Drive Retail Growth and Profits with Improved Customer Insight
How does better customer insight drive growth and profits?
The biggest driver of marketing success is the relevance of the message to your customer. If the consumer has no interest in the product, the message will most likely be ignored—even if you have a great offer. That’s why the more you know about your customers at the individual level, the more relevant your marketing will be. To be successful, it is critical to track customer behavior at the individual level so that your messages can be relevant to each individual customer.
“Creating and maintaining profitable relationships starts with renewed customer relevancy. This can be achieved through an organizational commitment to extracting actionable insights from customer data. Future retail failures will likely include those who were unable or unwilling to recognize this basic requirement.” Building A Customer-Relevant Organization;
Achieving High Performance In Retail
–PUBLISHED BY DELOITTE, 2009
Using customer insight to create more relevant interactions—in all channels, not just outbound messaging—fuels growth, because customers will respond more favorably and will be more motivated to purchase. And as your messages and offers become more targeted, your marketing will become more profitable, since you will send fewer unwanted, ignored messages. In addition, profits will improve when you stop over-discounting to drive sales.
But it’s not just improved marketing to existing customers that drives higher growth and profits. Improved customer insight can make your prospect marketing more effective as well. By understanding what your best customers look like and which ones respond best, you can refine your targeting of non-customers. Ultimately, you can use highly sophisticated modeling to drive dramatic improvements in cost per conversion and return on investment. For example, for one retailer’s direct mail acquisition program, we utilized modeling to reduce the break-even time frame from 6 months to 1 month. For another campaign, we used a modeling technique called “machine learning” to optimize paid search bids and ended up lowering the client’s cost per conversion by 44%.
What is preventing retailers from improving their customer insight?
There are a number of factors at play. But we will talk about the three most common issues.
First, many retailers are simply not aware of the enhanced profits that can be gained by improving customer insight and message relevance. And since there is an inherent resistance to change in most organizations, this is perhaps the most difficult barrier to overcome.
Second, retailers often simply do not have their data organized to generate better customer insights—and they are hesitant to make the investment to do it because they are not clear on the payoff.
Finally, assuming a retailer has been able to overcome the first two issues and has its customer data in good shape, there is often another issue to deal with: having the knowledge and experience to execute the appropriate analyses to yield superior customer insight. The ability to do this is rather scarce in the marketplace, and companies find it difficult to recruit and retain such talent. The most capable customer insight people tend to work for service companies where they can serve a diverse number of clients and projects.
What is the best way to make progress toward improved customer insight?
If you are at stage 1—trying to understand how much improved customer insight can increase growth and profits—there are two things to do: Gather information on other retailers’ success stories and then project the potential impact for your business.
Information can be gathered from industry publications, trade shows, blogs—really any place where 1-to-1 retail marketing is discussed. Another place to look is some of the companies that provide retail 1-to-1 marketing services, as they will often share results achieved with their clients.
Regardless of how much third-party information you gather, you will need to estimate the effect that improved customer insight will have on your business. It may be useful to speak with 1-to-1 marketing services companies or consultants like Agency 180. Many can provide a stand-alone project designed to project the ROI of improved customer insight for your company.
“Today, we are asking and answering questions about our business strategies that we never would have anticipated two years ago.” – A LEADING OUTDOOR OUTFITTER
If management is already convinced that investing in better customer insight is a good idea but getting the right IT infrastructure in place has proven elusive, you may want to consider outsourcing. There are multiple options, from having an IT consulting firm design and build a solution that can be managed internally to implementing a fully outsourced solution that is hosted at a marketing service provider. Should you decide to go either of these routes, give it careful consideration, as there are a variety of business models and technology options available. Technology is constantly evolving, and you will want to be sure that you find the most appropriate customer insight applications for your retail business.
Finally, if you feel that you have your customer data in reasonable shape but are unsure of exactly how to proceed, or if you simply do not have the resources to execute customer insight analysis, there are a couple of options. The first is to hire an analytic services company to provide the support you need. The second option is to develop or “lease” a customer insight application that will make it much easier to develop customer insight internally using less experienced resources. Given the high cost of outsourced analytics and the desire to retain customer insights within the organization, this is often the best solution.