer.
• 90% said it was important to be able to return an item purchased online in a physical store.
  

Recommendations

The Internet is not just for retailers anymore. As adults become increasingly comfortable with the Internet, they grow more reliant it for their purchasing decisions. Any business that does not have a viable Internet presence needs to catch up. Simply putting up a web page is not enough. Businesses should seek to create an online experience that mirrors – or exceeds – offline service levels.

Integration is key. Online and offline channels should not be treated as independent and disconnected offerings. Creating a seamless experience between online and offline channels is very important. Customers overwhelmingly expect a seamless customer experience between online and offline channels. Start by making your business web site functional – not just informational. Offer a way for customers to initiate or complete a transaction online and coordinate that experience with corresponding offline services.

Although the dot-com era as we know it may have died in 2001, the Internet has continued to grow into a business channel that businesses can no longer ignore or neglect.

Inside Jobs, October 10, 2007

What Is My Business Worth?

Once upon a time, I was part of an ownership group that was involved in the spin-off of our division as a separate and independent company. I remember that time very well. It was filled with high stress, sleepless nights, and lots of very anxious business partners. The thought of spinning off our own company and going it alone was exhilarating, yet terrifying. But to get the deal done, we had to reach an agreement with the parent company on one very important point: What was the business really worth?

I recall vividly that the business valuation issue became a flash point in several heated debates and downright ugly discussions. The parent company hired their appraisers and came up with one valuation. Our ownership group’s appraisers came up with a different valuation. The difference became a point of contention between the two groups.

Why was the valuation of the company such a sticking point? The valuation of the business set the foundation for what we would have to pay to gain ownership of the business. It also set the tone for how much equity the parent company would potentially hold in our division. We all knew that this one issue could make or break the deal.

The argument over business valuation can play out each and every time a business is bought or sold. This scenario is perhaps most prevalent in the franchise segment; a market segment that boasts over 760,000 franchised small businesses in the USA according to the International Franchise Association (IFA). Every time a new franchise is established, bought, sold, or transfers ownership, business valuation will undoubtedly be at the heart of the transaction.

The Quick Service Restaurant industry, for example, is highly franchised with over 56% of all establishments being franchised according to the IFA. Every year, thousands of these franchise establishments will be launched, bought, sold, or will change ownership. If you are involved in a franchise, especially a restaurant franchise, then you know that the valuation of your business can make all the difference. The valuation of your franchise operation often dictates how much you pay in taxes, represents the book value of your business, and determines the increase or decrease in value of your franchise investment.

However, getting an accurate and up-to-date valuation of your franchise operation can be difficult. It often requires searching for, and hiring, an appraiser – a process that can be taxing for any business.

Fortunately, there are now emerging solutions to help any franchise to get a fast, accurate, and comprehensive restaurant valuation at any time. QuikVal.com, for example, has packaged a 25-year proven approach to restaurant valuation into an on-demand service that is accessible via the internet:

www.QuikVal.com: Expert Restaurant Valuation. It Figures™

QuikVal™ is a fast and straightforward online method for acquiring an expert valuation of any restaurant business. They have packaged a proven service into a reusable set of methods and tools that can help business valuers, appraisers, and business owners to complete valuations when and where they need them. QuikVal is convenient, confidential, accurate and affordable. The website allows for secure and confidential Data Entry by restaurant owners, operators, franchisees, and business valuation experts.

Although franchise valuation may not get you excited, it is a critical area that is beginning to edge closer to the do-it-yourself solution model that is at the heart of ClearBrick. We applaud companies like QuikVal who are taking the initiative to make business services – such as restaurant valuation – more accessible and affordable than ever before.

So what ever happened to our attempt to spin off our division into a separate and independent company? It didn’t happen. We couldn’t get agreement on a fair valuation of the business. That, along with other factors, nixed the deal. Perhaps if we only had a fast and accurate way of valuing our business…

Inside Jobs, October 3, 2007

How Well Do You Really Know Your Customer?

The basics of customer information and how to use it.

How well you know your customers can go a long way in determining the long-term success of your business. Regardless of your industry, knowing your customer comes down to how well you collect, manage, and use the right customer information.

Granted, each industry and individual business is different. The amount and level of detailed customer information will differ depending on the type of business and market approach. For example, a mass-market retailer such as a grocery store may not have access to individual customer identifiers such as name or address. As a result, they may rely more heavily on aggregated customer information that provides basic demographic data. On the other hand, highly personalized service businesses such as specialized health care providers or management consulting firms will typically have very detailed customer information.


Regardless of your business model or industry, being able utilize current and accurate customer information can help to focus marketing efforts, personalize the customer experience, and anticipate shifts in trends and tastes. When it comes to customer relationship management, customer information is king. It all comes down to how well you collect, manage, and use the right customer information.

CUSTOMER INFORMATION 101

Customer information can come from many sources and in many forms. Here are some customer information basics that any business should know and maintain:

1. Contact Information: Contact information is the basic information that identifies the customer. Examples include name, address, email address, telephone number, billing information, shipping information.
2. Demographics: Demographics represent data attributes that provide factual information about the customer. Examples include age, race, sex, marital status, age, number of children, income, education, employment status, location, etc.
3. Socio-Economic Data: Socio-economic data identifies the connection between social and economic factors. Examples include the correlation of demographic data or changes in economic factors - such as a recession - on individual buying behaviors.

TIPS:

• Collecting customer information should be an evolution. Don’t try to collect it all up front. For example, to get a customer lead you may only ask for a name and email address. Then when an order is placed, you can collect additional information such as address, telephone, and payment information.
• For mass-marketing companies, credit card providers can have a very rich source of customer spending information that can help you understand your share of wallet, key demographics, and spending trends.
• Privacy Rules: If you collect customer information, make certain that you take every possible precaution to properly secure it and maintain privacy. A customer information security lapse is a quick way to lose credibility and trust in the marketplace.

INTERACTION DATA 101

Customer interaction data can be just as powerful, if not more so, than customer information. Here are some basic customer interaction data categories that every business should know and maintain:

1. Contact History: Contact history provides the details of all outbound communication for each customer. Examples include emails, telephone calls, sales letters, newsletters, proposals, etc.
2. Transaction History: Transaction history includes the details of each transaction performed for each customer. Examples include purchases, refunds, returns, etc.
3. Interaction History: Interaction history provides the details of all inbound communications for each customer. Often combined with contact history, examples include service, support, information, quotation, and other requests initiated by the customer.

TIPS:

• Develop and follow a customer response policy. For example, be sure to respond to any incoming customer inquiry or request within 24-48 hours. Customers can quickly get turned off by any business that isn’t responsive to their requests.
• Know your transaction history. Make sure that you know what product or service your customers bought from you before you contact them. You don’t want to look foolish by trying to sell the same product that the customer just bought from you last month.
• Persistence matters. Don’t just assume that since you’ve contacted a customer once that your job is done. Often, a customer lead that is contacted multiple times is more likely to convert into a sale.

CUSTOMER INFORMATION: USE IT OR LOSE IT

Collecting customer information is obviously important. What you do with it is critical. If you don’t use it, you may lose it. Customers come and go and their contact information often changes. Therefore, you may only have a limited amount of time to make the most of your customer information:

1. Get Feedback. Customer feedback can be the single most important piece of information that you can attain. Leverage your customer information to establish a continuous product or service feedback loop. Then, incorporate what you learn into your next generation product or service.
2. Follow-up. Don’t just sell and forget. Make sure that you have an effective customer follow-up program to keep your customer contacts current. Often, selling follow-on products or services to existing customers is easier, and more profitable, than acquiring new customers.
3. Focus on Conversion. Collecting customer lead information is an important first step. But don’t just focus on volume; Make sure that everything you do is focused on converting people into leads, leads into customers, and customers into repeat buyers.

MANAGING CUSTOMER INFORMATION

Customer information is one of your most important business assets. The more you can collect, manage, and utilize – the better. But customer information can also be a fickle thing. Customers move. They change jobs. They change their mobile phone numbers and email addresses. Customer information can seem at times to be in a constant state of flux. To manage this properly, you need to get disciplined about customer information management. Consider establishing a process and assign responsibility for regularly collecting, cleaning, validating, and updating your customer information. Remember, when it comes to customer information – the rule of ‘garbage in. garbage out’ definitely applies.

There are obviously many ways you can store your customer information. Whether you utilize an electronic spreadsheet, or a robust customer relationship management (CRM) solution, make customer information the central focus of your customer strategies. Don’t just collect customer data for the sake of it. Make the most of it. After all, data is just data. But data with relevance is information. And customer information is power.

Go ahead and ask yourself, ‘How well do I really know my customer?’