The post-purchase hierarchy of needs - The essential ingredients for building brand loyalty - Narvar

The post-purchase hierarchy of needs - The essential ingredients for building brand loyalty - Narvar
Narvar Report 2019

of needs
The essential ingredients
for building brand loyalty
The post-purchase hierarchy of needs - The essential ingredients for building brand loyalty - Narvar
Introduction                                   3
    Brand loyalty is in decline                3
    Building loyalty post-purchase             4
The post-purchase hierarchy of needs pyramid   5
    1. Communication                           7
    2. Choice                                  8
    3. Control                                 9
    4. Connection                              10
Post-purchase experiences that build loyalty   12
    Owning the experience                      13
    Build a personal connection                13
Making the most of the post-purchase high      14
    Best practice: Dollar Shave Club (DSC)     15
    Best practice 2: John Lewis Retail         16
Conclusion                                     17
The post-purchase hierarchy of needs - The essential ingredients for building brand loyalty - Narvar
         In the UK, online retailers face an uncertain future. The fall                       If online merchants are to find a path to growth, they need to find
         in the value of the pound since 2016 has increased the cost of                       a way to renew their bonds with customers and forge long-term,
         imports, while the prolonged economic uncertainty caused by
                                                                                              profitable relationships based on loyalty. This is a well-recognised
         Brexit is stunting growth in consumer spending—despite the                           fact, and many retailers and brands have been building new
         fact that wage growth is finally on the increase.    2
                                                                                              online purchase experiences to delight the customer and secure
                                                                                              their loyalty. Indeed, a recent study suggests that by the year 2020
         The resulting ratcheting up of competitive pressures means
                                                                                              customer experience excellence will overtake price and product as
         that brand loyalty has never been more important. Always a
                                                                                              the key brand differentiator.5
         good lever for growth (it costs five times more to acquire a new

         customer than to keep an existing one)3 brand loyalty is fast
         becoming existentially important for online retailers as they
         seek sustainable growth.

                                                                                              Loyalty is a relationship, not a scheme.
         Brand loyalty is in decline
                                                                                              - Deloitte6
         The challenge is that customers today are far less loyal than
         in the past. Choice is everywhere and it’s never been easier to
         switch brands. A study by Accenture highlights what this means
         in the starkest of terms: 83% of UK consumers are retracting
         loyalty at rates that are impacting profits. Over half of the
         consumers interviewed by Accenture had switched brands in
         the previous year.4

The post-purchase hierarchy of needs – The essential ingredients for building brand loyalty                                                                          3
The post-purchase hierarchy of needs - The essential ingredients for building brand loyalty - Narvar
Building loyalty post-purchase
         However, at present, most customer experiences are designed                          This falls into four broad categories:
         to lead up to a purchase. Then, job done, the experience stops.
         This is a huge mistake. The purchase is not, in fact, the end of the
                                                                                              ‘The Four Cs’
         customer journey but the beginning of a relationship.
                                                                                              1. Communication
         The experience from the time when the customer checks out                            Consumers show a preference towards retailers and brands that
         to when the product arrives is a ‘moment of truth’ for online                        have delivered exceptional and proactive communications

         shoppers: a positive experience at this time of anticipation
         provides retailers and brands with the opportunity to deepen                         2. Choice
         customer relationships for the long-term. Conversely, a bad                          Delivery flexibility is a key component for consumers considering
         experience will see customers look elsewhere for their next                          repeat-purchases
         purchase: a 2018 Narvar report showed that UK consumers are
         four times less likely to repeat-purchase from retailers that ignore                 3. Control
         them after a sale.7                                                                  Consumers want to have their preferences respected and they will
                                                                                              be loyal to retailers and brands that allow them to change their
         So, what should online merchants do in the                                           mind at the last minute
         post-purchase experience to encourage repeat sales and drive
         customer loyalty? To answer this question, Narvar commissioned                       4. Connection
         an independent study of 2,000 online shoppers in the UK to                           Recognition that consumers customers today want a strong
         uncover the moments that matter most. The Post-Purchase                              emotional connection with their favourite brands and retailers,
         Hierarchy of Needs identified by the report provide retailers and                    who should be providing immersive experiences at scale
         brands with a roadmap to creating a rewarding and engaging
         journey that extends beyond the ‘buy’ button.                                        Addressing these needs gives retailers a new path to differentiation
                                                                                              and provides a platform for a growth strategy based on customer
                                                                                              retention and repeat-purchases.

         Methodology: In August 2018, Narvar worked with Walnut Research to survey 2000 UK consumers

The post-purchase hierarchy of needs – The essential ingredients for building brand loyalty                                                                          4
The post-purchase hierarchy of needs - The essential ingredients for building brand loyalty - Narvar
The post-purchase
                                                                                              hierarchy of needs

                                                                                              If I have a good experience with a brand or
                                                                                              retailer after I’ve bought something online,
                                                                                              I’m more likely to shop there again.
                                                                                              In Maslow’s Hierarchy of Needs, there are five main human
                                                                                              needs, each one desirable once the previous is secure. Our
                                                                                              research has uncovered a similar cascading hierarchy of needs
                                                                                              around post-purchase experiences, but with just four main pillars:

The post-purchase hierarchy of needs – The essential ingredients for building brand loyalty                                                                        5
The post-purchase hierarchy of needs - The essential ingredients for building brand loyalty - Narvar
The hierarchy of post-purchase needs pyramid

                                                                                                           • Alignment to Values
                                                                                                           • Alignment to Ethos

                                                                                                                     • Omni Channel
                                                                                                                     • Transparency

                                                                                                                                • Estimated Delivery Dates
                                                                                                                                • Flexible Delivery Options

                                                                                                                                           • Order Tracking
                                                                                                                                           • Proactive Notifications

   The desirability of meeting these needs is clear: 86% of respondents to the study agreed that a positive post-purchase experience was fundamental to build their loyalty to a retailer or
   brand. For consumers older than 55 years’ old, this need rose to 90%. Achieving the right engagement from branded communications through to the respect of preferences is vital before
   real value, such as profits, can be realised. Let’s look at each pillar in turn.

The post-purchase hierarchy of needs – The essential ingredients for building brand loyalty                                                                                                    6
1. Communication
   According to the findings of our study, good communication is the foundation of customer      Figure 1: Receiving proactive post-purchase updates
   loyalty. As mentioned, brands and retailers focus heavily on the pre-sales experience in      is important, and grows more so with age
   marketing and engagement efforts, but often forget that the experience beyond the buy
   button should be seen as part of the purchase.
                                                                                                 Age 18-24                                  78%
   Retailers that communicate regularly on the progress of an order are much more likely to
   entice customers back rather than losing them to a competitor. In fact, 81% of participants
   in our study agreed that receiving proactive updates on the progress of an order, rather      Age 25-34                               70%
   than having to phone or email for updates, is critical in their decision to repeat purchase
   (see figure 1).

   For 80%, being proactively updated on delivery schedules, including information on            Age 25-44                                   80%
   delays, made them more likely to repeat purchase. Again, the importance of these updates
   increases slightly according to the age of the demographic. The feature is very important
   for people aged 55 to 75 (85%) and critical to those aged over 75 (93%).                      Age 45-54                                     81%

   This trend ties in with wider learnings about consumer requirements of brands. We
   know that 75% of UK consumers feel that the majority of retailers don’t understand their      Age 55-64                                       88%
   interests8 and this lack of relevance to consumer needs will damage their chances of
   winning loyalty. What our new study shows us is that the desire for timely, relevant and
   proactive communication is as important post-purchase as it is in winning the customer
                                                                                                 Age 65-74                                      85%
   in the first place.

                                                                                                  Age 75+                                         90%

The post-purchase hierarchy of needs – The essential ingredients for building brand loyalty                                                             7
2. Choice
   The second pillar on our Hierarchy of Needs relates to that fundamental component            Figure 2: Convenience, choice and information around
   of successful retail experiences: choice. When it comes to the post-purchase process,        delivery are a key priority­—especially for women
   consumers want to be able to direct the experience to suit their needs. This isn’t a new
   finding: back in 2016, McKinsey found that nearly 25% of consumers were willing to pay
                                                                                                I am more likely to buy again online from a brand or retailer that
   a premium for the privilege of same-day or instant delivery.9
                                                                                                shows me my estimated delivery time before I pay for my item
   What our new study shows, however, is just how important choice over when and where
   a package will be delivered is when it comes to building brand loyalty. Indeed, 80% of the
   people we spoke to agreed that they were more likely to be loyal to brands and retailers
   which offered a range of convenient and flexible delivery options.

   Meanwhile, 74% of consumers agreed that online retailers and brands that provide
                                                                                                      70%                                       77%
   estimated delivery dates/times on a pre-purchase page was an important factor that
   contributes to the likelihood of them making a repeat-purchase. Having this in place
   allows them to choose a convenient shipping method that fits with their schedule                     Male                                     Female
   with more certainty. Interestingly, choice appears to be a slightly more important
   post-purchase need for women than for men (see figure 2).
                                                                                                I am more likely to buy again online from a brand or retailer that
   Our overall findings around choice chime with previous research conducted on this            offers me a range of convenient and flexible delivery options
   topic by other organisations. One study, for example found that 70% of consumers want
   more flexible delivery options,10 while another suggested that 66% of shoppers bought
   goods from one retailer over another because the delivery services on offer were better.11
   Meanwhile, research by PWC suggests there might be an age element involved, with older
   shoppers placing a greater premium on being able to choose their delivery times.12 This            76%                                       83%
   was backed up by our own research, where the oldest demographic (75+) were also the
   most likely to demand flexibility and choice when it comes to delivery options (86%).

                                                                                                        Male                                     Female

The post-purchase hierarchy of needs – The essential ingredients for building brand loyalty                                                                          8
3. Control
   One of the defining characteristics of modern retail is                  retailers at the pre-purchase end of the sales cycle. For
   that it is driven by the empowered consumer. These                       example, consumers can now personalise their products
   are a new breed of informed, proactive and challenging
   customer that will go the extra mile to get the experience
                                                                            to an extent not seen before (one in five consumers
                                                                            will pay a 20% premium for personalised products).15
   they want. And if they don’t get it from you, they’ll simply             And consumers have seized control over how brands                 of consumers are more likely to repeat
                                                                                                                                              purchase when they have the ability to choose
   go elsewhere: studies have shown that 74% of people are                  communicate with them, catalysing omnichannel
                                                                                                                                              their preferred channel of communication
   likely to switch brands if they find the purchasing process              services (consumers now use nearly six touch-points with          (e.g. email, SMS, bot, voice etc.).
   too difficult.13
                                                                            retailers—50% regularly using more than four).16

                                                                            Our new research shows the gap in the market for
                                                                            providing consumers with greater control post-purchase.
                                                                            In fact, we have found that providing consumers with the          of consumers value brands and retailers which
                                                                            ability to control their post-purchase experiences is             continue to communicate directly with them
   Today’s individual customers                                                                                                               even after they’ve bought something, and don’t
                                                                            a key building block for establishing loyalty. The brands
   understand their commercial value,                                                                                                         send them off to a carrier company website for
                                                                            and retailers who interact with their customers during
   and can no longer be conveniently                                        the ‘anticipation’ (pre-delivery) and ‘honeymoon’
                                                                                                                                              delivery tracking and updates.

   categorised. In this culture of the                                      (post-delivery) moments of their post-purchase
   niche, all interactions, products and                                    experience are likely to see a significant reduction
   services need to be personalised                                         in time before the next purchase takes place.                Significantly, while the concept of the empowered
                                                                                                                                         customer and their enduring quest for control is often
                                                                            This includes after goods have been dispatched:              associated with Millennials, we found that the need
   -EY 14

                                                                            retailers and brands that allow consumers to change the      rings true for all age groups: while 67% of 18-24 year-olds
   One of the things modern shoppers want is control of                     details of a delivery, such as the destination or delivery   agreed that being able to use their comms channel
   the purchasing experience. They want the experience to                   date and time, will empower customers and win loyalty.       of choice is important, that was only six points higher
   run on their terms and in exchange they will give brands                 Importantly, these services should be delivered to           than the 45-54 bracket and three fewer than the 75+
   loyalty. This demand for greater control has been met by                 consumers on their terms. According to our research:         bracket (70%).

The post-purchase hierarchy of needs – The essential ingredients for building brand loyalty                                                                                                            9
4. Connection
   As with Maslow’s Hierarchy of Needs, once the practical needs of a post-purchase               Figure 3: Shoppers want an emotional connection
   experience are met, emotional needs come to the fore. This is particularly true when it        with retailers and to share their values­—particularly
   comes to brand loyalty, as loyalty is to a large part driven by emotional factors. Research    if they’re young
   has found that 70% of emotionally engaged consumers spend up to two times or more
   on brands they are loyal to. This compares to less than half of consumers with low
   emotional engagement.17
                                                                                                  Age 18-24                                    61%

   So, while communication is an imperative foundation for the post-purchase experience,
   an emotional connection with a brand or retailer is also fundamental when it comes to          Age 25-34                                   59%
   consumers committing to loyalty. This begs the question: what can retailers do in the
   post-purchase phase of a sale to illicit a positive emotional response from their customers?

   Our research offers some clues. We found that shoppers respond well to retailers
                                                                                                  Age 25-44                                   58%
   that communicate their values authentically and consistently at every purchase and
   post-purchase touchpoint. In these cases, customers are made to feel they are more
   than just an ‘order number’ in the eyes of the retailer, and this in turn drives long-term
                                                                                                  Age 45-54                             47%
   profits. Two findings in particular are instructive here:

   • Thoughtful and personal experiences are more important than discounts and coupons            Age 55-64                         41%
     for 53% of consumers.

   • 50% of consumers are more likely to buy again when they agree with a brand’s
     values. This shows the importance of communicating brand values authentically                Age 65-74                      35%
     and consistently.

   Significantly, this is one area where younger shoppers do appear to have a slightly
                                                                                                   Age 75+                            43%
   different outlook to their elders. Marginally, the younger the shopper, the more important
   it is for them to feel emotionally engaged (see figure 3).

The post-purchase hierarchy of needs – The essential ingredients for building brand loyalty                                                                10
The hierarchy of post-purchase needs
           Key: I am more likely to buy again from a brand or retailer online when:

                                                               I am treated like more than
               Connect                                         just another order number,                       I have an emotional connection
               • Alignment to Values                           which is much more important                     with them, or I agree with their values.
                                                               than discounts and coupons
               • Alignment to Ethos

                                                                                 60%                                             74%                                                   60%
               Control                                                                                                                                                                 I’m communicated with directly after
               • Omni Channel                                                    I can choose how they                           I’m shown my estimated
                                                                                                                                                                                       I’ve bought something, and I’m not sent
                                                                                 communicate with me eg.                         delivery tim before I pay
               • Transparency                                                                                                                                                          to a carrier company website for delivery
                                                                                 email, text, messenger                          for my item
                                                                                                                                                                                       tracking and updates

               Choice                                                                                      80%                                               80%
               • Estimated Delivery Dates                                                                  I am offered a range of                           I am told about a delivery delay
                                                                                                           convenient and flexible                           before it happens, so I’m not left
               • Flexible Delivery Options
                                                                                                           delivery options                                  wondering where my order is

                                                                                                                                     81%                                                   86%
               Communication                                                                                                         I am updated proactively                              If I have a good experience with
               • Order Tracking                                                                                                      on the progress of my order,                          a brand or retailer after I’ve bought
               • Proactive Notifications                                                                                             so I don’t need to phone                              something online, I’m more likely
                                                                                                                                     or email for info                                     to shop there again

The post-purchase hierarchy of needs – The essential ingredients for building brand loyalty                                                                                                                                        11
                                                                                              experiences that
                                                                                              build loyalty
                                                                                              The Post-Purchase Hierarchy of Needs can be used to identify the
                                                                                              features and capabilities required for successful post-purchase
                                                                                              experiences. These will vary from retailer to retailer but as customer
                                                                                              needs are consistent across retail sectors, there will be a solid thread
                                                                                              of commonality to all good post-purchase experiences.

                                                                                              When it comes to building brand loyalty, our research demonstrates
                                                                                              several further elements are critical. First, customers want to be
                                                                                              able to choose the level and channel of communication. Second,
                                                                                              they want to communicate with the brand or retailer – not a third
                                                                                              party, such as a delivery company. And third, when communication
                                                                                              and connection are performing at their best, loyal customers can
                                                                                              become full brand advocates.

                                                                                              of consumers are more likely to repeat-purchase
                                                                                              from a retailer or brand that communicates with
                                                                                              them directly after a sale.

The post-purchase hierarchy of needs – The essential ingredients for building brand loyalty                                                                              12
Owning the experience                                                    To achieve brand loyalty and repeat-purchases, it is
                                                                            important for retailers and brands to consider how they
                                                                                                                                          Thirteen percent, meanwhile, claim to be more loyal to
                                                                                                                                          their favourite brand/retailer than their political party of
   Communication being vital for brand loyalty is not a new                 can remain the owner of delivery communication. To an         choice. This is a prize well worth winning.
   concept. Many retailers and brands have programmes                       extent this should be something of a ‘no-brainer’. Most
                                                                                                                                          An emotional connection is achieved through consistent
   or schemes in place to ensure that regular and timely                    brands wouldn’t dream of relinquishing any control over
                                                                                                                                          but also personal communication. From interactions
   communication with customers takes place. However,                       the pre-purchase experience but have been happy to pass
                                                                                                                                          that are brand-led; for example, the sharing of values and
   a large focus of this is placed at the pre-sales stage and               on the post-purchase experience to partners. This
                                                                                                                                          authenticity, of personality and mutual trust and respect.
   there are those who leave the post-purchase experience to                makes increasingly less sense as ecommerce becomes
   third parties. This is particularly the case when it comes               more competitive.                                             Again, these elements are all familiar when it comes to
   to delivery, and it is here that customers feel let down.                                                                              creating winning pre-purchase experiences online. The
                                                                            Build a personal connection                                   key now is for retailers and brands to approach their
   Customers can unfortunately often feel abandoned
                                                                                                                                          post-purchase experience with the same dedication,
   following a purchase, especially when communications                     As mentioned, customers have more choice than ever
                                                                                                                                          design-thinking and customer focus.
   about the delivery doesn’t come from the brand or retailer               before. The ability to compare brands, product details,
   directly. As many as 75% of consumers that responded                     prices and peer reviews has resulted in loyalty being
   to the UK study said they felt “catfished” when the                      harder to achieve and even then, it’s often transient.
   post-purchase experience is handed to a third party.
                                                                            However, the study identified that having an emotional
   • Catfishing usually refers to luring someone into a                     connection with a brand or retailer drives at least 50% of
     dating relationship by adopting a fictional online
                                                                            consumers to shop regularly. This dynamic rises to 60%
     persona. However, the respondents to the UK survey
     believed that buying from one brand and then being                     for 18-34-year-olds and ultimately, with an emotional
     looked after by another - without choice - with regards                connection comes the added benefit of vocal and
     to the delivery of their goods felt very similar                       engaged advocates.

   • 35-54-year-old shoppers are more likely to buy                         The emotional connections brands can build with
     again online from a brand or retailer that continues                   consumers are strong indeed. Our research indicated
     to communicate directly with them after they’ve
                                                                            that a fifth of Brits are more loyal to brands that provide
     bought something and doesn’t send them to a carrier
     company website for delivery tracking and updates                      good experiences than they are to the Royal Family.

The post-purchase hierarchy of needs – The essential ingredients for building brand loyalty                                                                                                              13
Making the most
                                                                                              of the post-purchase
                                                                                              Focusing on the lifetime of a customer, not just the one sale
                                                                                              will see retailers and brands reap long-term benefits. Not only
                                                                                              have studies shown that consumers are willing to pay more for
                                                                                              a better customer experience,18 but it is well documented that
                                                                                              increasing customer retention rates by 5% can increase profits by
                                                                                              25% to 95%.19

The post-purchase hierarchy of needs – The essential ingredients for building brand loyalty                                                                       14
Best practice 1

         Dollar Shave Club (DSC)
         Dollar Shave Club created not only a loyal customer base with a
         curated, high-touch customer experience, but a community of
         fans. The business is underpinned by a core business philosophy
         focused on customer service, where customer experience is also a
         main differentiator from competitors.

         It is committed to providing the most convenient experience
         possible, by providing easy-to-understand shipment status
         information through to keeping DSC Members (their customers)
         within the brand experience.

         For example, DSC highlights select assets on their shipment
         tracking pages, featuring a mix of editorial content, product
         upsells, requests for referrals or app downloads, making this new
         touchpoint deliver on multiple levels.

         Dollar Shave Club boasts more than 3 million members, and
         their average membership is 3.4 years – for a company that’s
         only been around about 4 years. “What we sell is amazing razors
         and grooming products, but to be honest, grooming products
         are a commodity. We focus on the customer and on building a
         sustainable relationship and club experience to stand out in a sea
         of sameness,” says Nick Fairbairn, VP Marketing. “We try to bake
         loyalty into everything we do.”

The post-purchase hierarchy of needs – The essential ingredients for building brand loyalty   15
Best practice 2

         John Lewis Retail
         Whilst Amazon continues to hold the number one spot in
         customer service, it’s the customer experience that John Lewis
         provides that keeps them at the all-important second.

         ‘Never knowingly undersold’, John Lewis is renowned for putting
         customer service first. Most recently, it has been placing an
         increased importance on ‘experience’ as part of the retail offer
         with ideas like The Residence, a furnished apartment-style space
         in three of its stores that consumers can apply to stay overnight or
         host a dinner party in.

         While this may seem to be focused on the pre-sales experience, the
         invitation to take part in the programme is offered first to existing
         customers. It is an initiative which incorporates personalising
         individual customer interactions and behaviour to support the
         post-sales journey.

         Most importantly for customers, John Lewis spends £8 million a
         year on ‘goodwill gestures’, acknowledging that while some things,
         like a TV breaking during delivery, is not the business’ fault, it
         will ‘take the wrap’. And while the £8 million may seem high, it’s
         just a “fraction” of its marketing budget and an investment worth
         making to ensure customers are kept happy – and encouraged
         through trust and respect to repeat-purchase.
                                                                                              Key takeaway:
                                                                                              For retailers and brands who meet the post-purchase hierarchy of needs by achieving the right level of customer
         Andrew Murphy, retail director at John Lewis, claims it has a net
                                                                                              communication, offering the best choice, providing the control that customers seek and building an emotional
         promoter score of 71, the highest on the high street, and that 86%                   connection, successful profit performance will be realised.
         of customers say they feel valued when they shop there20

The post-purchase hierarchy of needs – The essential ingredients for building brand loyalty                                                                                                                     16
         Customers value businesses that keep conversations going, provide helpful information and stay on
         top of their concerns, whether it’s an issue with a delayed delivery or a question about exchange policies
         or what to buy next. Brand loyalty is only achieved through consistency and direct engagement. The
         product itself is often secondary, particularly when bought through a retailer.

         Our Post-Purchase Hierarchy of Needs provides retailers and brands with a framework for building
         brands loyalty. By focusing on the Four Cs, online merchants can better meet their customers’ demands
         stand out from competitors and fuel repeat purchases.

         Through rich, proactive and meaningful Communication brands can give customer peace of mind
         while starting new and potentially profitable conversations. And by providing customers greater
         Choice over delivery options they can create customer-first post-purchase experiences that better meet
         the needs of today’s empowered customers. Brands and retailers can build further loyalty by giving
         customers Control over their deliveries and the ability to change their mind over when and where their
         packages are received. And finally, brand and retailers need to build a real Connection with customers
         through compelling experiences that reflect the company’s values to win the hearts of consumers.

         Meeting the needs of customers post-purchase is the last piece in solving the puzzle of exceptional
         customer experiences. Brands and retailers that get in their first, stand to secure a significant
         competitive advantage.

         To learn more about how to build customer relationships – especially after the ‘Buy’ button is clicked –

The post-purchase hierarchy of needs – The essential ingredients for building brand loyalty                           17

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The post-purchase hierarchy of needs – The essential ingredients for building brand loyalty                                                              18
Narvar is on a mission to
simplify the everyday lives
of consumers.
We help the most admired brands and retailers build lifelong relationships beyond the
“buy” button. As an enterprise-grade SaaS platform serving 500+ retailers like Levi’s, Sephora,
Estee Lauder, Coach, and TUMI, Narvar drives brand loyalty at scale by enabling immersive
and emotional post-purchase customer experiences. From effortless order tracking, proactive
communications, to seamless returns, Narvar applies machine learning across billions of
interactions to simplify the everyday lives of consumers.

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