In all areas of business and industry (not just the stock market) we are obliged to make predictions about the future. This is of course in many cases a recipe for disaster without careful consideration of the context and the scope of the prediction. In fact all products: physical or software, depend on confident predictions about the market for them before they are given the green light for development.
Companies like SAP make money by providing certainty in an uncertain world, and also by making careful predictions about how that world is changing and providing products that cater to the expected conditions of the future. The Customer Experience portfolio of SAP solutions functions as a means to not only predict customer demand in the future but also to stabilise and instigate further demand for products. The value of SAP CX and C/4HANA is increasing due to particular conditions and trends in commerce which have accelerated due to the pandemic but which had previously existed.
Particularly over recent years (but extending as far back as a decade) companies have begun to leverage digitisation in order to sell direct to consumers. Now Direct-to-Consumer business models are augmenting traditional commercial strategies: not just among digitally native startups but among big brands. As a result, with a more direct relationship with their customers, it has become crucial for companies to spend time and money attending carefully to the customer experience and to invest in software solutions that provide a platform for this such as the SAP CX C/4HANA suite.
This week Ignite SAP will discuss the changing commercial environment, the consequent adaptations required of companies operating today, and how software like SAP CX facilitates these necessary transformations.
As the pandemic took hold and traditional stores were shut down, the companies that provided online stores with home delivery were able to maintain their revenue stream. This was not just a convenience for consumers and businesses: it was economically essential. The reason why this was possible was due to the pre-existing digital infrastructure, but many smaller businesses had to suddenly up their online presence.
The catalyst of the pandemic added to a trend among consumers of a preference for online over physical stores and since the establishment of that new normal several new trends in commerce have evolved due to changing consumer wants, needs and expectations.
Firstly, the online store is always open and so we now expect that we should be able to purchase anything at whatever time we choose. Although we all spent a great deal of time at home, the provision of first a 4G, and now a 5G network has increased the expectation that we should be able to order a product wherever we are, as the thought occurs to us, not just on our smartphones but on any device near to hand.
While this is obvious it has profound implications for the way companies conduct their commercial transactions, because all these devices are not just portable wallets and cash registers: they are the stores and most importantly the means of communication.
Consequently companies are seeking ways to enrich commercial interactions and other contacts with consumers in an easily adaptable way, because personalisation of these interactions is priceless.
As business owners, with these devices we have a means of building up a comprehensive profile of each customer. A way to understand them not just as customers but as human beings with all their wants and needs. We have a way to build a lasting relationship with them based on a shared narrative: a story of the relationship over time.
Instead telling them what they should want, or of talking at them about things we think that they might need, we can have a conversation through a series of interactions over time about what they require from that relationship and take steps to provide for these needs. This creates an indirect path to a purchase but by doing so we do not just make single, isolated sale, but nurture a mutually beneficial relationship that results in a lifetime of transactions.
For an example of identification with a product or brand we need only look to the Apple customers who have bought into their products with heart and soul: who now find it physically and sometimes emotionally difficult to use any equivalent product which is capable of performing exactly the same functions. They think like Apple customers, and consequently they are willing to pay a premium to use these products.
There is clearly an uncomfortable aspect to the intimacy of this new relationship between corporation and customer: as if the marketing, if it reaches the greatest extent overrides the customers’ free will. If companies treat each individual as a human being with whom they have a relationship then they have to respect the privacy and also the primacy of the customer that they serve. The customer should be in control of the relationship. The EU general data protection act has begun to address this but there will be further legislation to regulate the extent to which companies will be allowed to influence consumers as well as protect their privacy.
If companies can instigate and maintain these relationships with customers while still promoting their customers’ privacy and rights then they can expect to generate far greater revenue while still giving the customer a vastly better product or service than they would otherwise receive. The number of endpoints in this data network will eventually extend beyond phones and smart TVs to over smart devices such as refrigerators and cars.
Even now APIs and chatbots and user interfaces are being designed to take advantage of such a wealth of information. The AI used to support this is becoming increasingly important as the amount of time required to process the customer interactions, let alone process the information is becoming difficult to manage. You cannot have a one-to-one relationship between your customers and your workforce, yet a truly personalised service would appear to demand this. Modern AI now uses streaming data rather than historical data to predict demand and help organise supply chains and warehousing, and it can also be used to manage e-commerce and customer experience in a much more subtle way.
To add to this complexity the nature of “the customer” as a generalised abstraction is constantly changing even if we do not take into account the almost infinite variety of humans as individuals. For example, another trend in consumer need is for products that conform to their expectations of environmental sustainable production and distribution, with a low carbon footprint and with credentials that demonstrate corporate social responsibility.
The resulting issue is how to collect and interpret such a huge array of data in a meaningful way so as to provide the customer with exactly what they require and potentially to anticipate their wants and needs, without infringing their rights and privacy. When the traditional disciplines of marketing blend seamlessly with all other aspects of production and distribution as is the case with Direct-to-Consumer business models then we turn to software to provide us with superhuman information processing capabilities.
Since 1997 SAP has been providing an e-commerce solution in the form of SAP Hybris, and in has evolved continuously since that time. In 2018 Hybris became known as SAP Customer Experience and the C/4HANA Suite in a rebranding exercise design to reflect a new aspiration to provide a greater degree of integration of its constituent parts.
SAP C/4HANA now consists of SAP Marketing Cloud, SAP Commerce Cloud, SAP Customer Data Cloud, SAP Sales Cloud and SAP Service Cloud. Each of these parts is built up of a toolkit of advanced technologies that can help provide the user with the means to attend to some aspect of the commercial lifecycle with an overarching intention to automate time-consuming tasks, increase workforce productivity and promote profound understanding of the needs of individual customers.
IgniteSAP reported that on the 1st of October last year SAP that it had entered into an agreement to acquire the omni-channel customer engagement market leader Emarsys. Emarsys is a cloud-based platform whose clients include brands such as Samsonite and Nike. It delivers multiple-channel customer-centred marketing using automation to reach the widest possible group of potential customers.
This investment has added to SAP’s ability to cater for companies who require a customer data platform which integrates seamlessly with their other business processes software, and along with SAP CX and C/4HANA provides all the requirements to run a successful Direct-to-Consumer business model. The key to implementing this is not to destabilise the existing B2B model and the advantage of going with an SAP solution to do so is clear if you already have an existing SAP system, but it needs to be done carefully. In an episode of the LinkedIn Live Series “Keeping Up with E-Commerce” the principal of CX at the BORN group, Alex Stickelberger said:
“You have to think about your business model and you have to think about the channels, and it’s not always about increasing sales and opening up a new direct-to-consumer channel… It’s a just whole transformation process in general and how to communicate with the customer, how to create extra value, and how to find a sweet spot where they’re accepting the offer you’re giving them directly.”
D2C e-commerce provides brands with the ability to control all channels of communication and the whole customer experience and has the added advantage of providing end-to-end data on all of the business processes, particularly with SAP CX integrated with an existing SAP system.
In order to augment an existing revenue stream with D2C Javier Flores, the global industry principal of consumer products recommends that companies launch their D2C strategy in the following way:
1 Define why they want to go direct to consumer
2 Determine the value proposition
3 Share this value proposition with customers who care about it
4 Execute the D2C channel flawlessly
5 Get customer feedback about the processes and products
6 Transition between customer acquisition to building long-time relations
7 Capitalise on competitive advantages
Big brands have followed the early startups in developing a D2C model and the success of companies like Nike and Nestlé in this area have shown that it is not limited to small-to-medium businesses. With the careful leveraging of the information stream that comes with D2C corporations can develop a complementary revenue stream that can influence their pre-existing business activity for the better, and there are lessons for all businesses to be learned from the profound connection with a customer base that can be fostered with the Direct-to-Consumer model.
IgniteSAP would like to hear from you if you have opinions about the D2C business model.
What is your experience of D2C? Have you been involved with an implementation of SAP CX and C/4HANA? What was the outcome of the changes you made and how do you find customers’ attitudes to making this change?
Please let us know in the comments below.