Carlos Castellanos

16 November 2020

4 min read

Companies that want to flourish and grow in today’s increasingly digital marketplace need to align product, service, and brand around customer experiences. This customer-centric alignment recognizes that traditional mass marketing is giving way to more personalized and direct-to-consumer solutions.

An enterprise that wants to remain competitive also must refine its sales strategies to reach a diverse consumer demographic. Investing in service touchpoints – that go beyond user experiences with a product—is essential for resonating with prospective customers, and for building brand loyalty.

As the economy accelerates into a new age of experiences and the world grapples with a new normal, companies everywhere are trying to figure out how to optimize their channels for delivering customer experiences.

Optimizing service touchpoints

Brands that rely on retail partners are increasingly challenged by store closures that result in fewer physical touchpoints. Discounted inventory—often flowing from bankruptcy fire sales – is also flooding the market. That puts downward pressure on pricing and can jeopardize a brand’s ability to command premium prices. In-store customer experiences are also suffering as physical retailers cut costs by implementing measures such as reduced staffing and deferred on-site maintenance.

Service touchpoints include both physical and digital interactions between a brand and its customers. Companies can build brand loyalty by reducing friction and adding value at every step along a customer’s journey—despite a reduction in traditional retail sales channels.

While physical retailers still play an important role in connecting brands with consumers, their importance in the value chain is waning. That means it’s mission-critical for brands to partner with strong retailers— such as Nordstrom and Best Buy—and reduce reliance on struggling chains, like J.C. Penney and Sears.

Companies that recognize the need to build brand loyalty are also increasingly focused on service touchpoints that include everything from physical connections – such as brick-and-mortar stores and product installers—to digital connections—such as online storefronts and consumer financing.

Brands such as Ikea are increasing their control over the entire customer experience, including both physical and digital touchpoints. The company’s goal is to listen to its customers, to learn, and to adapt its business strategies in order to create unique consumer experiences.

Ikea, like many other companies, is finding new ways to reach consumers, in addition to traditional brick-and-mortar stores. In order to control physical touchpoints, for instance, Ikea acquired TaskRabbit, a home handyman service. Ikea also developed an augmented reality app to help customers visualize products in different rooms.

Investing in service touchpoints—that go beyond user experiences with a product—is essential for resonating with prospective customers, and for building brand loyalty.
Benefits of touchpoint optimization

Brands are optimizing physical and digital touchpoints in order to better control customer experiences to build loyalty. Captive touchpoints enable companies to control how and where their products are sold. And pricing control helps to curtail promotional pricing that can erode margins.

Nike is an example of a brand that is taking more control over its physical and digital touchpoints. The company’s strategy relies heavily on investing in direct-to-consumer sales channels. But as Nike navigates a changing retail landscape, it is reducing the number of retail stores it sells through and increasing investment in its own branded storefronts, both on-site and online. The company is also creating other innovative touchpoints, such as a subscription service for kids, and Nike Fit, an augmented reality app for sizing.

Good retail partners provide brand synergy by investing in technology to optimize supply chains and e-commerce. Brands need sales partners that are investing in customer-friendly physical touchpoints, and that offer added-value post-sale service and support. Integrated touchpoints across channels are essential, as is the ability to sell products at list price—without deep discounting.

The direct-to-consumer solution

Direct-to-consumer (DTC) sales are an increasingly important option for consumer brands. Companies like Nike are using a blended approach that includes traditional retail outlets and its own DTC channels. By contrast, Lululemon Athletica is indicative of a pure DTC model. Instead of relying on retail partners as intermediaries, Lululemon forges direct connections with consumers.

Companies like Lululemon are using DTC touchpoints to build customer loyalty and to help maintain premium price points. The company’s ability to connect with consumers is resulting in high operating margins that look more like what a luxury brand, like Tiffany, would command—not like the lower margins typical of other apparel companies.

Lululemon invests heavily in company-controlled physical and digital touchpoints. The Canadian company has developed a powerful and effective omnichannel sales strategy. Its arsenal of direct touchpoints ranges from about 500 of its own stores to websites, mobile apps, and yoga classes.

Most recently, Lululemon acquired Mirror, a smart fitness company that could provide access to hundreds of thousands of subscribers—every one of which is also a prospective apparel customer. In addition to providing a pipeline to new customers, the acquisition enhances Lululemon’s digital and interactive capabilities.

Touchpoint transformation

Lululemon and Nike are indicative of how brands are optimizing their sales strategies through physical and digital touchpoints that better connect with consumers.

As the retail landscape continues to shift, companies need to eliminate weak touchpoints that create customer friction and tarnish brand value. Instead, those companies should focus on maximizing value by partnering with strong retail partners and by developing their own direct-to-consumer solutions.

The combination of strong partner and omnichannel DTC touchpoints enables brands to control their interactions with customers at every step of the buying journey—from browsing and purchasing to financing and post-sales support.

In a world where the retail landscape is shifting, consumer behavior is changing, and the economy is struggling with pandemic-induced lockdowns, innovation around how to best reach consumers is more important than ever.

Carloscastellanos
Carlos Castellanos
Innovation Manager

Carlos advances the thought leadership of the Chief Innovation Officer of Samsung Electronics by drawing insights from industries, consumers, technologies, and emerging markets. Prior to Next, Carlos was an Associate Director at UBS Investment Bank where he covered US Retail and initiated research coverage of Mid-Cap Banks. He was also an investor at Crystal Rock Capital Management (Consumer & Media) and Principal Global Investors.