Edition 87
How to Hit a Homerun with Your Customers Using Big Data
by Marcus Arbelbide, VP of Supply Chain Solutions, BuildDirect

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At BuildDirect, we like to say we’re “customer obsessed.” Okay, great – what company isn’t?

The same can be said for the Major Leagues Baseball team, the Oakland A’s. The A’s didn’t have money to pay for big names which could mean disappointing customers as the team would most likely lose more games. They decided that with their financial constraints the best way to delight customers was to win more games so instead of paying for big names they would recruit players with good on-base averages and good batting averages – but of course you have to stagger these players in a particular way to maximize the potential of their performance – which is where the Harvard statistician comes in.

The statistician worked with Billy to figure out the perfectly balanced ratio of on-base and at-bat players, and built formulas to help understand and optimize the trade-offs between the two types of players.

These statistical models were used as the foundation for recruiting players going forward, and together they managed to build the A’s into a team that went on to win the Western Division of the American League.

When BuildDirect was first founded, we faced similar challenges to Billy Beane and his Oakland A’s. We had a thorough understanding of the heavyweight supply chain game we’re playing in, but we don’t have the breadth that our competitors do to recruit the Derek Jeters of the home improvement industry to put us on a guaranteed path to success. So, we had to leverage what we do have access to: customer data and an all-star team of number crunchers.

Much like Billy knew that finding the perfect balance between getting runners on base would statistically improve the A’s chances of winning more games, we know that the more we leverage what our customers tell us on a daily basis will significantly improve our chance of winning customers over.

So. What are our customers telling us?
After extensive customer surveying and market research, something became very clear, very quickly: in today’s online shopping world, customer expectations are high, and particularly demanding for existing heavyweight shipping models. Through our research we were able to identify 4 key service challenges:

• Consumers have increasing control and decision power over how and when they shop, purchase and receive their orders
• Consumers have increasing expectations about delivery speed, flexibility, security, services, and cost
• Consumers apply these high expectations to heavyweight items as well, despite the complex nature of their delivery
• Over 70% of consumers expect to receive the same quality and speed of delivery experience, regardless of shipment size

So, how do we exceed these escalating expectations? We don’t – we change them.
There’s currently a vicious cycle of customer experience in the world of heavyweight goods home delivery that can be broken down into four phases:

Excitement > Anxiety > Disillusionment > Acceptance

Although the first phase of excitement is exactly where we want our consumers to be, they quickly move to the anxiety phase of the cycle when they see the cost and delivery time of their heavyweight goods is more expensive and much longer than the books they order off Amazon.

The key to removing consumers from this vicious cycle, and transforming them into your repeat customers, is to better set your customers’ expectations and remove the anxiety and disillusionment from their experience all together.

Great, so how do we do that?
One of the overwhelming pieces of qualitative feedback we received through our research is that almost 10 times out of 10, customers are not only willing to pay for value-added services, but they’d prefer a special or elevated delivery experience, even if they have to pay more. Examples of this kind of customer behavior can be seen in the millions of consumers who opt for “Premium Options” when riding with Uber, or willing to pay up for Amazon Prime memberships.



When it comes to applying these tactics to heavyweight goods, although the shipments being delivered are significantly different in size and scale, the theory behind setting customer expectations and wowing consumers with an overall experience remains the same: consumers will give you more if they know they will get more.

Reduce your customers’ purchase anxiety by giving them a choice of services that are all easy to understand and select online. We found that by recommending special or elevated delivery experience options that are based on the product and location, our return rate dropped by over 30%.

Tiered levels of membership are a great way to alleviate customer anxiety when purchasing expensive, heavyweight items online, and incentivise them to buy. They’re also a great opportunity to set your customers’ expectations of the shipping method, while leaving the choice up to them along with the feeling of being in full control of their whole shopping experience.

Setting consumer’s expectations by giving your customers clear, easy to choose shipping options will most likely reduce your customers’ shopping pain points, and significantly increase the likelihood of gaining their business.

Think about your next at-bat, especially right after you’ve hit a home run.

So, now that we know to set the customer’s expectations by giving them clear, easy to choose shipping options in order secure their business, how do we ensure that we can replicate and eventually even improve this cycle for not only this customer, but all potential future customers?

Billy Bean would be the first to tell you that winning a single season game certainly doesn’t guarantee you a World Series title.

Much like Billy and his Harvard statisticians measured and tested different formulas with different batting and on-base averages to find that statistical sweet spot that leads to a “W”, we in the heavyweight delivery industry have to measure and test different formulas with different customer data and feedback.

We’ve found that the best way to continue growth of customer conversion and satisfaction with our services is to measure, analyze, iterate, and share. We do this in three key ways:

1) Measure and trend our Net Promotor Scores: everyone in our company receives daily customer feedback reports – ensuring organization-wide transparency on customer experiences
2) Root cause analysis and continuous improvement: we dissect every piece of customer feedback and their shopping behavior to look for opportunities for experience improvement and replication of experience success stories
3) Share feedback with providers: once we gather then analyze all our customer data and feedback, we share this information with our providers to action these insights on their future deliveries, and keep the cycle of continuous improvement in motion



It’s not exactly an industry secret that customer feedback provides direct and actionable insights on the delivery experience—but committing to learning from and improving on individual customer experiences on a constant day-to-day basis will certainly be the secret to your customer satisfaction success. This includes putting every customer interaction under the microscope, even (and maybe even especially) the bad ones.

The reality is, no matter how much we train and strategize and hone our game plans—we all strike out some times. In the world of delivering products to consumers, it’s inevitable that you’ll have to buck up against the pain of returns. Last year, the National Retail Federation reported in total, Americans returned $260 billion in merchandise to retailers, or 8 percent of all purchases, swelling to 10 percent around the holiday season. What’s worse, is that number will stand to grow year over year if we as an industry don’t start listening to our customers and finding out why they’re returning their product, and how we could prevent this behavior in the future.

Driving the point home
Okay so I know I must sound like a broken record at this point, but the importance of this bears repeating: in order to create a best-in-class customer experience, you have to ask your customers what they want and expect from a best-in-class customer experience.

By marrying our decades of heavyweight supply chain experience with direct feedback from our customers, we’ve developed a formula that enables us to keep up with seemingly inflated and growing expectations from customers of the shipping industry. This process can essentially be broken down into four key insights:

1) Make customer selection of shipping methods easy
2) Translate confusing messages
3) Use insights to predict and recommend services to customers
4) Be proactive

Once you know exactly what your customers want, you’ll be able to give it to them. Then when it comes to hitting a home run for your customers—you’ll be able to deliver.
RLM
Marcus first joined BuildDirect as VP of Supply Chain Solutions in January, 2017. Marcus brings significant experience as a senior transportation and logistics industry expert. At BuildDirect, he oversees the Gateway Supply Chain, a supply chain 17 years in the making, built to alleviate the issues of heavyweight delivery. Marcus works with small to large companies to identify and solve their supply chain challenges, from inbound logistics to final-mile and white glove delivery services.

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