Knowing customers wherever they touch your business

We have seen businesses who have been later entrants into internet and even mobile shopping losing ground as they lose customers who view such retailers as out-of-touch with their requirements. HMV was a great example where it seems their lack of investment in online in preference for diversification left a great brand anachronistic and irrelevant for its customer base and struggling for market share.
Today’s consumer wants a relationship with a brand that he or she values, trusts and wants to participate with through any channel. In return they want to be recognised as the same customer whether they engage on-line, in-store or on a mobile device.
Contact through any of these are valuable touchpoints where the relationship can be tested and data acquired, validated or augmented.
We had one client in fashion retail who were looking to stop publishing their printed catalogue since the number of orders being placed by phone or order form was declining. Analysis of how many of their best customers wished to manage the relationship across all channels was fascinating; typically they would wait eagerly for the latest catalogue and then having selected the items that attracted them they would go on-line to browse these products in more detail. Having made the decision, they would then visit their local high street branch and try the product and buy in-store. Taking away the catalogue would have had severe implications on their store sales.
The key is to recognise the customer however they present themselves to the business but ideally without the need for a loyalty card to encumber the experience as it replaces the enjoyment of shopping with a mundane device. In the work I did in the UK theme park sector in the 1990s and 2000s we shunned a ‘back-to-earth’ effect of data capture, relying alternatively on an in-context method of acquiring data which became part of the fun day out.
Once this can be achieved in retail (and I have some ideas of how to do it) the relationship can be integrated and rather than just today’s special offer being emailed or sent by SMS message, the individual can enjoy a much more tailored experience.
If any retailers would like to discuss this methodology do get in touch at mc@dmcounsel.co.uk.

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Scoring your customers

Companies must continue communicating with their customers through a consistent strategy that is driven by customer insight. Rating current customers is not solely based on how much they spend but has as its basis the classic RFM (or RFV in the UK) model that creates a score based on recency, frequency and monetary value. My recommenation is not to stop there but to add more elements such as Returns, Complaints, number of enquiries, length of time they have been a customer and create a contact plan that reacts to the dynamics of these scores.

Often we will identify cohorts of customers that represent bad business. The solution can either be to review the business process for how you do business with them, e.g. relegating them to an ‘exclusive’ on-line relationship where the cost of managing them is reduced rather than taking up the time of a salesman or telephone agent; alternatively the bullet might have to be bitten and you resign the account.

However, building segmentations or communities of valuable, profitable customers by profile and comparing their behaviour will also drive the communication; but don’t just use it to determine when to make contact. Customer insight should also drive the ‘next best proposition’ for each customer so that the sales person can be proactive in establishing opportunity. What you know about your customers can also be used to drive new customer acquisition by comparing prospects’ profiles with your customers and determining the best proposition.

Customers rate companies with whom they deal by the quality of the communications and this means relevance, personalisation and timeliness.

The extended 3-letter acronym to drive retail direct sales

Analytics software is useful, but some concept of what should be analysed is also of value. Retailers will often create a RFV model, combining Recency (of last purchase), Frequency (regularity of purchase) and Value (either total spend or average order value, for example) to create a score for each customer.

We have found that adding additional elements expands the score from the 3-letter acronym to a multi-letter acronym such as RFVRCA where you add on the instances of Returns, Complaints and Abandoned on-line baskets committed by the customer.

This score then becomes a comparitor between customers, a selection criterion for campaign or proposition and changes in the individual’s score over time become a valid measure of success of the relationship.

Applying demographic, lifestyle and psychographic profiling provides an even more granular segmentation and the ability to apply the concept to prospects, with the benefit of making relevant offers to convert them to customers.

Such models can be created without investment in analytical software and can be applied in rules-based workflow and business process, with the dynamics regularly reviewed and the model(s) enhanced.

The Power Of an MBA (Market Basket Analysis)

Businesses can find tremendous benefits from analysing the vast amounts of data they collect finding hidden nuggets of information among their data, once they know how to go through it systematically and leverage the effect on profitability.

In practice, all too often marketers are concerned with using data to drive promotion, but true insight into customers has impact on all the elements of the marketing mix.

The knowledge to be derived out of customer data can be used outside the selling or marketing communications environment. Knowing what products different types of customers prefer is fundamental in planning range, in stock control and in driving cross-selling or up-selling opportunities. Being able to compose and analyse the combination of products that customers buy, either at one visit or over time, will enable the marketer not only to determine how best to develop the business with those customers, but, by extrapolating this information, estimate the buying potential amongst the remainder of the customer base.

The often-cited (and some say apocryphal) “beer and nappies” story is an illustration of what can be achieved. Those that don’t know the story can read it at www.dmcounsel.co.uk. A notable example of this concept took place in a Spanish airport duty free shop. Analysis of the EPOS data showed a significant trend of purchases that comprised solely either brandy and cigars or whisky and cigarettes. When the airport data was matched by flight number (remember, each duty free sale has the passenger’s flight number on the transaction record) it became apparent that the first transaction type related to passengers en route to Germany and the second type related to passengers with the UK as their destination. What was also noted was that these purchases were all made within 10-15 minutes of the scheduled departure time for the respective flights. This meant that people were passing through the shop quickly at the last moment, just picking up the two most important items on their shopping list.

The management therefore put sales points for the respective combinations of products actually in the gate area for the German and UK flights, thus generating incremental sales amongst the passengers who really felt they had no time to make a purchase at the shop.

This type of analysis is certainly not the exclusive domain of duty-free shops, supermarkets or Amazon.com (we’ve all encountered their ‘people who have read this book have also bought this other book’).

If a company can identify a customer as having purchased a product then market basket analysis such as was applied here can deliver cross-sale opportunities by making the right proposition in communications, positioning complementary products together on the shop floor or on the website or catalogue page or driving the pitch made by a telephone sales agent.

You can use such techniques to determine the real cost of being out of stock of key items and the implications on supply chain. But, by combining market basket analysis with customer profiling, you unleash powerful techniques that can generate significant increases in sales.