merchandising moments of influence

IBM Software IBM ExperienceOne

Merchandising moments of influenceUnderstanding customers and guiding them to success

IBM Software Merchandising moments of influence 2

The priceThe assortment The promotion About usThe customer conversionThe customerIntroduction

To understand why customers make the purchase choices they do, it may be helpful to look rigorously at all the moments that have an influence on their final actions.

This reasoning is the basis of concepts variously called “purchase funnel,” or the “path to purchase” or “moments of truth” by product marketers. It implies a rather linear progression from general awareness to preference to decision to acquisition of a specific product.

The path to purchase is a useful construct—at each junction along the way there are opportunities for marketers and merchants to understand customers and guide them to success.

Yet, customers are seldom as single-minded as we imagine them to be. The paths to purchase are in reality very much branched and interconnected, replete with moments of decision that precede the final purchase choice—what is sometimes called customer conversion.

For a fresh perspective on this process, let’s briefly trace the customer journey. Along the way we can examine how and where the right marketing influences and decisions can help benefit the customer, and help the retailer achieve success in the process.

The end game is customer success. It’s what we all want to happen. Along the way we’ll do our best to illuminate:

• How did the customer arrive at the best possible purchase outcome?

• What decision moments can the retailer influence along the way?

• What tools can the retailer use exert these influences?• What actions can the retailer take to bring them there?

We’ll embark with an awareness that not every purchase path is equivalent. Shopping trips will vary by mission type, duration and seasonality. Some categories may be on sale, others in promotion. Certain purchases may require a good deal of consideration and price comparison, while others are part of a larger basket and get only a few seconds of thought.

Let’s go back to the beginning and identify some of the precursor moments that led to that success.

Introduction

There are opportunities for marketers and merchants to understand customers and guide them to success.

Introduction



Private label meets brandsA major U.S. retailer that historically reserved promotional displays for private label merchandise, used IBM DemandTec Shopper Insights to simulate the impact of promoting private label and branded goods together, and identified an opportunity to grow category volume and profit by +20 percent.

Improving price perceptionA European retailer needed to understand and act upon the pricing that mattered most to their customers. With IBM DemandTec Shopper Insights they identified better price points by segment that improved price perception and helped retain loyal customers, while maintaining a higher overall price index than key competitors.

Success is a happy, loyal customer. This process, however, starts long before, as retailers analyze historical customer demand and response, in order to extract insights about what makes customers feel successful and well cared for in the retail environment.

Savvy retailers rely on multiple streams of customer insights to learn how to keep customers aware, interested and loyal. It’s crucial to maintain an understanding of who they are, where they shop, what they buy.

The customerIt all starts with customer data derived from numerous sources—loyalty cards; basket analysis; data from external and syndicated sources. Retailers apply these insights against their own customer segmentations and these infuse the majority of subsequent decisions.

Customers’ ultimate choices (the “conversions” we talked about earlier) become the new bedrock facts for more refined, updated insights. They indicate how customers define their own success. The assortment, price, promotion, markdown and segmentation decisions the retailer made along the way.

Customers make the choice about whether to participate in club card program. They choose where they shop and what they buy at each occasion. Collecting data on these choices provides a first cut at customer insights that become input to the optimization processes to follow.

The customerIntroduction

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How IBM makes it happenIBM® DemandTec® Shopper Insights helps retailers and their trading partners with insights that help them better understand the shopper, and take action on these insights across pricing, promotional and assortment activities.

This common view of the most important asset— the customer—helps to ensure a better solution for everyone and a more collaborative relationship for the long term.

The solution provides decision-point shopper insights for retailers and their trading partners

IBM DemandTec Shopper Insights lets retailers understand who the shoppers are, where they shop, what they buy.

• Insights add value throughout the business planning process. Setting corporate strategy, determining key target segments, supporting marketing initiatives, executing merchandising plans in the store and collaborating with trading partners.

• Understand shopper behavior and answer key business questions. Make use of a suite of dashboards designed to quickly answer specific marketing and merchandising questions.

• Collaborate with trading partners to design shopper-specific solutions. Both retailers and consumer products companies need to better understand the shopper.

For more information

Read the Shopper-Centric Retailing eBook

Savvy retailers rely on multiple streams of customer insights to learn how to keep customers aware, interested, well cared for and loyal.

The customer

http://www.ibm.com/software/products/us/en/shopper-insights/

https://www.ibm.com/services/forms/signup.do?source=swg-smartercommerce-emm&S_PKG=ov10659&S_CMP=1355-0-118821

https://www.youtube.com/watch?v=838UAHvOGlA



The assortment

The assortment

Assortments based on scienceCombining customer insights, segmentation and optimization science to make better assortment decisions, a multi-billion dollar retailer used IBM DemandTec Assortment Optimization to grow top line sales by up to 10 percent across several categories.

Consumer-driven merchandisingA major retailer lost sales after altering their merchandising strategy for a category to reflect a brand-first philosophy. Using the Consumer Decision Tree (CDT) within IBM DemandTec Assortment Optimization the Buyer identified a better way to merchandise the category, recovering sales of USD two million.

The right mix of merchandise is an essential element of the customer experience, particularly in fast-moving consumer goods retailers. The sophistication of the assortment process is gaining rapidly, fueled by demand-based analytics that enable localized, relevant assortments based on customer response.

A strong assortment optimization discipline assures that customers are able to find the items they expect to find and want to buy. That means the successful retailer is able to determine a mix within each category that is tailored by store and/or region, based on insights from customer segmentation, regional preferences, demand modeling and other cues.

It is a relatively recent discipline to empirically manage assortments at the category-store level based on variation in demand. More retailers are mastering this capability as they learn to recognize how tuning the mix can enhance average tickets and encourage more frequent re-patronage.

In practice, the variability may come down to a relatively small percentage of the product mix. In grocery, there may be local brand preferences in certain categories. In apparel, it may mean adjusting the mix of sizes or colors for a popular dress, to meet known geographic variation. In any store, certain slower turning items may be associated with larger shopping baskets or high value customers and should be preserved in the mix.

Assortment Optimization can help retailers make strategic assortment decisions to increase loyalty.

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Read the Science Meets Assortment Optimization white paper

How IBM makes it happenIBM DemandTec Assortment Optimization is designed to help retailers determine which items should be stocked by cluster, store or planogram size.

The determination is based on the customers who shop in each store, the competitive environment and a quantified understanding of whether each item in a category is merely duplicative or truly drives incremental sales by adding needed variety to the category.

Assortment Optimization can help retailers improve variety in their assortments, rationalize SKU counts, localize product offerings and make strategic assortment decisions to increase loyalty.

Assortment Optimization defines the right mix tailored by store/region, based on shopper segmentation.

• Base assortment decisions on a quantitative understanding of incrementality and transferable demand. Relies on science-based analysis of shopper behavior to identify the relative importance of product attributes and the actual switching behavior of consumers.

• Collaborate with trading partners. Cloud-based, software-as-a-service delivery model allows real-time collaboration between all stakeholders: Retailers, Distributors and Manufacturers.

• Increase merchant productivity with a retailer-friendly design. Features automated processes to address the kinds of assortment challenges merchants face daily.


The assortment


http://www.ibm.com/software/products/us/en/assortment-optimization/

https://www.youtube.com/watch?v=h51uzR5plnc



The price

Competitive edgeA European grocery retailer improved comparable stores sales by 2.4 percent and increased product turnover by 2.7 percent using IBM DemandTec Price Optimization to price more effectively against the competition, and manage pricing of private label products alongside leading brands.

Maximizing markdownsUsing IBM DemandTec Markdown Optimization to make science-based, store-level markdown decisions, a Department Store chain increased Gross Margin by 400 points, improved inventory productivity and reduced markdown evaluation and execution time.

Among the core messages customers receive from merchandising actions, prices are a key element. Base or every day prices establish the tone and image of the retail establishment, through to end of season clearance prices that form part of a markdown program to liquidate excess inventory.

Price differentials between branded and own label items should convey rationality. New items should be priced at levels that make sense alongside category staples. The reality is that customers will purchase items at prices they feel are right, and they rely upon varying cues in making those judgments, depending on the type of merchandise they are looking for:

• Remembering prices of items purchased frequently and viewing the prices of competing items on the same shelf.

• Pre-researching products at multiple retailers and “showrooming” by checking prices on their mobile devices while in store.

• Forming judgments based on fashionableness, brand reputation, style, make and materials.

• Focusing on known prices at competitors and price gaps of branded versus private label.

For the successful customer, every day prices should feel trustworthy, competitive, and reasonably stable. The retailer should remain briskly competitive on known value items and image categories, while preserving a healthy level of overall margins across each store assortment and its online shopping site.

Customers are also savvy and budget-conscious and may tend to wait for the expected sales, particularly in fashion and other seasonal merchandise, to buy items at a discounted price.

For many retailers, decisions about markdown depth and timing have been based on rules of thumb, merchant instinct, and sometimes sheer nerve. Poor decisions can undermine total margin for a selling season, while simultaneously conditioning customers to wait to shop for items they are certain will be available at much lower cost a few weeks after the season commences.

But when markdowns are conducted as part of an effective lifecycle pricing practice, this arrangement can provide a favorable outcome for all parties. The retailer frees up cash and clears floor space, while the customer is presented with attractive deals and no doubt a few pleasant surprises!

The price

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Read the Price Optimization Best Practices white paper

Read How Lifecycle Pricing Pays Dividends for Softlines Retailers

Watch the Lifecycle Price Management video

Watch the Markdown Optimization for Softlines video

How IBM makes it happenIBM’s Omni-Channel Pricing solution enables retailers to dynamically manage and optimize base, promotional and markdown pricing across channels to drive sales, volume, profit and shopper loyalty — all while maintaining price image.

Omni-Channel Pricing includes integrated cloud-based products that retailers can deploy independently or in concert as a comprehensive solution. Using this solution, retailers can improve efficiency, intelligently price across channels and the product lifecycle, and gain new insight into customer behavior.

Many users of the Omni-Channel Pricing solution access its powerful customer, demand and market insights to manage prices across the entire lifecycle—including setting base prices, determining the right promotional price, and placing items on clearance. Others take advantage of a single system to support both store and online pricing, predicating how prices in one channel may cannibalize sales in another, and prescribing recommended actions in response to competitive price changes.

Solution Components• IBM DemandTec Price Management enables

retailers to dynamically respond to competitive pricing and ensure intelligent compliance to strategic pricing policies and goals.

• IBM DemandTec Price Optimization enables retailers to evaluate scenarios and optimize prices across channels based on defined objectives.

• IBM DemandTec Markdown Optimization enables retailers to plan and optimize pricing, profit and inventory levels for items leaving the assortment.

• IBM DemandTec Promotion Optimization enables retailers to determine optimal promotions to accomplish merchandising and marketing objectives.


The price



http://www.youtube.com/watch?v=Ikr-vEk8VLc

http://www.youtube.com/watch?v=uYyxy9NPyOw



The promotion

Plan for successA Department Store retailer cleaned up promoted prices and projected multimillion dollar cost savings per annum by replacing its highly manual promotion planning system, which caused errors and unplanned discounts to be given, with IBM DemandTec Promotion Planning.

Trade funds masteredBy implementing IBM DemandTec Promotion Optimization and IBM DemandTec Deal Management, a leading grocery retailer streamlined its trade funds presentation, negotiation and reconciliation process, and is now managing 98 percent of all trade promotions through the system.

Promotions happen year round, for a variety of reasons, including manufacturer incentives, seasonal events, and competitive actions. They add excitement to the shopping experience, communicate a value message and give customers extra reasons to visit the store.

With an awareness that many final purchase decisions are triggered by personalized, or tailored or relevant promotions, retailers are engaged in a continuous effort to identify, plan and deliver the right portfolio of offers by category, by item, by region, by store, by customer segment and by individual. At stake are share of trips, share of wallet and the ability to reinforce loyal shopping habits among best customers.

Promotion management is an intricate challenge that changes constantly and rapidly. It takes an end-to-end promotions management solution to keep all the planning and execution detail in order. An ideal practice will enable the retailer to:

• Collaboratively develop promotion plans with suppliers

• Improve the efficiency of the planning process• Improve the effectiveness of promotions• Track and interpret performance for use in

future planning

Leading retailers systematically identify the best items to promote and deliver more targeted promotions to customer segments. They work to get the most from available trade promotion dollars, while delivering deals that meet customer interest, across all selling channels— online, in-store and even in newer mobile channels.

Retailers have good reason to optimize the promotion mix to ensure deals are not in conflict with each other within a store—such as between a top brand and a private label in the same category. It is critical to manage what happens at what time, so as to not negatively impact sales and margin.

Avoiding over-promotion is also of key importance. It can be damaging to make purchase decisions overwhelming for customers in the store with too many deals in the same category. This miscalculation can throw a carefully honed price perception out the window. Deal management solutions are designed to help keep all this detail under control.

The promotion

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Watch the End-to-End Promotion Management video

Read Best Practices in Promotion Planning and Execution

How IBM makes it happenEnd-to-End Promotion Management from IBM DemandTec can help reduce complexity through a fully integrated promotion-planning solution designed and built for today’s retail venues.

Solution Components• IBM DemandTec Promotion Optimization enables

retailers to determine the optimal promotions to accomplish merchandising and marketing objectives.

• IBM DemandTec Promotion Planning enables retailers to establish a single repository of promotional offers.

• IBM DemandTec Promotion Execution enables retailers to build a single repository for all their information and content about promotional offers and events.

• IBM DemandTec Deal Management enables retailers and manufacturers to automate and streamline their trade promotions processes.


With promotions it is critical to manage what happens at what time, so as to not negatively impact sales and margin.

The promotion

http://www.youtube.com/watch?v=S5_LakvtbLA


http://www.ibm.com/software/marketing-solutions/promotion-management-solution/



The formula for customer conversion at retail is an amalgam of sound, fact-based decisions encompassing price, assortment, promotions and markdowns, all based on reliable customer insights.

Insight-enabled merchandising is a recursive process for the retailer that begins with a plan to pay relentless attention to customer behavior and response. While the past is never a guarantee of future purchases, the resulting insights are the best indicator of how well the retailer’s decisions were aligned with the customers’ definition of success.

Individually, customers are not perfectly consistent creatures. They face a variety of decisions every day, and their priorities and preferences shift for all kinds of reasons. But systematic attention to their collective behavior and logical segmentation schemes frequently reveal opportunities to be more relevant to more customers more often.

The customer conversion


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The result is more customer conversions, more re-patronage, and a greater share of the customers’ wallets.

“Merchandising moments of influence” reminds us that there are multiple opportunities along the way to improve the probability of success and deliver on the promise to customers.

Insight-enabled merchandising reveals opportunities to be more relevant to more customers more often. The result is more customer conversions, more trips and a greater share of the customers’ wallets.

The customer conversion

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About IBM ExperienceOne IBM ExperienceOne helps you attract, delight and grow the loyalty of customers by enriching the ways you engage each of them. IBM ExperienceOne provides a set of integrated customer engagement solutions that empower marketing, merchandising, commerce and customer service teams to identify the customers and moments that matter most, and to rapidly apply those insights to develop and deliver personally rewarding brand experiences.

IBM ExperienceOne ignites innovation by leveraging patterns of success from more than 8,000 client engagements, original industry research, and products consistently recognized as industry leaders in major analyst reports.

IBM ExperienceOne solutions are delivered in cloud, on premises, and in hybrid options.

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