The adage is a true for many retailers today as it was 50 years ago: “I know half of my advertising is wasted; I just don’t know which half.” Retailers spend vast sums on marketing, yet they have a limited ability to prove their ROI. It doesn’t have to be that way. Primedia Business – Promo, Click Here!
Transactional analysis technologies let CFOs weigh the impact of marketing on individual sales transactions. Such analysis focuses on sales in relation to the customers who made them; the mix of products or services purchased at the same time or over time by each; and the sales and profitability generated by each sale. It reveals patterns of response to marketing tactics and delivers feedback on a near-real-time basis. Retail marketing plans can now be continually updated based on fresh data. The result: optimized expenditures.
There are four lessons for retailers who are adopting transactional marketing strategies:
1. What consumers say is not always what they do. A leading fast-food chain ran focus groups and surveys to decide if it should offer meal deals, replacing individual products with bundled products at single price points. Survey respondents liked this streamlining, and the QSR dutifully followed through.
Sales fell 12%. A post-mortem of transaction data showed that bundling had disrupted customers’ old habit of mixing and matching items to suit their tastes and price points. In hindsight, customers’ past actions would have more accurately predicted their future actions. An analysis of sales-transaction data delivered a fuller view of its customers than the focus group snapshots.
2. Focus on total cost and total return. A consumer electronics retailer wanted to improve its sales circular, which had acceptable — but not stellar — results. The 16-page circular came out 18 times a year, touting as many as 90 items. Analysis showed that 40 key items were driving the bulk of response. The retailer trimmed the number of featured products to showcase only the highest-performing offers, cut its frequency to 16 times a year and cut each circular to eight pages. Production dropped by half; circular-driven sales rose 5%. 3. Evaluate pricing strategies on broader transactional data. A national retailer ran a price-sensitivity study to see if the market would support increases. It found that shoppers resisted an outright price hike, so it cut coupon values instead. The result was startling: Sales fell 23% and profits plummeted. The coupon cuts alienated many heavy coupon users, and drove them to competitors who offered deeper discounts or everyday lower prices. If the retailer had weighed transactional data to explore customer motivators, this misstep could have been avoided. 4. There’s always room for continued ROI improvement. A QSR’s year-over-year gains from newspaper coupons were leveling off; it assumed the program had run its course. To verify, the retailer used P-O-S barcodes to code, track and analyze hundreds of coupon offers in local U.S. markets. The insights were eye opening: Many offers couldn’t cover costs; others were cannibalizing full-price sales for the same or similar items. The retailer switched to a transactional marketing model, to better screen media vehicles and standardize offers that optimized sales against profit.
These lessons all have a single bottom line: In the last century, retailers applied transactional analysis to tailor service and inventories; they gained quantum leaps in impact and efficiency. Today, transactional marketing is bringing that same discipline to the selection of marketing media and messages — with similar results.
Pat Furey is president of Euro RSCG Retail, Dallas.
Network
