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Smarter Commerce: Transforming for a Customer-Centric World

Sponsored by IBM
Laurie McCabe, SMB Group Sanjeev Aggarwal, SMB Group Brent Leary, CRM Essentials March 2012

Copyright SMB Group, Inc.

March 2012

Smarter Commerce: Transforming for a Customer-Centric World

SMARTER COMMERCE: TRANSFORMING FOR A CUSTOMER-CENTRIC WORLD


KEY HIGHLIGHTS
Social, mobile and cloud computing innovations have radically and irreversibly changed customer expectations throughout the commerce cycleshifting the balance of power to the buyer. New dynamics necessitate that midsize businesses transform their culture and operations for a customer-centric world. To make this shift, companies need to integrate and analyze data across customer touch points, provide customers with a more consistent experience across channels, and have actionable metrics to continually refine and improve the customer experience. A more holistic, connected approach helps companies increase marketing effectiveness, improve operational agility and increase relevance for the customer. IBMs portfolio of Smarter Commerce solutions, experience, Business Partner network, cloud delivery and financing options can provide midsize companies with affordable, accessible solutions and the guidance required to get the most from them.

Technology trends are converging to create a perfect storm in the world of commerceone that empowers customers and raises the bar for companies of all sizes to meet new, more demanding customer expectations. Social media empowers customers with information from friends and other unfiltered sources. Mobile devices, applications and payments make it possible to research and shop for products and services anytime and anywhere. Cloud computing and ecommerce are blurring the boundaries between brick-and-mortar and online commerce sites. As a result, customers expect more from businesses throughout all phases of the commerce cycle. They want anywhere, anytime, any-device access to multiple sources for information gathering, product and service evaluation, selection, purchasing and customer service. For businesses, the trick to surviving and thriving in this brave new world is having the ability to anticipate what the customer wants, automate and personalize customer interactions, and enable the customer to do business where, when and how he or she wants. IBM has developed its Smarter Commerce portfolio to help companies put the customer at the heart of the commerce cycle. These solutions and services delivered by IBM and its Business Partners take advantage of cloud, mobile and social technologies. They can help midsize companies build the foundation needed to deliver a consistent, more responsive customer experience across channels. In this paper, we first look at how and why technology trends are radically transforming customer expectations and the commerce cycle. Second, we examine what this sea change means for businesses, and how companies

Copyright SMB Group, Inc.

March 2012

Smarter Commerce: Transforming for a Customer-Centric World

need to adapt their mind-sets and operations to create a more virtuous customer experience cycle. Finally, we provide an overview of IBMs Smarter Commerce initiative, focusing on its solutions to help midsize companies market and sell. Throughout the paper, we reference specific examples of midsize companies that are using Smarter Commerce solutions today to more easily determine and deliver what customers really want through more effective customer interactions, better information and insights, and improved processes.

SECTION 1: THE SMARTER CUSTOMERREDEFINING VALUE IN THE SOCIAL WEB


The ways people and businesses buy products and services have radically and irreversibly changed over the last few years. Rapid adoption of mobile and cloud technologies as well as the rise of social media have turned the commerce process upside down (Figure 1).

Figure 1: Technology Trends Are Converging to Radically Alter the Commerce Process

Source: SMB Group and IBM

Copyright SMB Group, Inc.

March 2012

Smarter Commerce: Transforming for a Customer-Centric World

Social networks have become collaborative platformsand a strong influence on how people perceive and buy products and services. The world has moved from one-way, brand-centric marketing and static web pages to two-way, interactive conversations that empower customers with more information and choices. Social shopping was originally pioneered by Amazon.com, which has offered customers reviews and suggestions for years. But social shopping is spreading its wings well beyond Amazon. Facebooks Like button makes it easy for anyone to share opinions with friends, and many new apps are also fueling this phenomenon. For example, Shwowp lets users track and share their shopping history; Kaboodle and ThisNext provide social shopping communities for people to recommend and discover new things; and ShopTogether provides a synchronized online shopping experience with friends, simulating a joint trip to the mall. The rising adoption of mobile devices is facilitating this trend. The Mobile Marketing Association estimates that there are 6.8 billion people on the planetand 5.1 billion of them own a cell phone, but only 4.2 billion own a toothbrush! Using the phone in their pocket, buyers can access price comparisons, reviews, ratings and other information online throughout the commerce process. To understand just how revolutionary this shift is, consider these statistics: Shift to online sales. 32 million people (66% of all adults) in Great Britain purchased goods or services over the Internet in 2011 (Office for National Statistics, August 2011). This was an increase from 62% in 2010. Rise of social media. In 2011, 65% of adults used a social networking site like Facebook or LinkedInup from 5% in February 2005 (Pew Internet & American Life Project). During the 2011 holiday season, the number of discussions on social media sites leading up to Black Friday 2011 increased by 110% compared to 2010. Key topics included price comparison tips, out-of-stock issues, waiting times and parking (IBM Coremetrics Benchmark). Explosion of mobile devices. Smartphone sales surged past PC totals for the first time in the fourth quarter of 2011 (Canalys). And people are using those devices to purchase goods and services: Worldwide mobile payment volume is predicted to total $86.1 billion, up 75.9% from a 2010 volume of $48.9 billion (Gartner Inc.; Market Trends: Mobile Payments Worldwide, 2011). Growing avalanche of information. We have officially entered the age of the zettabyte (with 21 zeroes after the 1). Next year, the volume of digital content will rise 48 percent, to 2.7 zettabytes (IDC).

In the retail industry, for example, think about how easy it is to go to a physical retail store to touch and feel a product, and then comparison shop for the same item and order it for less online via a smartphone. Or consider how quickly customers can share a negative experiencepoor service, out-of-stock items, long lines or endless phone tagwith others.

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March 2012

Smarter Commerce: Transforming for a Customer-Centric World

Whether you are a bank, wholesale distributor, manufacturer, retailer or any other customer-oriented organization, the bottom line is that customers expectations are rising. People increasingly expect anywhere, anytime, any-device access to multiple sources of information throughout the commerce cycle, from information gathering, evaluation and selection, to purchase and service. This mandates that vendors understand and implement new solutions and metrics to attract, interact with, acquire and retain customers.

SECTION 2: SMARTER COMMERCETRANSFORMING FOR A CUSTOMER-CENTRIC WORLD


To delve further into how rapidly and dramatically social/mobile technologies are driving changes in customer behavior and activities, lets look more closely at the sea change that happened on Christmas Day 2011: Total online sales for December 25 grew by 16.4% compared to the same date last year (IBM Coremetrics Benchmark). Digital content and subscriptions (digital downloads of music, TV, movies, ebooks and apps) accounted for more than 20% of saleslikely in part due to the gifting of millions of new devices. On any other day of the holiday season, that number was only 2.8% (comScore). The iPad accounted for 7% of all online sales on Christmas Day, accounting for 50% of all mobile sales that day (IBM Coremetrics Benchmark). Record eBook downloads for Amazon helped the company realize a 175% increase between Black Friday and Christmas Day compared to the previous year (PCWorld). Furthermore, at the Digital Book World Conference in New York, publishers predicted that worldwide sales of ebooks will reach parity with print books beginning in 2014. In the United Kingdom, there were 45.5 million visits to online retailers on Christmas Eve, and 62.8 million visits on Christmas Day, representing a 38% increase in a single day (Hitwise). Traditionally, Christmas is a day spent alongside family and friends, and away from commerce, with stores closed in recognition of the holiday. But now, technology lets people do what they werent able to do in years past: shop any day of the yeareven on holidaysfrom the convenience of their preferred device. As the numbers above illustrate, customers have taken advantage of what todays technologiesand companies using a Smarter Commerce approachoffer them. The iPad underscores this astounding shift: 7% of all 2011 online sales were made on an iPad, a device that wasnt even around two years ago. With the highest estimates for total iPad sales in the 40- to 50-million-unit range as of the end of 2011, the iPad accounts for just a tiny fraction of all devices (desktops, laptops, mobile phones, other tablets, etc.), making the number even more remarkable. However, even as customers behavior and expectations change, one thing that hasnt changed is their core philosophies. Customers have always wanted companies to listen to them and to act on the input they provide.

Copyright SMB Group, Inc.

March 2012

Smarter Commerce: Transforming for a Customer-Centric World

They want companies to value their time and their recommendations as well as their money. But, as the data points weve discussed clearly indicate, customers are changing their behavior and activities as they embrace social and mobile technologies, using new devices and applications to do what theyve wanted to do all along more easily. As technology enables customers to get better access to information, people, products and services, it also gives them more control over the commerce process. So although customers core philosophies are holding steady, companies need to change their philosophical approach to meet new expectations and align with changing behavior. Having a Facebook page or a mobile app will not be enough. Smarter companies will fully engage customers across multiple channelsnot only for marketing and branding, but also to bring the voice of the customer into the company. By analyzing social media, web and transactional data, companies can get the insights they need to create exceptional customer experiences to set them apart in the market. Speedo International illustrates this type of shift in philosophy and approach. According to Gareth Beer, ecommerce manager for Speedo International, We wanted to really understand the customer, how they behave, how they think and how they liked to be interacted with. The business is all about the customer. We need to be in as many channels as customers are in and align them as closely as we canwhether the customer is on a smart phone, iPad or in a brick and mortar store. To gain deeper insight into how effectively it engages customers and prospects on its site, Speedo integrated IBM Coremetrics and IBM WebSphere Commerce to more accurately: Track KPIs for sales, orders, visitors, stock and margins, and its consumer index score, which rates customer experience with Speedo. Gauge the effectiveness of pay-per-click campaigns and retargeting efforts. Set and meet service-level agreements to pick, pack and dispatch orders.

The goal is to have consistency and The goalacross these channels and visibility is to have consistency and visibility across these channels and heighten our understanding of the heighten our understanding of the customer. customer. Gareth Beer, ecommerce manager, Gareth Beer, ecommerce manager, Speedo International Speedo International

Understanding todays customer calls for a new mind-set, one in which businesses understand how customer behavior and expectations are changing. By developing processes and using solutions to better anticipate and respond to market shifts, companies can create the product, sales and service experiences needed to not only convert prospects into customers, but also turn more customers into brand advocates.

SECTION 3: CREATING A VIRTUOUS CUSTOMER EXPERIENCE CYCLE


Delivering the experiences customers and prospects expect begins with listening, and continues with providing products and services that align with customers verbal and behavioral feedback. Using the channels, formats and technologies that customers and prospects want to engage with is also crucial to develop, extend and enhance customer intimacy and loyalty. The process of delivering exceptional customer experiences starts

Copyright SMB Group, Inc.

March 2012

Smarter Commerce: Transforming for a Customer-Centric World

when organizations adapt their culture and processes to meet heightened and changing customer expectations, and is enabled by applying the right technology solutions. But engaging customers and then capturing and making sense of the mounting avalanche of customer information from social, digital and transactional channels isnt easy. And providing employees throughout the organization with the tools and access to information they needwhen they need itbecomes more challenging every day as more data is created. Having the right tools and processes in place to listen to, analyze information from, and effectively engage with customers and prospects is no longer a luxury but a necessity. As more people participate in social networks and share more information, more data about them is created. Coupling this unstructured data with traditional information (transactional data, activity data, service data, etc.) can bring companies closer to a 360-degree view of the customer. By integrating and analyzing this information, companies can turn disparate pieces of data into important insights they can act on to improve the customer experience. This desire is driving many midsize organizations to adopt a new approach, according to Paul Ernst, president of RiverPoint Solutions Group, LLC, an IBM Advanced PartnerWorld Member. According to Ernst, Using a platform like IBMs Unica marketing suite can provide a 360 degree view of all your marketing touch points. It also lowers technological complexity by removing the need to integrate multiple disparate point solutions for email marketing, web analytics, and other key marketing applications by providing a single platform. This more holistic, connected approach can help companies increase the relevance/effectiveness of corporate marketing messages, improve marketing agility, and increase the number of campaigns executedall without having to add more staff. Leveraging technology to engage customers and prospects in a more intimate fashion to gain a deeper understanding of them is at the heart of creating great customer experiences. It takes both the aptitude and the sincerity of an organization to do it. And those who put in the time and effort should find it worth their while.

A company might have done 100 marketing campaigns last year, and sent out 50,000 messages for each campaign. Using Unica, that company can do two or three times as many campaigns in the same time period, with much finer targeting and messaging. Because each campaign is more relevant to the customer, the company can engage customers when they are most ready to accept the information that the company is offering. Paul Ernst, president, RiverPoint Solutions Group, LLC

SECTION 4: IBMS INTEGRATED SMARTER COMMERCE APPROACH


IBMs Smarter Commerce initiative is designed to help companies transform their businesses to provide the compelling experience that smarter customers demand. IBM has invested more than $2.5 billion since 2010 in the Smarter Commerce portfolio, which provides solutions across the commerce cycle (Figure 2).

Copyright SMB Group, Inc.

March 2012

Smarter Commerce: Transforming for a Customer-Centric World

Figure 2: IBMs Smarter Commerce Portfolio

Source: IBM
Customer insight is at the heart of the Smarter Commerce portfolio, which encompasses IBMs advanced analytics solutions and its key business process solutions. Each solution helps businesses get the insight they need from customer conversations, input and experiences to optimize each phase of the commerce cycle: Buy: Synchronize sourcing and procurement based on customer demand to optimize supplier interactions across extended value chains. This includes solutions for supplier integration and management, supply chain optimization, logistics management, and payments and settlements. Market: Create targeted and personalized marketing campaigns, loyalty programs and brand experiences across different channels by gleaning and acting on insight from social networks, search optimization, advertising, etc. Sell: Streamline and optimize sales and fulfillment across multiple sales channels, whether physical stores, ecommerce, mobile, etc., so that customers can purchase products and services, exchange information and collaborate with vendors and channel partners.

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March 2012

Smarter Commerce: Transforming for a Customer-Centric World

Service: Proactively provide service to customers across all touch points and interaction channels to increase customer satisfaction, repeat sales and loyalty.

Many companies focus on the Market and Sell phases first because they help drive revenue. IBMs key offerings in these two areas include the following: IBM Coremetrics solutions measure and improve the effectiveness of online marketing programs, and include solutions for search engine bid management, email targeting, ad impression attribution, cross-sell recommendations and social media ROI analysis. IBM Unica solutions integrate and streamline all aspects of online and offline marketing, incorporating customer and web analytics, centralized decision management, cross-channel execution and integrated marketing operations. IBM WebSphere Commerce enables companies to deliver a seamless, cross-channel buying experience through contextually relevant content, marketing and promotions that support all sales business modelsincluding B2C, B2B and B2B2Con a single customer interaction platform.

These solutions help businesses maximize the insights that they generate through customer interactions, whether in a physical location (such as a store or branch office), over the web or from smart devices. With this intelligence, businesses can do a better job of tailoring marketing and offerings to customer interests; improving profitability by targeting the right offerings to the right customer at the right time; and reducing the return costs, restocking expenses and supply chain expenses incurred by handling returns. For instance, CustomInk, a custom t-shirt company founded in 2000, has grown to 300 employees. It offers hundreds of t-shirt styles and colors, as well as sweats, koozies, jerseys and other customizable products. The company has expanded beyond screen printing and embroidery to add a digital printing service allowing customers to design and order as few as one custom t-shirt at a time. CustomInk uses Coremetrics to continually improve the customer experience and grow the business in three key ways: 1. Dashboard for daily monitoring of key performance indicators (KPIs). CustomInk relies on Coremetrics to monitor a series of key metrics such as: What percentage of site visitors go to the Design Lab? How likely is a visitor to save a design? How do aesthetic changes improve conversion rates? These metrics help CustomInk determine whats working and what isnt. For instance, if the percentage of customers who save a design is low, it may be because something is broken and the customer cant load the design. Or there may be an overload of visitors from unqualified sources. Design Lab monitor. When a customer designs a t-shirt, CustomInk uses Coremetrics data to help it understand how people click around to design their shirts, providing the company with a better understanding of the engagement process and departure rates. The company evaluates the data from a statistical perspective, using basic standard deviation analysis. When things deviate beyond a certain

2.

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Smarter Commerce: Transforming for a Customer-Centric World

number of standard deviations, the monitor turns bright red to indicate there may be a problem allowing CustomInk to quickly determine what is happening and resolve the situation. 3. Pathing analysis. CustomInk monitors key paths through its site daily with Coremetrics TruePath. These insights help CustomInk determine where people fall off on different paths and then refine them to improve engagement and conversion. CustomInk can see when changes are beneficial, detrimental or neutral to customer behavior. For example, CustomInk has learned that small, aesthetic changes in color or type font, or changes in button styles or colors, can impact movement through the site and affect the drop-off rate.

CustomInk also uses Coremetrics data for behavior-based segmentation. By analyzing criteria such as on what page customers enter the site; whether they come from a search engine, email or Facebook; whether they come from a mobile device or PC; and what tools they want to use to design their t-shirts, CustomInk can better understand different customer requirements and tailor paths accordingly. IBM Business Partners help midsize companies get the most from Smarter Commerce solutions. RiverPoint Solutions Group, for example, helps its clients use Unica to get an integrated, 360-degree view of their customers across multiple channels: email marketing, the Web and social media. RiverPoint provides both technology implementation services and guidance to help clients streamline marketing operations. Taking advantage of Unicas implementation methodology, RiverPoint can speed time to value and help clients become self-sustainable with proven documentation, training and mentoring best practices. IBM provides both Unica and Coremetrics as cloud-based solutions, enabling midsize businesses to reduce upfront capital costs and pay for these solutions via monthly, quarterly or annual subscriptions. IBM Global Financing has also stepped up with a $1 billion lending program for SMBs that buy or lease its technology, with financing rates as low as 0% over 12 months for credit-qualified clients on purchases of as little as $5,000.

Midsize companies want the same agility as bigger companies, but dont have IT resources to manage it all. Unica gives them an integrated, multi-channel platform, and RiverPoint supplies the solution expertise, the integration to connect their offline and online presence to give them a 360-degree of all the touch points with customers. Paul Ernst, president, RiverPoint Solutions Group, LLC

Coremetrics plays a key role in all of our measurementsabout 30% of the time, we use it to monitor performance, about 20% of the time we use it to identify new opportunities, and the remainder of the time to measure the impact of changes we make. Rachel Jacobsen, marketing analytics manager, CustomInk

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Smarter Commerce: Transforming for a Customer-Centric World

SECTION 5: SUMMARY AND SMB GROUP PERSPECTIVE


The Internet truly did change everything in the world of commerce more than a decade ago. It created new online channels for information gathering, product and service evaluation, selection and purchaseand created a mandate for businesses to develop and integrate ecommerce with their traditional brick-and-mortar operations. Now, as adoption of newer social and mobile technologies explodes, another seismic shift of greater proportions is under wayand businesses face a new, perhaps more transformational imperative. The changing dynamics necessitate that midsize businesses have a closer relationship to their customersas well as suppliers and partnersto get the insights needed to better anticipate and respond to requirements, and ensure they deliver the right product or service at the right price, time and place. IBM and its Business Partners provide guidance and expertise to help midsize companies integrate and analyze data across customer touch points, give the customer a more consistent experience across channels, and gain actionable metrics to continually refine and improve the commerce experience. Although IBM isnt the only vendor to tout this type of approach, it is building a strong portfolio of solutions and investing in its WebSphere Commerce platform to strengthen social, mobile and new analytics functionality. And key acquisitionssuch as Unica and Coremetricsprovide additional automation, personalization and analytics capabilities to the mix. As important, IBMs Business Partner network, cloud delivery and financing options put many of these solutions firmly within the reach of midsize companies. In a very short time span, it has become a buyers world. Customers will continue to harness mobile, social and cloud computingand businesses must do the same. Companies that use solutions such as those provided in IBMs Smarter Commerce initiative can lay a strong foundation and put the right processes in place to make these disruptions work for instead of against them.

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Smarter Commerce: Transforming for a Customer-Centric World

SMB GROUP , INC.


The SMB Group focuses exclusively on researching and analyzing the highly fragmented SMB marketwhich is comprised of many smaller, more discrete markets. Within the SMB market, SMB Group areas of focus include: Emerging Technologies, Cloud Computing, Managed Services, Business and Marketing Applications, Collaboration and Social Media Solutions, IT Infrastructure Management and Services and Green IT. Read our 2012 Top Ten SMB Predictions for our views on game-changers in these and other areas of the SMB market.

Trademark information: trademarked terms are marked on their first occurrence in this paper with a trademark symbol ( or ) IBM, the IBM logo and ibm.com are trademarks or registered trademarks of International Business Machines Corporation in the United States, other countries, or both. If these and other IBM trademarked terms are marked on their first occurrence in this information with a trademark symbol ( or ), these symbols indicate U.S. registered or common law trademarks owned by IBM at the time this information was published. Such trademarks may also be registered or common law trademarks in other countries. A current list of IBM trademarks is available on the Web at Copyright and trademark information at ibm.com/legal/copytrade.shtml. Other company, product and service names may be trademarks or service marks of others. Speedo and are registered trademarks of and used under license from Speedo International Limited.

CustomInk is a registered trademark of CustomInk LLC.

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