The AlixPartners Retail Restart Playbook is a special weekly series of our Retail Viewpoint newsletter that provides in-depth answers and operational considerations for retailers as they reopen stores and restart business post COVID-19 closures.
Over the past few weeks as we’ve discussed various aspects of how retail can respond while business continues to restart and stores reopen, one idea has remained consistent. Because traditional inputs have been rendered unusable over the last two months, retailers must rely on real-time consumer data to make decisions on everything from product design to pricing.
For a long time, retail has had the image of being rich in data but deficient when it comes to drawing insights and even more challenged in using these to deliver better outcomes and business improvements. While most retailers have had various sources of data, these are often disassociated and don’t link together to create a complete and actionable view of the customer. Insights are generated and summarized via multiple reports but often don’t lead to improved results. While this was merely a dilemma earlier, right now this can be the difference between success and failure.
Consumer behavior has and will continue to shift dramatically as policies and needs evolve over the next several months. While this presents an extraordinary challenge, it is also an opportunity to make consumer insights a critical aspect of business strategy development. Moreover, the increase in digital interactions and measurable engagement allows for even greater ability to understand consumer behaviors and needs and help consumers by influencing their actions and habits.
When it comes specifically to marketing, there is, and will likely continue to be, a strong emphasis on driving efficiency and effectiveness. Marketing will also continue to play a key role in reinforcing customer and employee trust and your brand’s overall value proposition. Current cost pressures may lead some retailers to reduce spending on marketing too aggressively, leading to a decrease in margin-positive transactions or profitable customer acquisition. Marketing organizations will also need to be more agile in how they operate in order to stay relevant in what will likely remain a volatile environment. How can retailers more effectively unlock consumer insights and use these to make better business decisions, including how to market more productively? Here are some recommendations:
Establish a baseline of key changes in customer behaviors: To drive near-term actions, understand how and why your customer base may have changed:
- Create segmented views with a lens on new, existing, and lapsed customers and develop 30- and 60-day plans for each segment to drive topline and stop the leakage.
- Ascertain key changes in performance indicators—customer counts, channel penetration, purchase frequency, items purchased, items per order, dollars per order, and return rates—during the restart period.
- Analyze customer behavior in stores and geographies that opened first and use these learnings in future reopenings, operating with a rapid test-and-learn mindset.
- Survey customers regularly to understand changes to core needs and specific shifts in product category, pricing, and marketing preferences to better anticipate attitudinal and behavioral modulations.
Improve your ability to capture data and drive relevant interactions: Identify various sources of consumer insights and enhance your decision-making infrastructure:
- Evaluate mix of first-party and external data sources. Internal data could include purchase history, product reviews, user-generated content, rewards usage, customer service feedback, clickstream analysis, site search queries, etc. External sources could include commonly used terms on search engines, information gathered through social listening, social media trends, and other sources.
- Bolster your insights tools. Consider technology investments such as a data platform that helps create 360-degree views of customers and their interactions.
- Leverage artificial intelligence to make decisions around personalized online experiences, offers, and marketing messages using product preferences and customer-specific responses to interactions. Variations could include time of day or day of week and customer communication preferences as well as determining which prospects or customers to market to based on anticipated response rates and customer lifetime values.
Harmonize analytics, strategy, and operations to work in concert: Create cross-functional alignment on key decisions and their expected outcomes:
- Develop clear use cases linking together insights, actions, and outcomes and ensure top-down commitment to leveraging insights to drive value.
- Set up SWAT teams that integrate merchants, designers, planners, and marketers with your insights team to act on gathered information and make real-time and actionable business decisions.
- Identify priority customers and markets as well as key moments that matter to focus test-and-learn efforts.
- Iterate continuously when it comes to consumer insights. Do not launch a large-scale project right away. Instead, start by developing one use case and deploy learnings from it into any larger rollout.
Create effective and relevant marketing plans: Because stores are reopening at different times in different places, customizing marketing messages will be key:
- Customize marketing playbooks to reopening activities in local markets and geographies. In some cases, similar activities can be coordinated across markets that are at similar stages of reopening.
- Continue to communicate how your brand is focused on helping employees, customers, and communities navigate this period.
- Work with external agencies to understand overall market dynamics, evolving platform strategies, and how competitors and partners are responding.
- Monitor performance continuously and adjust tactics as consumer and competitor behaviors evolve and platform costs shift.
Optimize marketing performance: You need to recalibrate marketing spend without negatively impacting immediate or future margin or customer lifetime value:
- Eliminate or reduce marketing investments in areas that are less productive and explore cost-saving opportunities created by recent changes in consumer and competitor actions.
- Explore more sophisticated attribution techniques to inform marketing return on investment and potential investment reallocations. You may be able to leverage a variety of performance indicators, such as estimated impact on customer lifetime value, when evaluating marketing budget reductions.
- Model the future mix of online and in-store transactions using customer and market trend data and adjust associated marketing budgets accordingly. A mix of brand and performance-marketing tactics will be needed.
- Identify areas of improvements in key marketing-related workflows and automation, such as product setup, content management, etc.
Retailers must consider both accelerating consumer insights adoption and acting on them to make critical restart and reset decisions as this will be imperative in boosting accuracy of decision making. Next week, we will take a deeper look at the growing significance and share of ecommerce and how this trend interacts with other constituents of the retail value chain.