• How CMOs can create true customer value through segmentation
  • How CMOs can create true customer value through segmentation

    Retail data expert Marco Colombo reveals how technology marketing leaders can learn about relationships and stories from a major European shopping chain

    Establishing customer value is a crucial aspect for any marketer, but especially so of marketers within consumer facing organisations and brands. Here Marco Colombo, Solutions and Innovation Director at market data leaders IRI, discusses the process of creating customer value through segmentation, targeting and activation through the lens of the retail environment.

     Trying to achieve the ‘holy grail' of targeting the right people at the right time with the right message has always been the challenge for technology marketing leaders. But as customers become more demanding of those they do business and spend their money with - expecting a much more personalised experience tailored to their needs - marketing needs to keep up.

    Personalisation has been been a priority for technology marketing leaders for some time. A more targeted appproach is required and this usually begins with some sort of segmentation that can transform an often complex and diverse group of customers into smaller groups - and from ‘one-size-fits-all' to a more personalised approach and one-to-one marketing.

    Today, many retail organisations segment customers using the RFM method - recency, frequency and monetary value - as a way of understanding their total customer value. Recency defines how recently a customer has made a purchase; frequency how often they make a purchase; and monetary value is how much a customer spends. Regularity is an additional axis that quantifies how consistent and even the purchasing pattern is.

    Proper analysis of this combination of factors can help a business grow, even within challenging markets or times. Organsations can reasonably predict which customers are likely to make repeat purchases, the amount of revenue from new versus repeat customers and, most importantly, how to turn occasional customers into regular ones.

    Outside of technology marketing, take major European retailer Conad, which has spoken publicly about the customer value and segmentation strategies that it has implemented in its stores. Conad is one of the largest retail chains in Italy and with more than 3,000 stores and has been operating as a cooperative system since it was founded back in 1962 in Bologna. The retailer is structured on three levels: entrepreneur members (owners of the retail outlets), cooperatives (large scale shopping and distribution centres) and the national consortium (a service and market oriented body for member companies).  Since 2009, it has seen huge growth thanks to its unique structure, from developing strong relationships with the local community, and also in strategically placing stores close to where shoppers live and shop. In 2019, it was reported that the retailer was set to invest more than 300 million Euros in new store openings and restructuring of existing stores. 

    The motto of Conad is: "customers don't buy products and services but relationships, stories and magic," while the Conad strategy is all about transforming stores from places where shoppers purchase products to places where they can find solutions for their needs. To keep up with a constantly evolving shopper landscape and changing consumer behaviour and attitudes, Conad started to reshape its stores from point-of-sale vehicles to location focused operations where relationship-building happens.

    To improve its relationship with consumers, Conad saw the value in understanding who its customers really are, implementing a customer database that would provide a ‘single source of truth' detailing a comprehensive view of shopper information and behaviour, as well as the distance of store locations to customers. 

    Unlocking customer behaviour through data

    For any business, whether a high street or technology retailer looking to better understand and target shoppers and establish stores in more convenient locations, or a consumer technology business looking to offer customers a more seamless experience, the process of relationships starts and ends with data. But while data may be key to unlocking customer behaviour, technology marketing leaders can be overwhelmed by it. We have seen an explosion in recent years, particularly  where retailers and manufacturers are inundated with huge quantities of data from an ever-increasing number of disparate sources, whether that is point-of-sale, inventory, e-commerce and customer loyalty data. Despite these challenges, data is the key to unlocking consumer behaviour and shopper habit understanding. The challenge is in managing and understanding this data, and then translating it into actionable insights that help technology marketing leaders to grow the business. Making data-driven decisions, often using complex algorithms is becoming more complicated and confined to just a few data experts.

    For Conad, the process of deciphering and segmenting of its shopper data was divided up into five main stages:

    ·       Shopper data collection

    ·       Data management

    ·       Reporting automated analytics

    ·       Advanced analytics

    ·       Consumer activation.

    The retailer was able to create customer value by activating shoppers in four key areas:

    ·       Purchase segmentation and trip missions: Building trip mission clusters based on purchase size and content

    ·       Customer behaviour RFM method: Tracking the most valuable customers performance

    ·       Customer spend: Focusing on key purchase axis to identify high-medium-low customers

    ·       Preferred point of sale: Qualifying customers by adding modelling to behavioural dynamics.

    As a result, Conad was able to engage shoppers with more relevant and targeted marketing and advertising, implement mass initiatives to segment stores and provide location-based product assortments. Furthermore, Codan could accurately target shoppers to drive frequency and increase average basket size, while sending personalised custom messages to reward loyalty and support category growth.

    About the author: 
    Marco Colombo is Solutions and Innovation Director in Italy at market data leaders IRI



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