Clean Up in Aisle 5
Merchants are well schooled in the traditional patterns and habits of consumers – put the onion dip by the potato chips, for example. But I’d wager fewer than half of all retailers know how to use their customer data to improve the decision-making process across the whole organization, from product development to store operations.
Consider these very detailed consumer purchase findings, based on basic data collection over a 52-week period:
• 95 percent of customers who shop diapers also shop yogurt, and they visit the store for yogurt 19 percent more frequently than the total customer base;
• 90 percent of customers who shop single serve juices also shop cookies, and they visit the store for cookies 21 percent more frequently than the total customer base;
• 57 percent of customers who shop soy beverages also shop hot cereal, and they visit the store for hot cereal 11 percent more frequently than the total customer base.
Data points like these help our clients better plan specific offers to increase basket size –promote cosmetics to new mothers who will soon return to work, for example. However, if this data is kept in a vacuum, the insights do not help the retailer make bigger-picture decisions, such as how high to place the signage, or determining which brands suburban customers are least price sensitive to.
As technology reengineers traditional competition, the need for such understanding has never been greater. A family-run olive oil producer in California can now compete with a major chain in Illinois, and mobile apps enable consumers to make a purchase before entering the store. Fortunately, retailers have the wherewithal to reengineer the entire process of consumer understanding while maintaining the underlying art and science of retail. They can do it through the practice of enterprise loyalty.
Enterprise loyalty is pretty straightforward. It simply requires that the marketing department release the consumer data it has gathered to other areas within an organization so they can use those same insights to inform non-marketing decisions. In the retail industry, that would mean using consumer behavior patterns to determine the optimal location and layout of stores, the most effective pricing configuration and the size of fresh food packaging at different locations.
Once a company embraces enterprise loyalty, the implications to pricing, merchandising and delivery systems can be dramatic, because it enables the entire organization to see the consumer through one kaleidoscope lens, rather than from various vantage points. The result is a more personalized, unified brand experience that resonates from the mobile message to the aisles to selection and pricing. It’s about enabling a new omnichannel approach that is guided by the insights generated from customer information.
And this applies to employees as much as consumers. For example, when Walgreen launched its Steps with Balance Rewards program in spring 2013, it used the data to create separate webinars and engagement tools for its pharmacists, realizing their relationship with consumers is different than that of its cashiers.
However, while enterprise loyalty is a straightforward concept, getting there is no small endeavor. To realize it full potential, the company has to clean up its data and accumulate it in a place where all parts of the organization have access. Doing this requires a meaningful commitment to the process. Databases, analytic tools, training and a structured approach to change management are all required for success.
Equally important is a measured and staged process as the company rolls out the technology and insights across the organization. It’s not necessary to completely cut over to a customer-based approach on day one, but the organization will need to create an infrastructure that will allow it to migrate aggressively as the pilot projects bear fruit. The tools and underlying technology should be robust and scalable so it doesn’t restrict the process once the company identifies its new profit and performance accelerators.
Once the company is committed to an enterprise loyalty strategy, I’d offer these three tips:
Not all customers are created equal. The needs of high-profit, high-potential customers should be recognized and prioritized. It sounds obvious, but it seems many retailers focus on maximizing sales primarily through new customers, which can cost them deeper spending from existing customers. While the marketing department may be rethinking these business practices as part of its consumer insights, the real value is realized when operations, merchandising, real estate and product development are included in the consumer engagement conversation.
Share the load with partners. Vendors have rich insights that can provide a glimpse of shopper activity outside the store, and that can make them helpful in both structuring the approach and defining its application in enterprise loyalty. Such partnerships result in greater commitment and will enable new methods of defining the customer experience and competitive advantage.
Conversations are a two-way street. The natural next step is to progress from merely identifying and tracking customers to engaging them in dialogue. Personalization and real-time communications and recognition are the new frontier in retail challenges, particularly in a multichannel world. Through the enterprise loyalty strategies, companies can use their data insights to curate the customer experience, resulting in brand interactions that are personalized down to the customer.
While it is true that more than half of all store purchases are already planned, that does not mean they are firm – or even necessarily the best choices for that consumer. The sophisticated use of detailed consumer data, across the organization in a way that adds collaborative understanding, can ensure that 100 percent of all purchases are relevant ones. Achieve this, and retailers will need a bigger cart.