Computers and artificial intelligence have come along at an exponential rate over the past few decades, from being regarded as oversized adding machines to the point where they have played integral roles in some legitimately creative endeavours.
Delivering a personalised experience digitally at The Athlete’s Foot is not about replicating what has become a highly successful in-store experience, it’s about meeting a customer’s next unmet need.
Speaking at the joint CMO, CIO and ADMA Executive Connections event, entitled ‘Mastering Digital Transformation’, director of multi-channel for Athlete’s Foot’s parent company, RCG Corporation Mark Teperson, took attendees through the challenges of bringing digital thinking into the Australian shoe retailer. He also shared how digitising the retailer’s customer loyalty program has helped build an appetite for digital change.
ASX-listed RCG Corporation’s retail brand portfolio includes The Athlete’s Foot, Platypus, Merrell, Sketchers and Van, and the group has distribution licences for another 13 global shoe brands. The Athlete’s Foot alone maintains 138 stores operating nationally, 95 per cent of which are franchised.
Teperson admitted a franchise model is an interesting environment to work within when you’re trying to disrupt a business model.
“These guys have often mortgaged their house to buy a store, it’s their livelihood, and they care about what happens in their four walls,” he said. “Selling online and online itself was seen as competitive.”
An additional challenge Athlete’s Foot faced was how to take a very physical-based customer experience of fitting a shoe to a specific customer’s foot, into an online environment.
“It’s always grounded in how we become contextually relevant. We are not trying to replicate what we do in-store online – that would be a complete failure,” Teperson said. “What we have said is that if you’re going to buy shoes online, we should be providing the best fitting experience online for that customer.”
Building customer loyalty
It was this value-based mentality that Teperson and the team brought to an overhaul of its loyalty program, which kicked off in 2012.
“We delivered this great experience in-store, and the good thing about that is as soon as you go home, you tell your friends. But in nine months’ time, when you need new running shoes, you’ve forgotten about the experience and just have the shoes,” he said. “We needed to find a way to connect to our customer in-between those purchases, and reinforce the value we created and the awesome experience they had in-store.”
At the time, Athlete’s Foot had 1.1 million program members in an analogue program driven by direct mail activity and managed by third parties.
“If I wanted to send an email to the database, I needed to write a brief and submit it, and get the data two weeks,” Teperson recalled. “You just can’t operate like that today.”
In addition, it took too long for customers to earn rewards, Teperson continued. “If you’re only buying shoes worth $150-$170 every nine months and you need to earn $500 for a voucher, you’re talking about three years before you earn something, which is ridiculous,” he said.
“There was also a disconnect between the highly personalised in-store experience and this batch-and-blast approach via email. We create a relationship in-store with the customer, ask them questions about their exercise, health issues, their gait across our Fitzi technology, how they disperse pressure in their shoe, and then we take what we think will be the perfect shoe for them and fit them up. Then they’d leave the store and the 22-year-old that training for a marathon for an event would be sent an email about duty shoes targeted at a 65-year-old women.”
The digitisation of the loyalty program was about strengthening relationship between store visits, building trust and creating a more valuable loyalty program. Teperson said as a business, there was also an ambition to shorten the purchase cycle and gain more share of wallet, as well as create an opportunity to win customers back.
Doing this meant internalising the loyalty program and building it into the retail chain’s point-of-sale systems. “Instead of a customer waiting two weeks to get a voucher, they can earn it instantly in-store and it’s digitally sent to them in almost real-time,” Teperson said.
The team also created a single view of customer and can segment an email communication based on 135 different criteria about the customer such as purchase data, what they browse on the website, age and demographic, and interactions with communications. To top it off, the retailer changed the earnings threshold from a $50 voucher for every $500 spent to a $30 voucher for every $350.
“We doubled the number of customers earning awards as a result, which has a profound impact on the satisfaction around the program and how the customer feels about it,” Teperson said of its success. “We saw a direct correlation between redemption rates and customer satisfaction and stickiness, and they earn more vouchers over time.”
Vital to its success was engaging the franchise network to drive email capture rates instead of postal addresses. To do this, Teperson had to prove why it was so important.
The ‘aha’ moment came when he was able to show through data that having an email address for a customer resulted in an increased spend of 24.5 per cent on average. If Athlete’s Foot didn’t have an email address, a customer’s spend was declining by 6.4 per cent.
“It was just one piece of data we needed to get to in order to align the organisation and get them behind what we were doing,” Teperson said.
Communications as a lifecycle
Athlete’s Foot then created a lifecycle communications strategy based on what it knew about the customer, which evolves as the business learns more about that person. For example, an individual who has just bought a pair of running shoes will receive an email 24 hours later thanking them for the purchase and asking them to fill in a three-question survey about their experience. One of these questions allows Athlete’s Foot to correlate an NPS score.
“The other survey questions are about how they utilise their shoes – for example, how frequently they train and how far they run,” Teperson said. “That’s important because running shoes have a life. If you’re a serious runner, you should be getting 650km-800km out of a pair of shoes depending on how you run. There is a lot of education takes needs to take place, but we figured if we knew that data upfront, we could educate them through the process of communication. It was about changing the nature of our engagement and relationship.”
If the retailer knows a customer is running at a heavier pace and should be replacing their shoes earlier than the typical nine-month cycle, the comms cycle recalibrates for that specific customer, Teperson said.
Emails sent at different stages of the lifecycle include follow-ups on how the shoes are going, tips around training and motivational content, reminders on how to tell when shoes are wearing down, and when it’s time to replace the shoes. Because of the emotional connection customers have with a pair of shoes, Athlete’s Foot is now looking into other ways of recognising that emotional link digitally.
Thanks to these efforts, Athlete’s Foot generated a hefty increase in the number of returning members over a 12-month period and now has 1.8 million members. The retailer also had a 12 per cent increase in voucher redemption rates by moving from direct mail to email.
“When you’re not talking to a customer about a sales message, it’s amazing the kind of engagement you do get with the brand,” Teperson said.
There were plenty of challenges getting to this point, one of which was gaining agreement across the business on requirements and scale of investment.
“We also needed to be able to ensure we could measure the impact we were having at the store level; it wasn’t just online conversion rates but the incremental growth coming in to the stores,” Teperson said.
Understanding the infrastructure, internal capabilities and how new and old systems integrated was a big learning, as was education around data protocols.
“The franchisees didn’t understand how that one field in their POS system ended up in front of the customer,” Teperson said. “We had people who’d put in ‘customer eligible for seniors discount’ and that’s what they were addressed as in the email. Bad, so we addressed that quickly.”
Linked to this is measurement techniques, and Teperson said it’s vital to distil key metrics down to something you can actually influence.
“What are the levers, versus what are the outputs?” he asked. “If you stay focused on the things you’re really trying to drive, it helps narrow down where you need to focus the organisation and those around you.
“Operationalising the strategy too – it’s hard to say and hard to do. There’s always a big idea and plan, operationalising it, testing and learning, and making things happen is tough.”
For those going on a similar digitisation and personalisation journey, Teperson advised starting small, acting fast and communicating constantly with stakeholders across the business.
“Understand your performance and share results to build momentum across the organisation,” he added. “Make sure everyone understand you’re pursuing excellence, which is never ending, and that it requires being open to experiences and continual improvement.”