From B2C and B2B to Tourism and Entertainment - How are brands and businesses adapting to the acceleration of a "digital transformation" in creating best in class customer experience through digital channels.
Kathleen Kalpakoff, GVP CX Advisory at SAP Customer Experience shares key trends that CMOs, CDOs and CCOs are incorporating as they think about "return to work" and other important technologies they would need to invest in 2021.
Welcome to the next series of Annex Cloud Market Movers, where we bring in-market experts and luminaries to help us with some of the challenging times we're all-seeing.
Today, I have Kathleen Kalpakoff. She is the global VP of CX Advisory at SAP. Kathleen. Welcome to the discussion.
Thank you, Al. Happy to be here.
So Kathleen, before we jump into discussing the details, it'd be great to kind of tell our viewers what your team, and you do, at SAP and how do you help customers?
Sure. So I run a team called the Customer Experience Advisory. We have teams of folks that are aligned by industry, that have deep experience within their industries, having really sat in the shoes that our customers are often sitting in, having run P&L businesses and having to make decisions around how to best connect with the customers and engage with the customers. And of course, there are technology decisions that go along with those decisions.
So what we'll do is we will collaborate with some of our customers. We will go in and we'll actually assess... We have a pretty specific methodology. We'll go in and assess the customer experiences that they're providing to their end customers today. And we'll compare that to industry best practices, and we'll compare it often to their core competitors in their space because all of our customers are of course looking to be market leaders themselves.
And then we'll have a really, really deep conversation around how they're doing, and a little soul searching on opportunities. Sometimes depending on the customer and the situation it's, "What do we need to do to catch up?" But I think a lot of our customers understand what it takes to compete. And so they're really looking for the opportunities to differentiate. So those are the kinds of conversations we'll go in and have with the business leaders that are customers.
Wonderful. Thank you for doing that. I think where we are now in the last three months is extremely different than we were before. We all know that, in terms of these conversations that are happening at the CMO, chief digital officer level, in terms of digital transformation. Because we all know digital transformation has taken a massive leap just in the last three months compared to the decade before that.
What are the trends that you and your team are seeing in terms of changes in the thought process that these leaders are doing on their side? Obviously the shocking moment, because they've got to process what's going on around them, but at the same time you have to plan for the future and adapt. So what are trends you are seeing across the board in customers you're working with?
It's a big question, but it's a relevant one and I'll take it. I'll try to kind of address that in layers. So I think, to start off with one of the things that I think is worth mentioning is that digital transformation as you call it, it's clearly a hot topic right now, even during the pandemic. And, honestly, we wondered if we'd see a tapering off in the customer engagement strategies because of the situation we're all in and the strain on the economy and the strain on our customers.
But, to put it plainly, we're seeing actually the opposite. We are really, really busy having a lot of deep conversations. And particularly the level of interest from our customers to have a conversation around creating best in class customer experience through digital channels is really high.
I guess one of the ways I would put it... A colleague and I were having a discussion and we used the analogy of musical chairs. Do you remember that game when you were a kid? The music's going, we're all going along our way, and then without warning the music stopped. And, wherever you were in that moment is where you were. You were frozen in time in a way as far as the capabilities that you had put in place.
So companies had to live with whatever they had in place for an all-digital operational plan that they didn't plan on. So when the music stopped for many the silence has been deafening. And by that, what I mean is, that if they didn't have the right customer engagement strategies supported by the right business processes and tech to enable them to support a continuous dialogue with their customers, then they were literally hearing crickets.
So I think the silence has led to self-reflection. But it's also led to an incredible openness to new ideas and new approaches, in a very kind of urgent need to reach the customers and create a meaningful and ideally continuous dialogue and engagement with them.
So, what we've seen just across all the industries is a need to take action and an openness to try new things. And this is interesting, really because there's like a cease and desist in this internal... There's always been this internal and eternal turf war between channels. And I think we've all seen it in companies we've worked for, or in companies we work with. Where you could think of it like competitiveness between the online channels and brick and mortar stores for retail competing with each other for revenue, for the higher average order values, et cetera.
The results have actually been a little bit at the expense of the customer because these disparate approaches to how they engage with customers across channels and even across brands create an inconsistent experience for the customer. So where I'm leading to with that is that in this pandemic time, to a large extent, these silos or these organizational friction points have just come crashing down.
And there's been this stark realization with many of the customers that we're talking to that everyone's on one team now. And everyone has to have one goal, which is to connect with their customers and keep the conversation going and to personalize and engage with them in a way that's relevant. And, everybody that still has a job is just trying to make it work.
So, back to your question. For the business leaders, you have a chance to bring about an organizational shift that probably six months ago would have seemed impossible, maybe even three months ago. And it's really less about being opportunistic and more about being enabled to do the right thing for your customer. So companies talk a lot about being customer-centric, but to really put that into action is hard work.
And what does that require? What would be the learning from any of these companies that have had to go through that deafening silence and self-reflection? And I think at the end of the day, it really requires a unified customer data structure across all your channels and across all your brands. And this is the key to unlocking that personalized dialogue with your customers that in the end creates the trust and loyalty that you hope to have with your customers.
No, this is great. And I think lots of great ideas that I caught from there. The big one for me is breaking down the silos within the enterprise, which was... Again, it takes years and years of time and trust to build and build that. Because everyone has their own focus and their goals to achieve, and they may not always align in it, and it takes a long time. And now the goal is customer success, and I need to make my customer successful. And, how do we break that, and do it in the fastest way possible?
The second thing, which I thought was very interesting and important, is the willingness to still during these times want to adapt and want to do certain things. And that's great.
And the last thing that I will maybe even steal from you is the example of the musical chair. I haven't seen that one before. I haven't heard of that one before. And that's a great analogy in terms of understanding, is the music stopped and it's deafening silence. And you have to now really rethink and reenvision what you are going to do. So all great points here in that sense.
If we go one level deeper in that sense, now going to specific industries. There are some industries that were hit very hard. Tourism, entertainment, that sort of a vertical that was hit extremely hard. On the other end, there were industries that are fairing extremely better, but at the same time have their own set of challenges, for example, grocery. Online grocery has grown, I don't know, a few hundred percents overnight. And, grocers didn't want to invest in a digital experience before because they just wanted the store experience to be awesome. But now they're forced to reinvent and rethink that because it's overnight gone that way.
So, if we split those two together... Maybe we start with the industries that are hit hard and how they adapt: tourism, entertainment, movie theaters, whatever that might be. And then the other side, which is hit hard in a different way, but now they have to adapt as well. How are these industries thinking differently?
Yeah. So, let's take an obvious one, travel, and hospitality, right? That's a tough place to be in. There is no secret sauce to fix the reality that during a pandemic, people don't want to fly. People don't want to stay in hotels. And people don't want or can't eat in restaurants because in many places they're closed. I think what we're asking is what can these companies learn from this?
And again, it's going to be a recurrent theme because I think we're quite passionate about it, it's a matter of really knowing your customers. And especially your most valued ones and keeping that conversation going. So let me give an example. So I am a United Airlines Platinum member, maybe you are too. And I have been impressed by the ongoing dialogue coming to me from the CEO. They are letting me know things that matter to me. They're spending a lot of time talking to me about new safety measures.
But they're also doing things that are less self-serving for them and very empathetic to me. So an example would be they wrote... You go onto their website, front, and center, they talk about how flexible their cancellation policies are. They have a big button if you want a refund on something that you already booked. They're taking a long-term view of customer satisfaction instead of having a short-term, you know holding on to every dollar.
And they're doing things that impact and show that they care. So for example, they're providing free flights across the country for medical volunteers. And that matters to me. There's no question that United Airlines is suffering and its employees are suffering. But they're still willing to give back, and their messages have been very tasteful and relevant. And I for one will continue with this brand and feel better for it once I can travel again. So I think that's an example of a nice way to handle it. It doesn't solve the problem that no one's getting on planes or very few people but it's, I think, a longer-term view.
Another one that I think has some interesting learnings from, and creativity is the restaurant industry. So, as we mentioned, a lot of the restaurants are closed. In my town, a few of them are opening up with a bunch of rules, but that just happens last weekend. And, what we've been seeing from them, and you might be seeing the same, we're seeing them get creative on reaching out to their loyal customer base. So I'm getting emails about some of those... You know, grandma's secret sauce that I would love to go in and order? Well, they're sharing the recipe with me. Well, that got me on the site. I wanted to take a look at that.
One thing that's been really successful is the family meal deals. I have a family of four and some of the nicer, more expensive restaurants to go dine there and order four plates for my kids and I is a little expensive. But right now they're offering family-sized portions. So, I order at a very economical rate for me, probably a better rate for them too because they're making it in bulk, delivered to my doorstep. And then we've also seen restaurants do a lot of expanded marketplace, right? So with my dinner, I can get a roll of toilet paper or specialty grocery items delivered to my door. So it's been a time of innovation as we talked about at the top.
Wonderful. A few things I will sort of mention that we're seeing as well in my conversations. I'll give you an example of movie theaters, which is another sort of vertical. We've had some, several conversations, and as they're thinking about opening up potentially and under social distancing guidelines and so on and so forth. One of the things that they're thinking about is how do we excite people to your United example. How do we get our loyal customers that were cinema-goers back in the doors, and how we get them to trust us?
And one part of it is all about communicating about safety and everything else. The second part is about getting those people that were already excited about you as a company and getting them to start spreading the word so to speak, right? And, get them to feel comfortable first before you can get new customers. We're sort of calling it like flip the funnel from a CMOs perspective in a way.
Like the funnel was always acquiring new customers and grow the top line of the base. And then it just converts. And the challenge with that is that conversion's gone now. It just doesn't convert the same way. You almost have to flip the funnel and say, I'm going to retain my customers that were happy with me, get them back in first, and then start growing the funnels. It's almost flipping the funnel from a CMOs perspective.
It's also like securing your customer base as much as you can. And that requires that kind of ongoing relevant conversation. That you're communicating to them in a way through all of these times that resonate with them and that's relevant and that they don't feel... Because there have been brands, I'm sure you've noticed, that are engaging with us in a way that doesn't feel good.
You can feel the desperation, right? And that's why in the United example, and I'm sure you've seen many as well, where having that more altruistic message for a lot of us resonates better.
Yeah, and customer empathy is extremely important.
So on that topic of loyalty and retention, which is a renewed and rejuvenated topic of discussion at the, in the C-suite, what are your thoughts around how customers can think about this?
And maybe we split it because there's the B2C aspect of things where you've got a lot of consumers and their needs are varied and different. And then you've got your B2B customers where you're servicing certain industries, but they may be hit differently and you're still talking to people, but at the same time they're businesses.
So how would you look at retention in those two worlds? And, what thoughts do you have and advice do you have for people there?
The big question now.
But an important one. There are different ways to slice that. So if we look at customer loyalty, let's look at it from two points of view. Let's look at it from a company's point of view, and let's look at it from the customer’s point of view, regardless of the business model.
So from the lens of a company, I think that... and maybe I should say the lens of a CFO even, customer loyalty is really about increasing the lifetime value of their customer base. Right? From the lens of a customer, it's about being treated well, with respect, understanding of my needs, fulfilling the promises that you've made to me. And if you do this for me as a consumer, I will buy from you, I will refer people to you and I will likely continue buying from you.
So that's the bigger picture I think when we're talking about loyalty. I think it's important that we remind ourselves to look at it from both ends: the company perspective and the consumer perspective.
So, then let's break that down as you asked. Let's use a direct-to-consumer example. And if you'll bear with me, I'm going to give you a little story that's going to kind of lead to the point.
No, that's great. Please do.
Okay. So, I talked before about my strong view, based obviously from our many conversations with customers, that the kind of Holy Grail is this unified customer data structure. And, I think it's important to illustrate what happens when you don't have it, which will ultimately lead to a better customer relationship and that loyalty that we all strive for as companies.
So, I'll give you an example that I went through with a customer, with an SAP customer at Disney. So we all know Disney.
And I don't think it's any secret that Disney's been on a little bit of a buying spree when it comes to media. So Disney+ emerges and they have purchased Hulu, ESPN, Fox as well. So that's all now under the umbrella of Disney.
And so I, as a customer, made a phone call to Disney+. And I was asking questions about some of my options there. And I also am a Hulu customer and I'm also an ESPN customer. So I had some questions about my other subscriptions and how this all looked. And the customer service agent was, "I only know Disney+. I have no idea about Hulu. I have no idea about ESPN. This is my world. This is all I can help you with."
Which in itself, of course, was really disappointing and what's probably more concerning, if I were a Disney executive, is that the customer service agent clearly had no incentive to help me reach out to the other brands and get my questions answered.
So, the reason I'm bringing that up is, you needed to know... If you were Disney, you needed to know my value to you as a customer to determine perhaps the kind of programs that you're going to put forward for me when you think of loyalty. The rep on the phone wouldn't know about my Disney+ spend. But would they know about my Hulu spend? Would they know about my ESPN spend? Does Disney as a corporation have the insight into Kathleen across these brands? Because they don't understand that about me, am I being greatly undervalued in my interaction with Disney+? I would say yes, I was. And, how does that translate? And then what was the opportunity cost of that lack of understanding?
So Disney+ had the opportunity in that engagement, a live conversation with me, to cross-sell me into other media packages, right? Like they could have... I was actually looking for maybe like a package that would make sense for my family. There would have been a lot of opportunities to maybe increase the order value on the spot and deepen my relationship with Disney.
So all of that was lost in that transaction. So, to bring this full circle... Thank you for indulging me. But the topic of unified customer data structures is what enables that kind of activity. And customer engagement strategies and customer loyalty at the end of the day is the beneficiary of that. So having a deeper understanding of me as a customer, collected and shared across brands and all the channels also. Not just brands, but all the channels that I'm interacting with.
So that's one thought from a direct-to-consumer level. And Al, you know this better than anyone, based on the business that you're in, but customer loyalty in today's economy is so much more than the old days of a membership card with loyalty points. Then I can redeem my points for a discount on a future transaction.
We go in and part of our assessment, when we're consulting with our customers about the ideas around loyalty programs & customer engagement strategy, we're asking them to really widen the lens. I'm probably taking a couple of lines from your playbook here, but there's a lot more to think about than spend.
There's so much more value I can provide you as a brand. I'm living on social media. If I tag your brand on social media that has value to you, that's free marketing for you. Right? Am I writing online reviews? These all have great value to a company. Are they properly incenting behavior that they want to have continued to bring more customers at a very low cost to their doorstep?
And then rewards is always an interesting process. So one is, is what are you rewarding for? What activities are you incenting for? And we're seeing a much broader view for customers that are companies that are really kind of industry leaders in this regard. And then how do you apply those rewards is also an interesting question. Putting that CFO cap back on, a lot of loyalty programs are viewed, and are, a hit on the bottom line. Then that's affecting a company's margins, and that isn't always, maybe thought through from the folks putting it forward.
But then you can see some companies that are taking a pretty clever approach. So an example that I've always been fascinated by it, because it all works so well and I am falling for it over and over again, is Sephora, which is a beauty brand. And I have two teenage daughters at home with myself. Like you can imagine the amount of skincare and cosmetics being purchased by this family. And so I am a Beauty Insider with a plethora of points.
Sephora doesn't offer me discounts on the products that I'm buying continuously. What they do is they offer me the ability to apply my points to get samples of other products that I haven't tried yet. I would imagine they're probably getting at no cost or low cost from these brands that are trying to promote different products. And they're giving them to me, and yes, if you look at the portfolio of what my family's consuming, a lot of our new staples were samples a couple of months ago that we fell in love with. And we're expanding our spend ultimately with very little effect on margin. So that's really in the direct-to-consumer, some of the thoughts there.
No, that's great. And I think just the reinvention of that focus on the loyal customers, right? Whether it's the United Airlines or any airlines we've got communications from most recently, they've all communicated with us. Whether Sephora... in fact a great program, like you said, but literally yesterday there came an announcement and they upgraded their programs. So, if you haven't seen it, check it out
I have to look, I haven't looked. What happened?
... Yeah, they came out yesterday and they announced a bunch of more experiential rewards like you was saying. So it's not in samples only. It's a lot more experiences that you can now get. And some of those also can apply in the store. So to pull you back into the store at some point in time in that capacity. And, so they're re-innovating and continuing to innovate on those loyalty programs especially making it experiential to earn those benefits, and experiential to then redeem those benefits. And not just a discount-focused sort of umbrella.
And then the one thing I really liked, you talked about before, was that unification of data in the enterprise. You as a customer being sort of unified as one person and unified across the enterprise and recognized that way. That enables that experience to now work across the enterprise and not in a silo. And, so that was great as well.
Kathleen, this has been a great discussion. I'm sure we can keep going on and on, on these topics. But I really, really appreciate you coming on today and sharing this advice with us. For everyone else, if you want to keep hearing from experts like Kathleen, please go to www.annexcloud.com/marketmovers.
Kathleen, thank you again.
Yeah, it's my pleasure. Thanks for having me.
Co-Founder, Annex Cloud
GVP CX Advisory at SAP Customer Experience
Since 2010, Annex Cloud has provided industry leading loyalty solutions to more than 250 leading brands and retailers, including Jenni Kayne, Hewlett-Packard, Bed Bath & Beyond, e.l.f. Cosmetics, Olympus, Sugarfina, Mizuno, MacKenzie-Childs, VF Corp., with the ability to engage tens of millions of their customers one-to-one at scale.
The Annex Cloud platform provides fully integrated Customer Loyalty, Referral Marketing, and User Generated Content (UGC) solutions that seamlessly work together to optimize the customer journey and deliver a unified customer experience that is designed to accelerate revenue growth, retain valuable customers, increase average order values (AOV) and drive repeat order frequency.
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