ANALYTICS THE SECRET WEAPON IN RETAILERS ARMOURY ANALYTICS IN RETAIL

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1 ANALYTICS THE SECRET WEAPON IN RETAILERS ARMOURY

2 How retailers can use Analytics for customer relationship building, and streamline multichannel operations Rising GDP growth rates, increasing disposable incomes and growing consumer spending sentiment have driven the global retail industry uptake. The market is expected to be worth approximately $20 trillion by 2017, according to Lucintel (a leading global management consulting and market research firm). Evolving technological advancements, such as the Internet, social media and mobile, have emerged as powerful engagement mediums for buyers, and have brought a seismic shift to the retail landscape. Customers are more informed and therefore more selective in their buying decisions. Approximately 60% of respondents in the Deloitte Annual Holiday Survey 2013 believed they were better informed than store associates about available merchandise, coupons and competitive pricing. The retailers have taken a cue from the changing consumer buying behaviour, and have adopted an omnichannel approach. All touch points, such as brick-and-mortar stores, online shopping sites and mobile shopping, are tapped for providing a consistent shopping experience. So what does this mean for you, the retail community? To begin with, it means identifying how you can continue to offer a superior customer experience across all channels; and at the same time drive customer loyalty. The key to this is to understand the consumer psyche and offer the right products and services, which will resonate with the evolving lifestyle and tastes of buyers XCHANGING 01

3 CLICKS OR BRICKS, CUSTOMER INSIGHTS IS THE WAY FORWARD The impact of changing consumer buying behaviour doesn t vary much for the clicks or bricks retail businesses. As multi-device use becomes increasingly popular, retailers have adopted a multichannel approach, facilitating shopping 24/7, from anywhere and everywhere. As the Internet becomes embedded in the purchase cycle, buyers are heavily influenced by online reviews, and seek out the best offers online. So, what does this mean for retailers? You need to understand that creating an efficient strategy to manage customer insights is a must-have, for affecting purchase decisions. This means that you need to: Tune in to your customers feedback Analyse feedback data to generate results that lead to actions Treat this data to trigger innovative product and service ideas Talk to your customers on social media to know their views on product innovation Changing consumer buying behaviour has made retailers understand that creating an efficient strategy is a must have to affect purchase decisions ROLE OF SOCIAL MEDIA IN THE CUSTOMER BUYING LIFECYCLE Online Reviews Advertisements Advertising on Internet Media Mobile Shopping Online Forums Blogs Social Media Pay-per-click Social Media AWARENESS CONSIDERATION PURCHASE RETENTION ADVOCACY Brand Building Advertisement (Print, Radio,TV) Word-of-mouth Publicity Direct Mailers Brick-and-mortar Stores e-commerce Websites User Manual Graphic 1* 2014 XCHANGING 02

4 While the Business-to-Consumer (B2C) e-commerce companies may have taken the lead by doing things differently, offering a personalised shopping experience, through tailored landing pages and customised recommendations, based on previous search history the brick-and-mortar businesses aren t far behind. They are aware that change is imminent and that they need to act now to win later. The traditional store has transformed, from selling available products, to offering a multichannel lifestyle experience, by displaying the full range of products and services. Irrespective of channels, retailers are focusing more on understanding their customers personal characteristics and shopping preferences. The traditional one size fits all approach can no longer address the unique requirements of today s empowered and informed customers. Technology has driven this change by facilitating cross-channel outreach, and engagement opportunities. For example, the introduction of Bluetooth Low Energy (BLE) technology is set to revolutionise the buyer-seller engagement, by offering a personalised shopping experience at traditional stores. Under BLE technology, physical sensors (called Beacons) are placed in stores, to facilitate tailored notifications to be sent directly to a customer s smartphone the moment the buyer walks into the store. By opening the text-style message, users can go directly to the retailer s application, showing anything from time-sensitive discounts, to loyalty points, etc. Up to 90% of the world s information is hidden in formats beyond the competencies of the information management technologies, used by retailers, says IDC SHOPPERS SEEK RECOGNITION The majority of respondents indicated they want a personalised experience, whether browsing online or while inside a store of shoppers said they would want to be identified via their smartphone, when shopping at brick-and-mortar stores of global respondents said they would welcome the idea of online stores keeping track of their browsing and purchasing histories, to speed up future shopping Graphic 2* 2014 XCHANGING 03

5 STOP GUESSING, START KNOWING In order to understand how the buyer expects to be spoken to whether through a smartphone app, through the store associate or instant chat on the website retailers need to delve deep into their customers shopping patterns. This requires understanding how long they browse, sections where they spend the maximum time, and most importantly, whether they make a purchase or not. To do this, you have to plough through mountains of consumer data generated from vast amounts transactions, Point-of- Sale (POS) systems and social media interactions, etc. to glean relevant insights that drive revenue growth by enabling you to: Design and deliver better products Identify focus areas for marketing spend, by gauging the effectiveness of promotional campaigns Increase your customer base, through better product and marketing strategies Drive loyalty programmes However, the challenge isn t the lack of data; rather, it is how to deduce meaning from the sheer volume of data generated from multiple systems, channels and geographies. As a seasoned retailer, you first need to know what your expectations are; otherwise you will waste valuable time and resources in capturing irrelevant data, that will not help you answer your core question: What does your customer want? According to IDC (a leading research and consultancy firm) up to 90% of the world s information is hidden in formats beyond the competencies of the information management technologies used by retailers. REAL-TIME APPEAL Retailers are taking greater advantage of data to predict consumer behaviour and respond in real-time to consumers individual needs. To reach these goals, retailers are using Analytics in the following areas: 76% 70% 43% 38% SALE SPECIALS STAY LEFT 10 % OFF STAY RIGHT Strengthening Shopper Engagement Creating Personalised Promotions Enabling More Shopper Solutions Implementing Store Specific Assortments Graphic 3* 2014 XCHANGING 04

6 ANALYTICS UNDERPINS THE 3 Cs To build a stronger customer relationship, retailers need to focus on three Cs Customise, Connect and Converge. In today s flat world, customers are connected, with information at their fingertips. Customising your products, services and marketing messages will be the key to Connecting deeply with your customer, and building a long-term relationship with them. All of this is underpinned by the emergence of multichannel retail, and how you Converge your front-end channels and your back-end operations, to provide that customised experience in a seamless manner. Analytics has a role to play in each of these three Cs. By applying the right algorithms to the right data sets, you can drive the right decisions across your merchandising, marketing and retail operations. ANALYTICS: CONNECTING THE DOTS From Front-end Store Operations to Back-end Processes 1 Understanding Consumers Customer and Marketing Analytics 2 Maintaining Optimal Inventory Levels Inventory Optimisation 3 Resource Allocation and Utilisation Operations Analytics 2014 XCHANGING 05

7 CUSTOMISE What does your customer want? Will Jane buy the same red lace dress as Sally? Or, does Jane prefer chiffon in her favourite blue, but the same cut? A recent survey by Instant.ly on behalf of Synqera found that shoppers in America gravitate towards retail locations that offer a customised shopping experience. Understandably, retailers are customising product designs and the shopping experience. Welcome to the era of mass customisation building a unique product for every customer. Best-in-class retailers are deriving manifold benefits from it, including topline growth and improved cash flow. For example, Retailer iq, a targeting and Analytics platform for grocery, drug and mass merchandisers, launched by Coupons.com (a leading digital coupon promotion platform), is built on top of a personalisation platform. It evaluates shopping baskets and shopping history (in addition to other data) to deliver a highly personalised experience for its customers. This is Predictive Analytics at play it leverages granular data (generated from social media, feedback forms and POS systems, etc.) to extract relevant information related to customers preferences, and helps deliver assortments. Retailers are looking at offering a more targeted and personalised experience to their customers; in turn creating increased opportunities to cross-sell and up-sell related products, and also prevent shoppers from switching over to competition. Predictive Analytics acts like a crystal ball, empowering retailers to see the future, by helping you: Analyse large amounts of data, related to market, competition, product, customer and supply chain, by using algorithms to discover patterns and trends Improve the shopping experience with multichannel data management, which allows customers to order products from any medium/device of choice; and drive volume by offering the right product through the right channel Improve effectiveness of sales and marketing activities, and realise greater Returns On Investment (ROI) 2014 XCHANGING 06

8 CONNECT What is the best time of day to send a promotional to working professionals? Is your Facebook marketing campaign working better in France as compared to Germany? Are teenagers more receptive to video content than ? In today s hyper-connected world, customers are being bombarded with a multitude of messages across channels. In order to gain their attention it is important that retail marketers understand exactly what the customer is looking for, in what format, and when; so that you can engage with them in a more meaningful manner. You can drive effective customer acquisition focused marketing promotions and campaigns across channels both online and offline by leveraging Marketing Analytics. It allows you to sift through real-time customer data to get detailed insights on customer preferences; and introduce targeted marketing campaigns by varying the look, messaging and tone for the intended customer set. In addition, it also allows you to measure, manage, and analyse your marketing campaign efficiency, to realise higher returns on campaign spend. For example, a US-based supermarket player, Kroger, sends 11 million e-catalogue variations every week to its shoppers based on their buying patterns. In effect, every shopper is getting a catalogue of 1, where the products and offers are designed to meet their individual preferences and behaviour patterns. Once you have acquired customers, you can again use Analytics to consistently engage with them throughout their customer lifecycle; thus converting them into loyal brand advocates. Using Customer Analytics, you can unlock the power of data to analyse customer spending patterns by doing sentiment analysis, and understanding motivators of buyer behaviour in order to predict their response. For instance, Safeway, a US based grocery company, has a Just for U programme. The programme automates customised offers based on previous purchase behaviour by using complex algorithms to sift through shopping data to forecast a customer s requirements. Marketing and Customer Analytics helps retailers: Launch successful targeted marketing, advertising, promotions and product offers to attract customers Modify existing pricing strategies, to offer competitive prices, as well as sustain profit margins Identify profitable target customers, via customer segmentation and profiling Establish a close relationship with customers based on a deep discernment of their behaviour and identification of their requirements Reduce customer churn by identifying the ones likely to attrite, and determine drivers and predictors of attrition; thus helping you take pre-emptive action 2014 XCHANGING 07

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10 CONVERGE Are coloured trousers moving faster in New York through your e-commerce portal? Are your stores in New York seeing faster movement of black ones? But, what if your warehouse in the area is carrying more stock of plain black ones? Does your in-store stock consist of both? Retailers are under pressure to streamline processes, ensure efficient inventory management, and at the same time, share real-time information updates across their store network and new-age platforms, like online and mobile. In short, irrespective of the channel, it s now table stakes to offer consistency across the product range, promotions and smooth customer service. With multichannel shopping becoming a reality, retailers are dealing with a large number of diverse back-end systems and complex business processes; together with a high cost of integration. This has held them back from migrating to an integrated platform. However, multiple systems, operating in isolation, have to switch channels to access customer information, thus making it difficult for businesses to have an overall strategic vision. Tomorrow s retail companies will need an integrated, multichannel strategy, that encompasses operations and technology. An integrated platform provides a single view of the available inventory levels, order pipeline, store-specific sales, and existing promotional campaigns. Analytics allows you to create a cohesive multichannel strategy by combining the strength of each channel to offer a seamless customer experience, irrespective of the medium. This enables you to reduce costs, improve operational efficiency, enhance customer satisfaction, and drive business value. For instance, Waitrose, a chain of British luxury supermarkets, applied Predictive Analytics, to reduce waste and cut down on under-supplying. The retailer did this by mapping sales of individual stores, and then considering factors such as weather forecasts to determine shipping quantities, locations and timings. By leveraging Predictive Analytics, retailers can better manage their back-end operations, by accurately forecasting future demand. This can track the entire supply chain process and include factors such as upcoming promotional details, price changes, corporate plan, new product launches, and expansion in newer geographies, etc. It also facilitates inventory management in order to minimise warehousing costs, ensure stock optimisation, and reduce warehouse-to-store lead times. In fact, brick-and-mortar stores are already using Advanced Demand Forecasting, Inter-store Inventory Balancing Capability and Predictive Price Optimisation. By consolidating the disparate applications and services, Analytics allows you to: Offer a smooth, multichannel customer experience by allowing buyers to research a product in one channel, order it online or through mobile, and then collect it from a store Develop a collaborative, real-time supply chain with Predictive Analytics Help improve vendor management by measuring supplier performance against set parameters 2014 XCHANGING 09

11 CONCLUSION In order to drive smart retail operations across all channels, Analytics is emerging as a key catalyst. By effectively analysing vast amounts of data, retailers can now use the insights gleaned to expand the scope of their go-to-market strategies, to include multiple marketing channels, and run digital advertising and social media campaigns The opportunity to achieve competitive advantage from analytics powered retail is enormous. On the product front, it helps in tracking the customer needs, leading to the design and creation of innovative product lines, revenue streams, and in some cases, new markets. On the operational front, more and more organisations are leveraging data to gain better understanding of how to improve efficiency across business Analytics, on the back of the arrival of Big Data, is poised to revolutionise the way retailers operate globally, and drive the separation between the good and the great! AUTHORS Siddhartha Roy Senior Manager siddhartha.roy@asia. xchanging.com Aditya Tuli Product Head (Analytics) aditya.tuli@asia. xchanging.com Thomas Ajay Alfred Manager thomas.ajayalfred@asia. xchanging.com REFERENCES Graphic 1: Graphic 2: Graphic 3: Brick Meets Click aspx XCHANGING 10

12 ABOUT XCHANGING Xchanging is a global business processing, technology and procurement services provider, with 7,200 people serving customers in 48 countries. These three service lines are applicable across industries, as well as domain-specific offerings for insurance and financial services companies. We have a ten-year track record of innovation and reliable delivery, and anticipating and responding to our customers needs. Our service quality is reflected in the industry awards and world-class certifications we receive. FIND OUT MORE Transform your business, stimulate growth. AMERICAS 281 Winter Street Suite 380, Waltham, MA 02451, USA Phone: +1 (781) enterprise-us@xchanging.com EUROPE The Walbrook Building, 25 Walbrook, London, EC4N 8AQ, UK Phone: +44 (20) enterprise-eu@xchanging.com ASIA-PACIFIC Xchanging Towers, SJR ipark, EPIP Area, Whitefield Bangalore, , India Phone: +91 (80) enterprise-apac@asia.xchanging.com Realise more at: xchanging.com/business-analytics Business Processing/Technology/Procurement twitter.com/xchanginggroup linkedin.com/company/xchanging 2014 Xchanging 01/08/14