Retail TouchPoints: New Survey Shows Retailers Converting POS Into Marketing Tool
By Amanda Ferrante
Through a special arrangement, presented here for discussion is a summary of a current article from the Retail TouchPoints website.
A survey from Aberdeen Research found that best-in-class (B-I-C) retailers are over three times more likely than average performers to seamlessly integrate real-time unit-level promotion data updates at the point of sale (POS) within the last 12 months aiding in-store customer focus and sales programs.
The survey was part of a report, POS to Profits: Reviving Best in Class Sales & Service in Retail Stores, that also found that the top strategy of 50 percent of B-I-C retailers is to use POS as a backbone for continued customer-facing enhancement and localized in-store marketing. However, the survey of 132 retailers from May through June also revealed that 73 percent of retailers rate themselves below, or at best sub-par, on their current point of service or POS capabilities.
To achieve B-I-C performance, companies must strive to convert the POS into a powerful marketing tool for renewed customer focus and differentiation, according to the report. Companies must also align POS performance with enterprise performance to augment customer satisfaction and transactional volume, and consider rapid implementation cycles to improve speed to deployment and reduce total cost of ownership (TCO).
Aberdeen’s February 2009 report, Migrating to Customer-Centric Point of Service, found that 77 percent of B-I-C retailers encountered operational pressures impacting POS performance such as complex checkout procedures and long wait times. This year, the data reflects that POS pressures have shifted toward a reversal in in-store spending at POS and costs of operations.
Below are six major components of a marketing-centric POS strategy adopted by B-I-C retailers, according to the survey:
- Perpetual inventory availability and multi-location visibility tools at POS for inventory look-up by store associates and managers to address customer inquired for regular orders, multi-channel orders and special orders: 77 percent.
- Coalition loyalty programs and membership discount card programs executed at POS comprising of common point or dollar perks involving few other retail brands to increase basket size and wallet share: 70 percent.
- Signature pin-pad enhancements that stream dynamic and personalized promotional content and digital images prompting improved customer conversions, up-selling, cross-selling and impulse purchases: 67 percent.
- Mobile POS and thin/lean POS systems for quick checkout, self-service, clienteling and assisted selling by reusing POS logic (associates or managers that assists customers in the pre- and post-sales process). These measures help deliver the brand promise and cultivate a customer responsive, agile in-store shopping experience: 56 percent.
- Web enhancements including web-enabled POS functions, cross channel inventory visibility (i.e. virtualization) and integrated order management for web and special orders. These improvements enable improved product access and order efficiency: 53 percent.
- Pre-paid acceptance to expand transactional volume and customer loyalty (i.e. open-loop and closed-loop gift cards): 50 percent.
Discussion Questions: In what ways are retailers failing to fully capitalize on POS systems as marketing tools? What challenges must they overcome to improve?
I think this study points to a trend that every regular reader of RetailWire has known about for a while: POS is the linchpin for building next-generation marketing capabilities. Basic loyalty processing has been de rigueur for a while, but many retailers are upgrading to systems that allow individualized customer messaging on the receipt and/or through customer-facing displays.
The challenge that any retailer faces when it introduces a new, more granular way of talking to shoppers (whether POS, mobile, internet, etc.) is figuring out what to say. For most retailers, the database marketing team (or consumer marketing team, or whoever is responsible for targeted shopper communication) is already overworked simply managing a limited set of programs for the store. Given the limitations of today’s shopper segmentation tools and the time constraints of the people using them, the retailer will, at best, only be able to moderately increase the level of shopper communications before it hits the wall.
So, where should the vast and varied set of targeted offers and marketing messages come from if not the retailer itself? In grocery, we think the answer is obvious: the brands. The problem is, if brand marketers must work through someone at the retailer to create, manage, and measure each and every promotion, then the retailer’s staff becomes a bottleneck. The only possible solution is to give outside brands (and their reps at brokers and other marketing services companies) access to tools to create the promotions themselves. That way, the people who care most about the marketing of a particular product are the ones who create and target the marketing for that product. The retailer can then spend their time simply saying yea or nay to each brand-funded offer, and let software do the work of managing the offer mix for each shopper.
There are technical and business hurdles here to be sure. Building software to make the complex work of shopper targeting easy for a non-technical brand marketer is incredibly hard. Also, if chains smaller than about 1,000 stores (roughly the size of Publix) want to see their fair share of brand marketing spend, they’ll need to band together into a single network big enough to attract the brands’ national marketing money.
It is just amazing how little retail merchants actually know about their best customers. I make this observation after even mid-sized retailers have spend tens of millions on their POS, communication and IT infrastructure.
Yet ask a typical buyer if they know the name and spending pattern of their top 100 customers. Ask them how these customers respond to promotions and shop the web. Ask them how long the top customers have been customers and their patter of recency and frequency. Ask them how these customers rate the store in comparison to competition. Ask them how much margin their top customers contribute both in dollars and percent. Ask the buyers what additional dollars these top customers transact outside their department. Ask them the buyers to discuss trends on all of these.
You’ll find, for the most part, a dazed look–as if marketing insights were not their job. Yet the answers lead to insights that will drive more profitable assortment and promotion decisions. And the information to answer these questions is likely buried deep in a mass storage device in your IT department.
POS Systems are the window into all consumer behaviors and quite often are under-utilized.
Technology is now in place that fully capitalizes on POS data including optimizing in-store promotions based upon what products/brands/categories are moving by daypart, by market, by store.
A retailer isn’t fully leveraging the POS system if it isn’t driving local targeting strategies for marketing, tracking supplier purchases, producing robust sales analyses, informing inventory management, prioritizing brands and categories, influencing pricing strategies, generating consumer behavior insights, measuring individual store performance, weighing market basket sizes, evaluating mark-up impact just to name a few.
It is in fact their single biggest competitive advantage.
The POS systems today at retail are incredibly powerful and have the capabilities of providing far more data than one company can realistically review and analyze. What retailers need to review is what measurements and goals are they most focused on and then extract the specific POS data points that will help them improve those areas of focus.
I met with the Co-President of Mitchell’s this week. For those that are not familiar with the store it is a family owned high end clothing store for both men and women based in Westport, CT. They also have a store in Greenwich (Richard’s) and a third in Long Island (Marsh’s). No question the economy has impacted companies like Mitchell’s that focus on the luxury line more than most. Even with the downturn, Mitchell’s has fared far better than others in the same space. Why? I would attribute a lot of the credit to their POS/customer database and their ability to stay focused on their clients and how their habits change as the economy changes. When you ask Jack Mitchell the Chairman of Mitchell’s how many of his top customers does he know by name he says without pause the top 1,000. How many retailers can honestly say they are drilling in to really segment their shoppers and understand them as gradually as Mitchell’s? And they have been using technology to help for over 20 years. Long before it was popular, easy or inexpensive from a technology side.
Now it is obvious that a grocery retailer may not be able to take the same approach, but I would argue they could do far better at targeting specific programs to specific shoppers and create meaningful loyalty programs. Technology can no longer be the excuse. A week does not go by that I don’t speak with a least one technology vendor or consulting company that has an amazing solution for mining retail POS data. Retailers just need to take some time to seriously explore the options and then take action.
In order to create a seamless customer experience, retail associates must be able to access critical customer information and opportunities via the POS.
New POS today provides insight into a customer’s purchase history, estimated value, next most likely products that customer may purchase and potential service needs. Finally, the POS can highlight promotional offers that may fit those needs.
Leverage of Customer insight by an empowered sales associate is the most powerful sales tool there is. In addition, the state of the art POS can provide for the delivery of offers in two ways, through printed offers on the customer receipt and through direct actions of the sales associates.
The key is not to see new POS as simply a vehicle for improved inventory management or rewards system tracking, however valuable those opportunities may be. Rather, the POS is a way to bring the insight that once was provided by the memory and insight of the small shopkeeper to a large, scalable retail enterprise.
The CRM part of any POS system should be like a GOLD mine to any retail. With increase in competition with big box retailers and overseas, small business cannot compete solely on price anymore. Small businesses must create a personal/intimate user experience that a big box retailer or someone overseas cannot. Knowing the ins and outs of a certain customer generates loyalty and in return, creates “word of mouth” or “buzz” for your store.
A few things that can be created with this data are loyalty programs and discounts for frequent customers. Retailers also need to utilize the “note” box within the POS system. Inputting notes and profiling a customer is vital and often underused.
I truly believe CRM is vital to a POS usage.