Tweet me!How Retailers and many manufacturers often use POS data
by Jim B. Cantrell This e-mail address is being protected from spambots. You need JavaScript enabled to view it
There is a wealth of information there - you just have to determine what you want. Most users new to BI make the statement “I want a complete picture of my customers out of this data.” Translated, this often means, “I don’t know much about my customers.” The reverse is not nearly as accurate. Customers know a great deal about the places they shop, and they very often have a well formed view of a retailer, whatever your interpretation of that may be. Your retail POS data can be used to put yourself in your customers’ shoes and get a comprehensive view of your business from their perspective.
Influencing the Customers’ Views
There are several factors which can influence whether or not customers choose to shop where your goods are carried. There is certainly a question of needs versus wants, which can influence the likelihood of customers going out of their way from a convenience or price perspective to buy a product. Most retailing does not work this way. Assuming, customers have decided they need a certain product or type of product, their shopping behavior is typically affected by the following:
§ What stores are nearby that carry the products I want? With traffic and gas price influences in many major metropolitan areas, site location is clearly important.
§ What is the price image of the store? Customers, of course, care about price, and they will consider whether the nearby store is going to give them a good deal or if the competitor a mile further away will be less expensive. A more discretionary purchase may cause customers to time their purchases to coincide with a promotion that will save them money.
§ Can I get other things there? Now more than ever, consumers are pressed for time in their personal and business lives, and the ability to accomplish multiple errands in a single trip is important.
§ How do customers feel about their experience with a given retailer? Some stores have a certain quality which makes the shopping experience to varying degrees, a treat. This certainly satisfies customers’ “wants,” but not necessarily their needs. Sometimes impressions of a shopping experience are the “newness” of the store, the quality of service they receive in the store and the time it takes to check out once they have everything desired.
§ Is the store likely to have the product in stock, or is it available online? Nothing is more frustrating to customers than going to the store to buy something and not being able to do so. The ability of a retailer to integrate the online and in-store experience plays a role here. Getting complete insight into all of the questions in customers’ heads is impractical to do with a data warehouse. However, several common metrics found in the data enable a retailer to infer the answers to their questions.
Data Helps Infer the Customers’ Views
A number of data elements should be stored and/or derived from your comprehensive retail data model to analyze how customers view each of the stores carrying your product. Given that we are taking an individual customer’s view of your business, we should conduct an analysis at an individual store level – a “store-card” – that can be rolled up into local, regional and national numbers. Your analysis should include the following:
- Distance to closest “competitive” store
- Proximity to customers with the desired income demographics (census data and store locating)
- Comparison shopping factor (price index of comparable products from local competitive stores)
- Response to promotions at the store level (tracking variations by store)
- Foot traffic details (if available) analyzing foot traffic converted to transactions
- Visit/basket metrics (item counts, selling prices, revenue and margin)
- Returns frequency
- Renovation done recently
- In-stock percentages
- Transaction length at checkout
Promotion Efficiency and Effectiveness
For many companies, promotions are the biggest single expense. Understanding the value and return on promotion spending is imperative. Marginal gains in efficiency will lead to a significant impact on the bottom line.
Category Management
Category Managers face such promotion issues as:
Sales Management
Sales Managers will ask:
§ Which promotions worked or didn’t work? § What is the most appropriate promotional timing and length? § What was the competitive response to promotional activity? § Do promotions only attract sales/reward consumers or new consumers?§ What are the pricing opportunities for my brand? § How can I ensure that I get my shelf and promotional price right? § How effective is Every-Day-Low-Pricing for my brands? § What are the most appropriate price points for my brands? § What proportion of volume is sold on special pricing? § Of my promotional sales, what percentage is incremental? § What are my baseline sales and what impact does seasonality have on baseline sales? § Which retailer represents the greatest sales opportunity? § What alternate shopping channels are consumers using for your brands? § Is enough distribution in place to start advertising? § Is the shelf space optimized? § Is the mix of products in the category correct?Brand Management
Promotions are great business if they increase consumer sales. Generally, a product is sold to retailers at a discount to help fund the promotion. If there are no additional sales as a result of the promotion, the discounted stock sold to the retailer has been of no real benefit. Brand Managers will want to understand:
Consumer Purchasing Dynamics
In order to understand consumer purchasing dynamics as they relate to promotion effectiveness, key issues will include:
- How responsive are consumers to promotions?
- Did sales increase based on advertising?
- How does the length of a promotion influence its effectiveness?
Ensuring that promotional funds are optimally allocated to maximize return is an essential element of strategic planning. Key questions include:
- How effective are our promotions?
- For which brands is advertising most effective?
- What is my ROI for promotions and advertising?
- Where are the distribution gaps and opportunities?
- How effective is my sales force?
- Are out-of-stocks an issue?
Especially useful for:
Business benefits:
§ Present actionable recommendations and sales forecasts, confident in the quality, accuracy and timeliness of the underlying information. § Capture activity from multiple types of retail outlets for a complete picture of sales trends and consumer shopping patterns. § Identify the “why” as well as the “what” behind changes in product sales to fine-tune marketing strategy. § Adjust execution strategy to improve performance during a promotion or new product launch.§ Maximize the impact of merchandising and promotions by evaluating program execution and effectiveness at the local level. § Manage marketing resources more profitably by identifying retailers with high/low performance or other exceptional results in the marketplace. § Strengthen retailer relationships by developing actionable business reviews and employing category management techniques.Successful selling and marketing requires manufacturers to manage the sales process in cooperation with their retailer partners. To help facilitate this cooperation, DIcentral provides flexible account-level solutions which address a range of issues including:
§ Business reviews § Category management § New product introductions § Store-level opportunities § Sales force compensations programs § Operational efficienciesEven a simple BI solution can offer sales and marketing managers a comprehensive series of retailer-specific sales and merchandising information, providing a virtual report card of product and category performance. With full fact sets including baseline and incremental sales reporting, basic item level reporting services establish a common frame of reference for category management implementation across retail chains and geographic markets. Sample-based, store-level and census trading areas provide a wealth of detail which sales and marketing managers can use to review and evaluate marketing tactics on a chain and store-by-store basis.
Market Dynamics
Brand, Category and Sales ManagementBrand, Category and Sales Managers all need tools to evaluate the performance of a category and the brands within it. ACNielsen (There are many others you can also chose) can help you develop clear strategies based on consumer insights by addressing questions such as:
§ Is my category growing or declining? § What percent of households buy a category or brand? § Which sectors are growing or declining? § How do pricing and deal levels vary across brands? § Where did volume increases come from? § Where are the opportunities for category growth?Strategic Planning
Strategic planners need detailed insights into market dynamics in order to harness category opportunities and plan for the future. This calls for information about what is happening and how it is happening. Existing and new players in a category must address issues, including:
In addition to knowing what is happening in a category, ACNielsen can provide insights into consumer perceptions and attitudes. This can cover a very broad spectrum of issues including:
§ How important are current consumer based issues such as genetically modified foods? § Are consumers aware of and changing their behavior because of current issues? § Do brands that offer health benefits drive sales?Understanding the Consumer
Brand Management
To understand and provide for different needs, consumers should be segmented into logical groups that can be easily understood and provided for. In working with groups of consumers, key questions include:
Socio demographic information can be used to better understand your consumers and develop more effective marketing and promotion strategies. Fundamental questions include:
§ Who is buying my brand / category? § Who are the heavy category buyers? § Which buyer groups drive seasonality? § Which buyer groups respond to marketing activity?
Brands have personalities that can scream quality, great taste, real value or other attributes. Through marketing and sales techniques, it is possible to improve and change consumers’ perceptions of a brand. Knowing how consumers view your brand is critical to developing the brand. Major questions include:
§ Why do consumers choose my brand? § Do consumers understand what my brand stands for? § How do consumers perceive my brand? Category Management & Sales Management
Understanding the profile of retail shoppers and how they match against a category’s demographics will make for smarter category marketing. Category Managers will seek ways to leverage the category at the retailer level by understanding the behavior of different types of shoppers. Areas to examine include:
Consumer Habits
Most brand strategies are aimed at attracting more buyers and achieving higher purchasing rates. Therefore, understanding the make-up of consumers and the dynamics of their purchasing is key to achieving success.
To fully understand Consumer Purchasing Dynamics, it’s important to understand what goes on beneath consumer purchasing – what drives buyers to make their decisions, how they feel about their choices and ultimately what they plan to do with their purchase. Key issues include:
As I said in the beginning, there is a wealth of information in POS data. Can any one company siphen off value from every bit of it - no, and I would not consider this article even a primer or 'how to' it is more of an attempt at building exhaustive list of the reasons and value to be considered when you want to stop dealing with data and start using information instead.
