Comment: Retail Intelligence
This year is a crucial one for many retailers where strategic plans put into place to counter tough economic pressures will be fully tested.
By Cindy Etsell
However, while supply chains and sales channels can be optimised to ease the strain on margins, customer expectations continue to increase – around brand, value and service – forcing retailers to find ways to do more with less.
Set against a backdrop of rapidly evolving customer demands, retailers nowadays must increase the value derived from customer intelligence initiatives. This will be essential to boost their understanding of its drivers, benefits and critical success factors as well as the potential challenges.
Retailers face new pressures
The retail industry has always been susceptible to economic and consumer trends, and is seen both as an indicator, as well as an essential engine of growth. It should therefore come as no surprise to retailers, or consumers, that the industry is making major adjustments as the world’s economies recover from the deepest ever recession, and shoppers cut back on spending due to worries about personal finances and job prospects.
The economy has had a negative impact on retailers through increased taxation, currency fluctuations, energy prices and other external factors outside of retailer’s control. With value conscious shoppers on one hand and extra instability in the supply chain on the other, it’s easy to see why margins are in decline.
In fact the latest high street sales statistics published last week by the British Retail Consortium show just a 1.1% growth rate for February, down from a 4.5% increase for the same month last year (1). Add a proliferation of new channels, particularly mobile and social media, and it’s clear that retailers must attract evermore choosy and price-sensitive customers to compete.
Optimising operational excellence
The retail industry has become so competitive that consumers can easily take their custom elsewhere – to a competitor’s shop or another website with one click – if they aren’t happy. Indeed keeping track of customer feedback and using it to shape best practices is just as challenging as fine-tuning the supply chain. For every bad customer experience, it is a fair bet they will tell many more people about it compared with a good experience. The explosive popularity of social networks such as Facebook and Twitter only amplifies this effect.
However, where there is complexity, there is also opportunity. Retailers ready to embrace and manage the complexity of customer touch points, buying habits and shifting loyalties can react more quickly and beat slower competitors by giving customers more of what they want, more often. This changing dynamic means it’s the retailers that are willing and able to listen, meet and respond to customer feedback and demands that are going to reap the greatest rewards.
The detail lies in the data
For these reasons, it is understandable that retailers are keen to harness customer data locked in disparate transactional, enterprise resource planning (ERP), and marketing channels, including social media, to inform more fact-based decisions. By knowing who they are selling to and what they are selling, where and when, better, more informed strategies can be developed that have the best chance of success – from deciding what proportion of investment to allocate to emerging sales channels, to new store formats, branding and more targeted or personalised promotional campaigns.
Most retailers would agree that the notion of ‘knowing your customer’ or gaining a ‘single customer view’ is a sensible approach to finding that extra competitive edge – either through service differentiation, price or innovation and identifying new market opportunities. But, while most retailers will, to some extent and with varying degrees of success, already be carrying out some kind of research in customer habits and desires based on data held about them in transactional, ERP and marketing systems, the sheer volumes of information can make analysis difficult. Added to this, that data is often disparate and unstructured, creating anther barrier to true customer intelligence.
Sweating the data assets
If then the devil is in the detail, and the detail resides in the data, the most pressing concerns for retailers are automation – to handle vast quantities of data – and integration – to overcome disparate data and business unit silo barriers. So the focus for retailers is now on data integration to trigger more automatic campaigns, and integrating analysis and reporting for online and in-store.
When taking factors such as the recession, a reduction in advertising spend, shrinking customer bases and margin pressures along with a lack of a coherent customer picture, analytics is one way retailers can make sense of the market and gain customer intelligence. For retailers the best way to grow the business and build loyalty is to analyse the purchasing patterns of core customers across every touch point, to target them with relevant, profit-generating offers. In this way retailers can make analytics investments pay.
Smart retailers have been able to use a strategic implementation of programmes supported by analytics, to boost brand loyalty. This is has been made possible by a large, accurate and real-time single view of an integrated customer database. New, more targeted loyalty programmes have a greater chance of success by ensuring higher-value purchases and increased customer traffic.
Embedding the customer information gathered to support retail strategies is the most efficient way to achieve an advantageous outcome for the business in terms of increased marketing ROI, cross and up selling and fostering greater loyalty. The information retailers can collect about customers is only going to keep growing, both in terms of quantity, sources and type. So their focus must shift firstly to the integration of the data from multiple channels, and secondly, the optimisation of this data so that it can be better embedded into growth strategies.
Cindy Etsell, is a retail expert at SAS UK
