Interacting with Customers Santiago Gallino – Tuck School of Business - PowerPoint Presentation

Interacting with Customers Santiago Gallino – Tuck School of BusinessToni Moreno – Kellogg School of Management July 2013 – LBS – London, UK January 2017

Learning Modules 1. Demand forecasting2. Inventory Decisions 3. Assortment Planning 4. Pricing Decisions 5. The omnichannel customer6. Fulfilling omnichannel demand 7. Omnichannel journeys 8. Supporting an omnichannel strategy

M5.4 Introduction1 Interacting with customers is in the essence of retail.Excelling in this task is crucial to a successful retailer.However, excelling can mean different things for different retailers.

M5.4 Value Proposition2 The retailer value proposition to customers include a portion that refers to the product (or service) that the customer wants to acquire and experience that the customer receive while acquiring that product (or service) Product/Service Experience Value

M5.4 Value Proposition2 The retailer value proposition to customers include a portion that refers to the product (or service) that the customer wants to acquire and experience that the customer receive while acquiring that product (or service)Satisfaction PerceptionExpectation

M5.4 Value Proposition2

M5.4 Operational Behavior of Customers3 If you are a retailer, customers are not just wallets ready to be opened at the end of a line. They disrupt your operations with unpredictable behaviors, requesting service at inconvenient times, asking for the most bizarre things and changing their minds.Customers are ready to introduce variability at every step of the way. However, they tend to complain when they don’t find consistency.Where customers introduce variability?Arrival. Queues.Request and exception to the process. CapabilityEffortSubjective Preferences The dilemma is whether to reduce variability or to accommodate it. The answer depends on who you are or who you want to be as a retailer.

M5.4 Managing the Operational Behavior of Customers4 Classic AccommodationClassic Reduction Low HighHigh Quality of ExperienceCost to Serve Low-Cost Accommodation Uncompromised Reduction SegmentationCustomers Serving themselves. ATM. Self Check Out. Self Check In.

M5.4 Managing the Operational Behavior of Customers4 Diagnose the Problem. Which type of variability is hurting the operations?Design a mutually beneficial role for customersTest and Improve the solution

M5.4 Managing Wait Times5 Customers find waiting more tolerable when they can see the work being done on their behalf AND they tend to value service more.This holds true even under the appearance of effort.Barista at SturbucksOperational transparency can help and even increase customer and employee satisfactionCustomers are irrational, we are irrational. What customers remember of a visit to a retailer is the salient features not the details. And what they remember is what will determine whether they return or not.

M5.4 Managing Wait Times5 Occupied Time Feels Shorter Than Unoccupied TimePer process wait feels longer than in process waitsAnxiety Makes Waits Seem LongerUncertain Waits Are Longer than Known, Finite WaitsUnexplained Waits Are Longer than Explained WaitsUnfair Waits Are Longer than Equitable WaitsThe More Valuable the Service, the Longer the Customer Will Wait Solo Waits Feel Longer than Group Waits

M5.4 Managing Returns6 What is the trade off between restricting returns and conversion.We are not talking about encouraging returnsThe return experience can be the high end point of our contact with the customerCustomization can help reduce returnsGenerate Model to play with this assumptions and see the potential impact of different return policies