Improving customer experience in retail: A new dawn rises

As everyone in retail knows, the customer experience is critical to building customer engagement and loyalty, which in turn have bottom-line impacts on revenue.

According to new IDC and SAP research, the top three strategic outcomes retailers should focus on are:

1. Improving customer loyalty (59%)

2. Improving brand awareness (50%)

3. Empowering employees with the right data and tools (43%) to improve the customer experience

They have a lot of work to do to reach these goals. While 86% of retailers believe that their customer experience is at or better than their peers, the average net promoter score (NPS) for retail is only 41, which is below the cross-industry average of 44, according to CustomerGauge.

And some of the biggest names in retail have scores well below that. Customers and channels are in a constant state of change. So, what are brands doing to improve customer experience in retail?

Retail CX: Getting closer to the customer

First, forward-looking retailers are delving into new direct-to-consumer channels and business models. Retailers know that they need to go beyond in-person and traditional online channels. Today, shoppers use multiple channels, including pop-up storefronts, TikTok shops, and custom drops on Discord.

Over 47% of retailers say that developing new D2C business models across the customer journey is the future.

Second, they’re focusing on building a customer-centric culture within their organization and with their partners. It might seem counter-intuitive, but not every retail business is customer centric.

More than 44% of retail businesses say that undergoing organizational change to become more customer centric both in leadership and culture is a priority.

Third, in this period of intense change, retailers are making sure that they clearly communicate with their customers and truly listen to them.

That’s why over 40% of retailers are focused on having a solid voice of the customer program, including sentiment analysis.

AI shakes up the retail world

These are all important areas to focus on, but retailers must adjust to more than changes in customer behavior or in channels.

There’s a profound shift happening in technology with the evolution of AI that has the potential to change almost everything when it comes to customer engagement. Yet there’s a huge chasm in adoption.

Almost 43% of retailers have adopted AI across all of their front-office functions, from marketing and sales to commerce, distribution and more. But 42% have no plans to adopt AI in any of their front-office functions.

Every type of business is going through significant change as everything becomes more digital from customer interactions to even the product and delivery. Add to that the shift in underlying technology foundations happening because of AI, and the impact of that change is multiplied.

Improving customer experience in retail

The retail company of tomorrow needs to transform to deliver the experience customers want and expect by focusing on these three areas:

1. Customer data. Integrate customer data while reducing or eliminating data silos through the use of CDPs, data lakes, and similar technologies. Whether it’s understanding the customer journey, developing a new D2C model, or integrating AI into front-office applications – all of these need solid, clean customer data in a recognizable location. They also need to incorporate the privacy and security that both customers and regulators demand, making a CDP even more essential.
2. Integration of applications and business processes. Every business function, from supply and distribution to finance, sales, and marketing is responsible for customer experience. Integration of front, middle, and back-end functions beyond CX technologies should match the customer journey. This is one of the top issues for companies because often these systems are from different vendors and not easily integrated. If the whole company is responsible for CX, then it needs to be integrated in such a way to support CX at every touch point.
3. Agility in CX technologies. There are a multitude of CX technologies and vendors. Retailers should choose CX applications that are both flexible and resilient: Flexible in that they can change as business models and technology changes, and resilient in that companies won’t have to buy a new solution every five years to keep up with the market. This should include incorporation of AI, be composable and API first, and have built-in data protection.