Smarter Commerce: Transforming for a Customer Centric World

Smarter Commerce:
Transforming for a
Customer-Centric
World
Sponsored by IBM®

Laurie McCabe, SMB Group

Sanjeev Aggarwal, SMB Group

Brent Leary, CRM Essentials

March 2012

Copyright SMB Group, Inc. March 2012
1

Smarter Commerce: Transforming for a Customer-Centric World

SMARTER COMMERCE: TRANSFORMING FOR A CUSTOMER-CENTRIC
WORLD

KEY HIGHLIGHTS
 Social, mobile and cloud computing innovations have radically and irreversibly changed customer
expectations throughout the commerce cycle—shifting the balance of power to the buyer.

 New dynamics necessitate that midsize businesses transform their culture and operations for a
customer-centric world.

 To make this shift, companies need to integrate and analyze data across customer touch points,
provide customers with a more consistent experience across channels, and have actionable metrics to
continually refine and improve the customer experience.

 A more holistic, connected approach helps companies increase marketing effectiveness, improve
operational agility and increase relevance for the customer.

 IBM’s portfolio of Smarter Commerce solutions, experience, Business Partner network, cloud delivery
and financing options can provide midsize companies with affordable, accessible solutions and the
guidance required to get the most from them.

Technology trends are converging to create a perfect storm in the world of commerce—one that empowers
customers and raises the bar for companies of all sizes to meet new, more demanding customer expectations.
Social media empowers customers with information from friends and other unfiltered sources. Mobile devices,
applications and payments make it possible to research and shop for products and services anytime and
anywhere. Cloud computing and ecommerce are blurring the boundaries between brick-and-mortar and
online commerce sites.

As a result, customers expect more from businesses throughout all phases of the commerce cycle. They want
anywhere, anytime, any-device access to multiple sources for information gathering, product and service
evaluation, selection, purchasing and customer service. For businesses, the trick to surviving and thriving in
this brave new world is having the ability to anticipate what the customer wants, automate and personalize
customer interactions, and enable the customer to do business where, when and how he or she wants.

IBM has developed its Smarter Commerce portfolio to help companies put the customer at the heart of the
commerce cycle. These solutions and services delivered by IBM and its Business Partners take advantage of
cloud, mobile and social technologies. They can help midsize companies build the foundation needed to
deliver a consistent, more responsive customer experience across channels.

In this paper, we first look at how and why technology trends are radically transforming customer expectations
and the commerce cycle. Second, we examine what this sea change means for businesses, and how companies

2 Copyright SMB Group, Inc. March 2012


need to adapt their mind-sets and operations to create a more virtuous customer experience cycle. Finally, we
provide an overview of IBM’s Smarter Commerce initiative, focusing on its solutions to help midsize companies
market and sell. Throughout the paper, we reference specific examples of midsize companies that are using
Smarter Commerce solutions today to more easily determine and deliver what customers really want—
through more effective customer interactions, better information and insights, and improved processes.

SECTION 1: THE SMARTER CUSTOMER—REDEFINING VALUE IN THE SOCIAL WEB
The ways people and businesses buy products and services have radically and irreversibly changed over the
last few years. Rapid adoption of mobile and cloud technologies as well as the rise of social media have turned
the commerce process upside down (Figure 1).

Figure 1: Technology Trends Are Converging to Radically Alter the Commerce Process

Source: SMB Group and IBM



Social networks have become collaborative platforms—and a strong influence on how people perceive and buy
products and services. The world has moved from one-way, brand-centric marketing and static web pages to
two-way, interactive conversations that empower customers with more information and choices.

“Social shopping” was originally pioneered by Amazon.com, which has offered customers reviews and
suggestions for years. But social shopping is spreading its wings well beyond Amazon. Facebook’s “Like” button
makes it easy for anyone to share opinions with friends, and many new apps are also fueling this phenomenon.
For example, Shwowp lets users track and share their shopping history; Kaboodle and ThisNext provide social
shopping communities for people to recommend and discover new things; and ShopTogether provides a
synchronized online shopping experience with friends, simulating a joint trip to the mall.

The rising adoption of mobile devices is facilitating this trend. The Mobile Marketing Association estimates that
there are 6.8 billion people on the planet—and 5.1 billion of them own a cell phone, but only 4.2 billion own a
toothbrush! Using the phone in their pocket, buyers can access price comparisons, reviews, ratings and other
information online throughout the commerce process.

To understand just how revolutionary this shift is, consider these statistics:

 Shift to online sales. 32 million people (66% of all adults) in Great Britain purchased goods or services
over the Internet in 2011 (Office for National Statistics, August 2011). This was an increase from 62% in
2010.

 Rise of social media. In 2011, 65% of adults used a social networking site like Facebook or LinkedIn—up
from 5% in February 2005 (Pew Internet & American Life Project). During the 2011 holiday season, the
number of discussions on social media sites leading up to Black Friday 2011 increased by 110% compared
to 2010. Key topics included price comparison tips, out-of-stock issues, waiting times and parking (IBM
Coremetrics Benchmark).

 Explosion of mobile devices. Smartphone sales surged past PC totals for the first time in the fourth
quarter of 2011 (Canalys). And people are using those devices to purchase goods and services: Worldwide
mobile payment volume is predicted to total $86.1 billion, up 75.9% from a 2010 volume of $48.9 billion
(Gartner Inc.; Market Trends: Mobile Payments Worldwide, 2011).

 Growing avalanche of information. We have officially entered the age of the zettabyte (with 21 zeroes
after the “1”). Next year, the volume of digital content will rise 48 percent, to 2.7 zettabytes (IDC).

In the retail industry, for example, think about how easy it is to go to a physical retail store to touch and feel a
product, and then comparison shop for the same item and order it for less online via a smartphone. Or
consider how quickly customers can share a negative experience—poor service, out-of-stock items, long lines
or endless phone tag—with others.



Whether you are a bank, wholesale distributor, manufacturer, retailer or any other customer-oriented
organization, the bottom line is that customers’ expectations are rising. People increasingly expect anywhere,
anytime, any-device access to multiple sources of information throughout the commerce cycle, from
information gathering, evaluation and selection, to purchase and service. This mandates that vendors
understand and implement new solutions and metrics to attract, interact with, acquire and retain customers.

SECTION 2: SMARTER COMMERCE—TRANSFORMING FOR A CUSTOMER-CENTRIC
WORLD
To delve further into how rapidly and dramatically social/mobile technologies are driving changes in customer
behavior and activities, let’s look more closely at the sea change that happened on Christmas Day 2011:

 Total online sales for December 25 grew by 16.4% compared to the same date last year (IBM
Coremetrics Benchmark).

 Digital content and subscriptions (digital downloads of music, TV, movies, ebooks and apps) accounted
for more than 20% of sales—likely in part due to the gifting of millions of new devices. On any other
day of the holiday season, that number was only 2.8% (comScore).

 The iPad accounted for 7% of all online sales on Christmas Day, accounting for 50% of all mobile sales
that day (IBM Coremetrics Benchmark).

 Record eBook downloads for Amazon helped the company realize a 175% increase between Black
Friday and Christmas Day compared to the previous year (PCWorld). Furthermore, at the Digital
Book World Conference in New York, publishers predicted that worldwide sales of ebooks will reach
parity with print books beginning in 2014.

 In the United Kingdom, there were 45.5 million visits to online retailers on Christmas Eve, and 62.8
million visits on Christmas Day, representing a 38% increase in a single day (Hitwise).

Traditionally, Christmas is a day spent alongside family and friends, and away from commerce, with stores
closed in recognition of the holiday. But now, technology lets people do what they weren’t able to do in years
past: shop any day of the year—even on holidays—from the convenience of their preferred device. As the
numbers above illustrate, customers have taken advantage of what today’s technologies—and companies
using a Smarter Commerce approach—offer them.

The iPad underscores this astounding shift: 7% of all 2011 online sales were made on an iPad, a device that
wasn’t even around two years ago. With the highest estimates for total iPad sales in the 40- to 50-million-unit
range as of the end of 2011, the iPad accounts for just a tiny fraction of all devices (desktops, laptops, mobile
phones, other tablets, etc.), making the number even more remarkable.

However, even as customers’ behavior and expectations change, one thing that hasn’t changed is their core
philosophies. Customers have always wanted companies to listen to them and to act on the input they provide.



They want companies to value their time and their recommendations as well as their money. But, as the data
points we’ve discussed clearly indicate, customers are changing their behavior and activities as they embrace
social and mobile technologies, using new devices and applications to do what they’ve wanted to do all along
more easily. As technology enables customers to get better access to information, people, products and
services, it also gives them more control over the commerce process.

So although customers’ core philosophies are holding steady, companies need to change their philosophical
approach to meet new expectations and align with changing behavior. Having a Facebook page or a mobile app
will not be enough. Smarter companies will fully engage customers across multiple channels—not only for
marketing and branding, but also to bring the voice of the customer into the company. By analyzing social
media, web and transactional data, companies can get the insights they need to create exceptional customer
experiences to set them apart in the market.

Speedo® International illustrates this type of shift in philosophy and
approach. According to Gareth Beer, ecommerce manager for Speedo “The goal is to have consistency and
International, “We wanted to really understand the customer, how they “The goalacross these channels and
visibility is to have consistency and
behave, how they think and how they liked to be interacted with. The visibility across these channels and
heighten our understanding of the
business is all about the customer. We need to be in as many channels as heighten our understanding of the
customer.”
customers are in and align them as closely as we can—whether the customer.”
— Gareth Beer, ecommerce manager,
customer is on a smart phone, iPad or in a brick and mortar store.” — Gareth Beer, ecommerce manager,
Speedo International
Speedo International
To gain deeper insight into how effectively it engages customers and
prospects on its site, Speedo integrated IBM Coremetrics® and
IBM WebSphere® Commerce to more accurately:

• Track KPIs for sales, orders, visitors, stock and margins, and its consumer index score, which rates
customer experience with Speedo.

• Gauge the effectiveness of pay-per-click campaigns and retargeting efforts.

• Set and meet service-level agreements to pick, pack and dispatch orders.

Understanding today’s customer calls for a new mind-set, one in which businesses understand how customer
behavior and expectations are changing. By developing processes and using solutions to better anticipate and
respond to market shifts, companies can create the product, sales and service experiences needed to not only
convert prospects into customers, but also turn more customers into brand advocates.

SECTION 3: CREATING A VIRTUOUS CUSTOMER EXPERIENCE CYCLE
Delivering the experiences customers and prospects expect begins with listening, and continues with providing
products and services that align with customers’ verbal and behavioral feedback. Using the channels, formats
and technologies that customers and prospects want to engage with is also crucial to develop, extend and
enhance customer intimacy and loyalty. The process of delivering exceptional customer experiences starts



when organizations adapt their culture and processes to meet heightened and changing customer
expectations, and is enabled by applying the right technology solutions.

But engaging customers and then capturing and making sense of the mounting avalanche of customer
information from social, digital and transactional channels isn’t easy. And providing employees throughout the
organization with the tools and access to information they need—when they need it—becomes more
challenging every day as more data is created.

Having the right tools and processes in place to listen to, analyze information from, and effectively engage with
customers and prospects is no longer a luxury but a necessity. As more people participate in social networks
and share more information, more data about them is created. Coupling this unstructured data with traditional
information (transactional data, activity data, service data, etc.) can bring companies closer to a 360-degree
view of the customer. By integrating and analyzing this information, companies can turn disparate pieces of
data into important insights they can act on to improve the customer experience.

This desire is driving many midsize organizations to adopt a new approach,
according to Paul Ernst, president of RiverPoint Solutions Group, LLC, an
IBM Advanced PartnerWorld Member. According to Ernst, “Using a “A company might have done 100
platform like IBM’s Unica® marketing suite can provide a 360 degree view marketing campaigns last year, and sent
of all your marketing touch points. It also lowers technological complexity out 50,000 messages for each campaign.
by removing the need to integrate multiple disparate point solutions for Using Unica, that company can do two or
email marketing, web analytics, and other key marketing applications by three times as many campaigns in the
providing a single platform. This more holistic, connected approach can same time period, with much finer
help companies increase the relevance/effectiveness of corporate targeting and messaging. Because each
marketing messages, improve marketing agility, and increase the number campaign is more relevant to the
of campaigns executed—all without having to add more staff.” customer, the company can engage
customers when they are most ready to
Leveraging technology to engage customers and prospects in a more accept the information that the company is
intimate fashion to gain a deeper understanding of them is at the heart of offering.”
creating great customer experiences. It takes both the aptitude and the — Paul Ernst, president, RiverPoint
sincerity of an organization to do it. And those who put in the time and Solutions Group, LLC
effort should find it worth their while.

SECTION 4: IBM’S INTEGRATED SMARTER COMMERCE APPROACH
IBM’s Smarter Commerce initiative is designed to help companies transform their businesses to provide the
compelling experience that smarter customers demand. IBM has invested more than $2.5 billion since 2010 in
the Smarter Commerce portfolio, which provides solutions across the commerce cycle (Figure 2).



Figure 2: IBM’s Smarter Commerce Portfolio

Source: IBM

Customer insight is at the heart of the Smarter Commerce portfolio, which encompasses IBM’s advanced
analytics solutions and its key business process solutions. Each solution helps businesses get the insight they
need from customer conversations, input and experiences to optimize each phase of the commerce cycle:

 Buy: Synchronize sourcing and procurement based on customer demand to optimize supplier
interactions across extended value chains. This includes solutions for supplier integration and
management, supply chain optimization, logistics management, and payments and settlements.

 Market: Create targeted and personalized marketing campaigns, loyalty programs and brand
experiences across different channels by gleaning and acting on insight from social networks, search
optimization, advertising, etc.

 Sell: Streamline and optimize sales and fulfillment across multiple sales channels, whether physical
stores, ecommerce, mobile, etc., so that customers can purchase products and services, exchange
information and collaborate with vendors and channel partners.



 Service: Proactively provide service to customers across all touch points and interaction channels to
increase customer satisfaction, repeat sales and loyalty.

Many companies focus on the Market and Sell phases first because they help drive revenue. IBM’s key
offerings in these two areas include the following:

 IBM Coremetrics solutions measure and improve the effectiveness of online marketing programs, and
include solutions for search engine bid management, email targeting, ad impression attribution,
cross-sell recommendations and social media ROI analysis.

 IBM Unica solutions integrate and streamline all aspects of online and offline marketing,
incorporating customer and web analytics, centralized decision management, cross-channel execution
and integrated marketing operations.

 IBM WebSphere Commerce enables companies to deliver a seamless, cross-channel buying
experience through contextually relevant content, marketing and promotions that support all sales
business models—including B2C, B2B and B2B2C—on a single customer interaction platform.

These solutions help businesses maximize the insights that they generate through customer interactions,
whether in a physical location (such as a store or branch office), over the web or from smart devices. With this
intelligence, businesses can do a better job of tailoring marketing and offerings to customer interests;
improving profitability by targeting the right offerings to the right customer at the right time; and reducing the
return costs, restocking expenses and supply chain expenses incurred by handling returns.

For instance, CustomInk®, a custom t-shirt company founded in 2000, has grown to 300 employees. It offers
hundreds of t-shirt styles and colors, as well as sweats, koozies, jerseys and other customizable products. The
company has expanded beyond screen printing and embroidery to add a digital printing service allowing
customers to design and order as few as one custom t-shirt at a time. CustomInk uses Coremetrics to
continually improve the customer experience and grow the business in three key ways:

1. Dashboard for daily monitoring of key performance indicators (KPIs). CustomInk relies on
Coremetrics to monitor a series of key metrics such as: What percentage of site visitors go to the
Design Lab? How likely is a visitor to save a design? How do aesthetic changes improve conversion
rates? These metrics help CustomInk determine what’s working and what isn’t. For instance, if the
percentage of customers who save a design is low, it may be because something is broken and the
customer can’t load the design. Or there may be an overload of visitors from unqualified sources.

2. Design Lab monitor. When a customer designs a t-shirt, CustomInk uses Coremetrics data to help it
understand how people click around to design their shirts, providing the company with a better
understanding of the engagement process and departure rates. The company evaluates the data from
a statistical perspective, using basic standard deviation analysis. When things deviate beyond a certain



number of standard deviations, the monitor turns bright red to indicate there may be a problem—
allowing CustomInk to quickly determine what is happening and resolve the situation.

3. Pathing analysis. CustomInk monitors key paths through its site daily with Coremetrics TruePath.
These insights help CustomInk determine where people “fall off” on different paths and then refine
them to improve engagement and conversion. CustomInk can see when changes are beneficial,
detrimental or neutral to customer behavior. For example, CustomInk has learned that small,
aesthetic changes in color or type font, or changes in button styles or colors, can impact movement
through the site and affect the drop-off rate.

CustomInk also uses Coremetrics data for behavior-based segmentation.
By analyzing criteria such as on what page customers enter the site;
whether they come from a search engine, email or Facebook; whether “Midsize companies want the same agility
they come from a mobile device or PC; and what tools they want to use to as bigger companies, but don’t have IT
design their t-shirts, CustomInk can better understand different customer resources to manage it all. Unica gives
requirements and tailor paths accordingly. them an integrated, multi-channel
platform, and RiverPoint supplies the
IBM Business Partners help midsize companies get the most from Smarter solution expertise, the integration to
Commerce solutions. RiverPoint Solutions Group, for example, helps its connect their offline and online presence to
clients use Unica to get an integrated, 360-degree view of their customers give them a 360-degree of all the touch
across multiple channels: email marketing, the Web and social media. points with customers.”
RiverPoint provides both technology implementation services and — Paul Ernst, president, RiverPoint
guidance to help clients streamline marketing operations. Taking Solutions Group, LLC
advantage of Unica’s implementation methodology, RiverPoint can speed
time to value and help clients become “self-sustainable” with proven
documentation, training and mentoring best practices.

IBM provides both Unica and Coremetrics as cloud-based solutions,
“Coremetrics plays a key role in all of our
enabling midsize businesses to reduce upfront capital costs and pay for
measurements…about 30% of the time, we
these solutions via monthly, quarterly or annual subscriptions. IBM Global
use it to monitor performance, about 20%
Financing has also stepped up with a $1 billion lending program for SMBs
of the time we use it to identify new
that buy or lease its technology, with financing rates as low as 0% over 12
opportunities, and the remainder of the
months for credit-qualified clients on purchases of as little as $5,000.
time to measure the impact of changes we
make.”
— Rachel Jacobsen, marketing analytics
manager, CustomInk

10


SECTION 5: SUMMARY AND SMB GROUP PERSPECTIVE
The Internet truly did change everything in the world of commerce more than a decade ago. It created new
online channels for information gathering, product and service evaluation, selection and purchase—and
created a mandate for businesses to develop and integrate ecommerce with their traditional brick-and-mortar
operations.

Now, as adoption of newer social and mobile technologies explodes, another seismic shift of greater
proportions is under way—and businesses face a new, perhaps more transformational imperative. The
changing dynamics necessitate that midsize businesses have a closer relationship to their customers—as well
as suppliers and partners—to get the insights needed to better anticipate and respond to requirements, and
ensure they deliver the right product or service at the right price, time and place.

IBM and its Business Partners provide guidance and expertise to help midsize companies integrate and analyze
data across customer touch points, give the customer a more consistent experience across channels, and gain
actionable metrics to continually refine and improve the commerce experience.

Although IBM isn’t the only vendor to tout this type of approach, it is building a strong portfolio of solutions
and investing in its WebSphere Commerce platform to strengthen social, mobile and new analytics
functionality. And key acquisitions—such as Unica and Coremetrics—provide additional automation,
personalization and analytics capabilities to the mix. As important, IBM’s Business Partner network, cloud
delivery and financing options put many of these solutions firmly within the reach of midsize companies.

In a very short time span, it has become a buyer’s world. Customers will continue to harness mobile, social and
cloud computing—and businesses must do the same. Companies that use solutions such as those provided in
IBM’s Smarter Commerce initiative can lay a strong foundation and put the right processes in place to make
these disruptions work for instead of against them.

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SMB GROUP , INC.

The SMB Group focuses exclusively on researching and analyzing the highly fragmented “SMB market”—which
is comprised of many smaller, more discrete markets. Within the SMB market, SMB Group areas of focus
include: Emerging Technologies, Cloud Computing, Managed Services, Business and Marketing Applications,
Collaboration and Social Media Solutions, IT Infrastructure Management and Services and Green IT. Read our
2012 Top Ten SMB Predictions for our views on game-changers in these and other areas of the SMB market.

Trademark information: trademarked terms are marked on their first occurrence in this paper with a
trademark symbol (® or ™)

IBM, the IBM logo and ibm.com are trademarks or registered trademarks of International Business Machines
Corporation in the United States, other countries, or both. If these and other IBM trademarked terms are
marked on their first occurrence in this information with a trademark symbol (® or ™), these symbols indicate
U.S. registered or common law trademarks owned by IBM at the time this information was published. Such
trademarks may also be registered or common law trademarks in other countries. A current list of IBM
trademarks is available on the Web at “Copyright and trademark information” at
ibm.com/legal/copytrade.shtml. Other company, product and service names may be trademarks or service
marks of others.

Speedo® and are registered trademarks of and used under license from Speedo International Limited.

CustomInk is a registered trademark of CustomInk LLC.

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