People do crazy things, especially during the holiday season. On Black Friday – and even on Thanksgiving evening – customers will wait in line for hours to grab the best deals and knock items off their wish list. Retailers offer ridiculous discounts on high-priced items and keep doors open 3 days straight to cater to buyers around the clock, then web retailers kick in their own Cyber Monday promotions. Black Friday has remained the number one shopping day for the past decade, accounting for most of the sales that businesses reign in during the holiday season. But smart retailers don't have to wait until Black Friday to ramp up their bottom line. Your analytical or business intelligence platform can keep a pulse on operations year round and help increase sales before the 11th hour. Here's how:
1) Use analytics for in-store promotions
Analytics can help guide store layouts by tracking which products perform best on an aisle shelf vs. an endcap in various cities, and what products should go on sale in a given month and region based on sales history and inventory levels. Using business intelligence, you can run scenarios based on historical data and make predictions about programs designed to drive in-store business. For example, if you increase the circulation of your direct-mail flyer, how much additional business can you expect it to drive? Similarly, if you offer in-store coupons for a certain timeframe, what kind of sales uptick can you expect? Essentially, you can analyze past customer purchasing behavior to determine how to best influence future purchasing behavior.
arcplan's retail customers use our platform to track KPIs and run what-if scenarios to ensure that products are priced appropriately. For retailers, one important KPI is the cost of goods sold (COGS) – the price paid for the product, plus shipping, handling and other expenses to get it ready for sale. By keeping track of COGS, retailer can make sure that the selling price of a product exceeds the cost of buying or making the product, and delivers high enough profit margins. Of course, some retailers – especially around Black Friday – have expectations that the COGS for some products will exceed the sales price. These products are called "loss leaders" and they're stocked to get customers in the store so they purchase things that net a higher profit margin for the retailer. That pricing strategy is based on a lot of analysis, and it's proven to yield dividends year after year.
2) Use analytics to influence online purchases
Brick and mortar stores aren't the only ones who can benefit from analytics. Online retailer can conduct analysis of web traffic and e-commerce purchases. Conversion rate (the number of people who completed a purchase versus those who were just browsing) and shopping cart abandonment rate are two important metrics for web stores.
Abandonment rate is the percentage of visitors who drop items into their shopping cart but fail to complete the purchase. In some cases, cart abandonments are missed revenue opportunities (the shipping price was too high, the buyer didn’t have enough urgency to complete the sale, etc). A 2013 survey by SalesCycle revealed that abandonment rates in the second quarter of 2013 averaged 75% and continue to be a major challenge for online businesses. Retailers should use their analytical platform to track whether their cart abandonment rate is comparable to or higher than industry average and make every effort to recoup those sales. This may be achieved by sending a reminder email or even a discount if contact information is captured before the final checkout page, or by lowering shipping and handling rates.
No surprise here – mobile sales are also on the rise and contribute to a growing percentage of online sales. A recent Forrester report, The State of Retailing Online 2013, revealed that retailers reported a triple digit year-over-year growth in sales through mobile devices. Consider tracking web purchases through mobile devices – the figures may surprise you. If a decent percentage of your web visits are via mobile devices or you're looking to attract mobile buyers (who isn't?), then optimize and improve the mobile experience for customers using smartphones and tablets – you may be pleasantly surprised at how many individuals are willing to make purchases on the go.
3) Use analytics to better understand your customers
Remember the controversy over Target being able to tell when a woman is pregnant by tracking her purchase history? Thanks to detailed analysis of buying patterns, retailers can make inferences about customers' lifestyles and make suggestions for additional items that they may want to purchase. On a deeper level, analytics can help with marketing – cross-selling and upselling opportunities, as well as location-based marketing. For instance on the web, recommendation engines like Amazon.com's are cross-selling machines aimed at persuading customers to make additional purchases based on the retailer's analysis of related items. For example, when a visitor puts a printer in their online shopping cart, the site may suggest purchasing ink and toner as well. With an up-sell tactic, retailers may offer a more high-end version of the product. So if the customer has chosen a basic laser printer, the retailer may suggest a multifunction version that can copy, scan and fax as well. The retailer has nothing to lose by trying to make a few extra bucks on that purchase.
Location analytics is another growing field of customer analytics. Location-based services such as Groupon and Yelp allows businesses to advertise to customers that are in close proximity to one of their locations. This is a targeted approach to marketing that improves the probability of customer interactions and is also a great way of alerting customers of new businesses or special offers in their area.
All of these tactics are driven by data analytics! Tapping in to analytics ensures that retailers are on top of their game all year round. Measuring the right metrics in-store and on the web, and going the extra mile to understand customers better equips retailers to market better and sell more. At arcplan, we work with grocery, fashion, and discount stores all over the world to help them see more Black Fridays per year. Learn more about our retail customers >>
For more information on understanding your customers, check out our blog series on Customer Analytics.