Posted Date: 6/7/2011
Operating in a Customer-Driven World
By Adam Blair
The balance of power between retailers and customers has moved decisively in favor of the customer. Consumers are only willing to part with their hard-earned money on their terms, not the retailer’s.
This change has accelerated a shift that had already begun in retail: the move from product-centric organizations to customer-driven ones. More and more retailers are realizing that in order to succeed in the “new normal” of more powerful consumers, they need to make their customers the focal point of strategy, tactics and execution at all levels throughout the enterprise.
Those retailers that can reshape their enterprises in this way will gain opportunities to engage with shoppers in deeper, more meaningful ways. For example, the same social networks that provide a forum for shoppers to complain about a retailer’s offerings are also a valuable data source for the retailer to find out where they need to improve – and also where their competitors’ weak spots are.
Merchandising Movement
The move away from a product-centric model will have some of its deepest effects on merchandising, the area that is most involved with products and the decisions surrounding them. Becoming more customer-driven doesn’t mean merchandising will become less important: connecting customers to the products they want to buy has been, and remains, a retailing basic. But in today’s more complex environment, successful merchandising requires much higher levels of collaboration with other key departments, particularly marketing and supply chain/logistics.
In traditionally product-centric organizations, merchandising, marketing and supply chain have interacted without really collaborating, maintaining separate databases, applications and processes. This type of separate-but-parallel operation makes it nearly impossible for retailers to plan, create and execute the kinds of multi-channel, multi-touchpoint campaigns required to reach and influence shoppers.
True collaboration between merchants and marketers is essential in large part because of marketing’s ability to reach shoppers directly in today’s multi-touchpoint environment. Marketing “owns” customer insights as well as the tools to find customers and the vehicles to reach them at a granular level.
Supply chain/logistics provides another crucial customer connection, serving as the lifeline to the end consumer – a particularly critical role now that retailers are operating in multiple channels. Many retail executives in supply chain leadership positions are seeking more information about customers in order to have a better understanding of requirements and key retailing processes.
The New Importance of BI
The fuel that makes all these internal collaborations work is data, and business intelligence is the engine that turns that fuel into actionable insights and executable programs. In fact, many retail organizations are becoming more customer-driven in response to the explosion of information and tools now available to executives across all departments in the retail enterprise.
Surveys indicate that many retailers realize the value of empowering associates and sharing data within the organization. “Providing associates with better tools” was the top retail priority in the 2011 RIS/IHL Group Store Systems Study, identified by 50% of respondents.
“There is a clear relationship between better tools and better ability to access databases full of information to make smarter store-level decisions,” write study authors Lee Holman and Greg Buzek of IHL Group.
Retailers are seeing the necessity of making BI pervasive and offering guided analysis, which provides the metrics and Key Performance Indicators (KPIs) aligned by specific lines of business. A July 2010 Aberdeen Group study found that 60% of best-in-class retailers see aligning operational KPIs with line-of-business goals as a key operational intelligence strategy.
The integration of guided analysis with pervasive BI allows retailers to extend information to many people throughout the organization, in ways that help them understand how to execute on business insights within the context of larger objectives and executable plans.
The Mobile Connection
Fast, powerful BI solutions also allow retailers to dynamically segment their customer base as well as their product movement. Retailers with loyalty programs have traditionally done only relatively basic analysis of their customers, in large part because they simply didn’t have the bandwidth (human or technological) to dig more deeply.
However, today’s BI solutions bring retailers closer to the goal of one-to-one personalization than ever before. Retailers can put demographic and geographic data together with product purchases, customer actions and activities to create segments they literally never knew existed before. Adding in buying frequency information allows retailers to send individuals offers that are most significant to customers at the precise day of the week, or even time of the day, that aligns best with pre-established buying patterns.
All this segmentation comes to fruition with mobile technology, which allows retailers to reach an individual while she is at the point of purchase decision.
For those retailers that can use the power of today’s BI solutions to support new levels of internal collaboration, this business model offers tremendous opportunities. Those retailers that can’t make the transition to having with the customer in the driver’s seat will spend a lot of their time chasing other cars.
This article is an excerpt from the RIS report, “Visibility and Internal Collaboration Power Customer-Driven Retailing.” To download the full report, go to www.risnews.com and click on the “Partner Thought Leadership” tab.