Clienteling Pilots - Avoiding Six Potential Pitfalls

Clienteling Pilots

Avoiding Six Potential Pitfalls

Executive Summary

Today’s economic challenges have more and more retail companies looking for opportunities to increase top-line revenue with in-store initiatives. The promise of increased sales through Clienteling is extremely attractive in attaining these goals. However, capital is more constrained than ever, inducing senior managers to look for early proof that projected returns for any new technology or process improvement are in fact achievable. These cash starved organizations are equally concerned with the up-front costs associated with any new revenue-enhancing investment. As a result, more companies are looking to start small and pilot technology initiatives in order to justify the expense of moving to a company-wide roll-out. They are in essence “buying an option” against the total cost of this large scale investment.Pilots typically have a few important advantages:

• Lower initial investment
• Knowledge and Feedback (KPI’s, Business Process, Training Requirements) 
• Subject to specific conditions, a way “out” if the pilot is not successful

However, pilots often have distinct disadvantages – not the least of which is gaining adequate corporate focus and alignment with core organizational objectives. Since pilots necessarily have a smaller initial investment, often they do not gain appropriate levels of visibility across key areas of the enterprise. Similarly, because many pilots are approached as a “test” of a solution’s capabilities or usefulness, the initiative can be marginalized suffering from inadequate organizational priority, resources, focus or planning. If corporate goals, measurements and success-based accountability are not put into place early and consistently communicated to all constituents regularly, pilot initiatives often wander aimlessly. This results in many solutions never being given a real opportunity to provide their potential corporate value. 

Pilots require specific goals and a well defined path that the “rank and file” can follow to achieve success. Defining, communicating, measuring and managing your team will require a well designed change management processes. While the final roll-out of an implementation may be designed differently than a Pilot program, the Pilot must have a comprehensive multi-disciplined program as its foundation, which includes appropriate caveats, goals, rewards and risk identification.

The objective of a pilot needs to be exactly the same as the objective of the future broader full roll-out, albeit on a smaller scale. As a result, a significant percentage of the work needed to ensure long-term enterprise success must be performed early in the pilot initiative. To do anything less undermines the validity of the test, and can actually negatively impact the likely success of a subsequent roll-out.The six pitfalls to avoid during a Clienteling pilot include:

• Lack of Executive Sponsorship / Involvement 
• Lack of Defined Goals and Measurements of Success 
• Inadequate Resources, or Authority/Accountability Disconnect 
• No Mitigation Strategy for Potential Impediments 
• Lack of Full System Integration 
• Unmanaged Cultural Change / Lack of Program Design 

By recognizing these potential pitfalls in advance and by developing a plan accordingly, retailers can be assured of seeing the true benefits of a pilot, and can feel confident that their results are truly indicative of an enterprise wide roll-out. 

Six Pitfalls to Avoid

What follows is a discussion of six common pitfalls to pilot initiatives that may limit the success of a pilot, and negatively impact the desired results. The common theme throughout pertains to effective planning and execution of a cultural change management program. Unfortunately, well-intentioned retail decision makers often embark on a pilot, inspired by the promise of dramatic business improvement without a clear understanding of what it will take to change the established cultural norms and behavioral patterns to make the project a success. All too often the amount of preparation and oversight required to deploy a pilot is deeply underestimated. Failing to recognize and address these pitfalls will lead to less than optimal pilot results or, in extreme cases, failure of the pilot to succeed in any meaningful feedback for a subsequent rollout. 

 

1. Lack of Executive Sponsorship / Involvement

Executive sponsorship, and the specific understanding of this sponsorship to all constituents at the store level and above, is imperative to pilot success. The pilot initiative must be elevated as a top agenda item for senior management. Without top-down ownership of the initiative, other store priorities (i.e. floor moves, markdowns, staffing issues and other operational tasks) will inevitably supersede the extra effort of learning and using a new tool. While these other operational tasks are important, they don’t generate incremental revenue. Simply put, Clienteling is just too important to growth to be vying for leftover mindshare. Once store personnel understand that senior management is fully invested in the outcome of the pilot, in-store commitment and willingness to strive toward success increase exponentially.

Keeping the team aligned and committed requires consistent down-stream communication from Executive Management that highlights pilot objectives and projected business benefits. As with any new initiative, results are ensured by instituting accountability down the chain of command.

2. Lack of Defined Goals & Measurements of Success

Without clearly defined goals and a means to measure progress your pilot initiative is likely to wander aimlessly. If you want an associate to get from point A to point B, it is imperative that you tell them precisely where point B is, and that you ensure that they have the tools and abilities needed to reach that destination.

In order to determine the specific Clienteling activities that will provide the greatest benefit, start by articulating your corporate goals, and extrapolate that into specific in-store goals. It is important that the number of initial goals is limited to that of top objectives that can be reasonably achieved; usually 2-4 goals are best. Once the goals have been established, determine how the success of these goals is to be measured and how these Key Performance Indicators (KPI) will be communicated. In-store goals should map directly to a corporate goal.

     Example     
     Corporate Goal = Increased Frequency
     In-store Goal = Outreach results related to Potential Lapsed Customers

After appropriate measurements are determined, the method to deliver ongoing feedback must be instituted for each level of the organization. Corporate and store level KPIs should be visible to executive management, while individual associate and store level metrics are available to the associate, store manager and regional managers.

3. Inadequate Resources or Misaligned Accountability

Constrained capital often plays a major role in choosing to implement a pilot prior to committing to a full roll-out. When resources are tight it is common to staff a pilot with resources borrowed from other projects, and on a part time basis. While appropriate for some roles, it is important to note that there are two critical roles where this will have a significant negative impact. The two roles that require dedicated resources are the IT/Technology Project Owner, and the Business Owner.

Typically, there are an array of technology skills and resources that must come together to implement a Clienteling initiative, but ultimately there is one individual that must own the technical success of the project. This person’s role is to manage all technology aspects of the project, to test and validate all aspects of the project, and to act as the liaison between the stores, IT and the vendor. While this role is not likely to be a full time job for the entire life cycle of the engagement, there are times when the initiative will take up the majority of this person’s workday or workweek. Coordinating the internal efforts involved in integration, implementation, testing, validating, etc., require time and a single minded focus.

The business owner is perhaps the most critical individual resource in most in-store initiatives, pilot or otherwise. This person acts as the coordinator, helping to finalize the overall project as it relates to KPIs, Best Practices, Training Strategy, Communication Strategy, Monitoring Strategy and total program execution. This individual also needs to coordinate the efforts of the Users for application configuration, data validation and User Acceptance Testing.

While it is not uncommon for this person to fall outside of the direct store chain of command, this can create significant issues if not managed properly. This is true for two reasons:

• Accountability – If the stores do not feel they report to this person, the individual has no authority to hold the stores accountable.

• Priorities – While this initiative may be a major priority for the company, without direct involvement from the appropriate chain of command, other day to day tasks, always seem to be of higher priority. 

For these reasons, it is recommended that the business owner is either from the store chain of command, or that Executive Management communicates very explicitly how important the initiative is, and remain fully engaged from the goal setting, training and accountability aspects throughout the life of the pilot. Ideally the Business Owner should report directly to Executive Management related to the initiative. Division/Region managers must also be involved in the planning and execution, and held accountable the actions of their stores, and the prioritization of the initiative.

4. No Mitigation Strategy for Potential Impediments

There are an array of potential impediments to a project that range from overcoming existing cultural issues, to technology shortcomings, to process conflicts, to available resources. Every corporate culture is different, and each retail organization is supported by existing processes and tools. For this reason, there is no easy cookie cutter approach to identifying impediments. Instead prior to moving forward, the business must undergo a thorough analysis of existing processes, technologies and current culture to identify such issues.

Once the potential issues are identified, a mitigation strategy must be defined for each of the key elements. This strategy can then be put into practice and communicated throughout the entire lifecycle of the project.

The following is a brief list of potential impediments:

     1.      Competing agendas and processes

     2.      Unique technology restrictions (lack of access to data, etc.)

     3.      Resources

     4.      Culture and Attitude

Competing Agendas

Of the four potential impediments, competing agendas is the most common, and has the greatest risk of negative impact. When there are competing agendas, associates will tend to gravitate to what is comfortable, or known. This can create unspoken resistance, which is often difficult to identify. If an old technology or manual process delivers some of what is the scope of the pilot, or associates are rewarded for using different methods, or DMs or RMs stress different priorities, there is immediate ambiguity and resulting risks to the project. For this reason, all potential competing agendas should be identified and addressed prior to the pilot initiative.

• Features of the application currently available through other technology
• Features of the application currently available through manual processes
• Reports or key metrics where associates, managers, GMs DMs and/or RMs are being held accountable that may be inconsistent.
• Areas where the current incentive plan may conflict with the initiative
• Cultural issues related to client interactions 

Unique Technology Restrictions

While not often a critical impediment, there are certain technology restrictions that should be identified and addressed in the overall strategy and program design. Examples of such restrictions might include the absence of wireless infrastructure or dead-spots in the stores (mobile only), poor data integrity between existing systems, or legacy POS incapable of running web or third party applications. While some of these restrictions may continue to exist during the pilot (i.e. duplicate customers in the database), they must be managed to eliminate negative feedback or pilot performance. In some cases, simply acknowledging an issue and describing the future roadmap is all that is needed.

Resources

The number of resources in the store is rarely an issue with a pilot (or at least not beyond the constraints with which the store is already faced), however getting IT and Head Office mindshare can be a major problem. As discussed above, the alignment and accountability of resources is critical.

While the above discussion focused primarily on those that will effectively manage and motivate the in-store staff, there are a few other key stakeholders where lack of involvement will hinder a project’s success. Continued involvement from resources in the following functional areas is typically required in a Clienteling initiative:

• Marketing 
• Loyalty / Rewards
• Training 
• Merchandising 

Each of these business areas has a vested interest in the success of most in-store pilots, and each should engage early in the process, and remain engaged through the life of the initiative.

Culture

Cultural issues abound in many retail environments. Some retailers have a very strong sales culture, while others do not. In some environments the “Rock Star” associate is left to do what they wish, while in other environments associate behavior is quite regimented. Ultimately the retailer knows their business best; so a review of strengths and weaknesses must be done using an “introspective lens”. While existing cultural issues should never prevent a successful initiative, they must be recognized and addressed as part of the overall strategy of engagement to assure the appropriate level of buy-in from the associates and management.

5. Lack of Full System Integration

With pilot initiatives there is often a desire to go live with as little capital outlay as possible, attempting to identify business benefit for the least cost. After all, this is a pilot. One element that is often stricken from the pilot budget is fees related to full system integration.

Examples include:

• Direct tie into POS to launch the application
• Direct 2-way access between pilot initiative and other systems – (i.e. POS for client add, client search, etc.)
• Push task capabilities from current Loyalty or CRM system
• Real-time access to product quantities, or product price per store
• Access to data from external sources such as Alterations, Sends,UPS, FedEx, etc.

While lack of integration is unlikely to prevent achieving some level of success for the pilot, there are significant shortcomings inherent in not performing this work, and this should be recognized as a potential impediment to seeing all of the benefits. While it is often not possible to give the associates everything they want on the first day, it is critical that associates understand the long-term intent for the clienteling application and to have some visibility into the roadmap for the future. These system-related issues cannot become excuses for associate to not use the solution.

Perhaps more importantly, lack of full system integration does not provide a completely valid test in comparison to the solution that will be rolled out. Since in most cases, the final solution is to be fully integrated, such a pilot initiative is not reflective of this end state. While it is true that a partially integrated pilot solution should show even greater results once fully integrated, there is a risk of less than optimal pilot results without approximating a final roll-out environment whenever possible.

6. Unmanaged Change / Lack of Program Design

While listed as the sixth potential pitfall, unmanaged change can be the most important item on the list. It is last only as it encompasses aspects of nearly every other item mentioned before it.

Possibly more than any other initiative in retail, successful Clienteling is rooted in cultural change. The change required comes in the form of what is done, how it is done, and how it is managed. While many top associates understand the benefits to clienteling, and likely perform certain best practices today, Clienteling is about institutionalizing core best practices in a manner that is manageable and measurable. It is a combination of process and practice re-engineering.

Without proper change management in place, any pilot is likely to meander; producing less than the desired tangible results. In a worst case scenario, resistance and/or complacency from the stores may become so great that the pilot never truly gets off of the ground. In this situation the retailer is left with very difficult decisions about how to proceed – knowing the benefits of Clienteling, but not being able to prove the results.

While the above five potential pitfalls will impede successful cultural change, even if all five of these have been sufficiently addressed, change will not happen without effective execution.

In general, any change management program must answer three fundamental questions:

1. What are the specific goals?
2. What activities will accomplish these goals?
3. What are potential impediments, and how do we address them?
4. How will associates be engaged, and buy-in accomplished?

Without first answering these questions, the retail organization is failing to lay down the appropriate foundation to develop a plan. Without a planned, measured approach, execution will be ineffective and change will not happen.

Inadequate cultural change management is most frequently a result of insufficient planning and execution of one or more of the following:

• Communication – what is to be communicated, to whom, when and how?
• Training – what will be trained to which segments of associates, at what time, by whom, and how? 
• Monitoring / Feedback – what will be measured, by which method, provided to whom and in what time intervals? What are follow-up measures based on various metrics? How are people recognized, rewarded or held accountable?

Clienteling is all about change management. A complete change management program must be created before attempting to go live in the stores.

Conclusion

Pilot initiatives have very valid business goals and are based on sound business reasons. Unfortunately they are also faced with unique challenges, and if not managed properly are likely to generate less than desired results. Avoiding the six most common pitfalls can assure a successful pilot that generates significant, tangible results. The six pitfalls to avoid include:

1. Lack of Executive Sponsorship / Involvement
2. Lack of Defined Goals and Measurements of Success
3. Inadequate Resources, or Authority/Accountability Disconnect
4. No Mitigation Strategy for Potential Impediments
5. Lack of Full System Integration
6. Unmanaged Cultural Change / Lack of Program Design 

By avoiding these pitfalls through effective change management program design, a retailer can effective manage the activities of the associate, and attain the final end results they desire.