Loyal customers: Data-driven success factors

By Achim Himmelreich

The world of consumer goods and of the retail trade is currently experiencing turbulent times of transformation. Buzzwords like agile, omnichannel, or disruption are everywhere. And even though they represent sensible ideas and solutions, a tangible picture of what the future will look like is rarely apparent. More recently, this development was further accelerated by the COVID-19 pandemic, which impacted the toy segment to a greater extent – after all, people are much more often at home, trying to find fun and distraction in activities which before they would have sought outside of their own home. It comes therefore as no surprise that the toy sector's share of business from online sales has passed the 50 % mark. The question now is how to respond to these trends, and what exactly the above buzzwords stand for.

The power of customers

'Customer is king' is a maxim that has been around for some time, even though reality often looked very different. Nowadays, customers, especially the younger ones, act in fact like royalty, since their smartphone gives them the power to. Comparing prices, reviews, recommendations and analyses on certain games and retailers – all of this is available in seconds so that toy retailers are faced for the first time with enormous market transparency and super well-informed clientele. The fact that the smartphone (just like the tablet or notebook) even doubles as a game console, and/or extension to analogue games makes the overall situation even more complex.

To exist in this hyper competitive environment – and ideally, to bypass the pricing competition a little – both retailers and manufacturers need to offer more than just a product. They must become relevant to customers by, for example, recommending new games or game extensions which de facto match their preferences. If they manage to build this type of a personalised relationship, they will create loyalty and retain their customer base. Especially if available 24/7 on every channel the customer desires.

Deriving the customer's wishes from data

To know one's customers, businesses need to collect data on them and gain workable knowledge they can use from this information which in turn forms the basis for their relevant and personalised communication with the customer. Currently, most businesses are very far away from this target vision. They often cultivate one elementary direct interface with their customers at the most. The IT tools that are necessary for this type of transformation already exist or are being developed. High-performance omnichannel, marketing, and CRM software is available, just like relatively easy-to-use packages for Advanced Analytics and Artificial Intelligence.

When looking at the individual segments of the consumer goods industry – whether basic commodities, sports articles or otherwise – one quickly realises that businesses that consistently modernise their IT systems and drive digitalisation will outperform their competitors. The issue of restriction due to storage capacities has in the meantime been solved with the help of today's cloud technology which, in fact, offers unlimited as well as flexible scalability. And on a final note, large IT restructuring measures, such as a complex, monolithic software launch, no longer require a business to shut down for years. Companies can simply up the speed of the adaptation, evolve organically, while at the same time keep operations running. This works, for example, by establishing agile methods and flexible structures, by launching DevOp – an approach to improving the software development and IT operation – and API Management (Web Application Programming Interfaces).

Next to IT, in-company transformation is decisive

IT is without a doubt a deciding factor, but far from the only, or even most relevant one. The deciding thing is to which extent the transformation is not of technological nature alone, but also strategic, organisational, and cultural. A Chief Digital Officer, for example, will hardly be of use if the position is nothing but a shell without content. Changing towards a customer-centric business will only work if financial ratios are replaced by customer-centric KPIs (Key Performance Indicators). If agile methods are to bring the desired success, such success must tear down the walls between the silos and establish cross-functional teams as the go-to standard. If, consequently, everyone at a company will adopt a data-centric and customer-minded approach, the business will be able to "own and master the interface with the customer".

About the Author:

Achim Himmelreich has been a consultant for more than 20 years. Prior to joining Capgemini he acted, among other things, as a partner with management consultancy Mücke, Sturm & Company. His work focuses on digital strategy and transformation. He has closely followed the immense changes brought about by digitalisation from the beginning and has driven the establishment of new business models in countless projects. Since 2016, he has continued these activities with an end-to-end perspective at Capgemini as Global Head Consumer Engagement (Consumer Products & Retail). He is Vice President of the German Association for the Digital Economy (BVDW), a sought-after speaker and the author of numerous specialist articles.