While we're living through the "age of information" and have access to more data points than ever before, retail has a data problem. With current POS systems and retail software, having individual customer data is only possible through memberships and rewards programs. This unfortunately paints a limited picture of your entire customer base.
What about detailed information about first-time buyers, frequency of visits from those not in your membership programs, and spending habits across store locations? As big data becomes the norm, retailers must find ways to truly know all customers, and use that information for the benefit of both the consumers and the business.
POS systems and memberships provide incomplete data
POS systems revolutionised the retail industry - and with good reason. Product ordering and stocking became more informed, understanding average customer spend is easier, and viewing and forecasting sales and revenue became more accurate. But we're still missing a couple pieces of the puzzle. While retailers can get great insights about the products that sell the most and when customers are more likely to buy, you don't have all data possible to be drilled down on the customer level.
Memberships came along to help. When loyal customers register for membership services, their purchases are more easily tracked. Here you can then easily see how frequently individuals buy, and if they have higher or lower average purchase values. But you still are only capturing this information about a portion of your customers - and you are completely in the dark when it comes to first-time buyers or anyone unregistered.
What it means is that retailers have gaps in the understanding of overall consumer behaviour. While the data you can obtain may be enough to reach some conclusions about your customers and target audiences, you are still largely basing your business decisions on inferences and guesses about what appeals to everyone. It can also become more difficult to segment audiences accurately, and targeted marketing and sales campaigns without having more individual details. To know your retail customers means to unlock greater business potential.
Important customer metrics that retailers are often missing
When you can obtain more complete customer information, what are the most important details to know? What are the crucial retail metrics that indicate success of customer experiences, and what aspects of your customer journey do you need to look at to understand how your marketing and sales are working?
These are fundamental questions that many businesses today do not have the answers to.
With the advent of omnichannel marketing, sales and retail strategies, many merchants struggle with implementation and execution, but also understanding performance.
Conversion rates - it’s important to understand in-store behaviours such as conversion rates of visitors. How many people are entering the store, and what percentage of those visits actually result in a sale.
But conversion rates also apply to your marketing and sales strategies. For social media ads, email marketing, or physical/print coupons, offers and promotions, are you tracking what percentage of views, recipients, and items distributed actually result in an in-store visit and purchase? These metrics are incredibly difficult to track, and leave many businesses completely in the dark about how their strategies are working.
Average purchase value - for purchases that are made in-store, what is the average spend per customer? Do you understand this number, and the methods you can use to increase it? Even a five percent increase in average purchase value per customer can result in huge revenue gains for your business.
Frequency of visits - How often do customers visit your stores? You may know these details based on purchase history for your members, but are you using this data appropriately? And what about shoppers that aren’t in your system? Increasing frequency of visits can also be a hugely beneficial strategy for retailers, but unless you know how to identify and leverage this data, you may be leaving money on the table rather than executing customer experience and marketing strategies that can motivate visits and spend.
How can merchants benefit from knowing customers better?
Without a doubt, the next transformation in retail business will come in the form of finding new and better ways to understand the full customer profile, and the experiences you provide to them both online and offline.
Great customer experience is essential for generating loyalty, motivating spend, and increasing revenue, but you can’t create it blindly. Making informed decisions in terms of marketing, sales, and customer experience alignment is how businesses will capture market share, and survive trends in digital transformation and consumer demands.
Audience segmentation and personalisation are at the forefront of these trends. When you know your customers on the individual level, both become possible.
Let’s run through a scenario of what this might look like for creating an exceptional customer experience:
Say you have a customer who you know makes repeat purchases, though their purchase value tends to be low, the frequency of visits is irregular, and they typically purchase the same products repeatedly with little variation. How can you make their experience better? How can you make them feel important or appreciated and create opportunities for them to increase spend or try new products?
With a true omnichannel customer-forward strategy, you can nudge this customer to come in store more frequently with item-specific promotions. Or perhaps you utilise geo-location targeting to invite them into their closest store, or even attract them in while they are physically close by. Invite them to try new products by making informed recommendations based on their purchase history and offering incentives such as volume discounts.
And finally, follow up after-purchase to find out how they feel about their shopping experience, and the recommendations that were made to them. Use predictive analytics to estimate when they may need to repurchase certain items, and begin the process again - creating a closed-loop customer journey in which you engage them at every step.
Individual customer data is crucial for strengthening the relationships you have with your customers. When the right data is captured and used correctly and strategically, you can transform your business into a powerhouse for creating real value for customers that can increase sales, and improve the perception and awareness of your brand as a leader in providing better customer experiences.