Customer engagement has always been a key differentiator for businesses and retailers in particular. As the world grapples with a second wave of the coronavirus, customer service and engagement can mean the difference between business success and bankruptcy.
Gap clothing brand is an interesting example of the vast difference superior customer engagement can make. The brand has struggled over the years, and announced a $932 million quarterly loss at the beginning of the year. That represents the worst quarter for the company in 50 years.
Last week the company announced significantly better numbers, including a 60-percent year-on-year rise in online sales. In fact, online customers are now contributing to 40 percent of the company's revenues. Gap says it has 3.4 million new customers that have used online channels just during the past three months, representing a whopping 145-percent year-on-year increase.
CEO Sonia Syngal expects 50 percent of the company's revenues will come from online sales by 2023. "It is our goal to turn every customer into a loyalist," said Syngal. "Fueling our brands are our powerful omni-capabilities. We are ranked number two in US apparel e-commerce sales. We have sharpened our real estate strategy so that our stores will be where our customers want to shop today. And we have increased focus on convenience and experience and uniquely ownable digital and physical spaces. These advantages give us the power to deliver. This is such a unique moment in time."
The pivot to focus on customer engagement could prove vital to the company's well-being and growth. Gap also plans to roll out its "Power Plan 2023" strategy at the beginning of that year, which will also place a significant focus on customer engagement and using machine learning and data science to better understand and target customers. The plan encompasses the power of branding as well as platform, which means the company will leverage omni-capabilties and scaled operations to approach both costs and growth.
Perhaps the most significant component in the plan is to power the portfolio by extending customer reach across every age, body and occasion through "collective power."
"We put the customer at the heart of everything that we do and our Net Promoter Score (NPS) is the number one way we measure customer satisfaction," said John Strain, chief digital and technology officer for Gap. "Our teams and our stores are laser-focused on these numbers and it shows. At a time when great brands matter, we are in a tremendous position to drive the customer relationship."
The company also recently conducted a customer segmentation exercise to better understand who its customers are. Gap used data science and customer insights to evaluate its U.S. domestic apparel marketplace, breaking up its customers into 12 potential segments. The company then applied machine learning to its database, placing 74 million customers from the past two years into those target segments.
"We believe that customer engagement is a new currency for customer relevance," said Strain. "As much as you're relevant, customers will engage. If you can get them to engage, you can build a relationship. If you can build a relationship, all good things come. While we feel good about our coverage and position amongst our competition, we actually know there's a lot of opportunity to double-down and automate personalization scale so it's driven more by artificial intelligence and machine learning."