The Future of Promotions: How Customer Science is Transforming Promotions Within Grocery
By Tom O'Reilly / July 2016Events, Insights, Research
Grocery stores, supermarkets and food marketers are experiencing tremendous competition – especially with Americans spending more on dining out than ever before. To get more attention and drive traffic, grocers are increasing the number and depth of promotions. Yet more than two-thirds of trade promotions fail to break even, according to Nielsen.
For most retailers, a deepening dependence on promotions is a broken strategy that diverts focus to rivals, instead of customers. How can you change the game? The answer lies in using big data, customer science and algorithmic merchandising.
Topco hosted a webinar that allowed dunnhumby Managing Director of Customer Strategy & Engagement, David Ciancio, and me to present next-generation promotions planning and management, as well as success stories.
Promotional Success for Suppliers, Retailers and Shoppers
The measures of success of promotional campaigns are different from the points of view of suppliers, retailers and shoppers.
Suppliers want to see:
- Sales growth for their item
- Profit growth
- Market Share growth versus their competitors – including private label
Meanwhile, Retailers require:
- Sales growth for the item and the category
- Profit growth for the item and the category
- Market share growth versus other retail competitors
- Total store sales growth and profit
However, Shoppers need your promotional messages to contain:
- Relevance: “I buy these items”
- Value: “The price is right”
- Assortment: “I can find all the items I need”
- Service: “I like the store, it’s clean, friendly and fresh”
Bottom line, most promotions aren’t delivering sustainable growth. Aligning the needs and desires of all parties makes promotional campaign management a tremendous challenge.
The opportunity to make promotional programs more profitable for all involved is to shift the focus from products to customer experience and shopping baskets.
Customer Metrics for Planning and Evaluating Promotions
dunnhumby customer science extracts actionable insights from basket-level data without loyalty cards or card-based transactions. We all know shoppers who are most engaged in ads are more price sensitive. However, most ads reach less than 20 percent of shoppers. Harnessing customer science can elevate engagement up to 40 to 60 percent.
dunnhumby supports retailers in integrating customer metrics into the ad planning process by scoring:
- Reach – Household penetration
- Balance – which customers are engaged; which features are promoted to which customer segments
- Uplift – with associated basket size… the way the ad feature influences the basket content
Bringing Customer Science to the Ad Planning Process
There’s no question that access to big data, customer science and consumer preferences are critical to unlocking greater value from promotions. To remain competitive, grocers must develop relevant offers.
We know the most successful promotions are highly personalized. In addition, the messages must be delivered in the preferred communications vehicles – such as mobile messages and social media reinforced in the weekly circulars, in-store signage, gondolas, etc. Plus, the message must appear in the correct context, arriving at the decision point or the shopper proximity.
To add to the complication, you have to communicate and collaborate with suppliers, the marketing department, creative teams and finance group. Unless you’re all on the same page and able to view the most current information, your teams will be faced with redundant work and business decisions may be delayed.
Retailers need to be armed with the ability to make quick decisions, send additional communications to respond to competitive threats, and take advantage of marketing opportunities.
The opportunity for retailers is when customer science combines with optimized promotions processes. By gaining visibility to the most current and accurate data, departmental silos will be demolished. Being able to review historical data and forecasting in just few keystrokes, as well as the ability to conduct “what if” scenarios and modeling allows faster, more reliable strategic planning.
You can hear the success stories and learn to eliminate poor performing promotions by viewing the webinar recording at your convenience 24/7 at: http://goaptaris.com/future-of-promotions/