Many retailers have learned how to leverage their data to help identify opportunities to increase their share-of-wallet by cross-selling additional products and services to established customers. Yet many retailers remain disappointed with the results of their cross-selling efforts to deepen and broaden their relationships with established customers. Response rates have remained flat or actually declined. Average order sizes remain unchanged or are actually decreasing. Tinkering with the current approach will no longer provide incremental improvements — 2009 is the year to build a new foundation for your cross-selling strategy, based on four cornerstone concepts:
1. In-Market Timing
Many retailers who have developed an ability to anticipate when customers are interested in buying have done so by building a standalone model, and then face the logistical challenges of working with multiple models to account for both choice and timing in any customer’s purchase decision. Your analytics department or vendor needs to have the capability to take both of these dimensions into consideration in one integrated modeling framework.
How could your cross-selling results improve if you were able to not only anticipate what each customer or segment is interested in, but when their interest will be highest? And to eliminate individual customers or segments from further solicitations of the same or similar offer when they are no longer interested? And do both while also taking into account your competitions’ plans?
2. Repeat-Purchaser Focus
Every retailer has a percentage of single-transaction customers, but few retailers design and implement specific strategies to increase their number of repeat customers. Aside from the data management issue of identifying a first-time customer (not an insignificant issue in itself for many retailers), the other challenge is deciding what exactly to offer these customers to encourage a second purchase. Even with the limited data that you will have on file for these customers, an analysis can identify at either the individual or segment level the specific second-purchase decisions with the highest potential acceptance.
3. Cross-Channel Offer Affinity
Every retailer knows the importance of delivering consistent messaging across customer channels, and many are in the process of making significant strides in this area. Yet, despite widespread consensus that cross-channel integration is critical, many retailers struggle to find and deploy practical strategies to infuse more cross-channel intelligence into their marketing programs. In many cases, the concept of “offer affinity†affords retailers an immediate opportunity to provide meaningful communications to customers across channels.
“Offer affinity†is based on a marketing analysis that finds a pattern of one type of purchase naturally following another. To use a home improvement example, a purchase of deck lumber would have an intuitive follow-up sale of deck stain, but an analysis of transaction data could point to other “missed purchase categories†such as joist brackets, and flashing.
Finding these “potential pairings†is something that in-store merchandising display departments have studied and reacted to for years, but now that kind of intelligence can inform both offline and online customer communications.
4. Marketing Agility
A decade after the launch of marketing automation systems to execute and measure direct marketing strategies, many retailers remain locked into campaign-centric views of their marketing programs. The demands of today’s marketplace require that retailers be able to respond to smaller and smaller segments of customers with increasingly targeted and timely offers.
Your database marketing platform needs to provide a cross-channel marketing management solution that provides a high degree of customization at either the individual customer or segment level. Such a platform will allow you to transform the way you think about marketing, breaking out of the traditional campaign-centric view to truly deliver customer-centric marketing.
David King is CEO of Fulcrum.
By drawing on the experience of traditional retail, and taking advantage of the unique opportunities presented by the Internet, e-retailers can look brightly at the future in spite of a gloomy economy.
