Week 10 - IBM_Channel Management (SW).pdf

# Understanding omnichannel and its evolution This topic explores the definition of omnichannel, differentiating it from multichannel strategies, and tracing its evolution in business models, highlighting the shift towards a customer-centric approach [5](#page=5). ### 1.1 The multichannel model versus the omnichannel approach #### 1.1.1 The traditional multichannel model The traditional multichannel model is described as vertical and downwards [6](#page=6). #### 1.1.2 Defining multichannel Multichannel is fundamentally an operational view, focusing on how a business enables customers to complete transactions within each individual channel [7](#page=7). #### 1.1.3 Defining omnichannel Omnichannel, in contrast, adopts a customer-centric perspective. It involves orchestrating the entire customer experience across all available channels to ensure it is seamless, integrated, and consistent. This approach anticipates that customers might begin their journey in one channel and transition to another as they seek a resolution. The success of omnichannel relies on making these complex hand-offs between channels fluid for the customer. Essentially, omnichannel can be understood as a perfected multichannel strategy [7](#page=7). > **Tip:** The key differentiator is the perspective: multichannel is operational, while omnichannel is customer-experience focused. ### 1.2 The evolution of channel management The evolution of channel management models is characterized by a shift towards placing the consumer at the center of the strategy [8](#page=8) [9](#page=9). #### 1.2.1 The customer at the center of omnichannel strategy In an omnichannel strategy, the customer perceives their entire journey with a brand or company as a single, unified experience. All information gathered by the customer throughout this journey is relevant to them. Therefore, consistency in messaging, tone of voice, visual presentation (look & feel), and the quality of customer service are paramount [9](#page=9). #### 1.2.2 Towards a better overall consumer experience Omnichannel strategies aim to create a superior overall consumer experience [10](#page=10). ##### 1.2.2.1 Definition of omnichannel Omnichannel is defined as a multichannel sales approach designed to provide customers with a seamless shopping experience, irrespective of their chosen contact method. This includes interactions via physical stores or online platforms, through computers, tablets, or laptops, and via search engines like Google or social networks [10](#page=10). ##### 1.2.2.2 The omnichannel experience The omnichannel experience is characterized by its seamlessness, integration, and consistency, ensuring a uniform experience for the customer no matter when or how they engage with the brand [11](#page=11). ##### 1.2.2.3 Omnichannel marketing Omnichannel marketing involves the integration and orchestration of all communication and distribution channels. The goal is to build a coherent, evolving cross-channel experience with a consistent message. This makes the path to purchase more efficient and pleasant, while simultaneously increasing customer satisfaction and loyalty [12](#page=12). --- # Executing and benefiting from omnichannel strategies Successfully executing and benefiting from omnichannel strategies involves a structured approach to data, technology, and internal organization, ultimately leading to significant advantages for businesses [15](#page=15). ### 2.1 Key steps for executing an omnichannel strategy Implementing a successful omnichannel strategy requires a deliberate process to integrate various customer touchpoints into a cohesive experience. This process can be broken down into several key steps [15](#page=15) [28](#page=28): #### 2.1.1 Step 1 — Channel roles and strategic intent This initial step involves defining the specific strategic roles and objectives for each customer channel, such as websites, mobile applications, physical stores, and social media platforms. It's crucial to assign 2-3 strategic roles per channel and to clearly define commercial objectives and any associated constraints. For instance, a website might be tasked with education and search traffic conversion, while an app could serve as a loyalty hub for repeat purchases. Strategic objectives need to be aligned with market realities, such as improving customer confidence to reduce returns [28](#page=28) [30](#page=30). #### 2.1.2 Step 2 — Journey mapping to identify drop-offs This step focuses on understanding the customer journey by mapping user actions, touchpoints, emotions, and pain points. Using a canvas, companies can highlight system-level omnichannel failures, which often include issues like inventory synchronization, customer relationship management (CRM) visibility, pricing inconsistencies, and siloed hand-offs between channels. Identifying these critical drop-off points is essential for pinpointing areas for improvement [28](#page=28) [31](#page=31). #### 2.1.3 Step 3 — Data, economics, and organization This phase delves into the integration of essential data flows, the resolution of organizational crossovers, and the management of channel conflicts. Key data points to integrate often include customer IDs, browsing history, in-store interactions, real-time stock information, and loyalty history. Organizational crossroads may require advisors to access online wishlists or for e-commerce and store teams to share data, such as shade test results. Potential channel conflicts, like a marketplace undercutting a website's price or buy-online-pickup-in-store (BOPIS) impacting store commissions, need to be addressed. Mitigations often involve implementing shared key performance indicators (KPIs) for omnichannel sales, offering partial commission crediting, or establishing unified pricing rules [28](#page=28) [32](#page=32). #### 2.1.4 Step 4 — Prioritization and trade-offs The final step involves choosing which omnichannel features to build first, what to postpone, and defining a key KPI for success. Realistic and impactful features are prioritized, while less critical ones are delayed. The success KPI should directly reflect the desired outcome of the omnichannel strategy, such as a shade-confidence conversion rate as a proxy for reduced friction [28](#page=28) [33](#page=33). > **Tip:** The outcome of these steps is for students to learn how real omnichannel systems operate, how brands prioritize investments, break down internal silos, and ultimately secure more sales [28](#page=28) [29](#page=29). > **Example:** Sephora's omnichannel strategy execution involved defining channel roles (e.g., app as a loyalty hub), identifying drop-offs (e.g., shade confidence gap), integrating data (e.g., customer ID, browsing history), and prioritizing build-first features like unified inventory visibility [30](#page=30) [31](#page=31) [32](#page=32) [33](#page=33). ### 2.2 Benefits of omnichannel strategies for companies Adopting an omnichannel strategy yields substantial benefits for companies, creating a virtuous cycle of growth and customer engagement. These advantages include [14](#page=14): * **Increased sales:** By providing a seamless and convenient customer experience across all channels, businesses can capture more transactions [14](#page=14). * **Enhanced brand loyalty:** A consistent and positive brand experience reduces friction and fosters deeper connections, leading to greater customer retention [14](#page=14). * **Attraction of new clients:** A well-executed omnichannel strategy can broaden a company's reach and appeal, drawing in new customer segments [14](#page=14). * **Improved user experience:** Integrating channels minimizes disruptions and ensures a smooth journey for the customer, reducing frustration and improving overall satisfaction [14](#page=14). * **Better reviews:** A positive and frictionless experience directly contributes to improved customer feedback and online reviews [14](#page=14). > **Tip:** A key principle of omnichannel marketing is placing the customer at the center of a seamless brand experience that integrates sales and communication channels, blending offline and online interactions without drop-offs across touchpoints. This is supported by a unified IT backbone and organizational structure [34](#page=34). ### 2.3 The new norm: Data-driven experience management The evolution towards omnichannel strategies is intrinsically linked to the rise of data-driven experience management. Key aspects of this new norm include [34](#page=34): * **Importance of physical channels and retail experience:** Despite the digital shift, the physical store and the in-person retail experience remain critical components of a holistic strategy [34](#page=34). * **AI for automation and personalization:** Artificial intelligence plays a crucial role in automating processes and enabling personalized customer experiences while simultaneously improving operational efficiency [34](#page=34). * **Data management challenges:** Effectively managing the vast amounts of data generated across multiple channels is a significant challenge that companies must address to unlock the full potential of omnichannel strategies [34](#page=34). --- # The consumer journey and moments of truth The consumer journey and moments of truth explore the stages consumers pass through from initial awareness to becoming advocates, and how critical decision-making points influence their purchasing behavior. ### 3.1 The consumer journey stages The consumer purchase journey can be broadly categorized into several stages, moving from initial awareness through to advocacy. These stages include [19](#page=19): * **Awareness:** The consumer becomes aware of a product or brand [19](#page=19). * **Consideration:** The consumer begins to consider the product or brand as a potential solution to their needs [19](#page=19). * **Trial:** The consumer may have an initial interaction or trial of the product or service [19](#page=19). * **Purchase:** The consumer decides to buy the product or service [19](#page=19). * **Loyalty:** The consumer develops loyalty to the brand based on their experience [19](#page=19). * **Advocacy:** The consumer becomes a promoter of the brand, recommending it to others [19](#page=19). Various marketing channels and activities can influence consumers at different stages, including social media, direct mail, email, e-commerce, search engine optimization (SEO), public relations (PR), and in-store experiences [19](#page=19). ### 3.2 Moments of truth Moments of Truth (MOTs) are critical points in the consumer's decision-making process that significantly influence their purchasing decisions. #### 3.2.1 First Moment of Truth (FMOT) The First Moment of Truth (FMOT) refers to the very brief period, typically three to seven seconds, when a consumer decides which product or brand to choose. This is the crucial moment when a buyer, in a physical or online store, makes the decision to purchase [16](#page=16). > **Tip:** This is a critical marketing opportunity where a brand's packaging, display, and immediate appeal are paramount. #### 3.2.2 Second Moment of Truth (SMOT) The Second Moment of Truth (SMOT) occurs after the purchase, when the consumer experiences and uses the product or service. This stage focuses on the actual product experience, which can lead to enthusiasm, satisfaction, or disappointment. New technologies have less impact here; it is primarily influenced by product quality, customer relations, and after-sales service, making it the brand's core responsibility. Positive validation at this stage naturally leads to repeat purchases and the beginning of the loyalty process [16](#page=16). #### 3.2.3 Third Moment of Truth (TMOT) The Third Moment of Truth (TMOT) represents the final stage of the purchasing journey, where the consumer evaluates their purchase and shares their experience with others. This stage is characterized by word-of-mouth, online reviews, comments on forums and social networks, and general feedback, which can be either positive or negative. TMOT is vital as it conveys significant emotion, expressing consumers' passions and frustrations [16](#page=16). #### 3.2.4 Zero Moment of Truth (ZMOT) The Zero Moment of Truth (ZMOT) is a more recent concept, introduced by Google in 2011, which describes the stage of discovery and awareness occurring *before* the final purchase decision. ZMOT happens when consumers research a product, often without the seller's direct knowledge. A significant majority of purchase decisions, around 70 percent, are made during the ZMOT stage, often based solely on online information without physical product interaction or consultation with shop assistants [17](#page=17). > **Tip:** ZMOT highlights the immense power of online research and peer reviews in shaping consumer choices before they even reach a point of sale. ### 3.3 The interconnectedness of moments of truth The quality of a brand's customer relations, its ability to generate enthusiasm, and its success in building community loyalty directly influence subsequent ZMOTs, thus closing the consumer loop. A positive TMOT experience can fuel positive ZMOTs for future potential customers [18](#page=18). ### 3.4 Consumer journey mapping Consumer journey mapping is a process used to understand and visualize the consumer's experience. It involves identifying key elements such as experience triggers, the visual flow of activities, consumer expectations and desired outcomes, specific touchpoints and interactions, the emotional journey, and underlying motivations or opportunities [20](#page=20) [21](#page=21). The objectives of customer mapping are to: * Generate a complete understanding of the consumer experience [21](#page=21). * Enable companies to view their products from different perspectives, allowing analysis of user scenarios and identification of weaknesses or "loopholes" [21](#page=21). * Help companies comprehend customer needs and the routes and channels consumers use to discover and acquire products [21](#page=21). > **Tip:** Effective customer journey mapping aims to ensure there are no "drop-offs" or points of friction across all touchpoints and throughout the entire duration of the consumer's interaction with the brand [22](#page=22). --- # The growth and impact of e-commerce and technology on retail This topic examines the sustained expansion of e-commerce, influenced by trends such as mobile shopping and global events like the COVID-19 pandemic, alongside the transformative effects of emerging technologies. ### 4.1 The evolution of retail and technology Historically, retail operated with distinct physical spaces and customer interactions, but technological advancements have fundamentally reshaped this landscape. The evolution involves changes in consumer behavior and a growing emphasis on data for personalization [35](#page=35) [36](#page=36). #### 4.1.1 Omnichannel retail The concept of omnichannel retail signifies a convergence of online and offline channels, aiming to create a holistic and frictionless consumer experience by breaking down organizational silos. This approach builds trust by integrating the online experience with tangible offline interactions. Key considerations within omnichannel strategies include understanding customer engagement, the initial brand touchpoint, and the decision-making process for purchases, often necessitating the use of attribution models [37](#page=37) [39](#page=39). ### 4.2 The continuous growth of e-commerce E-commerce has experienced significant and consistent growth over the years. In 2022, e-commerce sales saw increases of 3% in Europe, 7% in the US, and 7% in Asia. While the COVID-19 pandemic provided a substantial boost, this growth has been part of a broader upward trend [42](#page=42) [43](#page=43). #### 4.2.1 E-commerce as a percentage of total retail sales The share of e-commerce in total retail sales has dramatically increased. It rose from 18% in 2017 to 35% in 2022. This trend is visually represented by a significant upward curve from 2000 to 2022, where e-commerce accounted for approximately 1% of total retail sales in 2000, 7.20% in 2010, 18% in 2017, and 35% in 2022 [44](#page=44) [45](#page=45). #### 4.2.2 Unequal distribution of product mix It is important to note that the growth of e-commerce is not uniform across all product categories, with some product mixes being distributed more unequally than others [46](#page=46). ### 4.3 The rise of mobile shopping Mobile devices have become a dominant force in e-commerce. In 2010, mobile devices accounted for only 1.3% of the e-commerce market. Today, over 50% of online retail sales are conducted via mobile devices [47](#page=47). ### 4.4 The impact of the COVID-19 pandemic on e-commerce The COVID-19 pandemic significantly accelerated the adoption of online retail. In 2020, global online retail sales were less than 30% of total retail sales. The pandemic led to an increase in global online retail sales of less than 10% of total retail sales, or about 10% to 15% of online retail sales prior to the pandemic [48](#page=48). ### 4.5 Emerging technologies transforming retail New technologies are playing an increasingly crucial role in reshaping the retail landscape. #### 4.5.1 QR codes QR codes have emerged as a significant technological winner, particularly in the context of the pandemic. QR code creation has seen a substantial surge, increasing by four times between 2021 and 2024 [49](#page=49). #### 4.5.2 Artificial Intelligence (AI) AI is poised to revolutionize the future of shopping and retail operations. The impacts of AI technology in retail include automation, process optimization, and hyper-personalization. This represents an acceleration of trends observed earlier, such as in 2016. A key underlying issue associated with the widespread implementation of AI is data privacy, as highlighted by regulations like GDPR [53](#page=53) [54](#page=54). ### 4.6 Lasting effects and post-pandemic realizations The intense online boom experienced during the pandemic has subsided, leading to a realization that physical retail is not disappearing but is certainly evolving. The rejection of purely physical experiences has proven temporary, as trust and social aspects remain critical for consumers [52](#page=52). #### 4.6.1 Lasting impacts of the pandemic Several effects from the pandemic are expected to endure: * **Omnichannel consumer behavior:** Consumers will continue to expect omnichannel services, such as in-store pick-up options [52](#page=52). * **Supply chain management:** The pandemic highlighted the importance of supply chain resilience, emphasizing decentralization and the need to manage volatility. Achieving resilience can be facilitated through better data on supply chain structures, investments in redundancy, increased input substitutability, and improved communication across the chain [51](#page=51) [52](#page=52). > **Tip:** While the pandemic accelerated e-commerce adoption, remember that physical retail retains its importance due to trust and social factors. The future likely lies in a seamless integration of online and offline experiences. > **Example:** A consumer might research a product online, check its availability at a local store via an app, then visit the store for a fitting, and finally purchase it through a mobile app for home delivery. This is an example of omnichannel integration. --- # Omnichannel application in the tourism industry Omnichannel application in the tourism industry focuses on creating a seamless and integrated customer experience across all touchpoints of the traveler's journey, from initial inspiration to post-trip sharing. The rapid growth of e-travel, driven by increasing mobile usage and a desire for rich content, presents both challenges and opportunities for tourism businesses in a highly competitive market [55](#page=55) [57](#page=57) [58](#page=58) [59](#page=59). ### 5.1 The traveler's customer journey in tourism The traveler's customer journey can be broadly categorized into several distinct phases: inspiration, planning, booking, experiencing, and sharing, with modification as a potential overlay throughout [61](#page=61). #### 5.1.1 Inspiration This initial phase is characterized by the traveler's nascent desire to travel, seeking answers to questions like "Where should I go?" and "Where will I stay?". Effective inspiration relies on compelling content that focuses on travelers' interests rather than just destinations. Social media plays a crucial role in storytelling and engaging potential travelers during this phase [62](#page=62) [63](#page=63) [64](#page=64). > **Tip:** Focusing on traveler interests and aspirational content can be more effective in sparking the desire to travel than simply listing destinations [63](#page=63). #### 5.1.2 Planning The planning phase is a critical and often lengthy part of the customer journey, particularly for accommodations. Travelers spend approximately 25% more time deciding on a hotel than booking a flight. A significant portion of leisure travelers are undecided on their brand choice (20%) or are considering multiple properties (65%) [65](#page=65). Key strategies for the planning phase include: * **Search engine optimization (SEO) and search engine marketing (SEM):** Being discoverable where consumers are searching is paramount [66](#page=66). * **Social media communication:** Communicating planning options and information across social media platforms helps engage potential customers [67](#page=67). * **Cross-device optimization:** Recognizing that planning often begins on one device (e.g., smartphone) and continues on another (e.g., computer) is essential for a seamless experience. Google Travel research indicates that 47% of consumers start planning on their smartphone and 45% continue on their computer [68](#page=68). > **Example:** A hotel chain might use targeted social media ads showcasing different room types and amenities to inspire travelers during the planning phase, linking directly to their website for more detailed information and booking options [67](#page=67). #### 5.1.3 Booking During the booking phase, businesses must be present where consumers are making their reservations. It's important to note that metasearch engines are increasingly functioning as online travel agency (OTA) marketplaces, such as Trivago [69](#page=69). #### 5.1.4 Experiencing This phase occurs when the traveler is at their destination and engaging with the services and activities. Interestingly, 85% of travelers decide on activities only after arriving at their destination, highlighting an opportunity for in-the-moment engagement. Utilizing Artificial Intelligence (AI) can facilitate instant exchanges and provide real-time assistance to travelers [70](#page=70) [71](#page=71). #### 5.1.5 Sharing After the trip, travelers share their experiences, which can influence future travelers. Understanding why people share content online is key: to help others, to appear knowledgeable, to entertain, or to be the first to share new information [72](#page=72). ### 5.2 Challenges and opportunities in the tourism industry The tourism industry faces significant challenges, including increasing competition from new operators and OTAs, price transparency, and the proliferation of devices and platforms for searching, booking, and reviewing. This leads to decreased customer loyalty, as clients can easily switch providers [59](#page=59). The core challenges revolve around: * **Creating memorable experiences:** This needs to span the entire journey, from initial search to post-booking [60](#page=60). * **Gaining customer loyalty and competitive advantage:** This requires real-time engagement and consistent service [60](#page=60). Omnichannel strategies offer opportunities to address these challenges by providing integrated online options at each step of the traveler's journey and leveraging social media across all phases of the consumer travel experience [73](#page=73) [74](#page=74). ### 5.3 Visual Representation of the Traveler Journey The document includes several visual aids that illustrate the traveler's journey and the touchpoints involved: * **Inspiration:** Pages 62, 63, 64, 76 * **Planning:** Pages 65, 66, 67, 68, 77, 78, 79 * **Booking:** Pages 69, 80 * **Experiencing:** Pages 70, 71, 81, 82, 83 * **Sharing:** Pages 72, 84 These visuals highlight how digital and physical touchpoints converge, emphasizing the need for a unified approach to customer interaction [61](#page=61) [73](#page=73) [74](#page=74). > **Tip:** Businesses should map out their customer journeys to identify all potential touchpoints and ensure a consistent brand message and service level across each channel [61](#page=61) [73](#page=73). --- ## Common mistakes to avoid - Review all topics thoroughly before exams - Pay attention to formulas and key definitions - Practice with examples provided in each section - Don't memorize without understanding the underlying concepts

| Term | Definition | |------|------------| | Omnichannel | An approach to sales that provides customers with a seamless shopping experience regardless of how they contact the company, whether through a physical store, online, or via computer, tablet, or laptop. It integrates and orchestrates all communication and distribution channels to build a coherent, evolving cross-channel experience with a consistent message. | | Multichannel | An operational view that focuses on how a company allows customers to complete transactions in each individual channel, without necessarily integrating these channels into a unified customer experience. This model is often described as vertical and downwards in its orientation. | | Customer Journey Mapping | A process used to visualize and understand the entire experience a customer has with a company or brand. It involves identifying experience triggers, visual flow of activities, expectations, touchpoints, emotions, motivations, and pain points to generate a full understanding of the consumer experience. | | Zero Moment of Truth (ZMOT) | The stage in the customer journey where a consumer investigates a product before making a purchase decision, often without the seller's knowledge. This concept, popularized by Google, highlights the significant role of online research in pre-purchase decision-making. | | First Moment of Truth (FMOT) | The critical moment, typically lasting a few seconds, when a consumer decides on a product in a store (physical or online). This is when the buyer makes the decision to purchase a particular brand or product based on initial impressions and choices. | | Second Moment of Truth (SMOT) | The stage where a customer tests and experiences a purchased product or service. This moment focuses on the post-purchase experience and is primarily dependent on product quality, customer relations, and after-sales service provided by the brand. | | Third Moment of Truth (TMOT) | The final stage of the purchasing journey where a consumer evaluates their purchase and shares their satisfaction or dissatisfaction with others. This corresponds to word-of-mouth, online reviews, and comments, where consumer emotions and feedback are expressed. | | Consumer Experience | The overall perception a customer has of a brand or company, encompassing all interactions and touchpoints throughout their journey. It is a holistic view that aims to be seamless, integrated, and consistent across all channels and over time. | | Data-Driven Personalization | The practice of using collected consumer data to tailor experiences, recommendations, and communications to individual customers. This approach aims to enhance customer engagement and satisfaction by providing relevant and customized content and offers. | | Channel Conflicts | Situations where different sales channels within the same company compete with each other, potentially leading to issues like price undercutting, loss of sales to alternative channels, or disputes over sales attribution and commissions. | | Unified IT Backbone | The integration of various information technology systems across an organization to ensure seamless data flow and communication between different departments and channels. This is crucial for creating a cohesive omnichannel experience. | | Customer Data Platform (CDP) | A system that consolidates customer data from various sources to create a unified, persistent customer profile. CDPs are essential for understanding customer behavior across all touchpoints and enabling personalized marketing efforts. | | Artificial Intelligence (AI) in Retail | The application of AI technologies to automate processes, optimize operations, and enable hyper-personalization in the retail sector. AI impacts areas such as inventory management, customer service, and personalized recommendations. | | Online Travel Agencies (OTA) | Companies that specialize in selling travel and accommodation online, acting as intermediaries between consumers and travel providers. Examples include booking websites for flights, hotels, and vacation packages. |