Digital to Physical Marketing Playbook

FOCUS: CUSTOMER IDENTIFICATION

CONTENTS

01/ History of Customer Identification

02/ Online Customer Identifiers

03/ Why Retailers Need to Invest in In-Store Identification

04/ Path to Increase Customer Identification

05/ Offline Customer Identification Tools

06/ Omnichannel Success Tips

07/ Success Stories

08/ What Lies Ahead

PAST, PRESENT, FUTURE Customer Identification throughout History

Any retailer can testify to the importance of knowing your customers and the potential lifetime value of each new shopper. Customer identification has gone from the simplicity of remembering the faces that walk in the door to the scary prospect of mannequins tracking and profiling them. Before we begin wading through the world of customer identification, lets analyze what was done in the past and how value was added to the retailer.

a

FUTURE

FACE TO FACE: Before computer systems, pen and paper were standard tools for record keeping. Customers were identified by name and possibly purchase history or address. During this time, the retailer could not be confident that information was correct, if they would see a customer again, or if the customer was satisfied. Of course, the expectations were not as high as today.1

PAST

MAIL ORDER: The influence of catalog retailers, such as Sears and Hammacher Schlemmer, helped transition society to be familiar with national brands and build relationships with them. Direct mail and catalogs were the only way retailers could reach their consumers without face-to-face interactions. Furthermore, any specific information that the retailer had on a customer could not be used for any remarketing efforts.

EMAIL AND ECOMMERCE: Email today is the login for the majority of accounts, the key identifier of order history with a company, and is where direct advertisements are sent. A single email can be worth anywhere from $1 to $40 or more for a retailer.2 Email has always been seen as an opportunity for marketers to reach people at low cost. Today, it is relatively easy to receive an email address from a customer since retailers will ask for emails at check out online and in stores. However, prior to any purchases or venturing onto a website, interested customers are seldomly identified by retailers.

DIGITAL IDENTITY: New ways of identifying customers are constantly emerging, some - such as recognizing customers whose phones are searching for in-store Wi-Fi and the use of cookie IDs to track intent data during online shopping - are even becoming commonplace. Retailers have the potential to collect large amounts of data on current and potential customers. However, what methods are actually worth it and how does one start capitalizing on data? What methods are dying out and what new ones are emerging? Join us to find out how to take advantage of present methods and prepare for the future.

PRESENT

ONLINE CUSTOMER IDENTIFIERS Passive Identifiers

COOKIES: are text files stored in a browser which track one’s movements on a site and remembers selections one made (such as login or preferences) from previous visits.3

PROS: The retailer gains data about how customers interact with their website across multiple visits. This is comparable to seeing what aisles are crowded or what displays are not being seen in a store.

CONS: Little information about the actual user can be relayed to the owner of the site. Also, multiple people can be using a certain device in a day, and a single person can use multiple devices making it hard to identify a single user. Can be rejected or deleted by shoppers and devices to not use cookies.

BASIC: Tracking a site's cookies can be relatively low-cost for a retailer who is just beginning to identify their customers in not-so-obvious ways. There are applications that make this a simple way to remarket an item to a potential customer.

SOCIAL IDS: can be used to find a customer’s social media accounts when they visit a website.4 Someone who is signed into Facebook, Twitter, or another social account can provide the retailer with data such as websites they visited and products they looked at.

PROS: Helps provide relevant content across devices, so moving from a laptop to a tablet to a phone would not be a problem since one is given the same experience.

CONS: Facebook and Twitter retain retargeting information, the retailer is not privy to this data. This method does not give the retailer social account information or personal data, making it hard to target the shoppers outside of social.

MODERATE: This method helps a retailer to allow new customers to become aware of their brand, but not to communicate with them directly. However, because social media has a powerful influence, it is great to have retargeting efforts there.

DIGITAL FINGERPRINTING: allows a retailer's website to look at device characteristics such as plugins and software a shopper installed, screen size, time zone, fonts and features of a specific device. This invaluable data is like a device owner's usage fingerprint.5

PROS: An efficient and effective way to identify customers and score their behaviors. Even if multiple people use a device, users can be pinpointed based on behaviors.

CONS: While it’s not illegal, most customers do not want to feel tracked by information they did not realize they were giving. As a result, companies who use one’s digital fingerprint do not discuss how they do so.

ADVANCED: Only large retailers with the resources to create a completely personalized experience should take this approach. Companies receive large amounts of data, and the process of capturing and analyzing data requires high costs and time.

ONLINE CUSTOMER IDENTIFIERS Active Identifiers

EMAIL SIGN-UP: As mentioned previously, email addresses are invaluable to retailers, and the most simplified way of identifying this is by asking. Methods of asking include e-receipts, in-store wifi sign up and various offers of data or discounts.

PROS: This is a more traditional online customer identification effort that customers are more comfortable and familiar with. It is clear that one is opting-in to provide information.

CONS: It is what happens after the sign-up that may make this a difficult identification method. People are wary of constantly receiving useless emails and not receiving relevant content.

BASIC: In order to maintain the usefulness of this method, a retailer needs to be smart about what they do after email signup.

SURVEYS: A survey is the most comprehensive way of simply asking customers for things the retailer wants to know.

PROS: Similar to a newsletter sign-up, this is an easy way to show one’s customers that they want the information to be clearly opt-in.

CONS: When a retailer emphasizes their survey too heavily, the retailer runs the risk of annoying customers7. Some retailers answer this issue by offering incentives such as coupons at the end of the survey. However, customers often rush through and don’t bother to answer correctly just to get the prize.

MODERATE: With any customer identification technique, quality is just as important as quantity and should be weighed when deciding how to approach this. Similar to an email sign-up, the retailer has to find a way to get past initial skepticism.

NATIVE MOBILE APPS: Mobile Apps are usually associated with loyalty programs, which typically prompt customers to provide personal information and/or login with their social media accounts.

PROS: It is a very transparent way for a retailer to capture customer information. This can provide a wealth of data for the retailer, and it’s clear to shoppers that they’re willingly providing information.

CONS: The majority of smartphone owners use the same five applications6, so it is often difficult to get potential customers to download the app and find it useful. An effective mobile app requires development costs to create and marketing costs to promote.

ADVANCED: The customers identified are often the ones who are already most loyal. Although this smaller subset is valuable, the retailer must incentivize regular use to make it effective.

IN-STORE CUSTOMER IDENTIFIERS

IN-STORE WIFI: In-Store WiFi is becoming more commonplace for retailers. Retailers will can set up a portal and customer browsing analytics

PROS: A much more transparent way of collecting data, as the shopper will have to opt-in and accept the terms & conditions of the retailers WiFi agreement. The retailers is then allowed to b

CONS: Making sure that the WiFi network is secure from being hacked is the biggest downside of offering WiFi in the store. The shopper is trusting you with their information, so it is extremely important to safeguard that information over time.

BEGINNER: Shoppers who use in-store wifi provide a rich dataset that retailers can use to understand their shoppers. From seeing what apps they are using to product specific searches, retailers should incentivize shoppers to increase in-store wifi adoption.

MAC ADDRESS TRACKING: Passive detection of customers' mobile devices at store level that broadcasts an unique number when they search for Wi-Fi. A device’s unique MAC address is sent along with requests that look for nearby Wi-Fi networks.

PROS: Easy to implement from a retailer point of view as long as the shopper has WiFi enabled on their mobile device. Since each broadcast signal is unique to each device, it is easy to extract and aggregate anonymous shopping data via passive sensors.

CONS: Much like the debate over cookies online, MAC address tracking has become the cookie equivalent of the physical store and there is much more to discuss in how this can be used in a transparent manner.

MODERATE: Not many retailers have employed MAC address tracking, but when done correctly, is a powerful, low-touch (no Wi-Fi) way of customer identification in the store.

FACIAL RECOGNITION: Using cameras and software to scan customers’ faces during store visits. Software can identify a customer based on age and gender.

PROS: This is useful for a retailer to identify who is walking in their store to better understand consumer behaviors. This adds more context to all of the other data collected by a retailer and provides a tailored experience through relevant advertising.

CONS: Facial recognition is a hot topic when it comes to privacy. As the newest frontier in in-store data collection, a person’s face is another unique identifier that has many implications once a company starts sharing that data with other companies.

ADVANCED: With great opportunities lie great risks with facial recognition technology. Retailers will have to double down on transparency and make sure that the customer knows what the retailer is planning to do with their biometric information..

WHY RETAILERS NEED TO INVEST In In-Store Customer Identification

In the in-store world, there is much more ambiguity when it comes to understanding shoppers’ interests in real-time and providing similar experiences like those designed and measured online. Not much has been done to identify customers in store, at scale. And while the majority of product research is done online prior to purchase, over 90% of purchases still take place in the physical store - 80% or more of those walk out without making a purchase.8

It has become critical to identify and remarket based on customers’ behavior in the online world to drive

sales. Why hasn’t it become standard practice in-store?

Here are the reasons why it's critical for retailers to start identifying customers in-store, prior to purchase:

ATTRIBUTION MODELING FOR OMNICHANNEL: In-store customer identification helps paint a clearer picture of which online and offline touchpoints contribute to sales. It can go a long way in seeing which combination of touchpoints (both online and offline)

most successfully lead to purchase. From an online perspective, if a retailer knows that a shopper is researching furniture on their website and has an identifier associated with them, it would be helpful to have a complementary offline identifier to help track that experience.

If the retailer offers digital experience with devices in the store and allows the shopper to go around and browse products, they can allow the shopper to opt-in via email at the end of their shopping experience in order to combine that in-store experience with the shopper's online experience or allow them to sign into an existing account. If the customer goes into a store and deeply considers something but ultimately decides to buy online a few days later, the retailer must know the impact the store visit had. Last-click attribution is an insufficient model for modern marketers measuring omnichannel success.

PERSONALIZATION: Retailers will be able to personalize digital content and interactions as a continuous shopper journey across physical and digital. Being able to have a complete profile of a customer provides many added benefits, such as more effective and

targeted content, advertising, intelligent and timely notifications, and the ability to accurately predict customer lifetime value. As more data collection is captured from the in-store world, retailers will be in a better position to make decisions in messaging, offers and advertising. Rather than making decisions based on arbitrary aggregate metrics, this will empower retailers to use hyper-personalization in an acceptable and helpful way.

SALES ASSOCIATE ENGAGEMENT: Retailers can allow sales associates to add more depth and find new ways to engage customers. At the end of the day, if a retailer and staff are providing value to the shopper on the items they are most interested in, shoppers will be more likely to have a positive image of the retailer.

In an age where shoppers are looking for a tailored shopping experience, the best way to win customers over the long haul is being able to collect data and using it in a meaningful way supported by human interaction that drives value to the shopper. While ecommerce is growing, there is still much emphasis on in-store experience, as shopping online will never provide the same sensory benefits of exploring products in the store.

THE PATH To Increase In-Store Customer Identification

01/ BEGIN WITH THE END IN MIND Every retailer knows that their in-store experience is in need of an update to reflect the ever changing nature of shopper habits. Being able to audit the in-store experience starts with these questions:

A. What is currently working? B. What can we get rid of in the store to simplify the shopping experience? C. What would make our customers lives easier when they're shopping in store? D. How can we provide value to customers after they walk out of the store and didn't make a purchase? E. How do we align the goals of customers and company with the incentives and goals of store staff?

02/ CREATE IMMERSIVE EXPERIENCES THAT HIGHLIGHT BRAND ATTRIBUTES It has been shown that shoppers want brand experiences that allow them to interact in the store. Two examples that define immersive in-store brand experiences are Apple and Nike. They create environments that make it more likely for shoppers to adapt their state of mind. When customers feel part of a brand, whether it be aspirational or innovative, it allows them to be themselves and more receptive to the brand story and products that are in the store. Being able to connect with customers on a personal level establishes trust and makes it more likely that they’ll share information with the retailer over time.

03/ COMPLEMENT PHYSICAL EXPERIENCES WITH DIGITAL TOUCHPOINTS THAT SHOPPERS EXPECT In-store shopping is no longer an analog space that seen as a “data black hole.” Today, shoppers come into the store well equipped with smartphones armed with a tool set. From price checks on Amazon to checking availability at a competing local store, the opportunities for retailers to convert shoppers while in the store has gone down due to increased competition. While it might seem daunting, retailers can build off their in-store experience with proven digital strategies. For example, in CloudTags’ connected stores, store associates are equipped with smart badges, which allow the store associate to tap the customers' tablet to attribute sales to that associate, whether that be in-store or online at a later time.

04/ TAKE THE IN-STORE SHOPPING EXPERIENCE ONLINE When a customer comes into the store with some of his or her research done online, it is going to take an exceptional in-store experience to push her over the line to purchase. However, if he or she is not comfortable with making her decision in-store, there is still an opportunity for retailers to make sure that he or she purchases that item with their company, even if that is online. Going back to creating immersive experiences in the store, it doesn’t end at the door. If a shopper walks out of a store without making a purchase, the next brand touchpoint will more than likely be online. Retailers need to be able to connect the dots and provide the same great experience as in the store.

KEY FIGURES Why Mobile Apps Are Not The Answer to Omnichannel Success Source:

33%WEEKLY

1% DON’T KNOW

8%DAILY2% MULTIPLE TIMES A DAY

19%MONTHLY

24%MONTHLY

13%NEVER

User Study: Number Of Retailer Applications Downloaded on Phone9

User Study: How Often Retail Applications Are Used9

10%3%

21%

39% 27%

SIX TO TEN

ONE TO TWO

MORE THAN TEN

ZERO

THREE TO FIVE

Source: “The State of Mobile Apps for Retailers.” RetailMeNot. Aug 2015

HOW TO WIN The Future of Customer Identification

IMPLEMENT TRAINING PROGRAMS AND INCENTIVES FOR BOTH STORE ASSOCIATES AND SHOPPERS: Although new technologies come along daily which provide added benefit to retailers, these can only take retailers’ in-store efforts so far. For example, Apple Pay received a significant amount of press on how Apple Pay is a leader in mobile payments, however actual usage of Apple Pay in retail stores has yet to make a considerable dent, as 91 percent of Apple Pay eligible customers have never tried the service.10 Having store associates be more proactive in asking shoppers to use new digital technologies in-store is critical to collecting more data around adoption and usage is critical in a retailers’ omnichannel strategy. If store associates are supposed to be more proactive in their outreach of digital adoption & usage, then there should be corresponding incentives for getting shoppers to sign-up for a loyalty program or download an app.

CONTINUE TO PROVIDE ENOUGH VALUE UP FRONT FOR SHOPPERS TO TAKE ACTION: While this might not be the boldest of future predictions, it’s one of the most important aspects of

Percentage of Sales Influenced By Digital By Year11

20152014

2013

2012

64%49%

36%

14%

Source: “Omnichannel Retail 2015.” L2 Inc. Aug 2015

omnichannel to get right. A study conducted by SAP reveals that up to 86% of marketing decision makers agree that omnichannel has increased consumer expectations.12 As retailers scale their omnichannel efforts to deliver a better customer experience, they must step up in creating the appropriate value for shoppers for the information they are collecting. As mentioned previously, above all else, this should be conducted in a transparent way that does not violate the customers’ privacy. As long as retailers are providing personalized content along each phase of the customer lifecycle, whether that be offers, new products, or updated inventory, customers will be interested in having a relationship with the retailer.

USE ID-BASED MARKETING TO SOLVE OMNICHANNEL ATTRIBUTION: As cookies provided much of the tracking in the online world for a long time, the advent of social networks and other ID based platforms are quickly becoming the future of online identification. Facebook has a big advantage in this space due to their massive scale as a platform, but look out for other alternatives, whether they be social (Twitter, Pinterest, etc.) or payment driven (PayPal, Stripe, etc.). This is promising for retailers in solving their omnichannel efforts because it will become much easier to track attribution across digital touchpoints and their corresponding offline actions. Building more complete online profiles combined with created an in-store shopping profile, this will give marketers the upper hand at understand their customers and how to more effective target them with personalized content and advertising.

6%

IMPLEMENTED

39%

WITHIN 2 YEARS

14%

IN 3-5 YEARS

41%

NO PLANS

Ability To Identify Customers Via Smartphone In-Store When They Walk In11 By Implementation Status

Source: “Omnichannel Retail 2015.” L2 Inc. Aug 2015

holla@cloudtags.com

APPENDIX

1. "Somebody's Watching Me: Camera Sensors to Be Placed in Retail Mannequins." RT English. Web. 11 Aug. 2015.

2. "Determining Subscriber Value: What's an Email List Member Worth?" MarketingProfs. Web. 11 Aug. 2015.

3. "What Is a Cookie? - All about Cookies." What Is a Cookie? - All about Cookies. Web. 11 Aug. 2015.

4. "Reaching People, Not Devices: How ID-Based Targeting Is Devouring Cookie-Based Targeting." ClickZ. Web. 11 Aug. 2015.

5. Tanner, Adam. "The Web Cookie Is Dying. Here's The Creepier Technology That Comes Next." Forbes. Forbes Magazine, 17 June 2013. Web. 11 Aug. 2015.

6. Perez, Sarah. "Consumers Spend 85% Of Time On Smartphones In Apps, But Only 5 Apps See Heavy Use." TechCrunch. 22 June 2015. Web. 11 Aug. 2015.

7. Dishman, Lydia. "Retailers: Your Surveys Are Making Customers Suffer." Forbes. Forbes Magazine, 7 Mar. 2014. Web. 11 Aug. 2015.

8. "A.T. Kearney Study Finds Brick and Mortar Stores Still Key to Consumers in the Omnichannel World - News Release - A.T. Kearney - A.T. Kearney." A.T. Kearney. Web. 11 Aug. 2015.

9. “The State of Mobile Apps for Retailers.” RetailMeNot. Web. 11 Aug 2015

10. “Apple Pay Adoption: The Falling Side of the Bell Curve.” PYMNTS.com. Web. 5 Aug. 2015.

11. “Intelligence Report: Omnichannel Retail 2015.” L2 Inc. Web. 11 Aug 2015

12. “SAP Survey Finds New Opportunities in Omnichannel for Consumer Products Companies.” SAP. Web. 11 Aug 2015