The Omnichannel Customer Deciding the retailer’s value proposition Module 5 Video 3 The Omnichannel Customer Deciding the retailer’s value proposition

Intro How can retailers define the value proposition they offer to their customers in a competitive marketplace? Establishing the retailer’s value proposition Importance of focus and tradeoffs Quantify the relevant tradeoffs Identify market trends retailers should keep in mind when thinking about their value proposition

Focus and tradeoffs It’s not possible to be excellent at everything! Example: Customers will obviously like cheaper prices and faster delivery Trade-off Curve Retailers that are not in the frontier would not be very successful in the long run customers can find options that are both cheaper and faster

Focus and tradeoffs cont. When a retailer is on the frontier It is not possible for customers to find options with a better price and a faster delivery Those retailers cannot improve one dimension without getting worse in the other Example: if a retailer in the frontier wants to offer lower prices, it will have to sacrifice delivery times. To be excellent at one dimension, you have to be bad at the other one How can you decide which dimensions to be excellent at and which dimensions not to be so good at?

Attribute map How can a retailer such as Nordstrom evaluate their value proposition when selling winter jackets? First step is to think about the attributes that customer value List all of them: quality of the jacket, the price, the delivery speed, the return policy, or the information provided by the retailer, but they may be many more Rank those attributes according to how important they are to our target customers most important to the least important Benchmark how we are doing in each of the attributes, relative to our competition

Attribute map cont. The attribute map helps us evaluate our value proposition Ideally Stand out in the dimensions our customers value the most Sacrifice those dimensions our customers value the least If this is not the pattern we observe in the attribute map May need to improve in the most important dimensions Perhaps we are focusing on the wrong customer segment

How to choose where to position our value proposition Ranking the importance of the attributes to our target customers is easier said than done If I asked my customers if they prefer faster delivery or cheaper prices, Probably tell me that they would like both faster and cheaper I need to know how these attributes weight in their decision so that I can decide which dimensions I should prioritize

How to choose where to position our value proposition (cont.) Conjoint Analysis details of conjoint analysis can be quite complex basic idea behind it using an example Focus on a particular model of winter jacket consider five attributes: price, delivery speed, returns policy, product information, and retailer present customers with the task of choosing between several combinations of these attributes Example: Customer has to choose between the following three options for buying the jacket This will force the customer to compare the different attributes and decide which of the attribute combinations the customer likes best

How to choose where to position our value proposition (cont.) The customer’s choice will give us information about the tradeoffs they make. We can present several of such choices to each customer, and do this with multiple customers, until we get an accurate idea of customer tradeoffs. A retailer could start by identifying the pool of potential target customers Use conjoint analysis to understand how customers value different aspects of the value proposition. Using this information, the retailer can decide which areas should be improved. The analysis may also help identify different customer segments with different priorities When that happens, we will have to decide whether we should focus on some specific segments

Trends Trends in customer preferences Example: Over the last years there has been a shift towards customers spending more dollars online. This is true across many different categories Retailers should consider this changing landscape when deciding their value proposition and the investments they will make to support it Another such trend is the increase of omnichannel customers Decide which customers to serve Decide which channel combinations to offer There’s no one size-fits-all strategy Important to keep in mind those things that will remain constant. When Jeff Bezos, CEO of Amazon, was asked about the changes he expected over the next ten years in retail, he said he was more interested in the things that were NOT going to change in the next ten years, because those are the things you can build a strategy around. For Amazon, those constants are low prices, fast delivery and vast selection.