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SMB Report: In-Store Technology, Daily Deals and Social Media Drive Growth For Smaller Retailers

Today’s small-to-medium business (SMB) retailers are challenged by key operational issues such as budgeting, limited resources and customer acquisition as they compete in a consumer-driven marketplace.

The web has become prime consumer real estate due to the breadth of product assortments, convenience and customization of online shopping. This paradigm shift in buying behavior, coupled with technological advancements and economic implications, drastically has affected how retailers large and small alike are operating today.

To compete effectively, progressive retailers are employing cost-effective technologies and tactics such as social media and loyalty programs to address their acquisition and retention challenges. They also are utilizing these channels to garner customer feedback that can be leveraged to implement processes for repeatable success.  

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“In order to remain both profitable and relevant, retailers are reducing their store counts, decreasing average store size, and investing to implement in-store what consumers like most about e-Commerce,” noted Kristin Wall, Program Manager, Retail and Consumer Leadership, Manhattan Associates. “Make no mistake: Retailers have come to love their online divisions. But with their physical stores’ long leases, most merchants aren’t about to give up their brick-and-mortar operations. While retailers work to keep costs down, those that rely solely on web sites to sell their products online are missing significant areas in which they can differentiate themselves — primarily customer service.”

The benefits of differentiating on customer service are well validated by The American Express OPEN Small Business Monitor, which found that 96% of all small business owners say providing good customer service has helped them survive in the tough economy.

Associate-based mobile applications, including mobile checkouts and in-store kiosks, are just a few examples of new in-store technologies that provide enhanced customer service without extra staffing requirements, Wall reported, a strategy particularly attractive to the budget-constrained SMB. 

SMB Pain Points And Pressures

SMB retailers are facing a plethora of key business challenges, particularly:

  • The management of limited marketing resources;
  • Budgeting and spending implications; and
  • Understanding evolving customer needs.

SMB retailers “should not value their customers based on historic spending but on future spend, as marketing resources usually are misallocated using this backward looking metrics,” stated Dr. V. Kumar, Director of the Ph.D. Program in Marketing at Georgia State University’s business school. “The smaller marketing budget can be spent efficiently and effectively if allocated to the right customer, at the right time, using a forward-looking metric such as customer lifetime value (CLV). By targeting customers with the highest CLV, and therefore the highest return on investment, retailers can ensure that every dollar is spent wisely,” said Kumar, who also serves as the school’s Executive Director, Center for Excellence in Brand and Customer Management.

Customer Acquisition Tactics

Customer acquisition is a critical component of any successful business, but for SMBs — who face a particular set of pain points and pressures — this key objective, along with customer loyalty, is increasingly difficult to manage.

“SMB retailers need to keep their eyes on two critical metrics: customer acquisition and customer loyalty,” cautioned Marc Caltabiano, VP of Products and Marketing, Cartera Commerce. “Without success across both of these metrics, SMBs cannot thrive. If a retailer is excellent at bringing in new customers but fails to keep them, the customer acquisition investment was wasted. If the retailer excels at retaining customers but fails at attracting new ones, the business will languish. A two-part strategy that incorporates both acquisition and loyalty is a must-have.”

Caltabiano also pointed to retailers now utilizing offers tied to shoppers’ credit and debit cards to motivate customers to buy. Because these card-linked offers are connected to the rewards consumers value most and are digitally redeemed, retailers can leverage consumer transaction data that pinpoints exactly where consumers spend. In turn, merchants can target offers to the right consumers more effectively.

Card-linked offers help close the loop for merchants by tying each offer to a customer’s spend over time ― not only with that merchant, but across a category. Merchants get access to anonymous transaction data that reveals impact on customer acquisition, order values and repeat purchases.  In addition to its efficiency benefits, Cartera reported that merchants large and small are able to confirm ROI upwards of 400% with their card-linked marketing programs.

Other cost efficient acquisition tactics for SMBs include sending email newsletters, which cultivate local community involvement, and creating brand-focused social media pages.

Daily Deals: Friend Or Foe To The SMB?

The industry buzz centered on daily deals has caught the attention of retailers over the last two years. Despite reports of daily deals “gone wrong,” sites such as Groupon and LivingSocial continue to thrive.

Recently, merchants and industry experts have bombarded daily deal companies with concerns regarding their business model and the strategic value of the deals themselves. On the other hand, consumers generally seem pleased with the concept of purchasing coupons that provide discounts of up to 90%, according to the 2012 ForeSee Daily Deal Commentary report, conducted by ForeSee Results.

“Our data shows that while overall deal subscriptions are down slightly since last spring, Groupon and LivingSocial remain healthy, with deal purchases increasing since last year,” noted Larry Freed, President of ForeSee Results. “That’s great news for consumers, retailers and for companies like Groupon, who are leading the way in the daily deal frontier. Groupon in particular offers tremendous value because it registers comparatively high satisfaction scores with both consumers and merchants.”

According to marketing trends data from a January 2012 MerchantCircle survey of small business owners in the U.S., 75% of respondents who offered a group deal in the past said they would offer another in the future. As of December 2011, approximately 12% of local merchants had offered a daily deal, a 33% increase from MerchantCircle’s June 2011 survey.

“The prolonged recession, the adoption of smartphones and tablets that enable fast price comparison, and the fact that savings have become more important, have created this new type of value shopper that we believe is here to stay,” Caltabiano said. “But smart marketing — without discounting — can translate into value, relevance and convenience for consumers, even those whose purchase decisions are driven more than ever by price. Profitable merchants and deal-seeking consumers can indeed be symbiotic creatures.”

Social Media Strategies For The SMB

With cost efficient marketing tactics top of mind, many SMB retailers have turned to social media to initiate customer engagement and support acquisition strategies. In fact, according to the American Express Monitor, more than half (55%) of business owners surveyed use social media tools to attract new customers, up from 50% last fall. Platforms being used include Facebook (38%), Google+ (14%) and LinkedIn (13%).

“Social media can create the buzz for products and services as long as the company identifies the influencers who use word-of-mouth to spread the positive,” Kumar explained. These influencers can be identified using the social media analysis frameworks now available [see RTP’s May 22 Newsletter] and recruited by companies with incentives and gamification offers, he said. “The monetary resources needed to engage the social media influencers are substantially lower compared to the traditional marketing campaign. Furthermore, since today’s analysis tools can evaluate and attribute a lift in sales to an influencer’s positive comments, retailers can measure the ROI of their primary social media influencers. And since social media is so targeted, the increased buzz generated in the social media results in higher brand awareness.”

Interestingly, even with these benefits, and conversely to many larger retailers, SMBs generally do not consider a social media strategy as an immediate need; only 27% felt a social media presence is necessary for their companies, according to the American Express Monitor. Similarly, 28% said it is “nice to have” while more than one-third (39%) find it unnecessary. Looking ahead, however, 41% of SMBs plan to increase their companies’ social media presence in the next year.

SMB retailers can use this three-point checklist to harvest engagement and sales on social media:

  1. Provide a ‘win’ for an opt in. Provide customers with an incentive, such as a discount, to encourage them to “Like” and “Follow” you on social media.
  2. Cross promote to get their vote. Present in-store only offers on social networks that can be tracked at the point of sale. This is a cost efficient way to understand the effectiveness of social-to-store efforts.
  3. Consider a Facebook store to give shoppers more. There are a variety of free tools and plug-ins, such as Payvment and TabJuice, that help create a social storefront.

While today’s digitally-empowered consumers present unique challenges for SMB retailers, integral tactics such as social media and daily deal offers are helping to enable their customer acquisition strategies. By implementing cost-effective, versatile technologies that support these tactics, forward-thinking SMB retailers are developing processes to address common challenges and enhance growth initiatives.

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