The chatbot cometh

New approaches may finally be transforming conversational AIs into something customers can actually relate to…

Talking to a human in a contact centre rattling off scripted, robotic answers can be maddening enough at the best of times. But what customers were found to dislike even more, according to a recent YouGov survey commissioned by Webhelp, is interacting with actual machines. The survey found that 84 per cent of UK respondents would rather make a complaint to a human, rather than an automated service. And 71 per cent said they wouldn’t even use a brand if human customer service representatives weren’t an option.

But the days of the run-of-the-mill chatbot that keeps repeating the same question when it can’t match anything in our sentence with the keywords in its knowledge base could be numbered. The next generation of automated assistant is the intelligent virtual agent, or IVA. IVAs use methods such as natural language understanding (NLU) and natural language processing (NLP) to better understand and respond to users’ queries, and “intent detection” to more accurately identify what users want. They can also remember past conversations with individual customers, helping them stay in context. These techniques go some way towards the holy grail of actually being able to hold a natural conversation with a chatbot that sounds more or less human, and where you don’t have to chop up your sentences into smaller chunks or worry about your accent.

But we don’t speak to IVAs for a nice chat. We want them to resolve our problems quickly, and preferably with as much efficiency as their human counterparts. And IVAs have had a spotty record at this until now – one was given its marching orders by Swedish digital bank Nordnet, for example, which fired its digital assistant from a customer service position two years ago as her performance underwhelmed both customers and colleagues.

Measuring an IVAs performance is essential to its technological and career advancement. However, Haptic, an AI technology company, maintains that the traditional metrics of customer satisfaction – such as net promoter scores (NPS) or customer satisfaction scores (CSAT) – don’t really give us a clear understanding of how intelligent the conversational AI actually is. Haptic’s proposition is a new metric, called intelligence satisfaction, or iSAT.

In Haptic’s framework, the intelligence of an IVA can be calculated by subtracting the number of calls with a negative outcome (customer drop-offs resulting from negative experience) from the number of successful calls where the query has been resolved. (So called neutral calls don’t feature in the equation, as here the customer drop-off is regarded as a consequence of low customer intent.) Certain factors – such as phrases repeated by both users and the IVA, or the frequency of swearwords during interactions – can make unsuccessful conversations easier to identify. To improve on the conversational AI’s performance, the next step is to establish whether the interaction failed because the AI couldn’t find the data that could have provided a relevant answer, or because the question fell out of the scope of the virtual agent’s competence. Once this has been established, changes in the chatbot’s design can be made accordingly.

But will customers be more willing to interact with conversational AI once they realise that IVAs can get things sorted out for them quickly, 24/7, and with only a thin margin for error?

Intelligent agents obviously aren’t sentient beings, but they can exploit sentiment analysis to “understand” how humans feel, as well as influence their attitudes and behaviour. A team of Japanese scientists even found that the human brain’s predisposition to anthropomorphise – to read human emotions and intents into anything animate or inanimate – may work in conversational AIs’ favour. In their experiment, their cognitive agent appeared on the screen as a chick with human facial features that could express positive human emotions.

The team’s finding was that receiving a congruent positive response from the IVA – a well-timed smile, for example – “can overcome the effect of believing that the agent is a computer program”. By imitating the positive facial expressions of the person it converses with, AI could activate the medial prefrontal cortex of the human brain, where anthropomorphism resides. As contrived as this may sound, it could serve as a key to the human acceptance of IVAs in the long term. And given the attachment we can develop to our smartphones, and the tears we shed over the death of “Oppy” the Mars rover, the new conversational agents are definitely in with a chance of being accepted to some degree by sentimental humans.

If the choice customers need to make is between a kind and competent human and a limited chatbot, it’s a no-brainer. But if they need to choose between an overstretched and inconsiderate individual, and an artificial mastermind capable of something resembling empathy that perhaps tries to assuage the distraught customer with a special offer – and that can simultaneously authenticate their identity though their voice or mouse movements – consumers could well be nudged into finally accepting these robot assistants for what, if not necessarily who, they are.

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By Zita Goldman

Five secrets to retail success beyond 2020

Huge swathes of consumers have turned to online shopping and, as a result, retailers across the globe are rushing to accelerate their digital transformation. The race is now on to create seamless cross-channel in-store and online experiences for their customers.

Digital channels are booming – however, brick-and-mortar stores will still play a significant role in ensuring long term success for forward thinking retailers.

So what are the secrets to this success? And what do you, as an ambitious retailer, need to be doing right now to safeguard success beyond 2020?

Here are the five essentials every retailer on the planet should be prioritising:

1 – Best-in-class CX

Now, more than ever, delivering a first-class experience – whether physically or digitally – should be the number one priority. Your customers are more informed and more demanding than ever before. They expect the convenience of all sales channels having the same information and being connected. They also expect your associates to have enhanced product and inventory information at their fingertips (your associates want this too) so they can give customers what they want when they want it. This can be done by turning your point of sale (POS) into a point of service and making store associates a big part of delivering a unified commerce experience.

From building loyalty, growing trust and creating compelling in-store experiences, the more you prioritise CX the more successful you will be.

2 – True unified commerce

It’s vital you put systems in place now to accelerate your journey towards unified commerce. Retailers who implemented technologies to allow for inventory accuracy and cross-channel visibility prior to 2020 – with enhanced ship from store capabilities – were able to perform better through the pandemic than those retailers who didn’t have the same visibility.

With real-time access to the same product, stock, order and customer information everywhere, all stores and online sales channels are unified. Alongside, with the ability to sell and fulfill everything from anywhere, you’ll never miss a sale and you’ll be able to give your customers what they want, when they want it.

As we said above, you need to provide customer convenience across stock, purchase, payment, delivery and return. And you should be able to use tech to provide a personalised CX, for example through levelling up your clienteling by integrating your POS with a CRM solution.

3 – Improved inventory management

Unified commerce begins with your inventory. That’s why your POS needs to communicate in real-time with your other systems. This means you always have one true view of your complete inventory across all channels.

It’s a problem store associates face every day. Even if they can check stock levels in another store, they have no real idea if they are accurate, which leads to a lack of trust in the system. The same applies to customers. They may be able to check stock online but, because it’s not real-time data, there’s no guarantee it’s accurate.

When you have a unified commerce platform – with real-time data shared across all channels – it’s simple to view and access all inventory everywhere and manage orders in a cost-efficient way, and you’ll use less capital by maximising inventory availability and minimising excess inventory.

4 – Flexible fulfillment

When many retailers went into lockdown earlier in the year, they didn’t know what stock they had in their lockdown stores, and had no way to use those stores as distribution or fulfillment centres.

It led to long delays for customers receiving their goods, it meant stock was static, and retailers were faced with a scenario where products were “out of stock” online yet “in stock” in locked-down stores (where retailers had no way of selling them).

This is why enabling the ability to ship from store, create micro-fulfillment centres, and turn closed stores into dark stores is one of the most important things you should be doing right now – both to be ready for the “new normal” and to safeguard your business in the event of further disruption to the status quo.

To meet your customers’ needs in a cost-efficient way, you need to not only amplify your store fulfillment possibilities with options to buy online and pick up in-store, to buy, reserve and pick up in other stores, and with “endless aisle”, where the customer can browse items that aren’t in stock but can be ordered on request. You also have to turn your stores into fulfillment centres, meaning e-commerce orders can be shipped from those stores, and that they can ship orders placed in other stores. With e-commerce sales soaring it’s also important for the stores to handle returns of goods bought online. It will keep the costs for returns down and also help turn returns into exchanges and stimulate upsells.

5 – Clear vision and purpose

Consumers crave experience and look to brands with authenticity and honesty at their core. 2020 has only highlighted brands that do not have a clear focus on their core consumers and that don’t deliver a compelling and consistent point of view, executed relentlessly and driven by a “benevolent dictator” style of leadership, that keeps strong even when the storms come. Brands becoming “verbs” and not just “nouns” still highlights the need to stand for something descriptive and action-oriented rather than just being a name.

Embracing technology and digitalisation will empower your associates, turn your customers into brand champions, and lay the groundwork for a thriving, successful business both now and in the future.

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If you’d like to learn more about the benefits of a unified commerce platform and a Retail POS built with cloud-native technology, explore more here.

A holistic retail experience for both brands and customers

How the decline in Chinese tourists around the world has hit the luxury sector

Xiaoqing Chen, University of Aberdeen and Carol Zhang, University of Nottingham

Large groups of Chinese visitors have become a pillar of the global tourism industry. Coronavirus has not only put paid to this enormous source of income for major cities and sights around the world, it is having a massive knock-on effect for the luxury goods business.

For any tourist, buying souvenirs is a key part of the holiday experience. They might be trinkets such as keyrings or fridge magnets, a T-shirt emblazoned with the slogan “I ❤ NY” or a Russian matryoshka doll. But a significant number of Chinese tourists prefer to spend large sums on luxury items, such as designer clothes and accessories, when they travel overseas.

Roughly one-third of global spending on luxury goods was credited to Chinese consumers in 2018. Consultants at Bain predict this to rise to 50% by 2025. Before the coronavirus pandemic, nearly all of this £85 billion worth of spending (92%) was done outside the Chinese mainland .

What’s more, most of this overseas shopping is done by women between the ages of 19 and 29, according to a 2018 survey of over 750 million Chinese people. From our interviews with many of these women, it seems clear that as the Chinese economy recovers from coronavirus they will return to spending. Where they are able to travel and spend will have a big impact on economic recoveries from the pandemic.

The awakened generation

In China, demographic cohorts are defined by decades. Rather than millennials or generation Z, in China it is the post-90s generation (those born in the 1990s) that have become the core driver of growth for many industries, including luxury, leisure and travel retail.

China’s post-90s generation are the direct beneficiaries of the country’s economic reform that began in the 1980s, which opened up the Chinese market to the rest of the world and spurred enormous economic growth through the 1990s to today. Girls, in particular, benefited from growing up at a time when China was more connected with the rest of the world and experienced significant cultural changes, including a decline in the historic preference for sons. The one-child policy played a part in this, too.

Compared with previous generations, which are more family-centred and self-effacing, post-90s Chinese women are self-confident, independent and well-educated. They are also keen to express themselves through consumerism. This was evident in the conversations we had with high-spending young women. For them, buying luxury goods was a key part of their identity and self-expression. When travelling, it was one of the most important parts of their holiday, if not the actual purpose for their trip.

Around the world, people buy and display luxury goods – from fancy cars to expensive watches and handbags – as status symbols. This is especially the case for the post-90s Chinese woman who seeks to distinguish herself from others in various ways. Vivian*, who’s 30, has a master’s degree and works in finance, told us:

“Buying luxury branded products is very personal. It’s my handbag. I do not want to look like everyone else.“

Travelling further afield to Europe is a way to buy luxury goods that distinguish themselves from their peers, as different designs are available to those in China. As well as the premium shopping experience, the people we spoke to repeatedly talked about the importance of having unique items. Ava, a 23-year-old student, said:

“Those special designs somehow are much more beautiful than those basic items that are available everywhere [in China]. They also reflect my lifestyle as a well-travelled person. When I carry it around, people know I am special.“

We also found that for the post-90s Chinese woman who travels abroad, buying designer items in the country where they originated from was seen as part of the authentic experience. As Emma, who is 23 and works in fashion, put it:

“Buying handbags in Paris makes me feel like a French lady. It’s a fun and authentic experience. It is a very different experience to purchasing them in Shenzhen.“

‘Revenge spending’

The coronavirus pandemic has not reduced this appetite among China’s wealthy post-90s generation to travel and spend. A survey from April this year found that almost 60% of this group who had delayed their purchase plans would return to spending once the outbreak was over in China. And a number of luxury businesses reported a big rise in spending following the easing of lockdown restrictions in China, including jewellery brand Tiffany and fashion house Burberry.

While overseas travel restrictions will significantly reduce the outbound tourist market for the time being, many brands will be hoping for a similar bout of so-called “revenge spending”, as people make up for the time spent cooped up in lockdown.

Having been the first to be hit by coronavirus, China is the first major economy to show a recovery. And as the world’s largest (and still growing) source of travellers and luxury shoppers, China will be the engine of the post-pandemic recovery for both these sectors. Both should be aware of what motivates this younger generation to spend in order to tap into it. Growing tension between the west and China, along with struggles to contain the pandemic in the west, may see other Asian countries as the first to benefit from outbound Chinese tourists.

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* Names have been changed.

Xiaoqing Chen, Lecturer in Management, University of Aberdeen and Carol Zhang, Assistant Professor in Tourism Marketing and Management, University of Nottingham

This article is republished from The Conversation under a Creative Commons license. Read the original article.

The future of retail will usher the rise of omnichannel

In a time of increasing change for retailers and consumers, retail trends have been accelerating at a much quicker pace than previously envisioned. However, one thing still rings true: consumers need a reason to change ingrained behaviours.

But almost overnight, the pandemic and the great digital shift brought with them the forceful push that mobile payments needed. Consumers were in many ways forced to figure out how to use digital wallets for their everyday needs, such as groceries or food deliveries. QR code scanning, which didn’t have much traction in the US, is suddenly popping up everywhere. Merchants are also aggressively promoting the use of digital wallets and touchless checkouts to promote a safer shopping environment.

As we look ahead to the future of omnichannel retail, education, marketing and customer experience will be key drivers of adoption.

Capturing the new customer 

The near-overnight transition of the digitally minded consumer has been the biggest and perhaps trickiest thing for retailers to adapt to in recent months. What consumers want, and how they want it, is changing in front of our eyes. In terms of penetration, we know that 68 per cent of consumers are shopping digitally more often – and using mobile wallets more often to do it¹.

We’ve seen during the pandemic a shift from out-of-home spending on things such as entertainment, dining and shopping, to home improvement, home entertainment such as video streaming or gaming, and food delivery.

Meanwhile, demand for digital gift cards has been steadily growing, and we’ve seen it accelerate due to the pandemic. In addition, we’re seeing consumer interaction with retail apps consistently rising – about 61 per cent of US consumers now make purchases within retailer apps, a significant jump from the 21 per cent who did so pre-pandemic. Meanwhile, the number of consumers who’ve never used a retailer app has dropped significantly, from 32 per cent pre-pandemic to only 13 per cent today^[1].

It remains to be seen which of these shifts remain long-term, but our research indicates that 78 per cent of consumers will expect permanent changes to their shopping experience, and that 44 per cent are unlikely to return to the way they used to shop¹.

And if those customers aren’t going to go back to pre-pandemic habits, then merchants who wish to serve them have no choice but to forge a more digitally enabled path.

The future is omnichannel

It’s no surprise that in today’s difficult times, consumers are concerned with budgets, but perhaps even more concerned with choice and control when it comes to how and where they spend. Increasingly, those factors determine where customers choose to conduct commerce. For example, payments with points are up 29 per cent among consumers Blackhawk surveyed^[2].

The actual payment process is becoming more invisible, clearing a path for a more controlled and dynamic customer experience. We need to continue to make it easy for consumers to pay and move on with their day, removing barriers such as having to remember card or account information, and streamlining the credential and authorisation process to further minimise those pain points that may send a consumer elsewhere.

In large part, this is why the entire retail and payment ecosystem needs to start thinking differently. We see immense opportunity to offer true omnichannel retail experiences, and programmes that increase the capacity to accept new payment resources such as barcode-based “cash payments” are making physical purchases for digital goods even easier for consumers.

Brands that are thriving are those actively looking for ways to overcome new challenges by creating fresh, seamless experiences to engage customers across the channels they find most valuable. It will be key for retailers to invest in their digital platform, expand and ensure payment option parity across their physical and digital channels as well as deliver a seamless, truly omnichannel experience.

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Learn more about Blackhawk’s capabilities by visiting our website.

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By Helena Mao, VP, Global Product Strategy, Blackhawk Network

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[1] “BrandedPay: How People and Brands Connect Through Payments” is based on the findings of an internet-based survey conducted by Leger on behalf of Blackhawk Network between February 12 and March 17, 2020. The sample size included over 12,000 respondents in eight countries.

[2] The “COVID U.S. Consumer Preferences” study is based on findings of an internet-based survey conducted by SurveyMonkey on behalf of Blackhawk Network on May 22, 2020. The sample size included 1,019 U.S. respondents.

Open for business: Why the retail sector needs to keep evolving to survive

The current recession, triggered by the global pandemic, hasn’t quite reached the depths many have predicted – yet. But the retail sector, and high streets in particular, have been disproportionately hit by government-enforced shutdowns. Many are struggling in the current climate. For instance, Scottish retailers lost £1.9bn in sales in the first four months of the COVID-19 pandemic.

However, the sector is nothing if not agile and innovative. But there are conflicting fortunes within the retail sector. For instance, food sales were up 3.3% year-on-year in July (and an average of 8% in the previous four months). And while they have been affected by the reopening of the hospitality sector, food sales remain solid and have benefited from a strong online offering. Figures out from Waitrose show 77% of British consumers now do at least part of their grocery shopping online.

As with all times of economic hardship, success stories emerge as businesses adapt to new market conditions. In this article, I will take a look at the significant part marketing will play in the retail success stories that will emerge as a result of the COVID-19 pandemic. And I will explain how the right promotions could save many of the retailers that find themselves in a precarious position in the future.

Define your market

Just as with offices across the country, retailers rushed at breakneck speed to digitise their business as lockdown took effect. For some, it was the creation of a new online offering that had previously never existed. Others rapidly updated and optimised their current online presence to deal with spiraling demand.

The enforced change to buying habits doesn’t look like abating any time soon. Many people are still afraid to venture into crowded public places as frequently as they did before.

Now is therefore the perfect time to reassess your market and truly understand your customers. The digital marketplace has become even more congested, and as such it is increasingly important to define your customer.

My colleague Mark Dodds, chair of CIM’s food, drink and agriculture sector interest group, has said: “The issues for retailers going forward will be mainly internal and strategic.  E-commerce for some of the high street retailers has not been their most profitable channel because of the large infrastructure and systems investment required. But the pandemic may have changed this and, as things settle down, online has the opportunity to become a more important profit stream.

“If retailers still believe that the money is to be made in store, where they can attract consumers with impulse buys, the role of the marketer will be to convince consumers that it’s safe and hassle-free to enter their stores.  Depending on how government guidelines develop, this may be a challenging message to get across.

“If the future is online, then we will see a shift in spend from ‘traditional’ media to more personal and direct messages encouraging those who have not yet done so to give online a go.”

Invest in your brand

Defining your market is essential for large and small retailers. However, so is assessing your brand to make sure your vision and values are still relevant to your customer base, according to Jamie Malcolm, retail marketing consultant to among others Samsung, Red Bull and Watchfinder.

Jamie told me: “Spending a bit of time on your brand vision and purpose will be incredibly valuable. There will be pressure to attract customers and to spend money on advertising, which is understandable. However, if your brand is misaligned, you will miss your target market, which no one can afford to do in these challenging times.

“This brand assessment will also help you define your ‘why’, which will strengthen the authenticity of your messaging.”

Build an emotional connection

The 2008 recession saw a change in customer demand. There was a greater emphasis on authenticity and purpose. Consumers wanted more from the brands they engaged with. They wanted an emotional connection. This hasn’t changed as we go through the COVID-19 pandemic.

Jamie Malcolm added: “Brands need to build on the emotional connection they have established with their customers. For instance, local marketing is going to be vitally important. During the first lockdown, by necessity people relied heavily on and supported their local suppliers. Despite our globally interconnected world, there will be opportunities to build your business through your local market.

“Communities, both physical and online, will also be a vitally important channel for your brand. Just as people came together to help each other during the lockdown, as we advance this will continue to be the case.

“An authentic brand will be part of this community, not trying to sell but to support its members. Find your community, become part of it. This isn’t going to make an immediate impact, but it will provide the building blocks for long-term survival and success.”

Focus on retention

Relationships are the key to success for retailers in these challenging times. You will probably have an existing customer base: communicating with them is crucial.

This is perhaps not going to drive sales today. But doubling down on these relationships will build the emotional connection you are looking for. It is also likely to increase referral business, which is always valuable.

Maximise your high street experience

The lockdown has heightened the pressure on physical shops. Increased investment to meet social distancing measures and to protect staff, added to reduced footfall, has undoubtedly taken its toll on many well-known names.

However, physical retail remains important. In May, online share of retail spending was 33.4%. This reduced to 28.9% by July. So how can marketing help the high street retain its relevance and make it through these tough times?

Susan Rose, Marketing Director at Slaters, said: “High street retail has been amongst the hardest-hit sectors during COVID-19. Customer experience is now critical to the in-store approach for retailers, large and small. Organisations also need to increase their research to identify niche opportunities. There is a definite opportunity for independents focusing on niche markets.

“So many of the high street stores matched those in the out of town shopping centres. We now need investment to make the experience our primary focus.”

The rise of retail-tainment

It’s time for ‘retail-tainment’. The in-store experience now, despite the challenges of face masks and social distancing, has to inspire and entertain. If the transactional nature of the stores is reducing, then the entertainment factor has to increase.

The management of queues will be important. With a competitive market, retailers may find that people have little patience for waiting unless there is some benefit or distraction to keep them entertained and ensure that their customer experience is a pleasant one.  If queues and one-way systems are the new norm, there will be less browsing and fewer impulse buys. The role of the staff will be paramount in managing expectations and ‘upselling’ once the customer is in-store.

The shopping experience now starts well before the customer walks through the door. Retailers need to ensure that whenever it does start, their customers feel engaged, important and happy to spend. The experience can go right back to customers’ email in-boxes where they should receive communications about what to expect when shopping in-store, how queues will be managed, and what steps retailers are taking to ensure a safe and happy shopping experience.

If retailers can take all this on board and develop engaging marketing campaigns to attract consumers and address any fears they might have, the retail sector could well surprise the analysts in the coming weeks and months.

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If you’re a marketer in Scotland or in any UK region, find out how you can join CIM. Or take advantage of our online training.

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By Ewan Anderson, CIM Scotland’s board member and vice chair of communications