Cracking the code of customers’ future value in retail
By Stuart Russell, Chief Strategy Officer, Planning-inc
Retailers have faced a series of challenges over the past half-decade. First, the shift from high street retail to online shopping meant a challenge for many on how they approached sales. Then the pandemic swept in, already over two years ago now, and it radically changed customer behaviour. Now, the industry faces a cost-of-living crisis that prompted 60% of adults in the UK to spend less on non-essential items in June.
Arguably, the end of these challenges is not yet in sight. A global recession may be a very real possibility, and according to a recent Deloitte report, the industry will not emerge from it in its existing state.
That presents the UK’s retailers with a tough decision to make – and an opportunity as well. Should retail C-suites batten down the hatches, hoping to hibernate through the economic winter ahead? Or should they take a more optimistic approach, looking further into the future with the hope that effort made now will pay off down the line?
There’s no ‘right’ answer during such volatile times, but I’m in favour of the second. I’ll explain why.
Re-evaluate measurements of success
Whatever your response, it’s going to be important for retailers to re-evaluate how they measure success moving forward. People are spending less. If you sell commodities, that ‘less’ might only be a small amount. If you sell luxury products, it’s probable that ‘less’ will be a lot more. Either way, it will be less. Continuing business as normal and measuring year-on-year growth will no longer make sense. Instead, retailers must turn their eyes to the finer standards of measurement to ensure their marketing budget will make an impact on customer’s future value.
Using more sophisticated metrics to measure business success can provide a more detailed picture during times of economic stagnation or deceleration. In combination with marketing spend destined to produce results in the long-term, that information can prove very useful.
Revenue might dip, hop, and shuffle along, telling you not much at all about your campaigns’ impact on customer relationships. But other measurements can. Shifting focus to analyse customer behaviour beyond the transactional can provide much better insights, and showcasing incrementality can be much more significant in the long run.
Reveal obscure patterns with big impact
Taking this approach, retailers must focus on leveraging first-party data – as much as they can. That’s the gold dust in times like these. Retailers who champion this process will undeniably stay ahead of the curve, as they’ll have a crystal clear picture of each customer’s habits, which helps build a more robust picture of expected future value. The financial reward may not be as immediate as a clearance campaign, but in the long term it is invaluable.
These vast amounts of data collected will only gain more value for the business as long as they’re continuously analysed and simplified. So note that this process should be in charge of a smart platform that can operationalise on- and offline behavioural and transactional data in real-time. Marketers’ time should solely be dedicated to deliver hyper-personalised marketing and insight-fuelled decision-making, based on each customer’s incremental value.
If retailers can place their efforts within the right context, the current economic downturn can still present an opportunity to grow as a brand. That growth might only come further down the line, as a result of information and insights you’ve gained now. What’s clear is that retailers must change tac if they’re to survive this crisis, the next, and the next after that. We’re in a different world now. And adaptation is the key to surviving it.
A big part of that adaptation will rely on moving targets away from sales and revenue-based metrics. Retailers should focus more on the insights they’re able to harvest. That’s what will provide value to those that aim to survive, and even thrive, through the next few decades. The long-term must remain front of mind.
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