Cisco Internet Business Solutions Group (IBSG)

Cisco IBSG Copyright 2010 Cisco Systems, Inc. All rights reserved.
Point of View
The Future of Retail Touchpoints
Extending Your Reach in the
Consumer Shopping Journey




Author
Edward Westenberg


Contributors
Joanne Bethlahmy
Lisa Fretwell
Clive Grinyer






January 2010


Point of View

Cisco IBSG Copyright 2010 Cisco Systems, Inc. All rights reserved. Page 2
The Future of Retail Touchpoints
Extending Your Reach in the Consumer Shopping Journey
A customers journeyfrom first hearing about a product to purchasing itinvolves a vast
and growing array of encounters with a product or brand. In fact, consumers touch your
brand an average of 56 times between inspiration and transaction.
1
Many of these
touchpoints involve standard retail channelswalking by the storefront, going online to a
branded e-commerce website, viewing a TV ad, or hearing a radio spot promoting a local
sale. But more and more, new media touchpoints such as social networking, blogs,
communities, video, and location-based services are becoming an integral part of the
consumer shopping journey.
And it doesnt stop there. The development of new and engaging touchpoint opportunities is
being accelerated by technologies such as augmented reality (AR), Near Field
Communication (NFC), IPTV, and SixthSense technology. These new interaction
technologies are evolving with stunning speed, making it a challenge for retailers to sort
through, understand, and respond to the touchpoint opportunities they represent.
One challenge is that retailers and consumer packaged goods (CPG) companies do not own
most of the new media channels or control the messages that proliferate through them. As a
result, these companies need to understand not only what is currently available or coming
down the pipeline, but also which touchpoints offer the best opportunity to influence
perceptions about their brands. They are asking: How should we approach social
networking? Do we need to respond to bloggers? Do we require a new media strategy, and if
so, what should be included?
Technology and consumer behavior are at a major transition point. Leading retailers and
CPG companies that want to break out of the Great Recession will need to start by gaining
market share in a low-growth retail environment. They must find ways to differentiate their
brands amidst a myriad of consumer touchpoints. These market leaders are using
touchpoints to listen to their customers, and are working hard to provide new services that
help them earn ownership of the customer experience. These successful brands seem to be
converging on broadly similar touchpoints through a unified, multi-touchpoint strategy. They
use social media to listen, offer services to engage, interact through forums to enhance the
brand experience, recommend based on behavior to drive personal transactions, and
support and reward customers post-sale to keep them coming back.
New technology-enabled touchpoints are evolving faster than ever, with many new
touchpoints already embraced by mainstream consumers. Ciscos Internet Business
Solutions Group (IBSG) believes that consumer companies should begin piloting new
touchpoints today, so that they will be ready to deploy on a large scale tomorrow. By piloting
now, retailers and CPG companies will learn to respond to messages and issues they may
never have anticipated otherwise. In this Point of View, Cisco IBSG offers several ideas on
how to begin.

1
Ed Thompson, Gartner, at the Gartner Symposium ITxpo in Cannes, 2007.

Touchpoint
Any product,
service,
transaction,
venue, or
experience
through which
a customer
receives a
significant
impression
of your brand.


Point of View

Cisco IBSG Copyright 2010 Cisco Systems, Inc. All rights reserved. Page 3
Touchpoints Are the Building Blocks of the Customer Experience
Retailers sell products and services to their customers. Perceptions of these offerings,
however, depend on the overall customer experience: the product, its usability, additional
services or features, quality, brand, price, and valueplus the quality and nature of every
encounter or interaction between the customer and the brand. Traditionally, retailers and
manufacturers have communicated their product and brand attributes through channels
they control, including the store, the call center, kiosks, events, and their branded e-
commerce website. In recent years, however, a shift toward new touchpoints has emerged,
completely independent of the retailer: social networking sites, blogs, online communities,
mobile applications, video, Twitter, location-based services, and many more.
The acceleration of the number and types of touchpoints has been catalyzed by anywhere-
anytime access to the mobile web, through devices such as the iPhone, BlackBerry, and
other smartphones. These mobile devices run on platforms that allow easy development,
sharing, and use of consumer-generated applications and content. Many of these
applications draw upon data provided by retailers on their own websites, including price,
availability, SKU descriptions, and store locations. This data can easily be combined with
information from other sources, such as social networks and GPS devices, to enable entirely
new capabilities.
Figure 1. The Evolution of Retail Touchpoints
sc
oints with exciting and engaging features will continue to evolve,
ter in
Source: Ci o IBSG, 2009
Various new touchp
enabled by many new and emerging technologies. We will explore some examples la
this paper.

Point of View
Deriving Value from Touchpoints
For consumers, touchpoint value comes from the capabilities offered, such as making it
easier to find product information, automating a household chore (creating a shopping list,
for example), or facilitating decision making by consulting family or friends. For retailers and
consumer product companies, value comes from information about personal preferences,
where and when a particular need may arise, and the ability to use this knowledge to lock
in customers.
The ability to respond in a timely and appropriate way will be a key differentiator. Touch-
points with high volumes of customer interactions and those that can elicit potentially
strong emotions in customers (for example, e-commerce sites or customer service
departments) tend to have the largest impact on customers brand perceptions.
Understanding the value driversespecially by customer segmentwill help you target
where to begin improving value for customers. Questions to consider include: What do my
customers value in an experience? Which service will enhance our customers lives and
reinforce our brand? Which experiences are improving my relationships with customers?
How do these experiences differ by customer segment?
Technology Has Turned Customers into Moving TargetsLiterally
Throughout much of the 20
th
century, government or corporate technology applications
trickled down to touch the lives of consumers. Today, that dynamic has flipped. Early
adopters will immediately try anything that looks as though it could improve their lives. What
seemed new yesterday is seamlessly integrated into their daily routines todayand the
corporate world is scrambling to catch up.
Consumers now assume that their smartphone will come with a built-in camera, GPS, and an
Internet browser. Combine these functions in a mashup and a completely new location-
based user experience is created. One consumer-created application, for example, displays
customer comments and opinions over the live camera view of a store location.
Leading consumer product companies are also testing the business value of mobile mash-
ups. Urbanspoon displays a periscope view of the users location, showing the popularity of
nearby restaurants; select a location with the cross-hairs and see the restaurant name,
distance, pricing, and cuisine category. With Bionic Eye, the user points the iPhone camera
at a building, and the screen displays which stores are inside. This application also includes
virtual signposts with directions to nearby points of interest or the nearest Starbucks coffee
shopa powerful capability enabling consumers to select their destination based on brand
(see Figure 2).

Cisco IBSG Copyright 2010 Cisco Systems, Inc. All rights reserved. Page 4

Point of View
Figure 2. Location-Based Mashups Offer Opinions, Directions, Local Services












Urbanspoon (left) displays popularity and other information about nearby restaurants. Bionic Eye
(right) enables customers to search for favorite brands nearby.
In augmented-reality (AR) solutions, content interacts with layers of information provided by
the real world. For example, by holding up a specially coded box or label to a webcam-
equipped computer, a user can see an augmented, 3-D image of the product, or a graphic
display of other additional information. In another AR application, nearby homes for sale are
overlaid on the live camera image of a neighborhood; by simply touching one of the
identified locations, potential home buyers can see photos and details about the home
(see Figure 3).
Figure 3. Augmented-Reality Applications Provide Visual Details About Products or Services













Lego in-store display shows 3-D image of Funda displays nearby homes for sale.
assembled product.
These AR applications typically focus on information about content not found on the
packaging. The global standards organization GS1 is working on a standard for mobile
solutions to make this sort of beyond the package information available to consumers
anywhere, anytime.

Cisco IBSG Copyright 2010 Cisco Systems, Inc. All rights reserved. Page 5

Point of View

Cisco IBSG Copyright 2010 Cisco Systems, Inc. All rights reserved. Page 6
Many of these developments are eroding the retailers traditional advisory role; merely
telling consumers about great products or brands no longer drives sustainable competitive
advantage for retailers.
A new touchpoint proving this contention is ShopSavvy from the Texas-based company
Big in Japan. Using an iPhone or Android-based mobile phone (Windows Mobile and
BlackBerry apps are soon to follow), consumers can look up any product that has a bar code;
read online reviews; check price, location and local availability; order online; notify a friend;
create a wish list; and automatically cache searches. As of mid-November 2009, more than 3
million users were performing an average of 26 product scans per month, 91 percent of
which were in-store. About 10 million wish lists had also been created, and more than 30,000
new users were being added each day.
2

Which Touchpoints Are Important in Your Customers Shopping Journeys?
With the current proliferation of touchpoints, much of the shopping journey has moved
outside the wallsboth physical and virtualof retail stores, and into the social networks
where people share their experiences and often gain their insights. Many retailers are trying
to figure out their approach to social media: embrace it and risk failure, or stay out and lose
out? Do they need presence on a mobile platform? What will happen now that IPTV and
gaming consoles are on their way to bringing shopping to the living room sofa? The
questions seem more abundant than success stories as retailers struggle to understand the
strategic implications of this fast-changing technology landscape.
The relatively linear shopping journey of yesterday has morphed into a more complex,
roundabout process that could be different for every purchase (see Figure 4).
Figure 4. Shopping Journey for Buying a Camera: Touchpoints Before, During, and After the Transaction
Source: Cisco IBSG, 2009


2
Andrew Mitchell, 4G Trends, November 18, 2009 (http://4gtrends.com/?p=2060).

Point of View

Cisco IBSG Copyright 2010 Cisco Systems, Inc. All rights reserved. Page 7
Touchpoints Provide Opportunities To Listen
If most of the shopping journey has moved outside the store, and outside the retailers
control, then what is the opportunity for retailers? Touchpoints offer retailers and CPG
companies the opportunity to listen and better understand consumer needs. Whether they
know it or not, consumers are leaving fingerprints on many touchpointswhen they seek
information on a particular product, or visit a specific location, or both. With the technology
and applications available today, companies can predict future choices of individual
consumers with unparalleled precision. Who has not been surprised about the old friend or
colleague who popped up as someone you may know in LinkedIn or Facebook? Todays
applications are capable of predicting someones personal preferences based on
touchpoint inference without the actual data ever having been entered.
This presents two opportunities: The first is to know what a consumer is going to look for
even before the actual need has materialized, and to be the first to offer it to him or her. The
second is the opportunity to increase the relevance of a retailers brand by making life better
and easier for the consumer.
Thirty to 40 years ago, predicting a consumers needs was based on the infallible knowledge
of a store buyer. Then, with the advent of digital cash registers, retailers were able to analyze
baskets using direct product profitability (DPP) tools and began seeing correlations between
categories and SKUs for the first time. The elusive goal of knowing what was on the
consumers shopping list, however, remained unattainable. So, retailers developed loyalty
schemes as a way to gather more personalized information about each customer. Better
basket analysis and targeted discounting became possible, but the ability to predict
consumer behavior remained imperfect. Then Amazon took a great leap forward when it
started using a social-filter-based recommendation engine, from which it now derives 35
percent of sales.
3

The next step will be to understand customer needs through social networking. Clever
retailers have already incorporated applications like Twitter as part of the shopping
experience. They allow their customers to share their ideas, questions, and suggestions, as
well as frustrations, as they shop. Retailers ability to make this a positive customer
experience hinges on being able to respond quickly and appropriately (see Figure 5).

3
"The Migration of Web Techniques to In-Store Retail Practices, Hutch Carpenter, January 14, 2009.

Point of View

Cisco IBSG Copyright 2010 Cisco Systems, Inc. All rights reserved. Page 8
Figure 5. Improving the Crystal Ball: The Evolution in Understanding Customer Behavior
Relevant
ate a lot of noise, so how do you know what is relevant?
ess

4
You dont need IT to Tweet, but you sure will be buying an awful lot of software in 2011
artner Group
October 2009
Source: Cisco IBSG, 2009
Knowing What Is
Applications like Twitter will gener
Cisco IBSG believes behavioral emulation engines will help retailers and CPG companies
know more about their customers than ever before. Behavioral emulation engines use
pattern recognition and artificial intelligence technologies alongside statistical tools to
identify and scrutinize granular data. There is already a growing list of engines that proc
the data and patterns gathered at touchpoints to predict a consumers future favorites. In the
next two to five years, newly emerging technologies such as retail behavioral
recommendation engines and real-time offer engines will enable these behavioral emulation
technologies to deliver significant benefits if correctly tied to shopper behavior.
that will analyze all this unstructured information. Imagine a year down the road when I
can go into a retailer and start tagging my likes and dislikes on any given product. It is
just mind boggling.
Jeff Roster, G

An example of the power of measuring touchpoints is Biz360, which correctly predicted the

outcome of American Idol 2009 before the show aired. The Biz360 tool, which was
developed in partnership with Stanford University, is typically used to determine how
brands, products, and services are being perceived.

4
ICT Marketing Strategy: Retail and Logistics Sub-sector, Gartner, U.K. Trade & Investment, March 2009.

Point of View

Cisco IBSG Copyright 2010 Cisco Systems, Inc. All rights reserved. Page 9
Cisco IBSG recommends that retailers start using these new tools to start gaining
experience now. The ability to listen to the conversation and know what to do with the
Leading retailers and CPG companies are already listening carefully to their customers and
ience. These
or example: Best Buy and Dell both use Twitter to listen to and communicate with their
eijn offers its customers a convenient mobile application containing a


t quickly spotting a potential negative experience and turning it into a

Many of the developments currently under way will transform the ways in which consumers
ers can try a new product,
se colors,

messages will be a powerful competitive differentiator tomorrow.
Successful Brands Converging Toward Similar Touchpoints
working hard to provide new services and earn the ownership of the exper
successful brands seem to be converging around broadly similar touchpoints to listen,
engage, enhance the brand experience, create personalized transactions, and lock in
customers (see Figure 6).
Figure 6. Major Retailers Use Similar Touchpoints in a Unified Multi-Touchpoint Strategy

Source: Cisco IBSG, 2009

F
customers. Albert H
cookbook with over 7,000 recipes that can be used to create shopping lists and more.
Adidas recently gave away an iPhone app that enables users to discover and learn about
Berlin street art. NikePlus and the Nespresso Club program allow these brands to interact
with their target groups and better understand their needs and wants. Tesco and Amazon
both use advanced recommendation engines. Nikon is doing a good job locking in its
customers through online services such as Picturetown. Heineken has launched a
cobranded rewards card that offers members special services such as guaranteed access
to concerts.
In addition to their unified multichannel, multi-touchpoint strategies, leading brands are
usually also good a
positive. Customers of Orange in the United Kingdom who are having problems with their
broadband connections can now visit www.orangeproblems.co.uk to find out how to solve
them. This forum started as a complaints platform, but was quickly embraced by Orange to
help its customers.
Tomorrows Touchpoints Are Being Tested Today
touch retailers and CPG companies. Here are a few examples:
IKEA won the 2009 Future Lions award for its augmented-reality application
advertisement. In the ad, IKEA demonstrates how consum
virtually, in their own homes using their mobile phones. Consumers can choo
styles, and sizes, and try them in the comfort of their own living rooms before visiting

Point of View

Cisco IBSG Copyright 2010 Cisco Systems, Inc. All rights reserved. Page 10
the store. An almost identical application called portable interior planner was used
successfully to launch IKEAs new PS product line in summer 2009 (see Figure 7).
Figure 7. IKEAs Award-Winning Ad Inspires Augmented-Reality Application

FoodTracer is an augmented-reality mobile application that shows information about

s such as Nokia and Microvision (see Figure 8) have created see-through
either
,
cer and Microvision Offer New Ways To Interact

technology, one of the most exciting new touchpoint possibilities, is still in the


the origin, production, and distribution of food. The applications aim is to provide easy
access to information about food, and to review grocery shopping behaviors (see
Figure 8).
Companie
color eyewear to enhance the value of the information consumers are receiving via
their mobile phones. To overcome the limitations of the mobile screen size, the
eyewear overlays reality with high-definition images and information controlled
by the mobile device or through gestures. Imagine viewing user-generated comments
or privately checking the online price of a product while you are viewing it on
the shelf.
Figure 8. FoodTra

SixthSense
development stage at MIT Media Labs Fluid Interfaces Group. SixthSense is a wearable
gestural interface that augments the physical world around us with digital information, and










Ad places virtual sofa in customers room. Actual app shows virtual clock in customers room.











FoodTracer shows where food comes from Microvision offers an informed view of the world.
and how it gets to the grocery store.

Point of View

Cisco IBSG Copyright 2010 Cisco Systems, Inc. All rights reserved. Page 11
lets us use natural hand gestures to interact with that information.
5
This technology will
make the retail environment interactive, and product packages will become integral parts
the brand and shopping experience (see Figure 9).
Figure 9. SixthSense Technology Displays User-Selected Produ
of
ct Information on Product Packages


est Touchpoints Now for Quick Deployment Later
rategy for testing

bloggers
a context- or
liver
an
tes, try a pilot with Neighborhood Americas MOVO Mobile service
stomers to use Twitter to comment on


T
Cisco IBSG encourages retailers and CPG companies to adopt a simple st
touchpoints. Deploy multiple, small-scale, time-boxed pilots to learn the effects and
dynamics of new media and tools. Here are some ideas for low-threshold pilots:
Rediscover the shopping journey: Start listening to the conversation on social
media. Learn about the data available on the Internet. A service such as Observed
Media could be an easy start for gaining insights about listening and metrics.
Observed Media provides industry trends and identifies the top 10 influential
and tweeters in a category. It crawls many online sources and targets specific issues,
such as the launch of a new product line for a particular brand.
6

Offer a service or mashup application. Start an experiment with
location-aware tool such as Placecast and learn about using context-aware,
personalized mobile marketing as a service. Placecast enables brands to de
relevant messages in context (tied to place and time) to their customers based on
opt-in program.
In the United Sta
to learn about the power of reaching consumers with exclusive alerts and promotions
combined with mobile social networking. Adidas has worked with MOVO and
converted online conversations to offline sales.
Invite your customers to interact. Encourage cu
their store experiences. Create a few hothouse stores where the pilot will run for a
limited time. Evaluate the results, then redesign and adjust the objectives of the pilot
and test again in a different location. Make sure the pilot is part of the daily routine and
embedded in the appropriate business process. Educate and involve both staff and

5
MIT Media Lab (www.pranavmistry.com/projects/sixthsense/), 2009.
6
http://www.observedmedia.com/

rat ic








Developer Pranav Mistry demonst es the SixthSense prototype, wh h scans the bar code
on a package of toilet paper and gives it a green light based on environmental criteria.

Point of View

Cisco IBSG Copyright 2010 Cisco Systems, Inc. All rights reserved. Page 12
consumers throughout the pilot. Try to anticipate potential results and be prepared to
take action. (How do you respond when several hundred customers suddenly start
sending you tweets requiring action?). Dont be afraid of what you will hear when you
listen; instead, think about how you will respond.
Figure 10. Pilots Provide Valuable Experience with New Touchpoints


Start interpreting the data avalanche. While we are still waiting for the new generation
or
from carrying out these small pilots. Consumers notice and will
nd
.
Conclusions
consumer behavior are changing at a dizzying pace. Retailers and CPG
n experience that reinforces


d a










of behavioral recommendation engines to mature, consider experimenting with
solutions like Aggregate Knowledge for automated behavioral recommendations
find out how ThinkAnalytics can add analytics to your customer relationship
management system.
There are numerous benefits
generally view them positively. The pilots should be used primarily as part of an overall
consumer strategy. Early experience with new touchpoints will enable you to respond a
execute quickly and efficiently whenever the time is right, or when a trend goes mainstream
Technology and
companies that wait for others to drive touchpoint adoption will be left behind. In the post-
recession world, there are no fast-growing new markets. Growth will come at the expense of
the competition. To survive and grow, retailers must continually look for the competitive
advantage that will help them differentiate their brand.
Focusing on key touchpoints ensures that customers have a
your brand promise. Listen to customers at these touchpoints and you will almost certainly
hear things you didnt know. Providing information consumers wantwhen, where, and how
they want itwill attract new shoppers and increase conversion. Listening to consumers
and responding to their needs will help keep those customers and build brand loyalty.
It is true that not all consumers are eager to embrace a new media shopping experience.
Early adopters and the new millennial generation, however, will tilt the playing field towar












People love Rackspace for personalized Offer a service: Consumers dont seem to mind
tweets. giving up some privacy. BabyCenter sends
ovulation alerts to your phone.

Point of View
multi-touchpoint strategy and away from the retailers control. Retailers should take action
today to:
Identify their core target shoppers
Understand how they interact with mediatoday and tomorrow
Develop a multi-touchpoint strategy that fits the brand and matches shopper behavior
Listen to consumers voices in these touchpoints, and respond appropriately
Offer a one-brand experience everywhere
If managed well, this strategy offers the opportunity to reduce the cost of acquiring, serving,
and maintaining customer relationships.

For more information about developing a unified, multichannel, multi-touchpoint strategy,
contact:
Edward Westenberg
Cisco IBSG Retail / Consumer Packaged Goods Practice
[email protected]


Cisco IBSG Copyright 2010 Cisco Systems, Inc. All rights reserved. Page 13