Retail - A Leading User Of BI Tools
Retailers understand clearly that 80 percent of their income is
derived from 20 percent of their customer base. That is why loyalty
programs surged 10 years ago, in an effort to grow and retain their
core customer numbers.
However, loyalty programs only work by offering discounts to custotmers
on products they have already decided to purchase. They do little
to increase revenue through upsell or cross sell tactics.
They are also challenged to fully quantify the effect one department’s
activities have on other parts of the store and business.
Multiple business analytics sources, all measuring different processes
are making it difficult, if not impossible to make good decisions
that positively and directly affect the bottom line.
New Ways To Appeal To Customers
By analysing patterns in buyer behavior, retailers can identify
new ways to appeal to them. This desire to gain greater visibility
into customers’ is leading retailers to adopt business intelligence.
Nearly 70 percent of retailers recently surveyed by the Aberdeen
Group already use BI tools while another 26 percent plan to invest
in BI. That represents one of the highest industry reports I have
seen in recent years.
The retail environment requires quick decisions to capitalise on
trends or curb loses from previous poor decisions.
However, the most value in retail use of BI tools and technologies
is derived from obtaining a longer term view of their customers’
Focus on Customer Lifetime Value
Top performing retailers are nearly twice as likely to focus efforts
on improving the lifetime value of their customers as a business
intelligence strategy. This involves:
- Understanding customer profitability
- Understanding the offers and incentives that draw customers
back for repeat business
- The ability to take advantage of opportunities for cross-selling
and up-selling customers on subsequent visits
A typical multi-stage BI initiative will involve:
Phase One - Analyze sales data from stores to
monitor the performance of selected brands and determine when and
where sales are strongest. Analysis also provides information on
which products consumers purchase together and, if sales drop, which
products shoppers buy instead.
Phase Two - Information on how promotions affect
sales and how well new products sell in stores.
Phase Three - Analyze data to determine which
kinds of media are most effective for sales promotions.
BI is able to provide granular information such as : women aged
18-30 in a certain part of the country are buying a lot of Diet
Key Business Value Findings
Retailers recognise the need to differentiate the in-store experience
in ways other than low-price.
Delighting customers and empowering store employees are becoming
core tenets of retailers mission statement.
The concept of improving the in-store experience is not new, and
do not guarantee retail success. More than half of the success depends
upon impeccable execution of in-store initiatives. Impeccable execution
cannot be achieved or maintained without regular and frequent review
of in-store activities.
Closed loop task management systems are being used to assign and
confirm execution of store-related tasks, with larger retailers
using demand forecasting for both stock and labor requirements.
By providing tools to store employees on the selling floor, retailers
also provide differentiated in-store experiences for customers.
Keys to Success
Access to current information on product and employee performance
and updating back office information systems are key steps for retailers.
Many still depend on faxes, phone calls, mail, and e-mails for their
head office-to-store communications.
By creating a more compelling, convenient, and consistent in-store
experience for consumers – opportunities for improvement are
available. Taking advantage of these opportunities should result
in improved comparable store sales and store operating income.
A key imperative is a move to customer-centricity, creating store
performance metrics that confirm and reward progress, and reviewing
performance against those metrics more frequently.
Best in class can be accomplished through improved workforce management,
task management, and better customer service tools.
Retailers must be prepared for the changing infrastructure requirements
that occur as a result of growth and incorporate lessons learned
by other innovative retailers.
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More Detail on Retail BI Strategy, Program & Technology
Index | BI Strategy | Complexities
| Barriers | Retail
IT Systems | BI IT Optimisation
| BI Evolution | Integrated
Retail BI | Implementation
| Business Benefits | RMS