According to the latest IMRG Capgemini e-Retail Sales Index UK, e-commerce sales grew by only 5% in January 2010, in comparison to January 2009 . At the same time, some retailers have posted large year on year online increases, House of Fraser and Faith have both posted sales growth of 91 and 128%. Online only retailers saw sales drop 2% through 2009 while Multi-Channel retailers have seen growth of 10% according to the IMRG.

These figures tell us a number of things;

• Retailers with strong brands can still gain sales by entering the online market – customers expect them to be there, so even late entrants such as House of Fraser can make progress.
• The greater your brand reach, the greater your chance of making sales in a tough market. People expect to have choice and convenience. Online-only brands will struggle unless they have a true point of difference in a fiercely competitive market.
• Retailers who really understand their customers will succeed in a fierce market.

I have spent many years working in marketing departments of retailers and in stores, and I have never spoken to a retailer who would ever say they don’t know their customers. They must do – customers walk through the doors in their hundreds of thousands each week. They speak to staff at tills, on shop floors, by phone, via e-mail, on doorsteps and in focus groups, every day. Market Insight teams carefully examine basket data from tills, loyalty cards and web analytics. There has never been more data on what people are doing in stores, online or over the phone.

For many years retailers have prided themselves on their ability to second guess what a customer will respond to. How they should lay out a store, what to merchandise by the till, the front door, on the home page or at a category level on a website. They think about which tools will be useful, which image is right and which promotion is best.

Ever better, retailers carry out multi-variate testing to find out what works best, they test press ads, TV ads, e-mail campaigns and direct mail shots. They can prove which version works best, and back the winner.

But do they know why?

In the course of my retailing career, I put together successful promotions, advertisements and product launches. I was even involved in some that were not so good. For all I would be able to tell you why I thought they worked or had failed but I could never actually prove my theory. Did we hit upon a lucky idea, or find the secret formula? If so, could we re-create it for a new product, different category or new season?

The answer to this question lies in talking to customers, observing their behaviour and listening carefully to what they tell us. When done properly, this can give real insight into the most important question: why?

Can I repeat that, yes, like many retail professionals my experience and skill meant I could get it right more times than I got it wrong, but is that enough when we face tougher trading in 2010 than most of us have ever seen at any time in our careers?

Do you know how much it costs to talk to your customers and what the returns could be? Here at Flow, we do and I know you would be surprised.

The unprecedented economic situation means that many products, services and entire businesses are now based on an understanding of their market which is outdated. There's a real danger of businesses providing square pegs for their customers' metaphorical round holes.

In a previous life, I was a recipient of the famous 1995 Bill Gates sea-change email. From that day on, the strategy at Microsoft changed. BillG echoed many business owners around the globe who hurried to adapt their business plans to incorporate online channels and internet connectivity. This simple change in direction has shaped the commercial landscape ever since. Those who adapted successfully and who understood the commercial opportunities and changing customer requirements have been the most successful.

The latest sea change is not one led by technology innovation, but by a dramatic shift in consumer behaviour. In all walks of life attitudes are changing, compounded by the constant media barrage of stories of economic doom and gloom.

"Deep recessions deliver more than just an economic shock: they can shock an entire social system into new ways of thinking and organizing." NESTA (2008) Attacking the recession: How innovation can fight the downturn.

It is all too easy for businesses to focus inwardly to drive efficiencies, or to focus energies on increasing revenue through additional marketing. These energies will be wasted, and even potentially damaging, if the product or service has become fundamentally out of line with the customers' needs & expectations.

We will see...

• Motivations to spend and interact changing, driven by a focus on essentials, economizing, escapism & networking.
• Brand loyalties are shifting as people openly look towards cheaper alternatives and shun luxury goods.
• Trust is no longer a given with established brands... Trust must now be earned in other ways and the risk / reward balance for the customer must be carefully considered.
• The decisions people make and the process by which they research options will be different. The network will play an ever increasing role as people search out value.
• The susceptible moments when customers may be open to up-selling or cross promotion are likely to shift.
• Market segments will rearrange themselves based on potentially new criteria related to goals.
• The list could go on...

Although the effect of these changes varies across sectors, businesses can no longer believe they ‘know' their customers based on old research, results or instinct. While companies focus inwardly on reducing the impact of the recession, the distance between their customer insight and the real customer attitudes and behaviour is growing. Their products and services run the risk of being upstaged by competitors who innovate based on a new understanding of the changing market and user requirements.

This is not a short term situation... these changes will have a lasting impact regardless of the duration of the recession. You only have to look at the attitudes of a generation who have passed through previous economic downturns to see the way it affects their long term attitudes as consumers.

What can be done?

At Flow, we believe that you need to get under the skin of your customers in order to develop and improve products & services. Many of our own case studies illustrate where this user centered approach has led to increased turnover and profits, and reduced costs.

We've previously blogged about a 3 pronged approach to designing in an economic crisis. All 3 require a fresh understanding of your customers:

1. Innovate: The situation provides real opportunities for companies willing to innovate based on fresh user insight. History has shown that recessions are ultimately great drivers of innovation. He who dares wins... UCD enables innovation with minimum risk because you know you're building the right thing from the start.
2. Optimise: It may well be that your existing products and services need a little adaptation for the changing market. Some small improvements can lead to large rewards. Fresh user insight will point you towards some optimizations which are likely to range from simple messaging changes, through to new ways of navigating.
3. Cut costs: A cross channel view across your complete customer will highlight some areas for cost cutting whilst enhancing the total customer experience. Online retailers are currently reaping the rewards whilst their high street rivals are struggling to maintain expensive, and less convenient, channels to market.

User centered design is available in shrink-to-fit. It doesn't need to be expensive, but it must be included if you want to capture the attention of a rapidly changing market.

- Meriel Lenfestey, CEO & founder of Flow

Not all of Seedcamp's cutting edge entrepreneurs understood how to design for customers.

After last year's success, Flow was asked to come back to Seedcamp to mentor on the product and marketing day. I got the opportunity to go and talk with a range of people about how they conceptualise and design new services.

The keynote panel for the day focussed heavily on usability and user-centeredness - in that order. It seems that for most people, the route to user-centered thinking still sparks the notion of usability testing your service/product after build, squeezing it in at the end. Since the cost of changes to software can tend to increase exponentially as you get closer to launch, making changes at the end is not a great way for young businesses to conserve their limited cash.

Soup.io: One of Seedcamp's winners

But from usability, the discussion branched out into the notion that a user-centred approach to strategy early on in the process is much more valuable. This was really valuable for the competing teams. The feedback made it clear that most young entrepreneurs weren't thinking or developing around customer needs. In conversation most said the one thing they didn't have was a differentiated picture about who their users are or how a usable interface might look.

I worked with five of the finalist teams to see if I could help!

Social, efficient, usable

This year's winners seemed to follow a consistent theme: publishing better content, with less effort, and tying it into your social networks. That certainly seems like the mood of the moment on the web.

My favourite

A company called Uniki didn't make it into the final seven. But they were a personal favourite of mine, as an interaction designer. They've created a system to allow gestural interfaces for projected screen. So you can stand near a data projector, wave your hand and turn an on-screen page.

A uniki user gestures at the projected image of an old book to turn the page

Seedcamp is a week-long event where young entrepreneurs come together with advisors and investors to put together viable start-up businesses. Flow will be there to provide user experience advice to the teams.

Venture capitalists know a thing or two about investments. Which is why user experience is one of the factors involved in seedcamp. For interactive projects, user-centred design reduces risk and increases returns.

User centred design techniques dramatically reduce the risks associated with innovating and launching new products. After all, if you've worked with your target users throughout the design process, you should feel pretty comfortable that you've made something your customers will buy.

As well as reducing risk, designing a good user experience boosts returns.The effort and money you put into research, concept and design will be paid back many times over through increased conversion and usage, a stronger brand and reduced customer acquisition costs.

Some of the literature quotes typical returns on investment at several hundred percent. It's entirely believable. In some situations, a simple usability test, or a piece of insight from the field, can prevent a key problem that would stop users from adopting an new interactive product.

Shrink to fit

Start-up ventures don't have much to invest. That's ok: the process doesn't have to be difficult or expensive. User-centred design techniques shrink to fit. You can perform basic user research with friends and family. Sketch prototypes are easy to create with just a pen and paper. You can perform rapid iterative usability tests in just a few days. When Flow worked with Moo Print during its start-up phase, the team powered through five design iterations in a week.

The point is though, that like any investment if you put nothing in, you'll get nothing back.

So here's our investment advice for all 22 teams at seedcamp. Focus on understanding your users' needs, motivations and real-world behaviours. Then use your insights to help you design and deliver the right user experience. Payback won't be far behind.

Observing target customers in their homes or while they shop can provide the insights you need to build a better website - and a better multichannel experience.

I wrote this article about cross-channel ethnography for Internet Retailing Magazine earlier this year. I'll be talking about this topic at the Internet Retailing event in October.

Insight to innovation: The power of cross-channel ethnography

When Bronislaw Malinowski decided to study the habits and culture of the natives of the Trobriand Islands in the South Pacific during his exile in the First World War, little could he have imagined that the techniques he developed to learn about other cultures would be used to revolutionise the marketing and sales of consumer goods and services. However, this is exactly what is happening.

Ethnography, once confined to academic research departments has, over the last 20-30 years, become a widely used and powerful research technique for companies seeking to improve how they market and sell to customers. They have even turned the lens on themselves to improve how they manage their own businesses.

More recently, the desire to provide compelling multi-channel customer experiences that lure customers away from competitors has become the holy grail for many retailers. However, there is a noticeable gap between the precision with which research is used to understand customer behaviour offline and how it is applied in the design of online stores.

This gap is closing, however. As online retailing enters the mainstream, multi-channel retailers are investing more to improve the quality and effectiveness of their online stores. They are also looking for ways to build customer loyalty in a world where technology is making customers more and more promiscuous. Cross-channel ethnography is one of the tools retailers are turning to for insight.

The trouble with websites...

"Well, I can't really tell what the phone looks like from the picture...", said Katie, a participant in a recent usability study for one of the UK's leading mobile operators. "I would go to a shop at this point, before I make a decision".

From a research point of view, this is not surprising behaviour. It has long been understood that Read more

Freemans has launched its new website, delivering a state-of-the-art online customer experience. Flow was pleased and proud to help them on the project.

Freemans understood that the right user experience would increase visits, sales and repeat business. But to deliver those benefits with minimal risk you need a user-centred design process. So we started our engagement with Freemans by creating a user-centred design project plan, then got started on the first step - research.

Research

Paul Heath was Flow's lead consultant on the project. I asked him about the research phase. "The research told us what users think and feel, and the kinds of experiences they encounter when they are shopping online and offline. We also undertook a competitive analysis of the fashion sector and an expert evaluation of the Freemans site."

"All of this data let us understand and priotitise the project requirements effectively. But it also let us innovate new ways for customers to interact with the site. During the concept phase, our understanding of our customers' ideal shopping experience let us create Read more

Your working environment has a big impact on your productivity, creativity and happiness. And good user experiences follow the same rules.

The interruptions caused by email and other digital communications reduce your IQ by up to 10 points, and cost large corporations UD$1m in revenue per annum. They also make people unhappy. Among many corporations, Intel has been running a "quiet time" initiative, where every Tuesday morning is set aside for quiet thinking only. No email, no IM, no phone calls, even.

On the flip side, I found interesting research about how corporate environments that provide clear goals, facilitate progress and praise success make people happier, more creative and more productive.

It struck me that most of this is linked to the concept of Flow, proposed by Mihaly Csikszentmihalyi. Flow is a state of optimal experience (very closely linked to happiness). If you've ever looked up at the clock and realised that an hour or two has rushed past unexpectedly, chances are you were in a state of Flow.

Flow is frequently caused by having clear and worthwhile goals, making visible progress towards those goals, and being appropriately challenged as you go. Almost exactly like that description of the happy and productive working environment.

But how many times have you sat down at your desk expecting to make rewarding progress, only to realise that you have a pile of unread email? Suddenly you're wading through unexpected issues and problems, and your original goal for the day is pushed further away. That's a recipe for no flow, and a feeling of frustration. No wonder the Intel pilot group look forward to Tuesday mornings.

Happy interaction

So, if you're a manager, you need to be shaping your team or organisation to work in a Flow-inducing way.

If you're an interaction designer, you need to design interfaces to help your users experience Flow. Three fairly plain lessons:

• Don't interrupt your users. People using computers are goal directed - they're online to get a task done. Excessive confirmation dialogs cause frustration. Interstitial and pop-up ads are worse. Flash intros are, mercifully, a thing of the past.  And perhaps the cardinal sin is emailing your customers too much. Why any brand would want to be associated with these negative, frustration-causing events is a mystery to me. "Are users stupid?" some unenlightened designers have been heard to ask. Well, if you keep interrupting them, you're reducing their IQ.
• Help your users to accept new ideas. Innovation is a hot topic for corporations looking for an edge. Helping your customers to innovate makes them happy too. Blogger.com helps new users understand blogging and create a blog in astoundingly simple steps. Google Adwords suggests new products and services that are specifically selected to be relevant to the user's goal. Amazon does the same, and also keeps many of it recommendations for after you've made some productive steps towards your goal - it recommends most stuff when you add to basket and when you complete a purchase.
• Help your users to think creatively. A lot of Web2.0, and the latest thinking in UCD, is about helping people to express themselves by building or creating something. Myspace and Facebook pages and relationships are a labour of love for some. Family trees are loving crafted in Geni. Photobox lets you craft beautiful paper photo albums using custom software. All Flow activities, where users make clear progress towards desirable goals, and learn something on the way.

To be effective interaction designers, we need to be happiness experts. And because the organisation behind the interface will always show through, we need to be happy and work in happy places. Now that's a goal worth working towards.

Ian Worley, Flow's Director of User Experience, was recently on a panel at the Media Futures 2008 conference in London. He was talking about the value of research in the design process: it lets you innovate with your eyes open.

Here's Ian's post...

Research is the foundation of all innovation. Design teams that augment their thinking with insights and feedback from their target audience will deliver better results. Be it ethnographic observation, participatory design or usability testing, research provides the stimulus and the constraints for a real (and really successful) innovation process.

What is the creative process? Here's one definition: it's about transforming what you observe in the world into meaningful and valuable artefacts through play, experimentation and feedback. What we call design research is really just a formalisation of those observation and feedback elements.

New technology is transforming the media. It's changing how people create, access, collect, share and consume information and entertainment. Ethnographic and participatory research are really valuable tools for understanding these changes. They uncover the nuances of new attitudes and behaviours at different social and cultural scales from individuals to communities.

If your organisation is hoping to turn a profit in this new media landscape, you need a deep understanding of the new ways people are consuming media now. Then you can design how they will consume it tomorrow.

Media Futures 2008 was an interesting day, a great opportunity and an amazing collection of people.

• Flickr set of the conference by Nico MacDonald
• More about the Media Futures 2008 conference

Flow helped the Training and Development Agency to build a user experience roadmap for their website and create a user experience scorecard for measuring its success.

Ethnographic approaches, such as contextual enquiry and experience labs, help organisations understand their target customers needs, behaviours and motivations. To get really insightful discoveries, researchers immerse themselves as deeply as possible in the lives or jobs of a limited sample of target users and try to discover what those people really think and need.

On the other end of the spectrum lies automated quantitative usability testing. Here you never see your users at all. But you get accurate measurements of how successful they are at achieving key tasks on your site. Gaining a quantitative understanding of your website's performance lets you chart your site's improvement over time, and identify where it could be performing better.

Ethnographic techniques tell you what your users want to do. Quantitative testing tells you how many of them are managing to do it.

And often, successful UX strategies will combine the two. Our project for the TDA did.

Building a UX strategy for the TDA

We began by conducting contextual research with people from the TDA's 7 target user groups - including teachers, support staff and school leaders. We gathered stories of actual experiences that they had lived through, and the sequences of activities they had engaged in. We also played some simple participatory design games with them to bring out ideas for the "ideal" TDA website.

With a separate sample, we usability tested the existing website. Using a huge quantity of sticky notes, the researchers put all the data together and analysed it. They uncovered a selection of 70-80 tasks that the different target groups needed to perform on the website. (We also discovered that there were really only 4 groups with different needs, rather than 7).

Next came a "task matrix". For each task, we identified:

• The audiences who do it
• Related tasks or sub tasks
• Triggers that cause someone to engage in the task at a certain point (events like assessments, deadlines, changes in staff)
• Target web pages where useful information would be found.

Straight away, this let us see where there were improvements to be made. If we struggled to find suitable target pages, or if the information or findability of a target page seemed poor, we knew we had an opportunity to improve things.

To take us beyond expert opinion, we also used the TDA's web analytics data. We checked how many people were visiting each target page, and assessed that figure in relation to task importance and audience group size. That gave us additional evidence about whether pages we easy to find or not.

Finally, we worked with stakeholders to assess the effort needed to improve the website for each task. Plotting each task on a chart of priority versus effort (for users and for the organisation) gave us a solid roadmap: small, high-value changes first; larger changes later.

User experience scorecard

To make it easier to measure and chart improvement in the site's UX, we set up a user experience scorecard using UserZoom.

UserZoom performs automated remote usability testing. It asks a quantitative sample of target users to try doing certain tasks, gathers clickstream data and quizzes them to check comprehension and attitude. The scorecard treats user tasks as key performance indicators of the site's user experience. The TDA is running benchmark UserZoom studies every six months, and the results are being fed onto an interactive dashboard.

The scorecard will help the TDA team to monitor the impact on the user experience as they work through the steps on their UX roadmap.

Flow's team: Mary Henley, Anthony Mace, Claire Mitchell, Leisa Reichelt, Sarah Herman, Pav Chahal, Nick Bowmast, Vanessa Kirby, conducted the research. Karen Wall looked after the client relationship.

The Transport for London website team's dedication to user centred design has helped make their site a leader in the public sector.

A recent report from the Public Accounts Committee has been critical of the way that UK government websites are designed and managed. But TfL.gov.uk, the Transport for London website, was one of the few cited for good practice and performance. It's no real surprise: the TfL team really understand the value of listening to customers, and designing for their needs.

Sometimes, we're pleased to say, TfL hire Flow to help them.

What London travellers really need

TFL's flagship offering is Journey Planner. Back in 2006, we helped TFL research and design the mobile travel alerts element of the service. Designing personalisation features for a website is never easy - because most of the time, people don't want to personalise. We all just want the website to do what we need with minimal effort.

Flow ran experience labs: one-to-one sessions with a range of different people. The lab sessions focussed on digging out the reality of London travellers' needs, motivations and behaviours.

A key technique was retrospective accounts: we gathered detailed stories about what people really did in specific situations. So rather than asking "what do you think about travel in London" we asked things like "Tell me how you got to this interview today," and "tell me about the last time something went wrong with your commute to work." To keep the conversation fun and manageable, we also collaborated with the respondents to create pictures, lists and timelines using sticky notes and marker pens.

Once we understood user needs, we could identify a service that people would really like. The travel alerts system lets you identify the routes you are interested in (typically the ones you commute on every day), and get travel alerts for those routes at specific times. We defined the concept, worked with TFL to create wireframes, then fine tuned them with two iterations of usability testing.

TfL personalised travel alerts: Prototype and live site.

Practical commitment to customers

Since then we've helped TfL research and optimise all sorts of things from the Oyster Fastload process to the London Transport museum website. And since communicating with travellers is a multichannel activity we've even run iterative usability testing in London Underground stations - quite a challenge.

Now approaching...

Flow is now working with TfL on a strategic project to map out the future for the website, and we're basing the process on user research.

To improve on the experience labs methodology, we're asking our research subjects to fill in diaries. We're catching reports of travel experiences while people are travelling, then following up on the details in the lab afterwards. From there we'll be using a scenario-based approach to map out what people's travel experience and identify the TfL website's optimal role.

The finished site will offer London's travellers an even more useful, usable and appealing travel experience.