Even without a clear understanding of exactly how Internet of Things (IoT) works, savvy retail consumers have a cursory understanding that the use of sensors and RFID technology are on the rise. For instance, consumers have likely noticed how easy it is to track product delivery. They may not know that a behind-the-scenes combination of IoT and GPS is tracking their package and sending real-time notifications on the mobile app, they’re just pleased that it improves their overall customer experience (CX).
According to a recent McKinsey study, “The Internet of Things: Catching up to an accelerating opportunity” IoT will produce between $5.5 and $12.6 trillion in economic value globally by 2030, including $710 billion in the retail sector.
How much of a slice of the nearly three-quarters of $1 trillion in value a brand is allocated may depend in large part on a brand’s acceptance of IoT as a transformative agent of change vs. a novelty. The dividing line will be in how well IoT helps to form a deep understanding of a customer, rather than present standalone personalization.
For example, a common retail use case today is to use a mobile app notification to provide an in-store customer with an offer on a product that is in the same vicinity as the customer’s present location, e.g. this customer is near the T-shirt section, here’s an offer for a T-shirt. But is that offer based on moving excess product, or is it based instead on having a real-time, in-depth understanding of a customer journey, in which IoT just happens to be the last mile to the consumer?
IoT and a Golden Record
To help understand how to maximize IoT value, the McKinsey study details key opportunities and challenges, one of the latter being a recognition that capturing value at scale from IoT requires “vigorous performance management” as well as collaboration to “change people’s behavior, systems, and processes.” Another hurdle, according to the study, is that many companies are still conditioned to treat IoT as more of a technology project than a driver of change.
To overcome these barriers – changing behaviors, systems, and processes as well as applying performance management – requires that brands treat IoT and RFID data as essential components of a golden record. Yes, IoT data may play an important role in manufacturing, supply chain, sales, and condition-based management, but giving it equal weight as far as what it says about a customer’s preferences, behaviors, and intent is vital for using IoT to enhance CX.
Take the use case of using a mobile app to make an offer for a T-shirt when the in-store customer is in the T-shirt aisle. A brand could make an identical offer to every customer in the T-shirt aisle who happens to be on the mobile app. Yes, it checks off the IoT box, but it doesn’t offer a differentiated, personalized experience in the context of a unique customer journey. A customer who just purchased a T-shirt on a different channel might not appreciate the offer. Or perhaps there’s another customer on the app who isn’t interested in T-shirts at all, but is just making a detour to the sweater aisle or as a bridge to another department outside of apparel. And just that morning the customer browsed the brand’s website for sweaters.
IoT and a Closed Loop of Data, Insight, Action
In recognizing IoT as a component of a golden record, a customer’s journey through a store is analyzed in parallel with other signals and behaviors from every other channel, and a next-best action delivered only if it has the highest probability to produce the desired outcome. A mobile app notification during an in-store visit may not necessarily be the next-best action, in other words. But learning how a customer navigates a store – where a customer lingers, the route she takes, what she tries on – is indispensable for predicting with a higher degree of certainty how the customer journey will progress across a totality of channels. Analyzing in-store behavior in conjunction with online browsing history, for example, may inform how a brand responds to an abandoned shopping cart.
Eliminating data siloes to incorporate IoT as a real-time component of a golden record is vital. It is what the McKinsey study means by changing behaviors, systems, and processes and to move away from implementing IoT for IoT’s sake. In this way, an IoT use case can be measured for how it helps propel a customer along a journey.
Ultimately, IoT then becomes part of the closed loop cycle of data, insight, and action that continuously enhances CX. With IoT helping to formulate a better understanding of a customer in the context of an individual journey, a brand has a higher level of trust in the veracity of a golden record. Better data yields better segmentation, campaign design, and execution, which in turn generate better responses and more intended outcomes (higher average spend, reduced churn, CLV, etc.). Segmentation improves again and the cycle continues.
Note: In a follow-up blog we will explore other IoT use cases, and how brands are using it to differentiate on customer experience.