The Burberry model: why blending online and offline boosts success
Luxury retailers such as Burberry have made no secret of the fact that they are making their flagship stores more like their online counterparts and not the other way around. The reason? Research has shown that shoppers using multiple channels are nearly four times more likely to make a purchase than single-channel shoppers so blending online and in-store experiences in this way can lead to more sales.
So how does this work in practice? Certainly in the retail world, marketers and retailers may find that Pareto’s Principle – more commonly known as the 80:20 rule could offer some insight.
Essentially, Pareto’s Principle states that for many events, approximately 80% of the effects from an event come from 20% of the causes. This rule can also be seen in the world of retail, where it is widely held that 80% of a brand’s sales come from only 20% of customers.
A common misconception with the 80:20 rule is that the numbers have to add up to 100 – but this is not the case. If a brand could better understand the 20% of customers that are delivering 80% of their results, they could significantly increase overall revenue. For example, consider a brand has 100 customers with total revenue of £10,000 and 20 of these shoppers spend an average of £400 each, with the remaining 80 customers spending £25 each. If a marketer can convert just 10% of the shoppers who spend £25 each to shoppers that spend an average of £200 each, then that brand could see total revenue surge by 18% to reach a final total revenue of £11,600.
So the key to improving commercial results is a better understanding of the 20%, but how can marketers swing the balance in their favour?
One observation is that shoppers are using multiple channels across which to spend more than single channel shoppers, so the natural response is that brands need to ensure customers are shopping across multiple channels.
Unfortunately, this is a common misconception that is currently leading to a commingling of the terms multi-channel and omnichannel. To create an omnichannel experience, a brand requires a presence across multiple channels, but omnichannel customers do not require multiple channels. The key difference between multi-channel and omnichannel is that for the latter, all channels are available to the consumer but they themselves are not integrated within them. So for omnichannel, the channels are themselves connected and the consumer sits at the centre of the experience.
So how does an omnichannel work in practice? Essentially, omnichannel is an experience that takes consumers from their current channel of choice and seamlessly chaperones them within an uninterrupted brand experience through digital and physical worlds without the customer being consciously aware or concerned about where one channel started and the other finished.
The issue is that creating this seamless experience requires effort – and a great deal of it. It takes courage for brands to think beyond the seasons’ sell-through and it takes vision for them to predict tomorrow’s trends. Yet more than anything, it takes effort to reach – and remain at – the forefront of customer experience and engagement.
Ultimately, however, if brands embrace omnichannel, they will reap the rewards of their efforts. By implementing an omnichannel experience, companies will find themselves in a positive position to serve all types of customers. This includes the preferences and habits relating to the 20% that make up the most valuable customers – enabling them to focus attention on these more effectively – and obtaining a better understanding of what actions they can take to motivate the 80% who do not spend as much and enable them to spend more.
Regardless of how marketers use the benefits of omnichannel, this approach requires better identification of customers, since to do it correctly and to tie their experiences together requires tight data integration and a true understanding of their needs. But if marketers can get these factors right and successfully adjust the 80:20 balance in their favour, omnichannel marketing is a strategy that will produce brands with positive financial rewards and a better all-encompassing experience for consumers.
Ollie Bath is co-founder and UK managing director of CloudTags