Neuroscience, loyalty and technology: The future of retail is personal
THE future of retail is like a bad movie sequel. This time, it’s personal.
Imagine dropping into a Myer on your way home from a busy day of work. Your wearable wristband — which has tracked your stress levels throughout the day — quietly alerts the store attendants, who greet you with a cold glass of water and offer you a seat.
As you relax, the attendant uses their tablet device to call a selection of products from the back room — products you didn’t even know you wanted — in your size and fit.
Your every interaction is tracked and analysed by the store, which carefully manages your long-term relationship to grow its share of your wallet. Whereas in the past it might have measured its success in terms of sales growth per store, now it tracks sales growth per customer. And in the face of the onslaught from online competitors like Amazon, traditional retailers will have to use every trick in the book, from data analytics to neuroscience, to keep you coming back.
“The more experiential retail becomes, the more it’s based on the emotional side of how you connect with customers, and I think emotion is playing an increasingly important role in the way stuff is sold,” Myer chief executive Richard Umbers told news.com.au.
The first “version” of that was simple advertising, but stores will have to get much more intimate to keep pressing those same buttons.
“The personal connection that is formed with the shopper as part of a relationship that can last years is actually a differentiating factor in the marketplace, where historically there has been a race to price and volume,” he said.
“[But] when you’re a premium department store, what are you really selling?
“Because everyone has your products, they’re available in the marketplace. The service component and emotional connection with the brand is one of the unique propositions that department stores can offer.”
Technology, he said, can “turbocharge” that service.
“It enables you to create those relationships from the fact that you know your customers and can build a history which you couldn’t possible hold in your head, but using technology you can do that over a period of time.”
Even right now, one of the core pillars of Myer’s $600 million turnaround strategy involves using technology to address long-held customer gripes, such as the lack of floor staff.
“We’ve rolled out 2500 iPads to our team members,” he said. “If you come in as a customer, if we haven’t got your size, haven’t got your colour, that’s enabling us to say don’t worry, we’ll have it sent to your home tomorrow.
“That’s real and it’s happening in our stores right now. What used to happen is the store assistant would go off into the back, vanish, and the connection to the customer would be lost.”
Michael Ford, CEO of whitegoods retailer The Good Guys, argues instead of simply meeting customers needs, technology will allow retailers to anticipate them.
“Historically what retailers have done, both in their merchandise and assortment planning and in their budgeting, is built it on historical, incremental growth,” he said.
“The great benefit they are deriving from data insights is they are going to be able to anticipate the needs of their customer. We’ve had 150 years of sleepy old retail — today that’s changing.”
Mr Ford said The Good Guys had even created a “sandbox store” targeted specifically at millennial customers. “It’s all about trying new concepts, new innovations, category extensions, redesigning the store, changing the fixtures, changing the paint colours, all sorts of things,” he said.
Mr Umbers and Mr Ford, who spoke at the Australia-Israel Chamber of Commerce Retail Lunch in Sydney on Wednesday, were focused on how technology can foster those emotional connections.
But Danny Naidoo, former chief information officer at South African retail giant Woolworths Holdings, which now owns David Jones and Country Road Group, says understanding how shoppers’ brains work will be crucial in working out how to apply that technology.
“Some of the biggest breakthroughs in neuroscience have come in the last five years, giving us a deeper understanding of human behaviour than the last 500 years,” said Mr Naidoo, who has joined the founding team of Aussie retail start-up Raincheck.
“In the next 15 years we’re going to see retailers adopting these findings.”
Simple gestures such as a reminder to buy something at a particular time, or even, bizarrely, sending shoppers a message telling them they made the right decision to buy something, may be used to “feed the customer’s wellbeing”.
“Consumerism is about pushing certain satisfaction drivers, and understanding that and what it means in a social context, I think will be a major shift,” he said.
“With the advent of wearables, and in a world where everything is connected, you could find wearables giving you a prod or a ping, or god forbid even the administration of a little dose of happiness.”
The work of neuroscientist Dr David Rock, in particular, is already being employed by some retailers. Dr Rock developed the so-called SCARF model, which seeks to explain factors that activate either a reward or threat response in the human brain.
SCARF stands for Status, Certainty, Autonomy, Relatedness and Fairness. “These five domains activate either the ‘primary reward’ or ‘primary threat’ circuitry (and associated networks) of the brain,” Dr Rock writes.
“For example, a perceived threat to one’s status activates similar brain networks to a threat to one’s life. In the same way, a perceived increase in fairness activates the same reward circuitry as receiving a monetary reward.”
Denise Lee Yohn, author of What Brands Do, explained how US appliance retailer Pirch used the model to design its store experience.
When customers walk into the store, they’re greeted by a “barista of joy”, who offers a free coffee or infused water — this raises the customer’s status.
“As you’re waiting for your coffee, the barista will ask, ‘Do you have an appointment? Would you like to be toured? Or would you [want to] wander through the store?’,” Pirch CEO Jeffery Sears told Lee Yohn.
“What’s actually happening in that interchange is certainty. So you’ve created certainty about how the store works.”
By explaining the layout of the store, the barista also fulfils the customer’s need for autonomy, while relatedness and fairness come through the sales team, who “instead of using the usual sales pitches, serve free samples of food prepared by chefs using Pirch appliances”, Lee Yohn writes.
While it might sound like manipulation, that doesn’t have to be a bad thing, Mr Naidoo argues.
“People in the developed world face an incredible challenge around time, but neuroscience tells us the number of ‘decision slices’ you have to make reasoned judgments during the day is limited,” he said.
“Developing these techniques to make it possible for people to make a complex decisions more quickly, or convince them they made the right decision, helps the person [through the day].”