Magazines Archives - 2009 October
Customer centricity is key to success
Retailing has always been and always will be about the customer and never more so than today as retail businesses across the world strive to keep a healthy balance between margins and consumer spend. Jolene Klassen finds out from global management consultancy company Accenture how retailers can transform their businesses to be absolutely customer-centric.
Over the past year, battered economies have kept the retail industry on the edge of its seat. While many businesses around the world folded as others changed hands, retailers found that they were frequently torn between improving their margins and maintaining their consumer spend, without compromising
On top of this, the ever-evolving consumer, who has become more discerning and demanding as purse strings tighten, proves to be an added challenge for retailers. In this highly competitive
It is no wonder that the more savvy retailers have turned to analytics, delving deeper into the customer psyche to understand how they go about their spending habits. Knowing their customers
By learning more about the customer and deploying the appropriate in-store loyalty programmes, among other initiatives, to achieve their customer-centric goals, retailers have been able to achieve their company’s sales and profit targets. At the end of the day, tangible results and benefits from retailers’ investments, while remaining relevant to their customers, is what will see them excel in the tough economic environment.
According to global management consulting company Accenture, customer centricity is about “how well retailers know their customers”, and then, most importantly, how effectively retailers are able to align their key “customerfacing” activities, such as merchandising, marketing and pricing, with their understanding of customers. This proves vital to retailers, especially when consumers have an “unprecedented choice of retailers, channels and products” in the market, states Marek Rucinski, partner and Customer-centric Retailing lead, Asia Pacific Retail at Accenture.
“Customer-centric retailing is more than loyalty and customer experience. It is the next-generation business model for retailers of all formats in all geographies. Their entire organisation needs
More specifically, in understanding what motivates customer demand, retailers are able to identify how customers respond to different product features based on their buying decisions, which can then be translated into what drives demand. In streamlining their product selection, retailers can not only derive
In addition, retailers can better manage their cost to meet demand by understanding how their profits are impacted by the change in assortment and space or merchandising decisions. In terms of space allocation in their stores, retailers are in a better position to decide where more space and inventory
In an Accenture study, Winning strategies for uncertain times: How retailers can achieve high performance in a downturn, the company shows that retailers who have achieved customer centricity leverage analytics in doing so — with three times the number of high performers in
In addition, through analytics, retailers were able to reduce their inventory by up to 20%, allowing them to stretch their operating capital, while those who reassessed their procurement processes,
With the ability to understand what consumers want, retailers would be able to map out their stores more precisely based on customer needs and behaviours, then align their marketing
One component that has been given emphasis by the company is, retailers need to increase their ordering accuracy to ensure that they are bringing the appropriate merchandise to their stores
In Accenture’s newly released report titled The Customer Code, Rucinski states that the challenge ahead for retailers is how to combine this analytics with their instinct, in order to “gain a
To this end, Accenture has broken down the process into six steps towards achieving customer-centric retailing:
Build and organise data
In determining these objectives, the retailers set the course for the direction and approach they will take in implementing customer centricity throughout their business.
Attaining and analysing their business data while keeping these objectives and factors in sight would then help retailers identify what they need to improve on, where their strengths and weaknesses lie, and provide a basis from which they can work towards obtaining customer insight.
Profile customer segments and store clusters After extracting the relevant data, segmentation helps retailers profile their customers, to better understand who they are, what they buy and where
In addition, retailers can better evaluate how their prices impact the customer’s buying decision; how effective their promotional efforts are; and if their product assortments are meeting
Armed with their customer profiles and by segmenting them into respective groups, retailers can identify where their opportunities lie and which areas in their business they need to work on.
To illustrate this, Accenture is working with a major retailer in Greater China, to deploy its Strategic Segmentation programme, which helps the retailer identify its customer groups and their respective value contributions and behaviours. Through this programme, the retailer is able to categorise its customers into seven segments, and then roll out targeted campaigns to each of the segments, to not only improve its relationship with the customers, but also to draw in potential customers into its stores.
Develop go-to-market strategies
Generate tailored tactics by touch point and channel
One area that is often overlooked is in streamlining product assortments in the store. According to Rucinski, retailers who have revamped their SKU range have seen increased sales of between 5% and10%, while margins improved by 2%-3%, which is no mean feat especially in light of the recent downturn. Aside from space and merchandising, analytics can also determine the effectiveness
Through years of experience, Accenture has found that about 87% of marketing investments can be improved, with about 29% of retailers’ marketing investments proving unproductive. With
Execute targeted tactics
At the same time, this would bring about added visibility to the retailers’ supply chain by monitoring inventory flow and levels, and identifying which range of products in the stores meets the needs of the various groups of customers, thus eliminating speculation in the process.
Track, learn and refine
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