WDHB Direct to Consumer Service Innovation Research & Analysis

Innovation & Differentiation in Direct-to-Consumer Services WDHB Research

Prepared July 2014

wdhb.com

WDHB Strategic Learning 2

Evolving customer expectations, new technological capacities and nascent platforms for service delivery have created an unprecedented need for innovative customer-centered service strategies, while helping organizations build new capabilities for differentiation in Direct-to-Consumer services.

As the leader in designing and delivering programs for people and strategy development, WDHB has had the privilege to witness both sides of the coin: on one hand, our clients, which include some of the world’s best-known companies in the consumer sphere, are increasingly on the lookout for new ways to improve the quality, variety and adaptability of the services they offer to customers. On the other hand, through our Learning Expeditions that facilitate the immersion of executive teams into unfamiliar environments and cultures to explore disruptive business perspectives, we have gathered insights into a wealth of trends in consumer-facing landscapes, helping us identify weak signals and detect upcoming evolutions of direct-to-consumer services.

With the following document, we are happy to share some of our learnings, dive into powerful examples of innovation in Direct-to-Consumer services, and suggest a new model for increased customer value.

ABOUT THESE INSIGHTS


A – Service Provider •  Individual

•  Organization •  Public or Private

B – Service Client •  Individual

•  Organization •  Public or Private

C – Service Target:

= the reality to be transformed or operated on by A, for the sake of B

•  People dimensions •  Business dimensions

•  Products, goods & material systems •  Information, codified

Forms of Service Relationship (A & B Co-create Value)

Forms of Responsibility Relationship (A on C)

Forms of Ownership Relationship (B on C)

Forms of Service Interventions (A on C; B on C)

Gadrey, J. (2002). The misuse of productivity concepts in services: Lessons from a comparison between France and the United States. In J. Gadrey & F.

THE SERVICE CONTINUUM


SERVICE INNOVATION IS BUSINESS MODEL INNOVATION

It‘s not just about technology anymore.

Henry Chesbrough

The essence of a business model is: Defining the way the firm delivers value to customers, entices customers to pay for value and converts those payments to profit. David Teece

Osterwalder, A., Pigneur, Y., (2010). Business Model Generation: A Handbook for Visionairs, Game Changers, and Challengers.

Chesbrough, 2007/ David Teece, 2010.


1 Navigating Customer Expectations across Touchpoints

2 Leveraging New Platforms for Service Delivery

3 Crafting Customer-Centred Strategies

4 Building Capabilities for Innovation

INNOVATION & DIFFERENTIATION IN DIRECT-TO-CONSUMER SERVICE


NAVIGATING CUSTOMER EXPECTATIONS Across Categories & Touchpoints

PE

RSO

NA

LIZ

ED

AD

VIC

E

AF

TER

-SA

LE S

ER

VIC

ES

EM

PO

WE

RIN

G C

ON

SUM

ER

S

MU

LTIC

HA

NN

EL

CU

STO

ME

R

SER

VIC

E

MULTICHANNEL CUSTOMER SERVICE “Embrace the platforms your audience is using, not the ones you’re comfortable with.” Scott Monty, Ford’s Global Head of Social Media


REAL-TIME & LOCALIZED ASSISTANCE

Sears’ mobile application connects customers with in-store representatives through text messaging. The store’s employees respond in real-time, provide advice on where to find items and share links to purchase items online. The option is called Member Assist Service.

Sears’ Shop Your Way connects shoppers with store associates using text messaging or calls.


EASING CUSTOMER SERVICE PAINPOINTS

Zappix is a remedy for customers who are frustrated when calling automated customer service hotlines. Keypad menus are turned into a visual menu allowing better overview and flow of information. In order to save valuable time, users can input authentication information on the app before making the call.

Zappix lets people skip the usual keypad menu prompts.


SOCIAL MEDIA AS CRM TOOL

KLM adopteda more systematic approach to social media customer care in 2010 when teams were first available during office hours and then 24/7. One year later, KLM made history when it became the first airline to reschedule a flight following a Twitter request from a customer.

KLM turns into social-media powered customer service.

PERSONALIZED ADVICE 59% of shoppers who have experienced personalization believe it has a noticeable influence on purchasing. (Infosys 2013 Study “Rethinking Retail”)


TAKING SALES ADVISORY ONLINE

IBM designed the Fabergé site to replicate the exclusive and personal interaction between the customer and the personal advisor. If desired, the client can engage online with a sales representative for the same boutique purchasing experience of a trusting one-to-one dialogue.

Faberge.com provides a personal sales advisor for every online shopper.


SERVICE WITH AN OPT-IN

The fashion e-tailer Modcloth integrated a live-chat feature on its website to allow shoppers to share information regarding their past interactions with the brand. As a result, the company increases knowledge about its customers’ personal style and can make more personalized recommendations for future purchases.

Modcloth lets customers submit personal data prior to having a one-on-one consultation with a stylist.


ADDING ADVICE TO DELIVERY

Lamoda employees are delivery personnel, sales associates and fashion coaches all in one. Deliverymen not only deliver clothess, they also wait during the fitting process, offer fashion advice, take returns and process on-site mobile payments.

Russian Internet fashion retailer Lamoda sends sales assistants directly to shoppers’ homes.

AFTER SALE SERVICES « The touchpoints that are part of your brand and marketing strategy -- moments people interact with a brand from initial awareness to evangelism -- are all opportunities to engage with your audience in richer, more vivid ways. » Albert Tan, Senior Brand Strategist, frog design


REWARDS FOR RECYCLING

Beijing Subway introduced 40 “reverse vending machines” in 2013 that enable passengers to offset travel costs by recycling plastic bottles. Commuters receive a discount between CNY 0.05 and 0.10 on their travel pass if they recycle empty bottles.

Beijing Subway rewards commuters for recycling plastic bottles.


ENCOURAGING RE-USE

Columbia Sportswear customers have the option of receiving orders in a reused box. The company encourages this practice by offering to track the life cycle and use of each boxes with “A Box Life”: all reused boxes have a unique QR code and a tracking number to explore the life story of the box. After 30 days of introducing the program, 66% of Columbia’s orders were being shipped out in reused boxes.

A Box Life encourages re-use by tracking the life and use of cardboard boxes.

CONSUMER EMPOWERMENT “Consumer empowerment is a mental state usually accompanied by a physical act which enables consumers or to put into effect their own choices through demonstrating their needs, wants and demands in their decision-making with other individuals or organisational bodies in the marketplace.” Prof. Len Tiu Wright, University of Huddersfield


POWERING THE WELLNESS ECONOMY

Kurbo Health fights childhood obesity. Its app combines a food-tracking program with games, challenges, a food diary and coaching. Its purpose is to encourage children to make smarter eating choices.

Kurbo Health�teaches children and their families how to eat healthy.


GAMIFYING USER EDUCATION

Eco:Drive is an application available through Fiat’s Blue&Me in-car infotainment system. It monitors driving habits and improves fuel efficiency. Additionally, drivers can download their driving data with a USB memory stick to a computer where they receive more detailed advice.

Fiat’s Eco:Drive turns greener motoring from a chore into a hobby.


LEVERAGING NEW PLATFORMS For Efficient Service Delivery

USE

R-C

EN

TER

ED

PA

YM

EN

T

DA

TA &

AN

ALY

TIC

S

SOC

IAL

CO

MM

ER

CE

M

OB

ILE

FIR

ST S

TRA

TEG

IES

USER-CENTERED PAYMENTS The global market for mobile payments is forecast to grow to about $720 billion worth of transactions by 2017, up from $235 billion in 2013 with more than 450 million users. Gartner Research, 2013


MOBILE PAYMENT GOES VIRAL

M-PESA is a small-value electronic payment and store-of-value system (transactions are capped at $500). Developed by Vodafone and launched by its Kenyan affiliate Safaricom. It is accessible from feature phones. Subscribers can use their phones to transfer funds between M-PESA users and non-users, to pay bills and purchase mobile credit for a small fee.

With M-Pesa, Kenya leads the world in mobile money.


PAYMENT, EASY AS A TWEET

Amex Sync is a program that connects Foursquare, Facebook or Twitter profiles to provide cardholders personalized offers and discounts directly at the point of purchase. Amex Sync has integrated payment options into Twitter where payments are simply made by tweeting a purchase hashtag.

With Amex Sync, American Express users can turn Twitter hashtags into purchases.

MOBILE-FIRST STRATEGIES “Mobile is the enabling centerpiece of digital convergence. It is the glue for all other digital industries to use when approaching convergence, but mobile is also the digital gateway for the real world to join in this global metamorphosis of human behaviour.” Tomi T Ahonen, Author, Consultant and Speaker.


AUGMENTED REALITY FOR UBIQUITY

In 2012, China’s largest food e-commerce site, Yihaodian, announced 1,000 virtual supermarkets at locations across the country. With the idea to call them “Unlimited Yihaodian”, the stores would be blank city spaces brought to life by means of Augmented Reality technology and smartphone cameras.

China’s largest food e-commerce retailer opens the world’s first augmented reality supermarkets.


MOBILE AS A DEVICE OF COMMERCE

Developed by online grocer PeaPod, its app allows household itemsto be restocked by simply scanning barcodes with a phone. PeaPod started the project in 2012 when it rolled out digital/mobile grocery aisles at commuter rail stations on the US East Coast and Chicago.

Peapod lets customers restock their household items with barcodes.

LEVERAGING DATA & ADVANCED ANALYTICS "Data are becoming the new raw material of business.” Craig Mundie, Senior Advisor to the CEO at Microsoft. “The Internet of everything changes everything.” John Chambers, Chairman and CEO of Cisco.


LEVERAGING ADVANCED ANALYTICS

Kutsuplus, Helsinki’s Transport Authority’s on-demand minibus service, was started in October 2013. Helsinki residents can request a minibus with their smartphone by providing the start point and the final destination. Kustuplus calculates the quickest route for multiple drop-offs and users can opt for a private transfer or a shared ride.

On-demand minibus service calculates optimal route for those on-board.


ADDING TRACEABILITY TO SERVICES

Swifto is connects dog owners with vetted and screened dog walkers. The service also allows clients to review the walker’s routes and sends confirmation messages to clients whenever a walk with the dog has started or ended.

Swifto incorporates RFID technology into dog-walking.


CUSTOM DATA TO INTUIT NEEDS

At the beginning of 2014, Amazon obtained a patent for “anticipatory shipping”. The system prepares deliveries in specific areas based on previous purchases, site searches or time spent looking at a particular item online. It then automatically ships the items to the nearest warehouse where the delivery waits for the buyer to hit the checkout button.

Amazon wants to ship deliveries before they’re ordered.


CONNECTED OBJECTS EVERYWHERE

In spring 2012, Quirky and GE entered into an innovation partnership and organized a contest that called upon users to submit ideas that could make everyday objects smarter by adding technology. MilkMaid, a smart milk jug, was chosen as the winner: sensors allow users to monitor the freshness of the milk and recommend when more should be purchased.

Smart jug can detect spoilt milk & notify user via text.


CONNECTED OBJECTS EVERYWHERE

Project Gutenberg, the “liquid library”, combines alcohol and apps. Rather than bottles, Pernod Ricard’s beverages are stored in metallic “container books” that are controlled by an intelligent base station. This ensures precisely measured portions and an alert the user when refills are needed.

Pernod Ricard prototypes a web-connected cocktail maker.


THE ERA OF THE QUANTIFIED SELF

The Airo wristband measures exercise intensity, recovery time and keeps tabs on general stress level based on heart rate variability. Also, by using different wavelengths of light to detect metabolites released through the bloodstream, the AIRO can detect how much was eaten and how healthy a meal it was.

Quantified self tracker AIRO charts nutrition, stress, exercise, and sleep.

SOCIAL COMMERCE

“If I had to guess, social commerce is next to blow up.” Mark Zuckerberg, CEO of Facebook, in 2010. “Goodbye E-Commerce, Hello Social Commerce!” Wired Magazine, in 2011.


TAPPING SOCIAL COMMERCE

To drive sales across pubs and clubs in the UK, AB InBev allows fans to give friends a pint of Stella Artois through a social gifting app. Users can share a voucher code through Facebook, which can be redeemed at participating on-trade locations.

Stella Artois launches a lager-than-life social media gifting app.


FACEBOOK COMMERCE COMING OF AGE

Soldsie, an e-commerce service, enables customers to buy items directly from their Facebook fans and Instagram by simply by typing « sold » in the comments section under the item’s picture.

Soldsie is a check-out system built for social.


CRAFTING CUSTOMER-CENTERED Service Strategies

SUP

ER

-LO

CA

LIZ

ATI

ON

SUB

SCR

IPTI

ON

MO

DE

LS

ON

-DE

MA

ND

DE

LIV

ER

Y

AD

AP

TIV

E S

ER

VIC

E

CU

STO

ME

R-E

MPA

THY

SUPER LOCALIZATION

“Content might be King, Queen, Prince and the Court Jester, but Context is the Crown!” Jonas Klit Nielsen, CEO & Founder of Mindjumpers


MARKETPLACES FOR SERVICES

In 2013, eBay launched eBayHire, a marketplace where customers can search for local service providers. In 2014, Amazon also announced its intention to start offering babysitting, house painting and other services.

eBay & Amazon integrate service providers into their marketplaces.


SUPER-LOCAL HELPERS

WunWun members can ask for delivery of most items at a flat $15 delivery fee, and request services, like dog walking or closet organization, that cost $2 for every five minutes. Once a request is made, a dispatcher assigns it to a helper who has been background checked and trained to respond to requests.

WunWun is an app that gives members access to a network of live dispatchers that can perform nearly any task.

EXPLORING SUBSCRIPTION MODELS “Don’t think of subscriptions simply as recurring billing. It’s better to see them as a way to maintain an ongoing relationship with your customers. Multiple events, not all of them transactional, happen in the course of that relationship.”

Michael Vax, Product Manager at hybris software


SUBSCRIPTION SERVICES BOOM

With more than 55 snacks varied throughout the service, General Mill’s “Nibblr” program lets consumers order a box at a time or on regular delivery. Subscribers can expect an assortment of dried fruits, nut mixes, crackers and more delivered to their door every single month.

General Mills launches snack delivery subscription box.


SUBSCRIPTION SERVICES BOOM

Dollar Shave Club, the razor subscription-based delivery service, has about 330,000 subscribers who purchase one of three types of razors on a monthly or bi-monthly basis. It is expanding to offer other men’s grooming product lines.

Dollar Shave Club sends razors right to your door for a few bucks a month.

ON-DEMAND DELIVERY The On-Demand Delivery trend is part of a bigger theme called Networked Purchase Path. At key points along the shopping journey, a forward thinking retailer or brand can effectively employ data, connected technologies and human service to meet the shopper where they are and anticipate where they will go next, creating seamless experiences and better interactions across channels.

PSFK, Future of Retail Report, 2013


CATERING TO THE NOMADIC

Estonia’s SmartPost developed a system of lockers so that online and catalogue shoppers can have goods delivered to the terminal closest to their home or their workplace. The company sends users a text message with a code to open the lockers.

In Estonia, 50% of e-commerce deliveries are made using automated parcel terminals.


FROM SEAMLESS DELIVERY…

Volvo tested a service called Roam Delivery that would provide delivery companies with the location of the recipient’s Volvo and a one-time digital key to open the car and leave packages inside.

Volvo wants to allow retailers to drop off merchandise right inside a parked car.


… TO UBER CONVENIENCE

In August 2012, American Airlines began delivery of passengers’ luggage direct to their home, business or hotel in less than four hours from selected airports. Travellers can book the service online when purchasing tickets.

American Airlines pioneers the luggage home delivery service for travellers in a hurry


ADJUSTING TO CUSTOMER RYTHMS

Designed for the rise in online shopping, Parcel receives ordered packages during the day and drops them off later the same day at a location more convenient for the customer.

Parcel promises residents of Manhattan evening delivery of important packages.


EVERYTHING ON DEMAND

Pager is mobile app that connects patients and doctors, allowing those who live in Manhattan to request a house call. Users install the app, set up a personal profile and store their credit card information. When they are not feeling well, they can use the app to find a doctor by searching specialties, credentials and fees.

Pager is a mobile app that brings a doctor directly to your doorsteps.

CUSTOMER EMPATHY

“For every two degrees the temperature goes up, check-ins at ice cream shops go up by 2%.”

Andrew Hogue, Foursquare


CONVENIENCE OVER ABUNDANCE

Convenience store GS25 created a virtual refrigerator for its buy-one-get-one-free promotions. Eligible customers can delay taking the second item, put it in their virtual refrigerator, and pick it up another day. The app has been downloaded more than 330,000 times and GS25 reports over 120,000 extra items have been saved in its virtual refrigerators.

Korean convenience store GS25 creates a virtual refrigerator for its app.


LETTING USERS TAKE CONTROL

Scandinavian telecom operator, 3, used service design to create an app that provides a clear and engaging way for customers to understand their voice, messaging and data usage. Users of My3 are able to take control of their bill, right from their smartphone, resulting in 50% of users reporting a reduction in calls to customer service.

Telecom operator 3 creates a service to demystify the phone bill.


CONTEX-AWARE SERVICES

In June 2012, Coca-Cola’s Limon & Nada lemonade beverage brand installed 18 temperature-sensitive vending machines in water and theme parks across Spain. With the day’s temperature shown on a large display, can prices drop as the temperature rises.

Coca Cola introduces temperature-sensitive vending machines in Spain.

ADAPTIVE SERVICE

“Cater to your customers’ lifestyles. It will create instant rapport and a lasting sense of “I belong here.”

Marilyn Suttle, Customer Service Expert


PERSONALIZING DEALS

The « Just For U » loyalty program takes a customer’s past six months of shopping history (as captured by their club card) and uses it to build a specific shopper profile to offer personalized deals on relevant products.

Safeway’s Just for U program produces special personalized offers.


END-TO-END EXPERIENCES

Airbnb is expanding vertically to become a powerhouse of the entire travel experience. This includes a concierge service for travellers, an airport transportation platform and full-service cleaning for hosts.

Airbnb creates a portfolio of new services that make the experience consistent from stay to stay.


BUILDING NEW CAPABILITIES For Service Innovation

CO

NSU

ME

R IN

VO

LVE

ME

NT

PE

ER

-TO

-PE

ER

EC

ON

OM

Y

SER

VIC

E P

AR

TNE

RSH

IPS

GLO

CA

LIZ

ED

STR

ATE

GIE

S

INVOLVING THE CONSUMER “In recent years, open innovation has been changing the way many companies think about developing products. But open innovation can — and should — apply to services, too.” Prof. Henry Chesbrough


TRAINING USERS

Airbnb, has launched a Hospitality Lab to teach hosts customer service best practices. With Airbnb guests speaking more than 32 different languages and traveling to 192 countries, the company decided to establish hospitality standards in an effort to create some level of consistency across guest experiences.

Airbnb builds a hospitability lab for its users.


GETTING INVOLVED IN COMMUNITIES

With 75 million members, the pharmacy chain’s reward program is America’s largest. Rewards points can be used on almost any product available at Walgreens and members can interact with each other online by sharing stories, discussing goals, etc.

Walgreens�has created a community-based support platform for its Balance Rewards program members.

ENGAGING IN THE P2P ECONOMY “There are two possible scenarios in my mind. The first is that capital successfully integrates the main innovations of peer production on its own terms, and makes it the basis of a new wave of growth, say of a green capitalist wave.”

Michel Bauwens


ENTERING THE P2P ECONOMY

The world's largest retailer by revenue is considering a new delivery option that would have in-store customers deliver packages to online buyers. The customers making deliveries would receive a discount on their shopping bills.

Walmart Is Considering A Customer-To-Customer Delivery Service.

LEVERAGING SERVICE PARTNERSHIPS “Rapid prototyping through partnership essentially means that a large company can test an idea without building additional capacity outside a core competency by aligning interests.”

Curious Catalyst


SERVICE PARTNERSHIPS

On-demand delivery service WunWun has partnered with taxi app Gett to create experiences of convenience. The combined service offering allows New York riders to have products or meals delivered to their black car.

WunWun and Gett partner to make their users’ lives easier.


SERVICE PARTNERSHIPS

Walgreens is making it easier for customers to have cold remedies delivered to their homes. House ridden customers can use the TaskRabbit mobile app and platform to order medicine directly from the nearest Walgreens location and have it delivered.

Walgreens launches a partnership with TaskRabbit for the home delivery of remedies.

CRAFTING GLOCAL STRATEGIES “Glocalization means the simultaneity - the co-presence - of both universalizing and particularizing tendencies."

Roland Robertson, Sociologist


E-COMMERCE IN EMERGING COUNTRIES

In 2013, Coca-Cola piloted an e-commerce store in India for customers to buy their products online. Operating via Hindustan Coca-Cola, a bottling entity owned by the soft drink giant, the company has been testing the service, Coke2Home.com, in the Ahmedabad region.

Coca Cola India pioneers online selling.


BUILDING TRUST WITH CONSUMERS

Chinese e-tailer, DangDang, offers flexible payment options, including cash on delivery and has a door-to-door return policy within seven days of purchase. These policies ease customers’ minds in country without an established mail-order industry.

DangDang works to give its customers a reason to trust them.

TAKE-AWAYS


Deliver on-demand Anticipate future needs

Customization & targeting

Gamification, innovation

A NEW TEMPLATE FOR CUSTOMER VALUE?

Loyalty programs

Deliver as promised

RELIABILITY

Willingness to help

RESPONSIVENESS

Trust, knowledge of employees

ASSURANCE

Caring & understanding

EMPATHY

Appearance of facilities, personnel

TANGIBLES

PROACTIVITY CONVENIENCE PERSONALIZE INTERACTIVITY REWARDS

From Service Basics….

….To Innovation Add-ons


RECOMMENDATIONS

Favour convenience over abundance of services

Leverage data to master personalized service

Map the customer journey through all steps of interaction

Consider sales & service channels in a networked way

Launch small scale service experiments and prototypes


TOWARDS THE INTEGRATION OF SERVICE COMPONENTS

Multichannel purchase paths

TRANSACTION

User-centred payments

On-demand delivery

DELIVERY

Efficiency & Traceability

Reverse logistics

POST-SALE SERVICES

Subscription & management of frequency

Service anticipation

CRM

Loyalty programs

Advice & personalization

BRAND ENGAGEMENT

Empathy & Empowerment

Along the consumer’s journey

Throughout the consumer/brand relationship

PRODUCT

PRICE

ACTIVATION

Empathy to Interactivity

Tangibles to Rewards

Assurance to Personalized

Responsive to Proactive

Reliable to Convenient


We hope this research and analysis has provided you some

insight and inspiration.

For comments or questions, contact us at [email protected].

Follow WDHB on LinkedIn to stay updated on our latest findings and Learning Expeditions.

LinkedIn

Stay in touch

WDHB IN NORTH AMERICA

WDHB, Inc. 1877, Broadway, Suite 600 Boulder, CO 80302, USA O +1 303 999 0184 F +1 303 648 4239

WDHB IN EUROPE

WDHB Europe GmbH Zwinglistrasse 43 8004 Zürich, Switzerland O +41 43 534 74 93 F +41 43 556 82 94

WDHB IN ASIA-PACIFIC

WDHB Asia, Ltd. 21st Floor, Phoenix Building No. 21-25 Luard Road Wan Chai, Hong Kong O +852 3568 6343

WDHB IN SOUTH AMERICA

WDHB Brasil c/o Draxos Av. Das Américas, 7935 Barra da Tijuca Rio de Janeiro, Brasil O +55 21 2127 6447

WDHB IN SOUTH-EAST ASIA

WDHB Pte Ltd 10 Anson Road #19-15, International Plaza Singapore 079903 Singapore