Supercharge Your Customer Data

By John Roach, Editor, Retail Solutions Online

Retailers with a loyalty card program: Do you realize that not only are you in the pockets of your customers (as well as their purses, jackets, and homes, too) but you're also inside their minds? You know what products they like to buy, when and where they typically shop, and what they may buy next, given the right incentive.

So, what are you doing with that information? If your customer loyalty program still offers consumer discounts and nothing more — meaning you haven't advanced the concept since its early 1990s heyday — then you're not capitalizing on innovative practices that can expand your customer base and increase your revenue.

Pioneering retailers, particularly in the food and retail drug sector, are optimizing the data derived from their customer loyalty programs in three pivotal ways:

1. They share real-time POS data with their suppliers.
2. Using that data, they collaborate with suppliers to improve their marketing and supply-chain operations.
3. They deliver personalized marketing digitally to their customers.

Individually, each of these actions offers revenue-generating and cost-saving benefits to your operation. But if you implement all three as part of a coordinated, sustained effort, you'll help usher in what today's retail leaders see as a new era in consumer data-driven retailing.

Retail 3.0

Gary Hawkins isn't a scientist; still, he experiments like one in what he calls his "laboratory," his family's decades-old Green Hills Market in Syracuse, N.Y. The CEO and author of two books on customer-focused retailing also runs Hawkins Strategic, a consultancy with clients across the retail spectrum. What he's seeing and hearing from industry insiders — and validating in his Syracuse laboratory supermarket — advances the wide-ranging promise of consumer data usage. Hawkins believes the metrics derived from this data will have as big an impact in the retail industry as the introduction of barcode scanners did more than 30 years ago. Hawkins is now rolling out a series of position papers around this premise, which he has dubbed "Retail 3.0" (see sidebar).

Hawkins traces the roots of Retail 3.0 to the grocery sector. "The supermarket industry over the last 10 to 15 years — instigated by Wal-Mart's entry into food retailing — has done a very good job of streamlining product logistics, taking costs out of the supply chain, and making operations as efficient as possible," Hawkins told me. "Now technology is being leveraged to further improve the situation."

Hawkins and other retail experts believe that better use of consumer data in marketing and supply chain operations, along with greater collaboration with suppliers, will lead retailers to new opportunities. So what should retailers do to capitalize on this emerging trend? Here are three ways you can supercharge sales using your consumer data:

1. Share real-time POS data with your suppliers. Retailers use POS data to assess store-level merchandizing effectiveness and respond accordingly. Your suppliers are better at big-picture analysis. Given access to your POS data, they can help you detect national trends and their affect on local tastes, and also assist with a better flow of products. Why not share your data in return for their expertise?

"I see a real movement toward retailers sharing information with their supplier community and leveraging their suppliers for more analyzed data," afterBOT's Jim Nadler, VP of marketing and business development, told me. "There's a more open discussion between retailers and suppliers as to how to best serve the customers. It's not completely there yet, but it's beginning."

For example, Food Lion's Vendor Pulse program shares retail data with more than 25 key suppliers, with a goal to increase the total to at least 100, according to Green Hill's Hawkins. The mutually beneficial program allows suppliers to view aggregated shopper data, while Food Lion gains greater collaboration to manage its product lines.

2. Collaborate with your suppliers to improve your marketing and supply-chain operations. Not only do you need to share the data, you also need to act collaboratively on it. Leading collaborative retailers use consumer data to segment shoppers into homogeneous groups and create more timely and effective marketing for each group. This strategy pays off for retailers in increased revenue, but it also benefits manufacturers. For example, Fast-Moving Consumer Goods manufacturers spend in excess of $60 billion annually in trade promotion marketing, providing a tremendous level of promotional support to the supermarkets that carry their products.

In addition to marketing, enhanced retailer-supplier collaboration can lead to improvements on the supply-chain side of the business. Greater supply-chain collaboration addresses three of the retail industry's bigger problems: operational inefficiencies, ineffective merchandizing, and out-of-stocks. Wal-Mart's data-sharing with Proctor & Gamble, begun in the early 1990s, is the benchmark for supply-chain collaboration. Wal-Mart shared its sales and supply-chain information with Proctor & Gamble, whose analytics generated automatic reorders for Wal-Mart. The groundbreaking partnership saved time and money throughout the supply chain, and increased both parties' efficiency.

"We're seeing the advent of retailers sending POS data upstream to the distribution network so that it can generate replenishment orders to be shipped back to the store," RedPrairie retail supply chain specialist Janine Renella told me. "This allows for reduced inventory and safety stock levels within the store because suppliers are responding to real-time POS demand signals, which also reduces inventory levels in the distribution network. We're seeing a kinship between the retail and distribution networks."

3. Deliver personalized marketing digitally to your customers. Good-bye, print ads; hello, individualized digital messaging. Retailers can now personalize product promotions and discounts using consumer POS data and the latest analytics software. Did a customer buy diapers on his last shopping trip? If so, present him with a digital coupon for more diapers and another for baby powder.

For example, Green Hills Market's SmartShop initiative is a second-generation loyalty-card program that creates a personalized ad flyer deliverable over e-mail, the Web, or in-store kiosks, whichever the customer chooses. The program, which gives loyalty discounts based on previous POS data, is now used by more than half of the store's 18,000 customers, according to Hawkins. "We believed that by providing relevant marketing, we could increase the number of customers shopping with us, we could increase their purchasing frequency, and increase sales," Hawkins told me. "And, indeed, SmartShop does that."

Personalized messaging is one part of the new marketing equation; smart retailers also are tailoring their pitches to a wireless world with time- and location-based mobile marketing. For example, according to Hawkins, retailers can text a lunch promotion to a shopper's cell phone at noon, and then, once he's in the store, offer promotions based on the shopper's location. "Retailers have the ability to market effectively and efficiently to different shopper segments, providing different promotions, conceivably at different price points, to different shopper segments," Hawkins told me.

Taking any of these three actions independently can empower your retail operation. However, if you expand your use of valuable consumer data to include all three, you'll supercharge your sales — as well as satisfy and grow your customer base — in the increasingly customer-focused, tech-savvy retail marketplace.

Have a comment about this article? Let me know. Contact me at jroach@vertmarkets.com.