Next time you admire a sweater in a shop window,stop and coNsider the history behind it.
That sweater, and every item in every showroom was carefully selected, priced, marketed and displayed with one goal: sell it. But selling it means understanding the buyer.
In today’s data capable marketplace, relying on overall sales trends is not enough to remain competitive. To anticipate
and understand not only the nature of but also the extent of today’s challenges—and build a strategy to overcomethem—organizations need to excavate invaluable consumerinsights. The most effective way to do this is through rigorous
segmentation and analytics.
Following the dollar into younger pockets
Take the case of a major department store chain—a client of Loyaltyone—in Canada. Everything looked relatively positive on its income statement—its annual sales growth, hovering at around three percent, tracked with industry benchmarks.
But a shopper-based analysis into the origin of those sales revealed a troubling trend: Its strongest results were
disproportionately generated from the mature family and empty-nester segments. These sales were actually higher than
the industry norm. meanwhile, the growth rate among young adults and those starting families—considered higher-potential segments—were well below those of competitors.
There was small comfort that its sales performance among younger shoppers was better than that of a typical department
store. The reality was the merchant was trailing the overall retail market, in some cases by more than five percent, as
younger shoppers gravitated toward new specialty stores and other rivals.
The result: a considerable sum in unrealized sales, not to mention future potential. The model was not sustainable.
Three-step ticket for success
If it wanted to retain near-term revenue and build a strategy for long-term growth, the retailer had to act quickly. That
meant answering several new questions: Which customers were generating sales growth, and in what categories? Which
segments were most vulnerable to erosion? And which offered opportunities for growth?
Answering these questions required in-depth shopper analysis. So, leveraging its Precima Analytics Solution, Loyaltyone developed a comprehensive value segmentation analysis comprised of three phases:
1. Identification and analysis of hundreds of unique shopper segments by combining transaction, shopper and market data;
2. Definition of the retailer’s priority shopper segments based on insights into current and potential value; and
3. Developing a shopper-centric strategy for growth by comparing current performance with market trends to
identify the best future opportunities.
The value segmentation analysis revealed the extent to which the strong performance by older segments obscured a longer term threat, and an untapped opportunity for sustained growth.
Applying our insights and recommendations, the retailer developed an aggressive marketing and merchandising strategy
targeted to younger shoppers. An array of new products and brands were brought to market in record time.
Youth is served
The results were dramatic. Sales from the two youngest adult segments increased by 45 percent. more importantly, the
retailer was positioned for sustained growth through traditional shopper segments and new, high-growth segments.
Today, the retailer’s brand and product decisions are no longer based on historical sales performance. They are
pinpointed on specific segments, providing clear analytical building blocks for long-term growth and competitive
differentiation.
True, the journey to the store shelf is a storied one. but, a thorough understanding of the buyer—through segmentation
and analysis—alongside a long-term competitive strategy can mean the difference between near-term or long-term success; between that sweater selling to a specific group of consumers or sitting idle in the store window.
Brian Ross is President of Precima, a LoyaltyOne analytics solution.
