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Retail marketing: Prisoner of the mass-market mindset?

November 29, 2006

Last year, American men spent an estimated $13 trillion. But until recently, this huge market has barely registered on the radar of most retailers and marketers. "Truth is, marketers are only beginning to understand the secrets of the male shopper," writes Nanette Byrnes in BusinessWeek.¹

This may be a symptom of an industry that's lagging behind the times in marketing to an increasingly diverse population. In the face of a splintered market and sophisticated consumers, best-guess marketing isn't bringing the same payoffs.

According to the IBM Institute for Business Value, "pronounced shifts in demographics, attitudes and consumer values have polarized the marketplace. Retailers competing in a 'world of extremes' will have to become much more innovative."²

The complex world of consumer marketing

In the early years of TV, marketers could successfully deliver a single message to a mass audience. Not so with today's media and channel fragmentation, says David Lubars, chairman and chief creative officer of ad agency BBDO, North America.

"In the old days, you could run crap, and it was inescapable. Today, whether it's traditional or new media, consumers have unprecedented choice about what they will or won't watch."³

To reach the right consumer, retailers and marketers have to know their market. And that requires a nuanced and dimensional view of what people will buy and why. "If retailers are to develop offerings that reflect actual customer demand, they must start with an understanding of their customers that goes beyond traditional demographics," says IBM.

And as Jim Koppenhaver of MarketingProfs writes, you can't rely any more on generic data like household income data to measure the potential spending power of customers. The reality is that "millionaires shop at Wal-Mart. And many people...are living well beyond their means."⁴

Missing the mark

So how do you identify and target your customers? One of the biggest assets retail marketers have is a wealth of consumer data – not just POS transactions, but customer surveys, loyalty cards, and online click-through patterns. But retailers don't use it optimally. And disparate operations means data from each channel is locked in its respective silo.

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To wit: 25 percent of respondents to a recent RILA/Cognos survey said their company doesn't have personally identifiable data on their best customers. It's next to impossible to market to customers if you don't know who they are, what they like, or what they listen to and watch.

It's a common refrain. "Most companies still regard consumer insights as an isolated research capability," says the McKinsey Quarterly. So they don't obtain data "at the points where segments, channels, and categories intersect, nor can they integrate the information to form valuable insights." The result? Many companies can't transform insights into action and don't have a common way of looking at customers across functions.⁵

A consumer insights network

Instead, says McKinsey, what organizations need is "an insights network that helps them look at the world through a number of lenses and to develop truly proprietary knowledge about customers."

That means crossing functions and segments that might include "loyalty card and point-of-sale data, which could be combined with region-specific shopper-segmentation data and with in- and out-of-store market research on the drivers of shopper's behavior."⁶

Ideally, a consumer intelligence network could also include supplier insights and category information from product manufacturers to further fill in the picture.

"Retailers will have to know what different customer segments value, and how those values shape what they want when they shop," says IBM.⁷

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The benefits of dimensional data

ERP systems can't support this approach. But business intelligence tools can – by integrating data across systems and delivering dimensional views of the information. And analytics help marketers see patterns and relationships in new ways to unravel customer attitudes and behavior.

The payoff? "The information and insights derived from marketing analytics can help your business accomplish a variety of goals – from targeting campaigns more effectively to driving greater demand and optimizing cross-sell and up-sell opportunities," writes Stephanie Acker-Moy in the DM Review.⁸

Planning and store operations

Customer insights can also feed back into key functions such as store staffing, promotion handling, and store-level initiatives such as upgrades, or adding new departments or services. By leveraging sales and product movement information, retailers can develop targeted initiatives like promotions and assortment changes to increase loyalty and basket size.

With in-depth consumer knowledge, they could also develop more customized merchandising and store promotion strategies. And by integrating information with the IBM Cognos Store Operations Performance Blueprint, retailers will be able to adapt more quickly to trends, new consumer demands, competitive challenges, and changing markets.

Summary

"Information has always been the key for marketers to remain competitive and to pull ahead of the competition," says James Koppenhaver.⁹

But the trick is to use information wisely. Instead of one-dimensional demographics and educated guesses, marketers need to mine their consumer data across categories and segments and analyze patterns. What they'll gain is a closer connection with people who shop – which will drive more effective campaigns that resonate with customers.

Find Out More Download our "Perspectives on Marketing" bundle [PDF - 2MB] Read the related story, "Marketing: Investment advisor to the business" Learn more about IBM Cognos Performance Blueprints

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Sources

¹ Nanette Byrnes. Secrets of the Male Shopper. BusinessWeek, Sept. 4, 2006.

² Gina Paglucia Morrison and Anca Van Assendelft. Charting a New Course: The retail merchandising-supply network. IBM Institute for Business Value, 2006.

³ Theresa Howard. Marketers Aim for "Engaged" Consumers. USA Today, June 20, 2006.

⁴ Jim Koppenhaver. The Driving Force Behind Purchase Decisions MarketingProfs.com, July 11, 2006.

⁵ John E. Forsyth, Nicolo' Galante, Todd Guild. Capitalizing on Customer Insights The McKinsey Quarterly, Number 3, 2006.

⁶ Ibid.

⁷ Gina Paglucia Morrison and Anca Van Assendelft. Charting a New Course: The retail merchandising-supply network. IBM Institute for Business Value, 2006.

⁸ Stephanie Acker-Moy. Balancing the Art and Science of Marketing: Using Analytics for Maximum Marketing Effectiveness. DM Review, August 2006.

⁹ Jim Koppenhaver. The Driving Force Behind Purchase Decisions MarketingProfs.com, July 11, 2006.