Satisfying customers, ensuring your promotions are effective, and boosting sales are complicated goals to monitor. Can customer analytics help?
Implementing a system for gathering customer data is one hurdle that many retailers have overcome. Unfortunately, many continue to struggle with what they should do with that information after it's been gathered and stored. Most know that the customer and transaction log data that's gathered and locked away in storage can somehow make existing customers better and help create new ones. Used correctly, that data can help increase sales. But before it can be put to use, it must be accessed and analyzed.
Retailers have found that the gathering part is relatively easy; it's the execution of customer-facing initiatives derived from that gathered information that's difficult. At the core of the issue is the deluge of data that's generated on the front end of a CRM (customer relationship management) information-gathering campaign. As store-level and call center associates propagate databases with customer information, and as transaction log purchase data builds with every ring of the register, retail decision makers are faced with the challenge of turning all that data into actionable information that nets sales. Fortunately, analytics technology has evolved to the point that mountains of customer data can be accessed, processed, and presented to retail executives in understandable charts and graphs and in plain English. Most modern BI (business intelligence) and analytics solutions include graphically oriented dashboard interfaces that leave the complicated back end aspect of BI in the server room where it belongs. This month's "Retail Solutions Forum" taps into the knowledge base of Neal Williams, chief scientist and president of data visualization solutions provider Corda Services, and Mark Smith, EVP of research at Ventana Research. Williams and Smith provide their opinions on the use and presentation of customer analytics in the retail industry. Here, they'll explain why dashboarding and scorecarding are such important elements of an analytics initiative.
Where do customer analytics fit into core retail applications and with what systems should analytics integrate?
Smith: Customer analytics are a key piece of any retail application. Analytics provide the foundation for insights and recommendations on consumer purchase patterns. Retailers should strive for real-time integration, but batch integration can provide necessary customer information faster than was previously possible.
Williams: Customer analytics are more important to retailers than ever before, and they should be tightly integrated with core retail applications, such as POS, CRM, and merchandising software. To keep up with the changing landscape of customers' increased expectations and their buying behaviors, analytics should be integrated and presented in real time. Analytics systems can benefit from having applications and solutions that enhance the insight and action ability of customer data. Therefore, visualization solutions, scorecards, and dashboards would be among those solutions.
Explain the advantages of customer analytics displayed in a dashboard format.
Smith: When displayed in a dashboard format, customer analytics are summarized and presented in a summary view that easily provides insight into the health of organizations that use them. Dashboards quickly provide managers with necessary information that can assist in decisions affecting the direction they provide for their employees.
Williams: Dashboards and data visualization let you sift through the chaos to spot patterns and trends, which also indicate the causes and effects for measuring promotions and advertising. They deliver a look into the preferences of customers, which can help in upselling actions and targeted marketing campaigns.
Dashboards and scorecards also can measure KPIs (key performance indicators), such as customer satisfaction and loyalty. They can alert you about a KPI that goes beyond set parameters. For example, if sales drop below a predetermined level, an alert is sent to key employees who can intervene. A good dashboard will reflect data in real time and allow for drill downs, which provide increased detail into a specific KPI. It also should integrate with a retailer's existing security protocols.
What types of retailers (e.g. size, verticals) realize the largest benefits from analytics solutions?
Smith: Medium and large retailers gain better benefits from insight into customer behavior. Having swift access to customer behavior and patterns enables retailers to optimize marketing and monitor promotion effectiveness. Smaller retailers have smaller samples to monitor, so, even if they did gather analytics, they would have reduced effectiveness.
Williams: The more complex and larger the retailer, the more it can benefit from a customer analytics solution. It doesn't matter what vertical or space the retailer competes in, size and complexity are the most important factors for gathering statistics, which feed analytics.
What specific improvements and benefits should retailers expect as a result of executing a customer analytics solution?
Smith: Usually, benefits include increasing customer responsiveness and satisfaction. However, most retailers also optimize their revenue-growing potential, while enhancing the focus of resources (e.g. employees).
Williams: Some of the benefits are enabling managers to make better-informed decisions that are based directly on data. Most retailers also experience better customer satisfaction and retention, as well as an increased ability to complete targeted marketing and to create additional sales opportunities with existing customers.
What is your vision of retail customer analytics in the future?
Smith: The future lies in better predicting future performance based on specific predefined variables and increasing the potential operational throughput of specific retail locations. By understanding the value of a retail location and applying customer analytics to it, there is an opportunity to fine-tune retail operations and store manager decisions. Rapid decision making will increase in speed and effectiveness in the future as tools and information become more easily accessible.
Williams: Customer analytics and data visualization are becoming mainstream in the retail arena, and tools that provide data for making quick decisions should no longer be considered nice-to-haves to remain competitive.