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Retail: it’s all in the mind

Knowing what customers think has long been the holy grail, and online technology allows retailers to get inside their heads more than ever. But how should they use this information?

Knowing what customers are thinking, wanting and talking about has always been key for retailers.

“Good customer insight is fundamental to the success of any retailer, whether on the high street or online. Without joined-up customer insight you have a suit without the trousers - an incomplete set that doesn’t do the job,” says Kevin McSpadden, managing director of data consultancy more2.

As customers have embraced online shopping, so the opportunity to learn everything about the customer - from simple demographics to their likes and dislikes - has increased because of the rich data retailers can now access.

Andy Wood, managing director of data marketing specialist GI Insight, says: “Understanding your customer via data is by far the most valuable thing you can do, because once you link that data with transactions, the way you speak to them and the offers you give them become much more targeted.”

Such information can help with customer acquisition and retention and boost the frequency or value of transactions, and can also be used for everything from choosing store locations to merchandising them.

Although there are the traditional methods of gaining customer insight - from customer focus groups to exit surveys - online lets retailers track customers’ shopping patterns. Alex Morris, experience director at digital agency Enable Interactive, says: “Unlike traditional retail, every visitor to a website leaves a trail. We can see what they look at, what they reject, how long they spend there and at what point they leave. Traditional bricks-and-mortar buyers and merchandisers would kill for that insight, but only a few really smart online retailers have begun to figure out how to use that data effectively.”

Tanya Bowen, head of customer relationship management (CRM) at BT Expedite, says it is the same data retailers have always been after: “It’s just the methods of collecting that have changed. What’s different is how you capture it and the sophistication of the technology to analyse customer behaviour.”

Deciphering patterns

The holy grail is to not only understand the spending patterns of a customer but also to get to know who they are and what makes them tick, enabling the retailer to target offers and marketing communication more effectively. Andy Francis, chief executive of digital marketing company E-style, says: “If you’re sending the same marketing message to everyone on your database then you’re five years behind. If you realise all your customers are different and can segment people based on such variables and plug in any other information you have on them, then you should be targeting people based on that.”

Stuart Aplin, marketing director at online retail specialist Drivebusiness, adds: “We are using segmentation to create trigger points so each customer will create for themselves a custom route of communication. For instance, if I shop at Gant and spend £400 [as opposed to £100] I will go into a certain customer bucket that will change how that retailer communicates with me next time. If the data shows I always buy polo shirts then it’s about targeting me with information about next season’s polo shirts,” he says.

Retailers who prioritise customer insight promote a customer-centric culture. Jo Molineux, head of multi-channel at young fashion chain Republic, says: “Placing the customer at the heart of our business is absolutely what we do.” She says tools such as exit interviews, web surveys, usability studies and research are key to better understanding the customer.

And online customers are happy to help. “You have the ability to answer questions very quickly and also have a huge database of customers that are willing and able to respond,” she says.

Customer analysis is vital and can yield surprising results. Bowen talks of a trial that BT Expedite is running for one fashion retailer, which found in an online survey that 85% of its best customers felt its store assistants were very helpful. However, when it analysed the data from the 15% of shoppers who weren’t satisfied, it found that they were high-revenue, high-margin older customers who felt alienated by the younger staff. The retailer responded by rolling out a programme called ‘Respect for older ladies’ as a result. “That’s a really good way of marrying purchase data with CRM to target areas of weakness within the business,” says Bowen.

Social media also has an increasingly important role in helping retailers understand more about their customers, but some retailers are getting it wrong because they are being too corporate in their approach and simply using it to broadcast the arrival of new product.

Instead, it should be a two-way conversation. Molineux says: “We open our business up on social media - sharing trends, what buyers are doing and so on, but we also get customers asking questions, so our customer service team checks Facebook and Twitter daily and responds to those queries.”

This strategy also brings customers together. “You get other customers answering customer queries which creates that real community feel,” says Molineux.

At premium chain Reiss, head of brand communications and ecommerce Ruby Victor says the retailer is taking “baby steps” to being as responsive as it can on social media: “What social media has brought home is that it gives you a two-way conversation - which means you also need to decide how you are going to address negative comments too,” she says.

The retailer is working hard at how to handle the conversation. It is bringing its customer service team in-house so there is a single centre taking care of everything from in-store to online comments. “My role is making sure we respond to all channels, and that whatever the communication we react quickly,” says Victor.

Speed is of the essence. “If someone has had a bad experience it can go really wrong if you don’t get back to them quickly. Even if you can’t put something right you need to be seen to be listening and learning from it,” Victor adds.

At New Look, the fast-fashion retailer already has a social media presence, with 160,000 Facebook fans as well as a Twitter site, but about 18 months ago it launched its own social networking site, MyLook. Capped at 4,000 customers, it provides feedback from customers 24 hours a day, seven days a week and has proved invaluable, according to marketing director Joe Irons. “No subject is off-limits and customers are candid about both the good stuff and stuff we could do better,” he says.

Used in conjunction with more conventional methods, such as the 75 focus groups and 125,000 customer interviews it carried out last year, such tools are vital for New Look. “All of this is about this obsessive customer focus that we have,” says Irons.

Blogs also play a part in learning more about customers and are used by both Reiss and New Look. Leon Bailey-Green, director of fashion ecommerce specialist The Online Fashion Agency, says: “Retailers can understand the lifestyle of their customers by tracking what blog content they interact with. They can then match up events and social themes to their offering. If a blog about the races at Ascot gets a good reaction (tracked by resulting sales, views, social network shares, comments), that can lead to creating more Ascot content next year. Or if [singer] Lily Allen gets a better reaction than [Coronation Street actress] Michelle Keegan, the customer is more into music than soap.”

Single minded

Retailers are also moving towards having a single, aggregated view of the customer by bringing all their sources of data together - be they held in store, online or in customer service departments.

Says McSpadden: “While a single customer view can be difficult to achieve, it is crucial to a successful retail marketing strategy, and those that invest reap the rewards. There is no doubt if you collect customer data in store and market to them via email or mail, you drive footfall and the sales far exceed the costs of the marketing activity.”

This is a big aim for Republic. “We haven’t got a full single view of the customer yet but that’s something we are moving towards,” says Molineux.

A single customer view takes some effort but is worth it. However, a fear of the unknown means many retailers aren’t making the most of customer insight, says Richard Traish, senior partner at management consultancy Kurt Salmon Associates. “There may be a perception that it’s difficult to do but that’s not the case. Technology is out there which makes it more accessible”

As well as better marketing, customer insight also allows retailers to boost sales while new customers with similar spending or browsing patterns are online. Online merchandising specialist Avail Intelligence has a platform that enables retailers to anonymously track customer behaviour and compare it to previous customers’ behaviour, allowing it to offer other products that similar customers have bought.

Pontus Kristiansson, chief executive and co-founder of online merchandising firm Avail Intelligence, says it’s a powerful tool: “The greatest benefit is removing irrelevance for consumers. By helping them filter out what is relevant, retailers are rewarded with greater loyalty, because if you can find what you are looking for you get a better shopping experience.”

Kristiansson suggests retailers can go a step further: “It’s really powerful to combine behavioural merchandising with ratings and reviews.”

Fashion retailers are picking up on this and retailers such as Next, Boden and French Connection are using ratings services from social commerce provider Bazaarvoice to allow customers to read and leave customer reviews. Andy Leaver, vice president of international at Bazaarvoice, says not only do ratings help drive sales but the interaction allows even closer contact with customers and creates brand advocates.

He cites the example of Urban Outfitters: “They invited their top six ratings contributors to come in and found they were so close to their ideal demographic of customer that it was unreal,” he says.

Gaining good customer insight is of huge value to retailers, but there is so much information and there are so many uses to be had that it can also be daunting. Says Aplin: “A lot of people are getting blinded by the amount of data they’ve got and almost need to take a step back. You need to gather all that data but you need to know what you are going to do with it.”

Without customer insight, retailers can lose their focus, says Irons: “It’s such a competitive industry that you have to be responding to what the customer wants.”

And according to McSpadden, it pays its own rewards: “The retailers that put data at the heart of their business are not necessarily the biggest or richest but are typically growing fast. The greatest myth is it is expensive to do, but actually it’s expensive if you don’t.”

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