Smarter retail: customer data or product data?

Karel Schindler at ROI Hunter asks whether product performance data could be the answer to recession-proof retail

 

As recession looms over the economy, retailers are reviewing every detail of their business plans to ensure they don’t fall foul to worsening market conditions.

 

Unfortunately for some, it’s already too late, with  online furniture retailer Made.com one of the latest in a long line to close its doors.

 

To avoid the same fate, business leaders are looking to their marketers for smarter, proactive strategies that will support the business in navigating the recession, retaining customers and ultimately staying afloat.

 

Take advantage of new data sources

Retailers have long utilised customer data to understand preferences, spending patterns and behaviour. Now, it’s becoming more difficult to obtain due to GDPR and the gradual phasing out of third-party cookies. Google remains committed to eradicating such cookies from its Chrome browser by the end of 2024.

 

Beyond the legalities, consumers are more concerned about privacy than ever and more selective about giving away their data.

 

The value of customer data as a sole driver of strategy is rapidly dissipating. Fortunately, retailers of today have a unique opportunity to explore alternative data sets to add to the picture.

 

Rather than relying on customer data alone, retailers should look to the products themselves for insights. Product performance data is the key to targeted, cost-effective and impactful campaigns.

 

But what does this mean for business leaders who are looking to keep the organisation financially healthy? Armed with this data, marketers can identify products that are delivering on current business priorities. This might include making sure that new arrivals are promoted before they get discounted, or decreasing the amount of returns simply by not promoting products with high return rates.

 

Product performance data in harmony with customer data will provide a competitive edge in a time where consumers are carefully choosing where they spend their money. This approach also prevents teams from deciding what to promote digitally based on a gut feeling, which 32% of UK retailers currently do.

 

Maintain a steady revenue stream

To protect the bottom line, businesses need a stream of happy and loyal customers making regular product purchases. Despite this, it’s all too common to see avoidable customer frustration threaten that loyalty.

 

Take the example of a consumer being served an ad for a product. They click it, only to find that just the XXL and the XXS sizes are left in-stock. This disappointment occurs regularly, wasting retailer budgets, frustrating consumers and risking lost revenue.

 

In order to prove their value, marketers need data-driven automations that can remove products with too few variants in stock to prevent unhappy customers. Similarly, retailers can exclude products with a high return rate from promotions.

 

With insight into individual product performance, retailers can find items that are likely to become a deadstock or products with low revenue and high promotional spend, and shift their budget toward higher performing products instead. Business leaders can be assured that satisfied customers are continuing to spend with the organisation.

 

Don’t advertise less, advertise better

In times of economic hardship, it can be tempting to reduce investment in advertising in a bid to survive. Considering that £19,000 on average is wasted on ineffective advertising channels a month, it’s easy to see why so many jump to this conclusion.

 

However, that reduction can have huge implications in terms of share of voice and share of the market. Procter and Gamble, the largest advertiser in the world, understands this well: at the height of the recession they actually increased their marketing budget, and their stock price bounced back with nearly twice the gains of the S&P toward the end of the year.

 

Rather than trim the marketing budget, business leaders need to ensure that product performance data is available to marketers. This data allows them to focus promotions on products that are already performing or have potential to perform, leading to better utilisation of precious budget and less need to reduce allocated cash.

 

Riding the economic storm

Studies have shown that in every recent recession, the companies that have been most successful are those that double down on their marketing investment. However, to confidently spend in the right areas in times of economic pressure, organisations require the right data to make informed decisions and ensure maximum efficiency.

 

With decreased consumer purchasing power in 2023 and increased scrutiny on consumer privacy, business leaders and their retail organisations need to explore every angle they can to achieve their goals. It’s time to include product performance data alongside customer data.

 

From promoting the popular products to excluding the unpopular ones, this untapped source of data can make possible the informed strategies needed to weather the storm.

 

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Karel Schindler is CEO at ROI Hunter

 

Main image courtesy of iStockPhoto.com