2016: The Year Your Retail Brand Needs to Solidify an ‘LMOD’ Strategy
What the hell is ‘LMOD?’
It’s not the slickest acronym, nor does it roll off the tongue elegantly, but if you are in the grocery, retail or restaurant sectors, it’s one you will want burned into your consciousness as we head into 2016.
I define LMOD as Loyalty, Mobile Ordering and Delivery, and it’s a loop that multi-unit retailers need to close quickly in order to satisfy instant-gratification-seeking customers (which we all are becoming) in the frictionless, on-demand economy smartphones and the likes of Uber, AirBnB, Munchery,Plated, Saucey and others have thrust us into over recent years.
Time is the new currency
Customers, particularly millennials (man, I’m starting to get sick of abusing this generation label, but facts are facts), are defining their quality of life less and less about status and monetary gain, and more with the time afforded to do the things that “matter.” Matter being whatever that particular person defines for his or herself.
Saving time, however, it not a new concept, nor is it exclusive to only the 18–35 year-old generation. Enter the explosive growth of on-demand commerce.
According to Business Insider, “The On-Demand Economy will usher in a paradigm shift similar to what was seen with the advent of the internet in the late 1990s.”
There’s no sign of it slowing down or being just a trend either.
This means there is no playing around, little margin for error and a relatively short period of time to get your LMOD strategy off the ground before you lose marketshare to a competitor who is faster off the mark or to a completely new disruptor.
Innovation and Disruption Will Rule
There are several reasons Amazon’s stock is up over 460% in 2015, which I won’t get into here, but use them as the standard-bearer example for getting products into the hands of consumers with the least friction and time possible. They have also almost tripled Amazon Prime membership in the past 2 years.
Pretty nice to be able to have millions of customers paying $99 a year before they’ve even purchased a single product, huh? Prime members also spend 2.4x more annually than non-Prime Amazon shoppers. With the right LMOD strategy in place, your brand could start doing the same.
I’ll use the example of Shipt, as it’s something I’ve used recently and a service I think gets the LMOD strategy right (well, almost…more on that later).
Shipt works at Publix (among others), a grocery chain based in the Southeast. Shipt allows you to order groceries from their iOS or Android app, and within an hour (in most cases) receive your groceries, hand-shopped by a local resident.
Here’s the quick-and-dirty list of what the app has done right, and how other retailers could follow suit (get my dress shirts from my favorite retail store delivered same-day, yes please):
1 . Design an app separate of your core brand
The Shipt and Publix branding (and excellent customer service) was so similar, I thought for a long time that Publix created Shipt (see my update at the bottom). However this is not the case, but thinking about it, it would have been a brilliant move, and a strategy some brands might want to consider.
Operating “independently” would allow the brand to treat and run the platform as it’s own separate business entity, even treat it like a tech startup (I’m envisioning an Urban Outfitters tech spinoff as we speak…after all, they’re not afraid of venturing outside of their core business).
Granted, this off-brand strategy is not right for every type of concept, only those with the right (larger) size, resources and an overly complex in-store offering (think multiple product categories). Restaurants, coffee chains and specialized retailers will want to maintain one consolidated branded app, and you’ll want your single mobile app to be pretty much 90–95% dedicated to LMOD.
2. Utilize an effective marketing push
With a loyal customer base to draw from (and Publix definitely has delivery-hungry raving fans), they did an excellent job pushing the service out without an extensive ad budget. They incentivized users to share among social media and earn discounts off of future orders. They also ran a promotion (that got me to join) that discounted the annual membership by half which ran for a limited time during the busy Thanksgiving holiday/Black Friday/Cyber Monday week, and a great way to announce the service in new markets.
3. Offer simple subscription options
Shipt offers two easy ways to sign up: Monthly or Annual, with the ability to cancel at anytime. The no commitment piece is a great way to attract customers who are a bit squeamish about going all-in right from the start.
4. Get the local community involved
One of the greatest benefits of on-demand commerce, is that it gives everybody the opportunity to join in. Have a newer car and some time, drive for Uber. Have a home or apartment, monetize it with AirBnB while you are away on vacation. Shipt is doing a great job in pushing “employment” into their service and tellingcompelling stories within the local communities. By employing local residents, who can be a grassroots means to spread the word, while consistently delivering the message that you will give back time to customers to do meaningful things with their lives will be impactful in driving adoption of the service.
5. Build a good product that works (but don’t wait too long for perfection)
The Shipt app is robust and easy to use with a fairly attractive UI. It needs to be robust in order to tie into real-time inventory at the stores. You’ll need to do your homework and put together an internal IT, Operations and Marketing team to deliver a solid solution that will continue to evolve.
I stress evolve, because Shipt, for instance, doesn’t have all the Publix products built into the app yet. To overcome this, there is an option to request an item, and since they are employing local, trained shoppers, it’s as simple as texting back and forth to ensure you get what you want. This type of approach gives you the ability to launch, a la the Facebook and Google philosophy of “move fast and break things,” without being perfect. The risk is not in launching with a partially baked solution, but not launching an LMOD platform at all or within a timely manner.
6. Provide an attentive customer service team
There was an error with my most recent order, however Shipt’s Member Experience Team did an amazing job to rectify it…quickly. After the order was complete, I received an email with my receipt along with a notification to rate my shopper, options for providing a tip and then review my order. With a quick hit of “was something wrong with your order?,” I was able to choose from a menu of options and state “wrong product.” Within no time, I had an email stating I was being refunded for the price of the wrong product. Lesson being, you’ll need the proper team built to service this model and react quickly to issues via email and on social media.
The Missing Piece
The one area lacking in Shipt is there is no Loyalty piece. Perhaps as a 3rd party provider, they find it challenging to find consistency among their retail partners. However, OpenTable does this pretty well. As a brand doing this on your own, you will not have this luxury, and Shipt/Publix too, may soon want to reconsider adding this component. For instance, my wife asked me, what about coupons? Great question currently unanswered by Shipt.
Starbucks comes to mind as a great Loyalty leader, in that there is something very gratifying about turning my pursuit of espresso-fueled mornings into a game and converting those gold stars into a free drink.
Gamifying the process and seeing progress the more I use the Shipt app would be nice reminders for me to “conveniently find” more ways to use the app. This would turn me into a shopper that doesn’t just turn to Shipt when I need to, say once a week when I need milk and eggs, but encourage me to want to spend more, either by earning rewards by adding more to each order or using the service more than once a week. That would have a dramatic impact to the bottom line, especially when multiplied over thousands or millions of customers.
Remember, data collection, and effective use of that data is key to a strong loyalty program, as well as offering customized rewards. The top brands realize this, and even more than driving repeat and consistent customers, it’s about delivering tailored messages and options at the right time and garnering insightful data about who your shoppers really are.
Additionally, it’s important to build a platform that closes the loop on all three elements of LMOD, so customers can have one place to go to get an enjoyable, frictionless experience. One simple-to-use app that has a good UI and gives the user Loyalty, Mobile Ordering (with multiple payment options) and Delivery at the fingertips is key.
The Near Future
The net effect of a successful LMOD platform will allow your retail store footprint to shrink over the next several years, which gives you the opportunity tomaximize revenue per square foot. In essence, your physical walls can shrink while your virtual walls will be able to expand, as long as the platform ties in well with the available in-store inventory in real-time.
The On-Demand Economy is going to fundamentally change the way we shop and brick-and-mortar/e-commerce/on-demand will start to blend even further together. We are already seeing this now with app restaurants and hybrid retailers such as Bonobos. We’ll see the rise of smaller stores, the influx of urban fulfillment centers and retailers competing less on price, but the enhanced experience that can be delivered in any way the customer wants to interact with your brand: in-store, online, on mobile and at the home via delivery.
However you don’t have to look far if you want to examine an industry who has been doing LMOD well for years. The large pizza chains enjoy over half of their orders from mobile, maintain loyal customers, deliver in a timely manner and utilize small retail footprints very efficiently. They have even gone so far to simplify the process by ordering via emojis! We’re at a point now though that all industries need to get in the game.
Building The Right Infrastructure
Before all of this can happen, however, it starts with modernizing your point-of-sale and back office infrastructure so your LMOD platform can seamlessly connect with all the moving parts and properly scale with it. This needs to be done with an open architecture that makes it painless and cost effective to add or integrate current services such as Loyalty, Mobile Ordering, Reporting and proper Delivery Management.
At Revel, we’re hard at work to redefine what a modern point-of-sale system should be. As a central nervous system to any retail business, we have built something that is lighter, more scalable and secure. We’re closing the loop on LMOD with our own services and not shy to the fact that our Open API allows enterprise brands to work seamlessly with our POS through their own services of choice.
At the end of the day, whether done entirely in-house, outsourced, or a combination of both, 2016 is going to be a defining year for your brand to shape an LMOD strategy before you lose customers to a competing service.
YOU MAY ALSO LIKE READING: CIOs, What Does Your “Bridge” Strategy Look Like?
I am on the Enterprise team with award-winning San Francisco based Revel Systems iPad POS, a select Apple Enterprise Mobility partner. I advise clients to implement a best-of-breed technology stack that will make a positive impact to their brand. Follow me on Twitter @BrandonTechExec and read more about Revel news here. #RevelUp!
UPDATE: An earlier version of this post stated that Shipt was created and operated solely by Publix. It has since been updated to reflect the correct info.