"Half the money I spend on advertising is wasted; the trouble is I don't know which half."
John Wanamaker, the founder of modern department stores
Maximizing Your Return on Marketing
It used to be difficult to accurately measure and manage marketing effectiveness. Luckily, this is no longer the case. Advanced marketing analytics allow retailers like you to make precise measurements to maximize return on marketing (ROM).
Retailers like Neiman Marcus, Lands' End, and Wal-Mart.com use advanced analytics for a competitive advantage in customer intelligence. By marketing cost-effectively, you'll not only beat the competition - you'll also see rapid paybacks and high return on investment (ROI).
Early and Fast Returns on Customer Analytics
Business gains from marketing come from diverse sources. Though many retailers achieve ROI (and ROM) relatively easily by pursuing common sources of business gain, it's with a first use of analytics that the rapid returns start coming in.
In many cases, preventing common mistakes is enough to pay for your entire customer business intelligence (BI) system. As the CIO at one of the nation's biggest names in retail said, "It was worth it to us just to stop the really dumb errors."
Areas that often provide a high and immediate ROI include:
- Customer segmentation. Identify specific groups of customers by loyalty program status, demographics, recency/frequency/value, brand loyalty, and other dimensions so you can promote to them more effectively.
- Personalized upselling/cross-selling. Automatically recommend to customers (or store associates serving customers) additional or higher-margin products based on the product under consideration and historic data on that particular customer.
- Promotion optimization. Accurately forecast the sales lift that a specific promotion will have and then balance the combination of sales lift and net margin to optimize return on that promotion.
- Multi-channel customer service. Enable customers to easily order online and pick up or make returns to stores. Understand your best customers' online, store, catalog, and total behavior.
- New store location. Identify the characteristics of your best-performing stores and identify new locations that fit those criteria.
- Loyalty program development. Develop and manage new loyalty program features that differentiate your program from others. Then measure their effectiveness and ROM.
- Low-cost email marketing. Use highly targeted email campaigns, which are automatically personalized to each customer, to add value. Personalization increases both the effectiveness of each campaign and the volume of customers opting to receive emails.
Continuing Advanced Returns on Customer Analytics
Once you start seeing good returns from these areas, you can continue to achieve high-ROI gains from additional, more highly advanced analytics. Continuing improvements use the earlier investment in customer intelligence for even greater ROI/ROM.
With areas of advanced ROM you can:
- Segment customers by shopping mission
- Calculate each customer's price sensitivity and attentiveness to certain types of promotions, and then target promotions accordingly
- Personalize recommendations based on the customer's probable shopping mission, not based solely on the product under consideration
- Optimize promotions while considering the net effects a promotion has on related product sales and margins that will be cannibalized or gain a halo effect from that specified promotion
- Optimize entire campaigns made up of a series of promotions
- Identify the optimum format and promotional plan to use at existing store locations to increase comp store sales
While the ROI on individual and ongoing uses of customer intelligence for superior return on marketing is enough to justify investment, the greater gain is long term. More effective, highly-targeted marketing and customer service create a greater value for consumers. And isn't that what your retail strategy is all about?
Take Action
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