Shopper Centric Marketing: How to Drive the Top Line / Protect the Bottom Line

by R Lunde

Shopper Centric Marketing               

Drive the top line / Protect the bottom line

Note: This is a modified version I wrote for Dr. Willard Bishop’s  Brick meets Click Blog.  Check it out … it’s going to be a lively discussion. http://www.brickmeetsclick.com/challenge-question-october-1


I am not trying for a white paper here … just a thought starter.

Drive the top line / Protect the bottom line

If a retailer wants to drive the top line while protecting the bottom line, shopper-centric marketing is the next requisite skill set.

Proof

Proof? Simply track the results of Tesco and Kroger over the last few years … include the ‘great recession’ years. Both are great operators … and both, with the help of Dunn Humby, have become 1st generation shopper-centric marketers. Compare their results to their peers … many of whom also are great operators … but traditional marketers. ‘nough said!

At the starting point

But they are only at the starting point of what is possible. The next generation of thinking, in my opinion, requires that you stop thinking of customers as homogenous or groups or buckets, but as heterogeneous. In other words, customers are like ‘snow flakes’ … all are apparently similar, but all are different and unique. You have to dump your dependent thinking on the Gaussian model of mathematics and move up to a different more relevant and appropriate concept. [There goes the mass media advertising model. Yet Ad agencies have their greatest potential revenue years ahead … if they adapt and adopt.]

The real value is found at the atomic level

When you look at data at the atomic level, you find that all customers buy something … but few buy the same things. You’ll find that very few SKU’s have a HH penetration rate of greater than 1/2 % of the shopping base. That means that all $80 baskets have $80 worth of product in them … but that that mix of items seldom is the same. It is a variety / mix of all the 50,000 to 100,000 sku’s the store carries. [For non-grocery industry readers … and $80 basket is a very good customer.]

Amazing insights

It means that the number 1 national brand is not necessarily the number 1 brand to a specific customer. That customer’s # 1 brand may be the 5th selling brand in the retail category hierarchy. Retailers need to be in the business of selling customers what they want to buy, not trying to get customers to buy what the retailer wants to sell. And that means you simply develop and deploy the technology required to offer customer specific programs by e-mail, text, Internet, direct mail, social media … whatever and however the customer has designated they want to be communicated with.

Shopper-centric marketing by the above criteria requires the ability for 1:1 marketing. The individual FSC is the key.

Why do you have to do this? Because the customer wants to buy … what the customer wants to buy. And … they have choices. Each of your $80 basket customers has choices … they don’t want a substitute for their preference … and as many of you know … they exercise those choices … often by shopping elsewhere. [Ask Wal-Mart.]

Increased marketing funds

This also means that every sku a retailer carries has the opportunity to market that specific product … which is a great opportunity for both the brand and retailer. Available marketing funds therefore grow exponentially. [I worked with the EITF and FASB in developing the accounting Issues for trade promotion marketing. Read them and you’ll see what I mean.]

Is getting the customer to buy something else possible

Does that mean that you cannot use marketing to get customers to try new products or services? NO! In fact, some exciting algorithms will find the most likely prospects for the offer. Does that mean you cannot detect and market to brand switchers and develop an appropriate strategy? NO! But those are stories for another day.

As far as worrying about what your customer buys elsewhere, Don’t fret too much at this stage … you can get a pretty good idea from your own data and a little 3rd party data. Start with what you know and build from that.

And remember, it not always about financial incentives. Often it is information a customer seeks … or it can be a combination of information and incentives. Technology exists to discover and deliver that which is appropriate to the specific customer.

Actually, the data technology and systems exists to accomplish all+ of what I have discussed.

Why commit to the shopper –centric model

Why go shopper – centric? Remember that just a 1% improvement in price realization revenue will often translate to a double-digit increase in net profits. [Go figure what that does to your stock value.]

So … I think shopper – centric marketing merits some serious discussion not just as an abstract intellectual exercise, but also the effort to turn the potential into a real every day strategic and tactical tool.

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