Few businesses are privy to as much consumer data as traditional brick-and-mortar retailers. But knowing more doesn’t always mean knowing what to do with it. We’ve identified three critical business questions big data can answer for retailers, revealing profitable opportunities to grow sales and profits.
Question 1: How Effective Are Promotions?
According to a recent article by the Boston Consulting Group, “Promotions are a common source of success and frustration for retailers.” Indeed, the article states that as many as 30-50% of promotions have no positive impact whatsoever on sales and margins. Worse, many actually do nothing more than reduce profits without leading to additional sales.
To determine whether a promotion achieves its goals, retailers should start by looking at the following data points:
- Redemption rate: How many customers presented coupons at the store (if applicable)?
- Marketing costs: How much was spent on the promotion?
- Change in overall sales: Was there a total sales increase?
- Change in sales of promoted items: Did customers buy more promoted items?
- Change in sales of similar items not promoted: Did customers buy fewer of other, similar items?
- Change in number of customers: Did the promotion bring in new foot traffic?
- Change in customer lists: Did the promotion result in new data that can now be marketed to in the future?
Question 2: Which Customers Should We Target?
Good retailers want to attract as much foot traffic as they possibly can. Smart retailers want to attract the right traffic that will maximize sales and profitability. These retailers take the time to learn as much as they can about their best customers-the ones who buy more quantity or higher priced items.
This level of detail requires the retailer to invest in an infrastructure that has the capacity to capture and analyze data at a very granular level. Fortunately, this investment can reap big rewards by highlighting such important characteristics as:
- Purchase history: Which customers have bought in the past? Average purchase price: Which customer segments buy higher priced items?
- Average purchase quantity: Which customer segments buy more quantities of items?
- Social media mentions: Which customers are actively influencing other customers to buy?
- Customer acquisition costs: Which customer segments require more effort and budget to acquire?
Question 3: What Is the Best Way to Reach Customers?
We don’t live in the age of telegrams anymore. There are a number of different ways to reach out to your customers. But which is the most effective, postal mail or email? The answer can be the difference between throwing dollar after dollar on ineffective communications or steadily breaking through the clutter to reach your customers when they want in the way they want.
Once again, big data can provide important clarity on which communication methods will provide the strongest results:
- Geographic demographics: Where do customers live?
- Customer preferences: How do customers indicate how they prefer to communicate?
- Mailing list growth: Do customers willingly provide their postal addresses?
- Email list growth: Do customers willingly provide their email addresses?
- Email opens: Do customers regularly open promotional emails?
- Redemption rates: Do customers redeem more printed coupons or emailed coupons?
Big data is sparking a retail revolution. Armed with improved business information and market intelligence, retailers are able to answer their most pressing questions and optimize key facets of their operations. Without question, obtaining and analyzing the right data to draw the right insights requires skill and effort. But for those businesses willing to do the work, they’ll be able to reap the rewards of an improved competitive advantage for years to come.
Looking for more ways to use data to achieve marketing success? Download “Using Customer Data to Achieve Email Marketing Success.”