Customer value creation

The retail business model is changing. Gone are the days of selling rigidly defined assortments via stationary outlets to anonymous but loyal customers. The trend is now toward selling flexible assortments via variable channels to a small number of customers who are willing to offer their loyalty. As a result, store locations and available assortments alone are no longer decisive.

In the future, the value retailers generate for customers through digital services will effectively determine retailers’ success. These digital services can comprise product information, innovative price and delivery models, as well as benefits in terms of process speed and quality.

Market drivers

This development is accelerated by a change in consumers’ preferences – instant satisfaction, using instead of owning, anywhere/any time.

Direct digital access to customers also puts manufacturers in a position to sell directly to customers. As a result, the traditional role of the retailer is coming under pressure from all participants in the value chain. Retailers can no longer rely on the core competency of having the “right” assortment at the “right” price in the store.  Customers enjoy 360° visibility when it comes to prices and competitors. This means retailers have to offer articles and services that cannot be compared easily, if at all (proprietary products, bundles, services), or even price models that, unlike conventional sales prices, do not permit comparison (subscription, club).

For traditional retailers, this also means understanding their existing stationary presence as value added in new digital business models, and not as a burden.

Customer value creation: the new marketing paradigm

This new customer relationship is characterized by:

• Omnichannel as a business model: brick-and-mortar stores as entry points to digital channels – online shops as a means of switching channels to stationary stores. The customer process is considered from the initial exploration to buying and using right through to retirement/disposal – and no longer merely as the “moment of truth” at the POS or the customer service counter.
• Services and price models that optimally support the customer process. The focus here is on the quality of the processes for the customer – and no longer on product quality alone. The services provided for customers include information, product, service, and financing – no longer simply transferring ownership at the POS.
• Customer loyalty through the customer-centric management of offerings. The focus is on customers and the value they create – not on the channel. A shift from article to service/from sale to rental/from ownership to use.

Implementing this paradigm, however, has to resolve the conflicting goals that stem from a traditional sales channel perspective:

• Expanding the stationary, traditional channel by enhancing the goods-to-store business model, also as a means of securing the cash flow for the necessary investments in the digital transformation.
• Establishing the digital channel through a modified business model while increasing value for the customer (and reducing customer-process costs for purchases and purchase preparations).

KPS has more than 800 experts specializing in stationary and digital retail. Benefit from their expertise in processes and technologies: realigning the strategy, the organization, and the corporate goals is an important precondition for generating customer value in the digital business models.