RSR Research: The Customer Data Challenge
Commentary by Nikki Baird, Managing Partner, RSR Research
Through a special
arrangement, presented here for discussion is a summary of an article from Retail
Paradox, Retail Systems Research’s weekly analysis
of emerging issues facing retailers.
Last year, I predicted that we would see
a shift toward "transparent retailing" largely
driven by three trends: green retailing, supply chain visibility, and greater
use of customer data. Well, as an industry, I don’t think we’ve made
much progress on any of these counts.
So rather than make some predictions for
2011, I offer a challenge. Let’s
just take one of these three — greater use of customer data. How can you
use the information that you’ve gathered about your customers to make their
lives better, easier, and/or more fun?
1. Purchase history analyzer: Just as Safeway offers this service to
help club card customers find more healthy eating options, are there ways that
this information can help your own customers? Are there items in their purchase
history that might qualify for Flexible Spending Account reimbursements that
they might have missed? Would any of these be business purchases? Can you predict
purchase frequency for replenishment items? Are any of them high-value items
that might change a consumer’s insurance needs? At some level, these can seem
silly or trivial — but if they help you delight your customers, why wouldn’t
you do this?
2. Digital receipts: Even if you don’t think you’ll get out
of providing a printed receipt (grocery stores in particular seem to need to
be able to show customers how much they saved as they walk to their cars),
offer emailed receipts to your customers — and/or provide them an easy way
to get purchase details into whatever financial tools they use, whether that
is Mint or Quicken or what-have-you. These personal finance providers are getting
very sophisticated. Intuit has launched digital receipt integration
this year, for example.
3. Shopping list helper: Using the above-mentioned purchase history
analyzer, offer a shopping list builder (must integrate online to phone, by
the way) that is pre-populated with high frequency purchase items. Make it
easy to add/edit/delete though, because otherwise such a list builder
goes from helpful to hopeless in a flash.
Retail in 2011 has to be more relevant
to individual customers (hmmm, I’m
sensing a theme coming on). And in order to achieve that, retailers need to
use all of the assets they have at their disposal — most especially customer
information assets.
Discussion Questions: In what other ways could retailers be further capitalizing
on customer data? Which of the suggestions in the article offer the most
potential?
I’m wondering if any of these ideas would help a shopper very much. No offense, Nikki, but this seems like an idealistic world view of grocery shopping, where everyone wants to eat healthier (they don’t), everyone has their own computer at home (they don’t), and they invest time in making shopping lists so that they are more efficient (they don’t).
Instead of this “push” approach, perhaps we should look at the “pull” side. Better assortment at the local level can enhance the shopping experience and can be derived from shopper data–this is Marketing 101–bringing the right product to the right place at the right price. Innovations such as Publix Apron may highlight products that are in heavy use at a location (or relatively light use).
I like Nikki’s thoughts regarding consumer data and opportunities for retailers to help make their shoppers lives easier through the use of that data. One trend that was big in 2010 and I believe will continue in 2011 is the growth of Private Label. Consumers are still dealing with the housing bubble, stock loses and for over 9% of the US, unemployment. Why not use shopper data to understand the market basket and offer consumer’s savings through trial on Private Label. When someone buys Ragu sauce offer them free Private Label Pasta. A shopper who mixes their basket with National Brands and Private Label saves money and at the same time builds a stronger relationship with their retailer. Retailers have a wealth of knowledge on their shoppers. Phil Lempert discussed this in his December 16th article.
The question is what to do with it. Nikki shared several great ideas and I look forward to seeing some being used in the coming year.
The best way to delight consumers using data is to help them prepare a shopping list before arriving in the store, quickly locate the items they want to purchase, identify ways to save money purchasing those items and check out quickly.
I couldn’t agree more with Stephen. Each of Nikki’s suggestions are great. However, to really move the retail needle, the biggest opportunity is to move a little farther up the value chain and truly begin to customize assortments by location. Not only is there less data and complexity (easier to succeed), it is still a huge competitive opportunity. Successful retailers like Bed, Bath, & Beyond along with Whole Foods figured this out a long time ago. Even Macy’s, long the king of standard assortments and centralized decision-making has begun to experience real, tangible success with its My Macy’s strategy.
My guess is that you’ll see a lot more of this in 2011.
Going along with some of the themes raised here about the economy and the reality of people’s home lives, how about better coupon aggregation and organization? I get Catalina coupons at check out and they NEVER make it back with me into the store despite my best intentions. Help automate those discounts for me to reward the intended behavior (buying the right brand, making five purchases in a single month etc).
I just lived through my local Jewel giving me stickers every time I checked out which I could redeem for free cookware if I collected enough of the stickers–really? I thought the S&H green stamp model was long gone!
With most grocers in particular, it’s been the same story forever–reams of data, no will (or margin) to mine it. Okay, start with the 20% of shoppers who are the largest basket and start analyzing them to figure out if you can reward them differently and drive more loyal behavior. Identify the profitable and loyal customers and focus on them. That could make a real difference.
With all due respect to Bill and Stephen, location-driven assortments are simply an incremental (though valuable) step along the path to shopper-specific retailing.
I don’t think anyone in this forum would argue that it makes sense to have the same assortment in three different grocery stores located in, say, a working-class Hispanic neighborhood, an affluent suburban neighborhood, and a downtown financial district. But location-based assortments are still trying to best-fit a single assortment to a complex distribution of consumers. The consumers who shop a given location may skew one direction, but any assortment choice will only be perfect for a subset of your store’s consumers.
The holy grail in retail should be presenting each consumer with the optimized, tailored mix of products, marketing, and interaction that drives the most engagement from that consumer. The physical constraints of a traditional retail location limit the practical ability to create “stores of one” (unlike Amazon, which does exactly that), but from a marketing and trip-planning point of view, there’s huge power in personalizing the shopper’s experience.
Nikki mentions shopping list prediction and goal-oriented purchase history mining, and there are many, many more opportunities along the same lines: circulars-of-one, personalized coupons, shopper-specific marketing events … the list goes on and on. This is the area where I expect the true innovation of 2011 and beyond.
Seems to me that the simplest solution offered is the assistance with a shopping list. Consumers are in and will remain in a ‘budget’ mode for some time. More customers are likely using a list than ever. Scanner’s household is–what about yours?
Improving local assortment requires only knowing what sells by location. It doesn’t need be tied to particular shopper data.
Maybe the best retailers, online or otherwise, to effectively utilize customer data for suggesting purchases are Amazon and Zappos.
Product assortment and customer data and the effective utilization of these are two different things. One has a much broader objective and the other is singularly focused (or at least should be) on a given customer.
As a retailer, the benefit of the broader objective has a greater payoff because it can spill over into the individual customer as well.
Successful use of either type of data seems rare. Maybe a better objective for 2011 for retailers is to just start using the data in a very simple way. Simple would be good.
Great suggestions by all, as usual! Happy New Year! Guess what’s NOT new this year?! With all the great merchandising and assortment strategies and technologies available today, what is STILL one of the most high-impact ways to build profitable sales growth? Fulfill your shoppers’ needs! That’s right: HAVE WHAT THEY WANT IN THE STORES and ONLINE. Out-of-stock conditions in all segments of retail continue to plague the industry. Utilizing customer data to create the visibility and the actionable insights throughout the supply networks will have a far greater positive effect on the business.
As a retailer I want to do all I can to solidify my relationship with the grocery buyer. Yet, as a consumer I don’t see any of the three ideas helping me much.
Here is why customer data is a challenge for retailers: Nobody, just nobody, shops at one store all the time, so the purchasing history data each company possesses is partial and therefore just not all that useful either to them, OR to me. Few people “go grocery shopping” as an isolated trip anymore, but stop to pick up groceries on the way to or from somewhere else.
In my case, for example, if my day’s appointments take me west, I stop at Jewel. If I am east, I hit the Whole Foods and if my travels take me northwest, I go to Dominick’s. They are all nice, clean stores with good products and service or I would not go there. But do any of these three stores through their data bases really know me and my overall purchasing habits and needs? Do they know what items my household uses and eats, and how often, or on what days of the week or at which times I shop? Can they really predict much of anything?
Sorry, but I think that collecting individual consumer data and using it productively is a pipe dream.
The very best way to help the consumer is to avoid spending money on projects designed to penalize consumers in any way.
If retailers would quit messing with ideas that promise results but don’t require the retailer to do any work, everyone would be better off. Besides, who ever gave a retailer permission to collect data on their customers and then use this data to discriminate? Why do some customers receive a retailer-issued coupon and others do not? Why do some customers receive a discount on an item and other do not? A review of successful retailers reveals straightforward pricing and exceptional service. Why not try that for a change?
While the advances are hardly universal, I would challenge the premise that little progress has been made. A few progressive retailers are leveraging their loyalty data to help the customer save more, build lists, etc.
The perception that little progress has been made is driven by the lack of publicity about these programs. The retailers involved see the value of their efforts and are wisely avoiding public discussion of their activities.
There are still only three things the marketing program is trying to do: retain existing customers, attract new customers, and expand and improve (higher gross) the purchases of existing customers.
While on one hand the Frequent Shopper Card is making a lot of consumer data available, it is also the biggest barrier to attracting new customers. I think the greatest thing a retailer could do is offer reward points based on the customer’s accumulated points on a competitor’s card. Basically, ask them to bring in a receipt that shows their accumulated points along with their card number and their card. Use this information to issue a new card for the new retailer (it would be great, but I don’t think you can ask them for their old card) with points added. This can be combined with “card free” weeks where all promotions are offered without the need for a card. In the store, since hopefully you’re going to get a lot of new shoppers, there should be clear aisle signs and maybe even a handout that helps “newbies” find their way around the store.
As we try to offer more services based on the knowledge provided by the frequent shopper data, we must also work harder at making it less painful for shoppers to come over to a new store.
Grocers and other retailers have more data than can use and have so grossly underutilized their resource that virtually any measure of smart targeting should create a positive result.
For 2011, any grocer with a two-tier club program should ensure first that the data collection process has integrity. No more allowing the cashier to swipe their card or the person next in line just to give the current customer a discount. Simple, but effective.
Next, demonstrate value to the customer for the data collected. Let them know why they should play the game, reassure them that data collected is not put into the black box and monetized for the enterprise but returns value to the participating consumer.
Third, get ahead of the transaction to drive more share of customer visits and promote products with CPG subsidy.
Data, analysis, product placement (and in stock) and customer centric marketing. Done.