Session 3

Customers, company and collaborators in a multichannel environment

Multichannel Retail Strategy

08/22/2020 Dr. Ashis Mishra, IIMB 1

Marketing 1.0 – 4.0
• Marketing 1.0
• Product driven marketing
• Marketing 2.0
• Customer centric marketing
• Marketing 3.0
• Human values focussed marketing
• Marketing 4.0
• Digitally influenced marketing

08/22/2020 Dr. Ashis Mishra, IIMB 2

As per McKinsey
• Retail 1.0
• Birth of modern supermarket
• Early 20th century – Piggly Wiggly Memphis (1916)
• Self service, price mark, open stands, checkout counters, employees with uniform etc.

• Retail 2.0
• Birth of Hypermarkets
• 1963 Carrefour in Paris suburbs and WalMart in Arkansas
• Everything under one roof – big box stores – operational efficiency – lower cost

• Retail 3.0
• Rise of e-commerce
• 1995 Amazon sells books online; 1997 Webvan sells grocery online

08/22/2020 Dr. Ashis Mishra, IIMB 3

As per McKinsey
• Retail 4.0
• Multichannel or Omni-channel retailing
• Searching and buying on PCs, tablets and mobile devices becoming near ubiquitous
• Physical stores are looking for virtual presence
• Virtual stores are opening physical counterparts
• Stores want to be connected with the consumers all the time whichever way possible
• One channel need not substitute the other – rather it should be complementary with a
synergistic effect

08/22/2020 Dr. Ashis Mishra, IIMB 4

Customer characteristics - trends
• Emerging markets are characterised by
• Young, urban, middle class consumers
• Different demographics than their parents
• Migrating to urban / semi urban areas
• Sizable income to spend
• Embracing big city life style
• Moving up from a lower socio economic status
• Aspirational purchase behaviour
• Experience fine living
• Emulate behaviour of people with higher classes
• They are not one big homogenous segment
• There are multiple sub-segments (traditional vs. aspirational)

08/22/2020 Dr. Ashis Mishra, IIMB 5

So - What is different?
• They have strong mobility and connectivity
• So
• Live life at a faster pace
• Everything should be instant and time efficient
• See things on TV – search for it in mobile devices – look for stores where it is available –
look for offers / discounts – probably make a decision regarding
• Purchase
• Brand
• Store format etc. then and there
• Go to a store to buy items – check for price and quality online in their mobile devices –
look for offers and discounts – ask intelligent counter questions for clarification – provide
info on counter offers available to them and make a decision regarding purchase

08/22/2020 Dr. Ashis Mishra, IIMB 6

So - What is different?
• Make purchase decisions anywhere – anytime
• They would love to experience things physically as well as digitally
• They are quite social and connected
• Trust their peers and fellow shoppers more than the brand ambassador /
sales person / store
• They prefer 2 way communication from the brand than the traditional one
way
• They are more informed (collective intelligence) and more distracted
• Outer directed (driven by opinion of others – who may not even be known to them)
• More opinionated (put their experience – opinion on social media instantaneously)

08/22/2020 Dr. Ashis Mishra, IIMB 7

Key takeaway
• Both online and offline coexist now and probably will keep doing so tomorrow
• They are not adversary – rather complementary
• Need to identify the role of each one of them and develop a strategy to optimise the
overall productivity
• Connected consumers are assets; not threat. Use them intelligently
• Mobile connectivity
• Experiential connectivity
• Social connectivity
• Concept of competition and collaboration need to be revisited
• Probably they are the same thing
• Can not hide the inefficiencies
• There are no barriers to entry any more in most markets
• Customer’s time is precious

08/22/2020 Dr. Ashis Mishra, IIMB 8

Change in orientation – thought process
• Exclusivity does not look sustainable; better go for inclusivity
• Innovation
• Entrepreneurship
• Transparency
• Connectivity of the customers – social inclusivity
• Dynamism in the market – multiple business models
• Walls between industries are blurring
• Medical with tourism
• Telecom with financial services
• Within banking financing, insurance, funds management, retail banking etc. are blurring
• So do you want to compete or synergize?

08/22/2020 Dr. Ashis Mishra, IIMB 9

Change in orientation – thought process
• Vertical integration to horizontal integration
• Competitiveness of companies may not be determined by their sizes, country of
origin or past advantages
• Smaller, younger and locally based companies can compete against larger players
• Innovation (iTunes disrupted brick and mortar music retailers with online retailing; Spotify
disrupted Apple’s business with it music streaming; Apple had to launch Apple music)
• Technology (online go to market strategy viz. Vivo, Oppo, Xiaomi etc. 3D printing)
• Dynamic business models (high volume mainstream to low volume niches)
• Uber, Airbnb against hotels / taxi companies
• Customer trust is no longer vertical; it is horizontal
• Customer is no longer a target; but an active participant in the value delivery
process
• A friend / peer of the brand

08/22/2020 Dr. Ashis Mishra, IIMB 10

Change in orientation – thought process
• From Individual decision making to social decision making
• Traditionally consumer decision making has been individual
• Now because of inclusivity and connectedness, it has moved to social decision
making
• Higher level of importance to the opinion of others rather than the opinion of
self
• Consumers conform more to social opinion
• Social risk is the highest
• Customers are not passive targets of marketing communications; rather they are
becoming active media of communication
• Companies have lesser control over content of communication; no scope for censoring
content; can not handle complaint individually; huge backlash in case something goes wrong

08/22/2020 Dr. Ashis Mishra, IIMB 11

Change in orientation – thought process
• The backbone of marketing – STP
• The consumers are targeted based on their segmentation variables and then
the offer is positioned to the target segments
• The targeting is done based on geographic, demographic, psychographic and
behavioural segments where the consumers have no say – they don’t choose
their segment
• All these changes in omni-channel marketing and connected – mobile
consumers
• Companies could use traditional STP to identify and in cases come up with specific
proposals / offers before entering omni-channel programme
• After that the complete thought process change as well as complete transparency is the
way forward

08/22/2020 Dr. Ashis Mishra, IIMB 12

Change in orientation – thought process
• STP in digital era
• Consumer segments are the consumer communities chosen by the consumers
themselves (through social media)
• Thus formed consumer segments are immune to spamming and irrelevant
advertisements
• They may reject any company’s attempt to force its way into their web of
relationships
• To effectively engage with the consumers’ community, brands must ask for
permission
• While asking for permission, the brands must act as friends / helpers / problem solvers rather
than hunters
• The brands must appreciate the horizontal relationship – bargaining power of the consumers
and must respect the consumer’s decision to “confirm” or “ignore” (la Facebook)

08/22/2020 Dr. Ashis Mishra, IIMB 13

Change in orientation – thought process
• Differentiation and brand positioning to brand transparency and
innovation to remain relevant
• Traditional thought process is communicate the differentiation of the brand
and create a consistent positioning; deliver the value / brand promise
consistently over a period of time to remain relevant
• In the current era, consumers are now facilitated and empowered to evaluate
and even scrutinize any company’s brand positioning promise
• Brands can no longer make false / unverifiable promises
• A community driven consensus will provide stability and relevance to the brand – not the
corporate posturing
• Shorter life cycle of the product and lack of time as well as patience of the consumers
means continuously running to remain stable (maintain the current position)

08/22/2020 Dr. Ashis Mishra, IIMB 14

Change in orientation – thought process
• From 4Ps to 4Cs
• Product, Price, Place and Promotion are traditional approach to marketing
strategy
• Strategy elements in a digital era
• Co-creation
• Involve the consumer in the product conceptualization, design and development stages for
better success rate
• Currency
• Pricing should be current and dynamic rather than cost based or competition based
• Airline industry, hospitality industry, retail industry does it from time to time
• Needs to have a process in place to gather relevant data, real time analysis and decision
making regarding the optimal price at any point of time

08/22/2020 Dr. Ashis Mishra, IIMB 15

Change in orientation – thought process
• Communal activation
• Peer to peer distribution (activate the community) rather than levels of
distribution and extent of coverage
• Airbnb, Uber etc. are serious disruptors in the industry
• 3D printing will spur the peer to peer distribution more in future
• Conversation
• Traditional promotion is often one-sided
• New age of promotion is two-sided; consumers respond to promotion
• Also peer to peer conversation regarding the promotion
• Tripadvisor, Airbnb feedback system and rating system is the example

08/22/2020 Dr. Ashis Mishra, IIMB 16

Change in orientation – thought process
• Collaborative customer care
• Traditional view point of customer service is post – purchase. It is limited to
the promise before purchase / part of it
• New approach is that of customer collaborative customer care.
• Marketer needs to show genuine concern for the customer by listening,
responding and consistently following through on the terms pre-decided by
the company as well as the customers
• Company may even invite the customer to participate in the service delivery
through self service

08/22/2020 Dr. Ashis Mishra, IIMB 17

Change in framework
• Traditional customer path • In the connected world
(personal) • Aware
• Awareness • Appeal
• Interest • Becomes attached to a short list of
brands
• Desire
• A stronger brand appeal helps going
• Action further
• Derek Rucker’s modification • Ask (individual to social)
• Awareness • Ask friends or themselves
• Attitude • Do research, call centres, visit stores
• Act • Act (purchase, post-purchase etc.)
• Act Again
• Advocate in contrast to loyalty
08/22/2020 Dr. Ashis Mishra, IIMB 18
Traditional approach
• A couple bought their first home and now looking to purchase a new
washer and dryer
• They visit several big box retailer’s websites; At one store’s site, they
identify 3 models that they are interested in; save them to a wish list
• As the space in their house is limited and it’s a relatively big purchase,
they decide to see the models in person and take their time to take a
decision

08/22/2020 Dr Ashis Mishra, IIMB 19

New normal!!!
• The couple would find the nearest outlet on the retailer’s website; get
direction to the outlet using google maps
• They get motivated to drive down to check the models
• Even before they walk through the doors, a transmitter mounted at
the retailer’s entrance identifies the couple and sends a push alert to
their mobile phones welcoming them
• It could provide them with personalized offers and recommendations based
on their purchase history in the store
• In this case, they could get quick links to the wish list they have created as
well as an updated specs and prices for the washers and dryers that they had
shown interest in (captured in the click trail in the store’s website)
08/22/2020 Dr Ashis Mishra, IIMB 20
New normal!!!
• Additionally, they may receive a notification of a sale – “15% off on
selected brands appliances, today only”
• Two of the items that they have added to their list is on sale
• When they tap on the wish list, the app provides a store map directing
them to the appliance section and a call button to speak to an expert
• They meet the sales person, ask question, take measurements and
close on a particular model of washer and dryer
• The store could use sophisticated tagging technologies and
information on the washer and dryer is synced with other application
on their mobile phones
08/22/2020 Dr Ashis Mishra, IIMB 21
New normal!!!
• They can scan reviews using consumer reports app, text their parents
for advice, ask a Facebook friend to comment on their choice and
compare the retailer’s price against others
• They can also take advantage of a virtual designer function on the
retailer’s mobile app
• They could enter few specs regarding their apartment and they get to view
“how the washer and dryer would look in their apartment”
• If all the input are favourable, the couple decide to take advantage of
the 15% offer and buy the appliances
• They exit with date and time for delivery and installation

08/22/2020 Dr Ashis Mishra, IIMB 22

This requires..
• New capabilities
• Understand the consumer characteristics and behaviour; identify multiple
touch points
• Integrate the data from each touch point with appropriate analytics engine to
identify the customer
• Design personalized offers and benefits for him / her
• Design and create frictionless experience across channels
• These are different organizationally for you; for customer, its all the same. It should be
that way
• Build a more agile organization
• That has the capability to identify insights and execute within a short time span

08/22/2020 Dr Ashis Mishra, IIMB 23

 Tesco - Multichannel
Multichannel retail strategy

08/22/2020 Dr Ashis Mishra, IIMB 24

Company background
• First Tesco store – London – 1929 by Jack Cohen
• By end of 30’s – more than 100 stores in London
• Jack Cohen was influenced by American self service supermarkets
• Retail strategy “Pile it high – Sell it cheap”
• More focus on stock and hence suppliers – no customer orientation
• Early 1980’s - Ian Maclaurin Tesco CEO
• Operations background – streamlined operations – closed smaller stores –
expanded aggressively in suburbs- >200 super stores – centralised distribution
• Still no customer focus – no merchandising

08/22/2020 Dr Ashis Mishra, IIMB 25

Company background
• By 70’s – 80’s, selling cheap products was less successful at Tesco
• By late 80’s, Tesco was almost bankrupt
• Orientation changed with induction of Terry Leahy into the board in
1992
• Marketing focus – customer focus – merchandising focus
• Maclaurin retired in early 1997 and Terry Leahy took over as CEO
• By then Tesco was the largest, most profitable supermarket chain in
UK

08/22/2020 Dr Ashis Mishra, IIMB 26

Key strategy elements
• Core UK
• >1800 stores with 55 million sq.ft of retail space – 250,000 employees
• Accounts of 75% of group sales
• > 26 million customers in UK - > 11 million Tesco club card holder households
• Grow with multi format approach
• International
• Operates in 12 European and Asian markets outside UK
• 800+ stores – 100,000 employees – 15 million customers

08/22/2020 Dr Ashis Mishra, IIMB 27

Key strategy elements
• Non-food
• Sale of non-food accounts for more than 6.8 billion pounds in UK
• Market share of food and grocery is 20% against 7% non-food
• Focus on the non-food sector aggressively to reduce dependence on food
• Retailing services
• Tesco personal finance, Tesco.net, Tesco telecom (1.5 million customers)
• Services account for 65 million pounds in profits
• One of the key focus areas

08/22/2020 Dr Ashis Mishra, IIMB 28

Tesco Formats
Store format Size Place Merchandise mix
Homeplus 30,000 Sq.ft Stand alone / retail parks Includes non-food and
clothing
Extra 60,000 – 125,000 sq.ft Hypermarkets Regular supermarket
product range + large
non-food segment
Superstore 26,500 sq.ft Oldest and most 25,000 – 30,000 SKU
established store format Mostly food
Metro 11,000 sq.ft City centres, train Tailored range of food
stations, high streets lines, ready meals,
sandwiches
Express Up to 3000 sq.ft Near Tesco petrol stations Fresh produce, wine
spirits, bread and
confectionary

08/22/2020 Dr Ashis Mishra, IIMB 29

Tesco.com
• Started in 2001 in partnership with Microsoft
• Customers could order via
• Telephone
• Fax
• Internet
• Too inefficient – high delivery cost – not profitable
• Gave way to automated new system of online business

08/22/2020 Dr Ashis Mishra, IIMB 30

Tesco.com – business model
• Customer to register
• Personal data
• Delivery directions
• Tesco club card details (for past purchase details and award points)
• Access the website and place order
• Can use laptops or any handheld device
• Choose delivery date and time
• Make payment

08/22/2020 Dr Ashis Mishra, IIMB 31

Tesco.com – business model
• Instore picking as against warehouse picking (industry practice)
• Dense network of stores all over the country
• No route takes more than 25 minutes since 94% of the population in England
live within 25 minutes radius of a Tesco store
• Product availability, quality and any other aspect of shopping is the same as
the store
• Picking time is optimised
• It starts at 6 AM and continues till 2 PM
• Over the course of the day, as the customer flow increases, picking staff reduces
• Investment in picking algorithm based on past orders

08/22/2020 Dr Ashis Mishra, IIMB 32

Tesco.com – business model
• Building delivery hubs
• Larger supermarkets with excess capacity are converted to delivery hubs
• Increased picking staff, delivery fleet and customized order handling area in
the back of the stores
• They serve larger areas and help taking away pressure from congested
supermarkets
• Dot com only stores
• Huge automated warehouses that looks like a Tesco store (20,000 – 50,000
sq.ft)
• No customers – no cash registers – no check out staff
• Just for online order fulfilment
08/22/2020 Dr Ashis Mishra, IIMB 33
Tesco.com – business model
• Integration of the model into brick and mortar stores
• Include the online purchase from the physical stores in the store performance
matric (sales per square feet)
• Online business has a similar operating margin as a physical store (5.7%)
• Sales growth in physical stores is 9% where as that of online business is 30%
• Provides enough incentive to the store manager to cooperate and contribute
• Costs
• Direct costs (picking staff, delivery fleet, drivers, equipment, IT systems)
• Indirect costs (additional cleaning and replenishment costs during picking
hours)
• Pure brick and mortar costs
08/22/2020 Dr Ashis Mishra, IIMB 34
Morale of the story?
• Integrate online and offline business
• Seamless experience for the customer across channels
• Resources and strategy at the back end to make the value
appropriation work adequately

08/22/2020 Dr Ashis Mishra, IIMB 35