Retailing has never been so exciting.
Over the past decade, traditional retailers have looked to boost consumerism through various pricing and merchandising strategies. In addition, technological innovation has also helped retailers standardize their retail value chain, which in the process has led to enhanced customer experience. However, the onset of digital platforms has compelled these stores to innovate to remain in business.
The rise of digital retail formats such as e-commerce and mobile have somewhat dented the growth of brick-and-mortar retailers. However, e-commerce players have not been able to run away with the trophy, because they face hyper-competition. The flourishing digital retailing market has commoditized one of the most fundamental differentiating factors of the industry: price.
So if pricing is no longer the key differentiator for retailers, what is?
The answer is customer engagement. This is not new news. But it’s highly dependent on having a proper data-driven approach. Forward-thinking retailers are now aiming to engage customers throughout their buying process, including decision making, purchase and after sales. Insights generated from purchase data patterns, social media, online interaction and mobile location data are all used to entice the customer through personalized marketing.
The recent IBM Center for Applied Insights study “Inside the mind of Generation D” shows that 75 percent of retailers rely on traditional transactional data (from POS, credit card and ERP systems) and around 45 percent mine structured social media data. However, what’s more interesting is that approximately 50 percent are tapping into videos and images, and 40 percent are even analyzing unstructured text data, such as blog posts and customers reviews. This clearly shows retailers are not leaving an inch in analyzing all available data sources to generate insights and understand patterns.
This could also indicate a fair amount of fear about missing an opportunity, which, in a way, is good for the industry. This will likely spur innovation among retailers as well as technology providers. Moreover, in the current market context, structured data analysis is a must for retailers. Analysis of unconventional data sources is what provides that added competitive advantage in terms of understanding latent consumer behavior and emerging buying patterns.
So how are retailers using these data to generate insights? The same study suggests 77 percent of retail companies analyze data through business reporting and data querying methodologies, and around 61 percent of retailers apply predictive modeling to explore the data. Remarkably, the latest data analytics technologies helped around 45 percent of the companies to make headway in areas of simulations, process decision automation and next best action modeling, which invariably will define the next phase of retail analytics. The right mix of data sources along with innovative analysis techniques will go a long way to support retailers’ efforts to form an end-to-end customer engagement strategy.
These findings suggest that the survival of the fittest will depend on how companies use data to engage customers during their deliberation phase instead of just the buying phase and keep them interested well after their purchase. What kind of insights are you using to build stronger customer engagement?