Brand growth management already has many KPIs. What omnichannel retailing KPIs do you use to measure the payback of your investment?
Summer time is brand strategy planning time, when brand managers prepare for battle with their KPIs to prepare for new recruiting and securing a higher share of next year’s investments for their channel. But consumers have fundamentally challenged that profit centre logic. Perhaps it’s also time to rework your brand investment planning and the KPIs that measure brand growth success?
For decades, brand growth investment had one simple guiding principle: investment priorities follow management’s priority in sales growth. If, for instance, the strategic priority for 2005 was to grow own retail stores, managers across all regions fought for their investment share and scrambled to justify why their region deserved the most investments in the following year. They used KPIs such as improved 4 Wall Contribution, payback time or return on investment ratio to make their case. So regardless which KPI you had for your brand, all was based on the assumption that the payback of an investment can be measured in an individual distribution channel, a profit centre.
Has Online Changed the Payback Logic Forever?
Profit centre profitability already lost relevance 2010 when online shops became a priority for brands. It was the year when e-commerce was on a steep growth path, but only half of the top 50 brands had their own online stores, not to mention terrible usability and poor service. Investing in own e-shops became a strategic must, whether or not the online manager was able to promise investment payback or break-even.
Lately many brand organisations have begun to question their previous channel and profit centre logic. Not only field managers, but also CFOs and controllers are asking:
- How come we have wholesale, retail and online go to battle over investment into ‘their’ channel, while consumers expect to experience all channels in equally great shape?
- If consumer make their brand sales journey across all channels, how do we allocate a sales contribution and determine a channel’s profitability?
- And how come all online pureplay startups don’t bother with payback calculations, but focus on scalability and consumer experience instead?
In response to that discussion, the first brands diminished the roll of investment calculation to place more focus on overall omnichannel retailing success. But while investment readiness grew, the decision-making processes didn’t necessarily improve. At times, it seems that with all the investment hype, the need to manage and measure a path to success was forgotten.
How to Measure Omnichannel Strategy Success?
There probably isn’t a single corporate annual report of the last three years that doesn’t emphasise investments in an omnichannel retailing strategy. But with the exception of companies now reporting their share in online sales or Direct to Consumer (DTC), not much has changed in corporate reporting. This lack of reporting on any omnichannel retailing KPI is, quite simply, due to the lack of such a KPI. And that’s because there really can’t be one.
Yes, many new KPI pop up and claim to measure omnichannel retailing (link). But a deep dive into the KPI calculation will reveal that they don’t truly measure how successful channels interact. Most of these KPIs are new labels on old measures and continue report success in a single channel.
How do you measure whether a human, prone to irrational and impulsive behaviour, completed a store visit because of the previous day’s online experience, or because of a highly commercial store window? How can you substantiate whether a growing share of tourist shopping is based on your investment in an improved store locator or simply the result of diluting currency exchange rates?
Yes, investment in omnichannel retailing is in urgent need of measurement, as evidenced by our test last year. Even though we chose to assess advanced sporting goods brands in retail capital London, we were surprised at how little was delivered in terms of omnichannel retailing experience.
Can benchmarking or a scorecard be an alternative way to measure omni channel paybacks? Yes they can, and they deliver more than a payback calculation by promising additional sales. In our current era, I believe in measurable consumer services and scorecards over payback promises.
A qualitative benchmarking scorecard is the clearest way to determine where you are before and after an investment. Well-drafted and correctly used over the course of an investment project, a scorecard can be your perfect ‘30-second investment elevator pitch’. With a scorecard, every consumer can tell you whether the investment had a measurable payback.
Old and New Ways of Looking at Investments
The controller in me would love to be in a position to preach that all investments need a payback calculation and a clear proof of return. That’s because strong numbers are still the best way of measuring financial success.
But that doesn’t justify working with false or biased numbers to cover up the fact that we can’t ultimately be certain what influenced sales in an omnichannel retailing environment. Don’t waste time and energy on doctoring investment cases. That time is much better spent in truly improving your omnichannel consumer experience to benefit your customers and your bottom line.
With investment planning season for 2019 just around the corner, now is a good time to rethink your allocation and controlling. If you haven’t measured omnichannel success yet, it’s time to begin. If your previous measurement didn’t have the impact you hoped for, try introducing a measure specific to your omnichannel consumer experience.
I can think of many new KPIs that potentially measure some aspect of omnichannel retailing. But I can’t think of another one as balanced and powerful as an omnichannel retailing scorecard. Don’t just focus on numbers. Also look at processes, tools and structures to report omnichannel retailing success and think holistically about best practices beyond numbers. Now is definitely high time to re-think your ‘channel vision’ and embrace an omnichannel logic with the hearts and brains of your organisation – your consumers have already done so years ago.
About the author:
Guido is fan of balanced scorecards and counts 147 in his collection, omnichannel being just one of them. Contact him via e-mail for your personal scorecard needs or to discuss other topics that require reporting on more than just numbers. Read more of Guido’s work here.