Retail precision: Where are your next best customers?

By Gary Sankary, head of retail, Esri

Disruption in the retail market continues unabated. Consumers control over where and how items are purchased continues to dominate the discussion. Retailers have to make the most of each and every customer interaction. It's absolutely critical.  According to a Connected Shopper Report from Salesforce, 75 percent consumers expect a consistent experience no matter where they engage with a retailer — online, in person, on a mobile device or via social media — and half are likely to switch brands if they feel a retailer cannot accurately anticipate their needs. Clearly the stakes have never been higher.

And yet, it's never been more difficult to declare victory. A whopping 67 percent of customers cite bad experiences as a reason for churn, but only one out of 26 unhappy customers complain according to industry findings. The rest just leave quietly, and retailers are never the wiser. That's data that is tough to collect and even tougher to act on.

Make no mistake the emphasis on customer experience must continue for retailers who are going to successfully navigate through this new business model. They have to take a hard look at how they will balance their efforts to improve and refine the customer experience while also recognizing that they simply cannot be all things to all people. Instead, they need to add precision to their customer retention and engagement strategies to understand not only who their best customers are, but where the next crop of like-minded customers will come from.

What makes a customer a good one?

No question data is the fuel that drives customer engagement. As customers interact with stores and products they leave a digital trail. Aggregating the data helps retailers find statistically significant groups of people within populations who behave in a similar way. In turn, that information provides a greater understanding of who customers are and what their personal preferences maybe. But among these findings how can retailers drill deeper to map preferences with profits and tie promotions to sales lift?

While retailers want to maximize every opportunity for a sale, the truth is not every not every customer is a "good" customer. Identifying who are the best and the characteristics that make them so is job number one. Being able to capture metrics like frequency and basket size for example help retailers identify the customers that are most important to their business. Rewarding those customers for their loyalty with personalized offers and products, early access to sales and events and fast returns are ways retailers are adding value to these customers interactions with the retailer, in turn building loyalty and protecting market share.

Segmentation and personalization are among the most important capabilities retailers can use to build customer-centric strategies that address the very best customers at a more granular level. Gone are the days where it is enough to understand path to purchase at the macro level; on-premises analysis can detail how customers move inside the store, where they linger, and even how they react to specific merchandise or store designs. Leveraging these detailed data-based insights can help retailers quickly amplify messaging and drive relevancy — from merchandising all the way through pricing, advertising, and marketing.

Location matters for data context

Despite all of the data sources available to retailers today, getting truly actionable insights out of that information is harder than most would readily admit!  Adding location to the overall data strategy provides retailers with a much-needed central pivot point. The ability to join otherwise disparate sources — loyalty program details, social media feeds, online customer reviews — and tie them to a location gives retailers a better understanding of specific customer interactions. In short, geography helps retailers understand why things happen where they do.

All retail data — income, consumer sentiment, footfall traffic, and demographics — is geographic in nature. Being able to tie business activities to locations, from purchases to deliveries, provides needed insight to answer questions centered on "why?" — why did that promotion work in that typically sluggish region? Why did that customer segment avoid the new ship to store feature? Why did Q3 sales disappoint in an otherwise profitable product category?

Uncovering the answers to these questions enables retailers to adjust their plans accordingly improving a certain store's product mix or rolling out a set of differentiated services to meet the needs of an under-served customer group. And they can do it quickly. Maps and spatial analysis not only unite customer, demographic, and product data, but visualize the information quickly to speed decision-making.

Adding precision to personalization

Insights that are uniquely tied to location are by nature more precise. Smart maps show where people work and play, where they travel, and what their priorities are; all of which are critical to strengthening customer engagement. Bringing together huge data sets from a wide variety of sources can reveal previously unseen spatial relationships, like how many customers live in the trade area of a given store, how many customers live in the same neighborhood, and how far they might otherwise travel to purchase the same goods.

Precision matters as the ability to find and engage concentrations of ideal customers in very specific markets drives target marketing and impacts store performance. Developing precise routes for deliveries makes reliable home delivery possible. Knowing where customers spend time while shopping makes in-store marketing more potent. That granular level of detail is needed if customers — the most profitable ones — are to stay engaged and brand loyal.

In today's dynamic market, retail sales growth is driven by customer engagement and precise execution. Whether it's in marketing, merchandising or store operations, precision and location has never been more important. As retailers continue to work on improving and refining the customer experience, empowering them with relevant data insights that provide micro segmentation and localization strategies, ensures they can engage the best customers in the best way to achieve the best results.