Better merchandising will elevate the customer experience
Through a special arrangement, what follows is a summary of an article from COLLOQUY, provider of loyalty-marketing publishing, education and research since 1990.
When it comes to the brand experience, retailers should be thinking inside the box — that is, the box of detergent, cereal or juice on the shelf. The product itself can influence the brand experience as much as a mobile app, website or store layout. Thinking inside the box is a matter of extending the retailer’s customer-committed focus to include its manufacturer partners.
The first step is sharing data insights. This is one of the key principles of enterprise loyalty: pushing customer purchase data outside of marketing to all organizational departments. Enterprise loyalty strategies can inform better decisions regarding price, store location and — of most importance — merchandising.
What follows are four key areas where manufacturers and retailers can collaborate to elevate the brand experience — and product sales — through merchandising.
Trade promotions
Traditionally, manufacturers design trade promotions using broad-based market data. By re-focusing promotions to appeal disproportionately to the most frequent and highest-spending customers, both retailer and manufacturer are ensuring the most bang for their promotional buck.
In addition, by tailoring promotional discounts to levels that reward valuable customers, retailers and manufacturers can save some dollars for other, more valuable promotions.
Consumer promotions
Manufacturers usually send direct communications to consumers through freestanding newspaper inserts, direct mail coupons or coupons printed at the register. By analyzing their retail partners’ customer data, manufacturers can become more familiar with shopper preferences and craft more targeted promotions, resulting in more relevant offers.
Media advertising
As with consumer promotions, analyzing a retailer’s customer sales data can help a manufacturer develop more effective media advertising campaigns by revealing which customers are disproportionately likely to purchase its products.
Product development and innovation
Customer insights also reveal gaps in the retail assortment. The data can help the retailer determine if products would benefit from expanded distribution or shelf space, or whether to launch an entirely new product.
As with any strategy, enterprise loyalty used to enhance merchandising should be applied with clear performance goals and incentives in place. All managers should understand their role in achieving customer-committed merchandising plans, and should be recognized when meeting their metrics.
Discussion Questions
What are the hurdles preventing vendors from better utilizing retail partners’ customer data for collaborative purposes? How can enterprise loyalty help drive merchandising decisions?
Is there a major CPG manufacturer who is not already doing this, and often with better data than a retailer’s own data? Doesn’t everyone subscribe to Nielsen or IRI’s syndicated store sales data? Don’t most have national panel data showing purchasing on a trip basis?
Obtaining POS data from all your retail partners at a frequency and in a format that supports better decision making across those four areas is challenging to do cost effectively. Visibility seems most often limited to only a few very large customers. One thing not mentioned is the purchase journey extending beyond the store and the influence of consumer behavior in online, mobile and social channels on buying decisions. Collaborating to understand and influence this path is necessary, and brands have the potential to inform a lot better in-store marketing execution with consumer insights.
The hurdles are privacy and money. In light of recent data breeches, consumers are becoming more concerned about how their data is being utilized and shared. And it takes money to analyze the data captured by retailers. Who is going to pay to analyze the data?
Research consistently shows that 80% of consumers begin their purchase journey online. Subsequently, online merchandising has taken on a new role and level of importance. Even if a traditional trade promotion does catch the consumer’s eye, chances are they will still go online to both search for information and compare prices.
The third point in the article is focused on “Media Advertising.” It might be assumed that social media and online merchandising is apart of that overall media category. However, the description of “developing more effective media advertising campaigns” sounds very old school.
With today’s Omni-channel shop anytime and everywhere consumer, online and mobile marketing warrant specific attention and collaboration for both retailers and manufacturers.
Few companies manage their sales and customer data well, which is the biggest hurdle. And privacy is an important component of managing data when sharing it.
The perspectives presented make sense, given they are promoted by a loyalty marketing firm. Unfortunately, the fact of the matter is that retailers have historically (and continue to) balk at sharing any customer data with their vendors. The adversarial, yet symbiotic, relationship between retailers and brand vendors are well known. One of the differences is about who owns the customer – the retailer or the brand. Is the customer in the store because of the store or because that’s where they can purchase a particular brand item? Both retailer and brand want to promote and further their BRAND. The retailer wants to increase basket size (i.e. buying more stuff in the store) where the brand is only interested in selling more of their particular item(s).
Unless both the retailer and brand can agree on what customer data is beneficial to meet both objectives simultaneously – then the chasm continues. I believe their are merchandising and marketing designs using various technologies and workflows that can meet both these objectives. One crucial requisite element is that the retailers’ marketing, merchandising, operations and IT departments have to be aligned and work together – therein lies a formidable hurdle!
The push by chains to have merchandising uniformity in all their stores is a big hurdle, even though sales for certain products vary greatly from region to region and even store-to-store. Individual store managers, other than those of independents, have little to no decision-making power to customize merchandising for their stores, though they are the ones who know (or should know) their customers best. If data is going to be used effectively and efficiently, there needs to be a way to customize it for individual locations and their particular customer base.
Getting the right data to the right people at the right time to determine which consumers are in common between retailers and manufacturers is the first step. Then, understanding the path to purchase of THOSE consumers (not other consumers) is the next step. Then, developing strategies that work to accomplish joint goals.
This is hard work. The first step is tremendously difficult. However, if it is not done well, then it makes no difference what else you do.
Let’s not forget social data. It is a great tool to mine sentiment around products while in the infant stage of consumer acceptance. Mining the unstructured data for merchandising is a new field, but it is doable with the tools available today at a ROI that any large or medium size company can afford.
As for the sharing of data between goods producers and retailers, that often comes down to the data format. In theory this is a simple task but when you have legacy systems that only store in one format or data that isn’t stored in an easy to understand format, the task can become very costly and time consuming. I know within one retailer, the task of shifting through the POS transaction data took six weeks and that was just to do an analysis internally. Imagine trying to share that with hundreds of partners, that data will need to be reformatted in a better way for it to be useful and cost effective for anyone else to use.
Been there, done that. Enterprise loyalty has been a goal for many years. Unfortunately, vendors and retailers have every attribute of a dog except pure loyalty to the other. That’s one hurdle.
One time we worked long and hard to originate a multi-product P&G sale (rather a Tide, Crest or Crisco sale) and found that didn’t fit in the then P&G brand manager’s play book. But with heavy perseverance, a joint multi-purpose event occurred and the results were remarkable. Despite the eye-opening success, things reverted backwards due to budget and power bases.
Consumers’ understanding of the use of their data should be made transparent. The 2013 Target breach woke consumers up to the reality that even the most trusted retail brand with big goodwill could betray them in such a way. The retail industry should educate consumers on the benefits of sharing social, retail, and other data across their personal data ecosystems. Most people don’t understand the role of Big Data in their lives, and media generally cover only the “big brother” aspects and not the benefits in terms of product development, customer service, and just-in-time lifestyles. This will have big implications for health and health care as more retail data sharing can make a huge difference in nudging healthy lifestyles in terms of food and exercise/movement.
All great insight and tips. However, I would advise retailers to continue to work on their own processes and technologies that give them the insight across product, location, manufacturer, et al. Loyalty, and the collection of sales data by the individual consumer are powerful tools. Combining this data with select (for the audience) mobile and social mechanisms and further refine with the application of reporting and analytics, and a retailer should be able to understand how best to serve a customer and where revenue opportunities exist.