THE CURRENT SITUATION
The global outbreak of COVID-19 is causing an unexpected and unprecedented crisis and puts the global economy at risk. It’s reshaping the business environment and shifting priorities economically and socially. Experts foresee a recession in most major national economies during 2020 – resulting in global growth dropping to zero, the second weakest performance in 50 years (2009 being the other).
With now around 170 countries having confirmed cases of COVID-19, the current situation for the global economy looks extremely challenging. However, it is believed that - consistent with historical experience – the eventual resurgence will be strong, with annual growth next year rising as high as 5% in the early months and reaching 4.4% for the whole year (Oxford Economics: Global Outlook, March/April 2020).
So although we are experiencing rough and challenging times, there is light at the end of the tunnel. In this article we would like to describe a few opportunities and some actions we encourage companies to take.
Show purpose and live up to your values
Caring and empathetic brands which demonstrate thoughtful marketing are more likely to connect to consumers in the long run, as those efforts will be remembered long after the crisis is over. By showing empathy, companies can increase loyalty and live up to the values they often preach.
Consumers are increasingly looking to businesses which act upon the right values and brands which prove to be lighthouses in this storm. Companies need to find ways to give back and make a positive contribution without a sole focus on a great marketing message. Companies will be judged on their messaging and actions during this crisis and only consistency and authenticity will lead to more loyal consumers.
Accelerate towards omnichannel
In times of social distancing, the online channel becomes more important than ever. Now companies must focus on blurring the line between physical and online experience for seamless shopping from any channel. This transition towards an omnichannel approach is on the agenda of nearly every retailer, and in times like these the focus on online increases even more.
Nevertheless, when the situation stabilizes, and stores will be able to re-open their doors, consumers will value a good personal in-store experience again. Even better if you have an advanced omnichannel approach in place by then and can offer a seamless experience – both off- and online.
Connect to your consumer
In times where your consumers are not able to visit your store and physically experience your brand and values, make sure you connect with them in different ways. Brands should ensure all communications have an honest and compelling message as consumers expect this. A clearly defined target segment (or segments) and a thorough knowledge of your consumer are the foundations for this purposeful directed communication.
You need to know who you’re talking to and who your consumers are. Use social media to help increase brand loyalty and sales during the crisis through your eCommerce channel and use social media to help rebound in the physical stores after the crisis.
Focus on long-term strategies
Even though everything is slowing down due to lockdowns and other restriction, there should be time taken for the development of further strategic planning. Obviously, the priority of every company at the moment must be the security of their business and their employees.
While those things are tackled, the long-term view and the strategic direction for the future mustn't remain unattended. Brands who come out of this crisis with a clear plan for what to do and where to focus to drive their business will have a head-start compared to the competition that survived but do not have a clear plan for the aftermath.
WHAT WE THINK YOU NEED
Listen to the consumer
Intensify your efforts to understand your consumers. Who are they? What are their needs, wants and desires? How do they shop and why? You need to draw a detailed picture of your consumers and analyze their desires to be able to offer the greatest possible value along their journey. You should bring the marketing, consumer research and service teams together to encourage them to listen to consumers and share their unique experiences and recommendations for future improvements.
Focus on your target the right way
Knowing your consumers is great – but do you know who you want to target? Do you stick to your current consumers or do you want to shift to a different segment, or both? How is your target segment going to evolve in the next few years? These are the questions you need to answer to develop a long-term strategy, which should be the foundation of all other action.
Evaluate all touchpoints based on consumer value
Along the consumer journey, all touchpoints need to be evaluated according to what additional value is brought to the consumer, and how much value can be added in the future. Each innovation and idea needs to be judged against these criteria, with a standardized framework behind it.
Focus on loyal consumers
Consumer relationship program
Installing a loyalty program gives your company access to tons of consumer data and it costs a lot less to sell to existing consumers than acquire new ones. Therefore, it makes sense to invest in a loyalty program. As consumer retention becomes a key ingredient for brand growth, and as competition increases within nearly all industries, consumer relationship management is more important than ever and can offer value for both sides: the consumer as well as the company.
Transform consumers into loyal consumers
You need to give reason to consumers to be loyal – which does not just mean discounts and promotions. Consumers are loyal for different reasons. Of course, some people shop in stores where they always feel they get the best deal, yet this is not the case for many others. Some consumers value a brand for what it stands for. If you have a consistent strategy for how you would like to be perceived, who you would like to target and what the according actions and next steps look like, you can leverage many different factors to turn consumers into loyal consumers.
Foster innovation culture
You should engage all your employees at all levels to have a voice and provide input on building the best consumer experience and enriching the experience with ideas for innovation. Learn from the best: have consumer experience champions throughout the company to spearhead initiatives, and work with employees to get everyone on board. This will create a more inclusive environment and a community feeling. Collect ideas and set up a culture where ideas are valued.
A standardized approach for how to develop and evaluate ideas is key when you are using a testing environment in form of a store to draw conclusions and findings. Define the added value, consumer touchpoints and KPI’s beforehand and evaluate ideas in order to select the promising ones for testing. For testing itself it is essential to select the right approach to be able to get the correct outcome and results that can be used to further develop strategic planning.
Review core processes
You need the analyze your merchandise lines and decide which should be corrected, decreased or expanded. Some of them may have great market share and high current productivity (sales and profit per m²), while others show low market share as well as decreasing productivity. If productivity is low, but their market share is high - does that mean you they need to be corrected – rather than decreased? On the other hand, what if productivity is high, but their market share is low? Create a strategic merchandise planning map which answers related questions and gives the direction for each of your categories.
Benchmarking store portfolios and divisions and monitoring progress against budget while using the right KPIs is another essential part of reviewing your core processes. Measures like gross margins, sales and profits per m² come into play. When you measure your progress, make sure to track your defined KPIs by store clusters and put the right filters into place to effectively compare your stores - to avoid any comparison issues that inevitably occur when you just compare by region, district, or other geographically defined territories. In addition, you need to know where they stand in capturing market share, closing the gaps, and taking out bad costs.
Decisions on store formats, store space allocation, store investment, cost structure, and staff still need to be made. During challenging times, you must concentrate on where there are needs compared to the gaps, and where there are bad costs. Find the relevant differences among store clusters within your portfolio - the planning process must focus on these relevant areas - to protect and strengthen the business for the long haul.
Don’t use digital just for the sake of it. Use digital to enhance the consumer experience and bring additional value to the consumer, through digital in-store features or digital support for back-end processes to deliver a better experience. Bricks and Mortar and eCommerce must be linked and seen as two possibilities to enhance the single shopping experience the consumers have with your company.
Support internal processes
Digital enhancement can improve not just the consumer experience but also internal processes. The right tools in the right place will decrease friction between departments and increase speed and effectivity within projects.
Where do you want to be?
What is your desired state in 2, 5 or 10 years from now? What kind of brand would you like to become?
A strategy that is detached from single departments and answers those general strategic questions plays an important role and needs to be in place to enable all other initiatives and workstreams to follow one company-wide direction.
Who do you want to be?
The core of every business is the brand: define a strategy for how you would like to be perceived with guidelines that all future actions must be based upon. This direction is defined by pillars like a company’s vision, mission, and values. These guardrails need to be aligned and distributed throughout the business. All employees should know what their company stands for, as they are also ambassadors of that brand, especially in retail.
Who is your target consumer?
What is the target segment you are serving and what needs, wants and desires are the foundation of your strategy? Do you know your existing consumer base and are you going to target them in the future? And how will this evolve? Or are you looking to shift your target to a different segment? Before refining your actions, you need to clarify questions like this with all stakeholders in the company.
The past few weeks have been challenging for many business and individuals and there are still difficult times ahead. However, while we are trying to make the best out of the situation and deal with all short-term problems, there also must be a time to prepare for what comes after. As soon as the situation normalizes again – whenever this may be – brands who have prepared and developed strategies on how to approach the “ramp-up” phase that lies ahead will have a clear advantage and use arising opportunities to get a head start.
If you would like to know more on how we can help, feel free to reach out to us.