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February 1, 2012
—by Brent Leary, CRM Essentials
In conjunction with IBM’s Smarter Commerce initiative, the SMB Group and CRM Essentials are working on a series of posts discussing how technology is empowering today’s customer, and why companies have to change their approach in order to build strong relationships with them. This is the fourth post in the series.
Christmas 2011 is a great example of Smarter Commerce in action. It’s a lesson in why businesses need to transform the way they market and sell their products and services. According to the National Retail Federation, retail industry sales for the 2011 holiday season increased 4.1 percent year-over-year to $471.5 billion, beating its expectation of 3.8 percent growth. And while the overall numbers probably made for a pleasant holiday for the industry as a whole, what was happening online was astounding:
- US online holiday shopping season reaches a record $37.2 billion, up 15 Percent vs. 2010 – a rate of increase almost 4X higher than the overall rate for retail.
- A post-holiday 2011 retail study from Kabbage, Inc. focusing on small-to-medium online merchants found 69% of respondents reporting increased sales. On average, study participants experienced a 32% hike in sales compared to the 2010 season.
- As late as one week before Christmas 2011, one-quarter of consumers hadn’t even started holiday shopping. (Consumer Reports)
- 93% of retailers have offered free shipping at some point during the season vs. 85% last year. (USA Today)
- The 2011 US Holiday Season edition of the ForeSee Results E-Retail Satisfaction Index of the top forty Internet retailers increased by a point from 78 to 79 (on a scale of 1-100)
- Almost one in four retail searches online on Christmas Day were made using mobile phones or tablet devices, according to the British Retail Consortium (BRC).
- The number of adults in the United States who own tablets and e-readers nearly doubled from mid-December to early January, according to a new Pew Research study. (New York Times)
Technology’s Impact on Behavior Is Accelerating
The world is changing. While still a fraction of the overall sales figures, ecommerce is growing at a much faster rate than traditional retail. And not just for the big retailers. As the Kabbage study illustrates, small and midsize online retailers enjoyed tremendous growth as well. This in part stems from the effect technology is having on the customer buying process, and the ability of companies to adapt their business processes to support online shopping.
When you think about twenty-five percent of shoppers not starting their Christmas shopping until after December 18th, it really hits home how the process of shopping has changed. Five to ten years ago most people still were going to multiple stores in search of ideas for things to buy, to find recommendations, compare items, and to look for deals, so they had to start their shopping efforts earlier. Now they can do most of that online – with a lot less time involved. And from the online retailer’s perspective, they leverage the latest technology not only to provide this information to online shoppers, but also to deliver the goods on time as well. Jewelry specialist Blue Nile offered free FedEx shipping guaranteed to arrive by Saturday, December 24, for all orders placed as late as 7 p.m. the day before (Friday, December 23). And other online retailers offered similar shipping capabilities.
This all adds up to shoppers more efficiently finding what they want, knowing the price they want to pay and having the confidence of getting it in time – with the added benefit of not having to wrestle with issues like parking, crowded malls, weather etc.. And as both companies and consumers accelerate their technology adoption, look for ecommerce to steadily increase its portion of the retail pie while customers leverage social and mobile to decrease the time and effort it takes to buy things.
Technology’s Impact on Behavior is Dramatically Affecting Expectations
One of the more interesting developments is how technology is impacting customer expectations as well as their behavior. Now that companies like Amazon can get items to us in two days for free, we expect this kind of service all the time. And while 93% of them did offer free shipping at some point during the holiday season, a study also showed 73% of consumers recently surveyed by MarketLive named “free returns” as a top promotion in determining their online purchasing behavior.
This is a great example of customers understanding what technology can do, and expecting vendors to find ways to leverage it to continuously improve their shopping experience. And improving the experience is crucial to keeping customers satisfied. According to the ForeSee study, satisfaction scores are important because a one-point change in website satisfaction can predict a 14% change in revenues generated on the web. And when they were highly satisfied with a purchase:
- 64% of survey responders said they were more likely to buy from the same company the next time they needed a similar product;
- 67% were more inclined to recommend the company to others; and
- 65% felt a sense of ‘brand commitment’.
This illustrates that investing in improving customers’ web experience is a terrific way to build brand loyalty and capture the benefits of viral marketing (or something like this).
A Christmas Carol…
You really don’t have to look much further than Christmas Day 2011 to see how technology has changed customer behaviors and expectations. Digital content & subscriptions (digital downloads of music, TV, movies, e-books and apps) accounted for more than 20 percent of sales on Christmas Day. On any other day of the holiday season, that number was only 2.8%. And these numbers were driven by the rise of mobile devices, with the iPad leading the way on Christmas Day with a staggering 7% of all online sales coming through just that one device – accounting for 50% of sales that day, according to the IBM Coremetrics Benchmark.
While the numbers tell the story, it really hits home personally when I saw my parents (both octogenarians) sitting at the kitchen table Christmas Day – my father with his iPad, and my mother with her Kindle Fire. And my mother, having received the Fire as a gift, was reading an ebook she purchased Christmas morning… with an Amazon gift card.
This is a totally different story of Christmas than Charles Dickens told in the 19th century, but it’s a tale of what to expect in the 21st century when it comes to customer engagement. Because of technology and its empowering effect on customers, they are developing “great expectations” their vendors must live up to. Which means vendors must be smarter in their approach to smarter, more informed customers.
This is the fourth of a six-part blog series by SMB Group and CRM Essentials that examines the evolution of the smarter customer and smarter commerce, and IBM’s Smarter Commerce solutions. In our next post, we’ll look at key points to consider when planning a smarter commerce strategy. In our next post, we’ll look at IBM’s Smarter Commerce offerings to help illustrate how midsize companies can reshape the way they do business to meet the expectations and needs of smarter customers.
December 28, 2011
January 7, 2011
Ten years ago, SMBs were just beginning to understand the need for and value of building web sites and storefronts. Today, SMBs are at a similar point when it comes to building mobile web sites and enabling mobile transactions. Why is this important? 4.8 billion users browse the web via a mobile device compared to 1.7 billion users who browse the web via other means, such as a laptop of PC (source: ITU, October 2010).
SMB Adoption and Plans for Mobile Web Sites
Figure 1 – Plans for Mobile Website
Our recently published SMB Group market study, “2010 Small and Medium Business Mobile Solutions Study,” reveals that SMBs understand the importance of mobile friendly websites and plan to invest in a mobile web presence in order to help fuel their growth. In the very small businesses (1-19 employees) segment, only 11% have some mobile web presence, while in companies with more than 500 employees, 44% have created a mobile-friendly site.
With interest and adoption of smartphones, tablets and mobile applications exploding, both small and medium business have very aggressive plans to ramp up activity and functionality on the mobile web site front. These businesses view mobile web sites as a key mechanism to attracting new customers, improving customer service and retention, and growing revenues.
From an industry perspective, financial services/banking and professional services firms are taking the lead in deploying mobile web sites today. Going forward, retail, non-governmental organizations (NGOs) and education have very aggressive plans to establish a mobile web presence within the next 12 months. Many startups are choosing to start by developing their web presence through a mobile design paradigm first, from which they can then create a traditional web site.
What Information and Transactions are SMBs Offering and Planning for on Their Mobile Web Sites?
The most common types of information that SMBs with mobile web sites provide today include business contact information, available from 79% of SMBs’ mobile web sites; product and service information, offered on 71% of these sites; operating hours, listed by 65%; location applications, available from 60%.
SMB use of mobile web sites for transactions is more nascent, but is picking up steam. Today, 28% of SMBs with mobile web sites offer customers capabilities to schedule appointments or make reservations; 10% use mobile advertisements; and 8% mobile coupons. SMBs that don’t currently offer these capabilities have very aggressive plans to ramp up these services in 2011–up to 53% for certain functions.
High-growth and market leading SMB companies already have a mobile web-presence or are planning one in the next 12 months. In addition to this, depending on the industry, these SMBs are also very aggressively looking at enabling mobile transactions on their mobile websites. With upwards of 29 million smartphone users and 3 to 4 million tablet users, SMBs see the urgency of having a mobile web presence.
December 31, 2010
As part of the recently completed SMB Group study “2010 Small and Medium Business Mobile Solutions Study,”
we performed a detailed analysis of U.S. small and medium business (SMB) spending on mobile devices, applications, and services. As explained in this study, SMBs (1-999 employees) spent approximately $26.1B on mobile solutions and services in 2010—an amount forecasted to increase annual at a rate of 17 percent for the next few years, with some segments growing much faster than the others.
As indicated on Figure 1, voice and data services gobble up the biggest part of SMBs’ mobile budgets (69%), followed by mobile application (12%) spending, mobile devices (11%), and mobile device/application management (8%). In the U.S., mobile service providers typically subsidize mobile device costs as part of their two-year mobile service contract subscriptions, resulting in the lower spending for mobile devices–which would cost two to three times more if they weren’t subsidized.
Figure 1 – 2010 SMB Mobile Solutions Spending
Other important takeaways from the survey and our analysis include:
- While SMBs currently spend more on devices than on mobile management, growth in spending for the latter is outpacing spending on the former by roughly 13%. This reflects the reality that as mobile adoption and business dependence on mobile solutions grows, SMBs will need to invest in solutions to more efficiently manage mobile services and solutions.
- Although SMBs currently spend more on voice and data services than mobile applications, survey results indicate that spending for mobile applications grow about 30% faster than for voice and data services.
- Very small businesses have the highest average spending per employee for mobile services, solutions and devices. Average mobile spending per employee decreases as company size increases. As companies grow, they have more formal mobile policies that encourage mobile plan sharing, and can take advantage of volume discounts to help cut spending. For example:
- Very small businesses with 1-19 employees spend about $150 per year per employee on mobile devices, compared to $101 per employee for companies with 50-99 employees.
- Expenditures for annual mobile voice and data service plans per employee rage from $1,056 for companies with 1-19 employees to $511 for small businesses with 50-99 employees.
- Annual mobile application spending ranges from $416 per employee for companies with 1-19 employees to $292 per employee for companies with 50-99 employees.
- The role of the user-management, sales, office manager, information worker, etc.–and the industry are key factors in determining what types of devices are selected.
For example, Information workers in industries like health care, legal, real estate are adopting smartphones and tablets more rapidly than other types of users in other industries.
Mobile spending now accounts for almost 10% of all technology spending for U.S. small and medium businesses and is forecast to grow at a rapid pace for the foreseeable future. This presents very significant opportunities for vendors on several fronts, including:
- Mobile device companies that develop new devices that tailored to specific user roles and industries.
- Mobile web and mobile application providers to create innovative new applications that help SMBs perform business functions more easily and flexibly.
- Service providers that go beyond voice and data service plans to offer higher value solution bundles.
However, the high cost of mobile service plans threatens to stall SMB adoption of smartphones and other devices that enable employees to take advantage of mobile business solutions. This is particularly true in very small businesses (1-19 employees), where 40% cite high voice and data costs as a top barrier to mobile solution adoption. Even when we look at the total small business group (1-99 employees), 37% say these costs are their top obstacle. As a result, 43% of small businesses currently provide voice-text phones and plans only to employees.
Of late, service providers are offering more limited choices for voice-text only phones, which will push some small businesses to invest in data service plans, smartphones and the applications they enable. But, small businesses will need more flexible and affordable data plans to take advantage of the mobile applications that can help their businesses grow. We’ll be watching closely to see what types and which vendors will try to shake up the status quo with new pricing schemes, bundles and incentives to help small businesses take better advantage of the mobile opportunity.