Customer expectations have increased exponentially and will continue to grow. Retailers must rise to this challenge or risk becoming irrelevant.
Big data provides an excellent mechanism for retailers and CPG manufacturers to understand shoppers’ needs in a more meaningful way. But it’s critical to capture and analyze data in a consistent and timely manner in order to create a more customer-centric experience, motivate desired behaviors and satisfy shoppers’ needs better than the competition.
As mentioned in my contributing chapter from “The Little Book of Big Data,” by the Shopper Technology Institute, consumers are eager for retailers to step up their game when it comes to using big data and predictive analytics to deliver a better experience. Customers are clamoring for this. In fact, in primary research around the issue of customer-centricity, Precima found that 80% of consumers say they want retailers to use their data to decide which products and services to consider offering or eliminating. When the full power of data is tapped, it can offer shoppers the right prices, promotions, assortment, personalized communications and more.
When retailers really listen to the stories shoppers are telling them through the data, they are able to create a customer-centric approach that delivers sustainable and measurable business improvements year after year. They’re able to make strategic decisions about allocating resources in pursuit of the most attractive customer, category and store opportunities. This appears to be well worth the effort. When retailers rethink their approach in the following areas, Precima has found, they see impressive results:
- Strategic: Big data insights can help retailers identify and assess current spend as well as model potential spend for individual customers for each category in each store. This allows the retailer to allocate people and financial resources against the customers, categories and stores that present the greatest opportunities to grow the business.
- Pricing: Retailers can develop tactics at the lowest levels of the store, product and even customer hierarchies. Precima’s clients have seen impressive results in this area: Aligned with customer needs, Precima’s Total Store Price Optimization determines total store price plans that can drive sales and profit increases of 1% to 3% while enhancing customer price perception and improving market share.
- Promotions: With big data, retailers and CPG manufacturers can identify which promotions are performing well, which are not but can be improved and which should be terminated. Determining the right items to promote, the best discounts to offer and the appropriate allocation of ad and display support leads to dramatic improvements in performance. In addition, it is possible to identify promotions that disproportionately appeal to loyal customers so that promotional investments can be tailored toward these valuable customers. Precima’s clients see increases in promoted sales from 3% to 6% and increases in promoted gross profits from 5% to 10%.
- Assortment: Retailers can identify which items have high demand transfer and low customer loyalty and, as such, can be safely removed from the assortment and replaced with higher-productivity items. Precima has seen clients improve the sales performance of low-productivity items by 1% to 2% and gross profits by 2% to 4%.
- Personalized marketing: The major challenge with personalized marketing is to achieve high response rates while simultaneously driving incremental sales and doing this at a scalable level to meaningfully move the needle on sales. With a big data approach, Precima has seen clients achieve response rates of more than 40%, drive incremental sales of up to 4% and improve campaign ROI from less than 15% to more than 100%.
An enterprise-wide, customer-centric approach based on a holistic understanding of the customer will deliver results. When retailers and CPG manufacturers take a customer-centric approach across pricing, promotions, assortment and marketing, Precima has found, they consistently see measureable improvements. For a retailer with $2 billion in annual revenue, this can equate to an additional $80 million in sales per year and an additional $30 million in gross profits.
True customer loyalty – and resulting business improvement – can best be earned through the effective collection and use of data insights to understand customer needs and take actions to meet them better than the competition.