Consider Customer-Centric Retailing the First Step Toward Customer Loyalty

Customer-centric retailing has been embraced by a broad range of organizations and is high on the boardroom agendas of many more.

A customer-centric retailer uses insights gained from advanced analytics to identify and understand a core group of most valued customers. From there, they can predict what might motivate shopping behavior changes that will make them even more valuable down the road. It is seen as an ultimately essential strategy for any retailer facing the demands of an increasingly competitive marketplace. The challenge now is how to take something that sounds compelling in case studies and execute all the practical steps required to make it work. But as with all promising new ideas, there may be some missteps along the way.

Don’t underestimate the necessary effort.
Many retailers don’t always grasp the degree of coordinated effort required to implement customer-centricity. A grocery chain will drill down to identify shoppers who don’t have time to cook. The marketing team will come up with a program aimed at steering such shoppers to products that fit their busy lifestyles. Multiple offers will be tested, all shaped by a deeper understanding of why people buy and what may inspire them to buy more.

Too often there’s a presumption that once an analytical insight points the way to boosting revenue in a category, the entire organization will instinctively align itself behind that goal. In fact the people responsible for category management or inventory control may follow entirely different models, which can lead to contradictory or misaligned decisions. It is vital that everyone be engaged in rethinking how the organization must evolve to reflect the new focus. People must be shown where the information applies in their day-to-day jobs and how this will change the way progress is measured.

Don’t think category, think customer.
The shift to customer-centricity means moving from traditional category management to insight-driven customer management. In the past, a category manager would receive a report showing products ranked by sales volume and contribution to profit. From there it was often just a matter of de-listing the lowest-performing items. Now, managers also have to look at what products resonate with the best customers. Armed with customer-centric data, management can develop more nuanced ways of measuring category performance in relation to overall and individual customer profitability.

Stop trying to cast the net so wide.
Customer-centric strategies must be designed to appeal first and foremost to a core group of highly valuable shoppers. But, a retailer’s target audience may include prospects who are not currently frequent shoppers. As Web-based businesses continue to reinvent historical operating models, using segmentation and customization to personalize offers, retailers may in fact gain the ability to be all things to all the people who matter most – current and potential high-value shoppers.

Expand your horizon…at least beyond the fiscal year.
Retailers considering a customer-centric transformation inevitably ask how quickly they’ll see results. When the strategy is implemented correctly, you can expect to quantify a positive impact in months; most case studies show a dramatic payout within a year. That said, customer-centricity is definitely a strategy for the longer term with a goal of building more meaningful and lucrative relationships with key customers.

And this is where some retailers may be most liable to have a ” mistaken” view of customer-centricity. Unlike traditional analytics, which focuses on optimizing current business activities, the customer-centric model is a forward-looking strategy that must permeate every area of the enterprise in order to succeed. Fully grasping its holistic scope can involve a slight learning curve. But there’s no mistaking its power to reinvent a retailer’s value proposition and remake an organization in the image of its greatest asset – the shoppers it attracts and retains by profitably anticipating their every need.

Brian Ross is general manager and Miguel Pereira is director, consulting and analytical services of Precima.