The five W’s of effective data management for retailers!
Retailers are being inundated with articles about Business Intelligence and effective data management. First let’s look at a simple definition: Data is defined as the facts and statistics gathered for future reference. Most independent retailers have the tools at their disposal to collect data but the challenge is to use that data to effective positive changes in their businesses. I think using the same principles that apply in journalism will work for retailers as a guide for effective using data. The five principles are: Who, What, When, Where and Why. Let’s see how they apply to retail data.
Who: The ‘Who” is very straight forward. A retailer should attempt to collect as much information about every customer. We will explore more deeply the value of data as we move through the W’s but suffice it to say data is the gold of POS systems. The effective use of customer data is the driver for retaining customers and growing your business from them. Develop a “quid pro quo” approach with customers; Ask them for their data in exchange for some benefit. The simple rule is “If you don’t ask you don’t get”
What: “What” refers to exactly the information you should collect that will yield the biggest benefit. The low hanging fruit is transactional data. Knowing exactly what people buy is the basis for developing marketing campaigns. The goal of any campaign is to build a stronger relationship with your customers which results in a great share of their wallet. The best campaigns are designed around creating additional visits and creating incremental sales. Using a customer’s purchase history allows you to tailor your offers and make them relevant. This is a short list of key customer metrics:
• What they bought
• Frequency of purchases
• When they last visited your store
• Average transaction and gross margin per transaction
• Emails addresses
When: Knowing when customers buy provides some very useful insight. The most obvious use is to tailor offers based on their shopping patterns. Digital marketing and social media allows you to make offers and send coupons on the days your customer habitually shops. If they own a summer home or ski chalet you can design and campaign with specific offerings targeted to their needs as the start of new season. A lawn and garden center knowing when a customer comes in to buy the essentials for their lawn and garden is another great opportunity. The list of marketing opportunities based on knowing a customer’s shopping habits goes on and on so don’t ignore the potential. Knowing when a customer buys also provides data on their frequency of visits. Do the shop every ten days, two weeks or once a month. You can send out an offer based on a “at risk customer”, or a customer out of compliance with their usual shopping pattern. The offer is,” We love you and miss you please come back in and take ten dollars off your next purchase.” To ensure your marketing campaigns are successful they need to be creative and changing all the time. The knowing “When” metric is just another data point to use to retain customers.
Understanding where a customer purchased a product has more relevance for Omni channel and multi store retailers. In the case of retailers who have a fully integrated e-commerce business it’s important to know if the purchase was made online or in the store. Was it purchased online and shipped on picked up at a retail location. Is there customer an online shopper only and do they live in close proximity to one of your stores? For multi store retailers is makes sense to know the store a customer usually frequents for marketing purposes. As social media marketing and geo marketing become more refined and affordable to the independent retail having location based information on customers will provide another data point you can use to build targeted marketing and geo based offers.
The “Why” is the easy aspect of the justification for the time and effort it takes to stay engaged with your customers. The average retailer loses anywhere between twenty to thirty per-cent of their customers every year due mostly to natural attrition. If by staying engaged with your customers you can influence that natural attrition positively by three or four percent over a five year period it will have a dramatic impact on your profitability. As a customer’s duration increases you will get a larger share of their discretionary spending. They will also become very strong “influencers” by recommending you to their friends. The cost of retaining a customer is three to six times less expensive that cost of acquiring a new customer. The fact is that if you’re not paying attention to your customers, your competition is, this is an at will relationship, the duration is determined by the customer.