How Customer-Centric Retailers Ask Deeper Questions
The ongoing revolution in sophisticated, customer-focused analytics has sparked a dramatic paradigm shift in the retail landscape. Faced with steadily increasing competitive pressures – and recognizing that the battle for customers isn’t won on price alone – forward-looking organizations are moving decisively into a new era of data-driven customer-centric retailing.
Of course, smart retailers have always paid attention to their customers. What they lacked was a way of inferring all they wanted to know about people’s shopping habits, product preferences and aspirations. To gain those kinds of insights, you need two things.
The first, obviously, is information. For most retailers today, this is the easy part. As long as you have a loyalty program or any kind of mechanism for identifying your customers, you have a wealth of personalized transactional data in your systems.
The trickier part for retailers is drawing meaningful conclusions – and this is where the latest advances in analytics intersect with the practical world of commerce. Using market research and sophisticated segmentation modeling and overlays of publicly available data, you can gain an unprecedented degree of insight into who your customers are, what’s important to them, why they choose to go to your store and why they may shop somewhere else.
We’re not just looking at what shoppers do, but <I>why</I> they’re doing it. And with that deceptively simple evolution – from what to why – the scope quickly expands beyond marketing to all aspects of a retailer’s business, from merchandising to store design to long-term planning. Customer-centricity is, by definition, a strategy for the entire enterprise. Next come the bigger questions: Who are my most valuable customers? In what categories am I gaining or losing share, and why? From there it’s a natural progression to having the customer perspective drive all strategic decisions across the organization.
In customer-centric retailing, rather than reacting to your competitors or the marketplace, you can hone in on the existing customers who represent the greatest source of potential revenue. What products do they care about? Are they price-sensitive in a particular category? What promotions do they respond to? What motivates them to shop – by trip and category?
Indeed, your strategies can become so specific that you gain the advantage of being somewhat insulated from competitive pressures. You also introduce an element of stealth into your marketing and fly under the radar when launching new programs, or in deciding whether to lower prices or maintain market-based pricing.
Of course, the resolve to embrace customer-centricity has to come from the top. If you’re introducing a game-changing strategy, there must be commitment from senior management and a shared vision of how this will translate into competitive advantage and increased profitability. The compelling case studies from customer-centric retailers around the globe will quickly build support in the boardroom. But what really wins over managers is demonstrating how you can paint highly detailed pictures of individual consumers by tracking how they shop. When marketing and merchandising budgets are lean, it’s invaluable to have this level of insight so you can invest in strategies that accurately reflect customers’ true worth today and their value down the road.
In asking why people shop the way they shop, you realign your value proposition around a subset of core customers with the potential to deliver the greatest return. Instead of seeing what all shoppers do and reacting accordingly, you identify your best prospects, determine what motivates them, and deliver against that. You focus the whole organization on it. You even design stores around it. With the ultimate goal of inspiring those customers to ask a why question of their own: Why would we ever shop anywhere else?
Brian Ross is general manager of Precima.
