The Holy Grail of Retail
How to Deliver Customer Centricity for Competitive Advantage
Graeme McVie
LoyaltyOne
About Our Two Surveys
Customer Survey
Retailer &
Manufacturer Survey
Method: Completed on mobile phone
(app-based) immediately after shopping
at a food, drug, or mass retailer
Respondents: 1005 U.S. shoppers
• Ages 18 to 55
• Primary or shared responsibility
for household shopping
Length: 5 minutes
Source: uSamp online consumer panel
Distribution: Proportionately
representative of the U.S. population by
age, gender, state
Method: Completed online
(computer/tablet/smartphone)
Respondents: 335 managers & above
• Employed full-time at food, drug, or
mass retailer or consumer goods
manufacturer
• $1B+ in annual U.S. sales
• 500+ employees
Length: 15 minutes
Source: uSamp online B2B panel
Distribution: 50/50 retailer/manufacturer
Today’s Discussion Topics
WHY?
Why is a customer-centric approach essential to
long-term success?
WHAT?
What opportunities exist to enhance customer
centricity?
HOW?
How to pursue customer-centric retailing for
competitive advantage and sustainable growth
WHY A CUSTOMERCENTRIC APPROACH IS
ESSENTIAL TO
LONG-TERM SUCCESS
Important for Long-term Success: Customer Centricity was
Considered Twice as Important as the Next Factor
%
40
35
30
25
20
15
10
5
0
Manufacturers
Retailers
Most Customers Want Retailers to be
Customer-Centric in Multiple Ways
Relevant
Coupons Based
Relevant coupons
based on my
on
my Shopping
shopping
Relevant
FocusMerchandising
on satisfying
customer
needs
Based on Data
I Share
Reward me for my
Focus on Satisfying
loyalty (earn &
Customer Needs
redeem points)
Special
Based
SpecialOffers
offers based
my loyalty
ononmy
Loyalty
Relevant
Reward merchandising
me
for my Loyalty (Earn &
based
on data I share
Redeem
Points)
7 in 10 Retailers Expect Big Impact from a
Customer-Centric Approach
Value per Customer
Retention
Market Share
# of Active Customers
Spend per Customer
Promotion Performance
Customer Reactivation
Marketing ROI
Acquisition
Efficiency
ROII
A Focus on Current Customers is Aligned with
Current Customer Behavior
83%
of customers have been
shopping at their primary
store for more than
three years
Focusing on Current Customers Presents
Growth Opportunities
% share of spend by category (top customers, top 10 categories)
100%
90%
80%
70%
Average:
50%-70%
60%
50%
40%
Current
Spend by
Category
30%
20%
10%
0%
Opportunity
Spend by
Category
Category 1
Category 2
Category 3
Category 4
Category 5
Category 6
Category 7
Category 8
Category 9
Category 10
We Consistently See These Benefits When Utilizing
a Customer-Centric Approach
CUSTOMER-CENTRIC PRICING
CUSTOMER-CENTRIC PROMOTIONS
SALES
GM
SALES
GM
1%-3%
2%-5%
3%-6%
5%-10%
CUSTOMER-CENTRIC ASSORTMENT
CUSTOMER-CENTRIC MARKETING
SALES
GM
SALES
ROIs
1%-3%
2%-4%
1%-4%
40%-150%
The Retailers that Best Satisfy the Needs of
Customers Will Win
To achieve this, retailers need to
realize two objectives:
Understand
the needs of individual customers
on a timely & frequent basis
Consistently
Execute Actions
that best satisfy customer needs
THERE ARE MANY
OPPORTUNITIES TO
ENHANCE CUSTOMER
CENTRICITY
Retailers Believe They’re Embracing Shopper
Insights, but Half of Shoppers Aren’t Feeling It
Senior management has
strong commitment to
customer centricity
We leverage customer
Insights to develop
strategies and plans
We consistently deliver
personalized marketing
communications
They don’t ask for my
feedback after I shop
The personal data
they collect does
not benefit me
They don’t send me
attractive offers based
on my shopping
Going Deeper, Retailers are not Consistently
Utilizing Customer Data Company-Wide
30%
49%
36%
Operationalized
Insights
37%
32%
Customer
Data
25%
7 in 10 Manufacturers Feel That Retailers Aren’t
Using Customer Data Enough
Retailers Are Not Seeing the Fruit of Their
Efforts
MORE APPEALING
PROMOTIONS
MORE RELEVANT COMMUNICATIONS
MORE RELEVANT PRODUCT ASSORTMENT
BETTER VALUE PRICE PERCEPTION
BETTER CUSTOMER ENGAGEMENT
1 2
in
have seen
improvements
To Become More Customer-Centric,
Challenges Need to be Overcome
1
INCORPORATE INTO STRATEGIC DECISIONS
2
CHANGE ORGANIZATIONAL MINDSET
3
IMPROVE PROCESSES/TRAINING INFRASTRUCTURE
4
OPERATING AS DEPARTMENTAL SILOS
5
INCORPORATE CUSTOMER INTO DAILY DECISIONS
6
IF IT AIN’T BROKE…DON’T FIX IT
REALIZE THE FULL
POTENTIAL OF
CUSTOMER CENTRICITY
Historically, Customer Centricity has Delivered
Different Value in Different Areas
Loyalty
Programs
Customer
Marketing
Merchandising
Vendor
Collaboration
(Funds)
Integrated Customer-Centric Retailing
Overcomes Organizational Silos
Marketing
Customer
Behavior
Customer
Metrics
Integrated Customer
Centricity
Customer
Behavior
Product
Attributes
Merchandising
Product
Attributes
Category
Metrics
Customer &
Campaign Analytics
Merch + Marketing
Optimization
Category Models &
Optimization
Customer-Centric
Policies & Reports,
Targeted Marketing
Campaigns
1-to-1 Marketing,
Customer-Centric
Optimized
Price/Promo/Assort
Category-Specific
Optimized Prices,
Promotions & Assortment
Best-in-Class Customer-Centric Retailing from
Strategy to Execution Along the Value Chain
Enterprise Customer Strategy
 Analyze customers
 Identify growth opportunities by customer, category, store
 Develop customer strategy & drive functional plans
Integrated Customer-Driven Plans
Merchandising
• Category Strategy
• Price, Promo, Assort
• Innovation
Marketing
• Loyalty
• 1-to-1
• Targeted Mass
Operations
• Store Features/Programs
• Service
• Real-estate Planning
Vendor Collaboration & Alignment
Pragmatic, Phased Approach for
Customer-Centric Strategy
Create shopper
insights:
• Identify greatest
strategic value
opportunities
Drive strategic
decisions:
• Allocation of resources
Democratize shopper
insights:
• Incorporate customers
across the company
Drive overall strategy
process:
• Design enterprise
customer strategy
Strategy Example: Allocate Resources to Largest
Category Opportunities
Pragmatic, Phased Approach for
Customer-Centric Merchandising
Promotions:
• Deploy shopper/needspecific promos
Pricing:
• Identify KVIs for loyal
customers; price for
value
Promotions:
• Solicit customer-centric
promos from CPGs
Pricing/Assortment:
• Understand segment impact
of price/assort decisions
Pricing:
• Segment-driven prices
Assortment:
• Drive innovation
Collaboration:
• Align manufacturer
brand/trade investments
with your customer needs
Pricing Example: Make Informed
Customer-Driven Price Reductions
ITEM A
Price Change: -10%
ITEM B
Price Change: -10%
All
Volume Change: +12%
Volume Change: +10%
1st
Volume Change: 0%
Volume Change: +12%
2nd
Volume Change: +3%
Volume Change: +8%
3rd
Volume Change: +20%
Volume Change: +2%
Promo Example: Promotions that Appeal to Best
Customers AND Deliver Category Results
Coffee Example
Value to Overall Category
HIGH
LOW
Maintain for Overall Category Value
Maximize Promo Investment
Fix or Stop
Maintain for Best Customer Value
Private Label Ground Coffee
Value to Best Customers
HIGH
Promo Example: Re-Allocate Investments from
Promotions that Don’t Perform
Sales $’s at Different Discount Depths Overall and by Segment
All Customers
Sales $’s
Low Value
Customers
Secondary
Customers
Priority
Customers
0%
0%
10%
10%
20%
20%
30%
30%
Discount %
40%
40%
50%
50%
Assortment Example: A Customer-Centric
Approach to Assortment
1. Determine Item Importance by
Customer/Segment
AssortmentDriven Segments
Segment Item
Importance
2. Quantify Each Item’s True
Value/Importance
Current Value
+
=
Transferable
Demand
Item Halo Demand
True Item Value
Pragmatic, Phased Approach for
Customer-Centric Marketing
Customer Marketing:
• Improve effectiveness
of upcoming
customer marketing
campaigns
CRM:
• Build shopper
engagement intelligence
platform
Customer Marketing:
• Consistently execute
customer-centric
marketing comms
Branding:
• Design overall & banner
branding
Marketing Mix:
• Shift budgets from
mass, untargeted
activities to personalized
marketing
Offer Optimization Consistently Designs
Personalized, Omni-Channel Communications
Offer Bank
Content & Channel Bank
Email
Paper
100% PERSONALIZED
$5 off when
you spend
more than
$100
Web
Pragmatic, Phased Approach for
Customer-Centric Operations
Demo/Info Centers:
• Setup in-store
demo/info stations
in specific stores
that are aligned
with large growth
opportunities
Events/Programs:
• Establish customerdriven events/programs
in-store
Staff Alignment:
• Hire, train and allocate
staff in order to satisfy
large customer needs
Customer Experience
Design:
• Improve the shopping
experience by designing
stores around customer
needs
Example: Which Stores Present Opportunities for
Seafood among Households with Teens?
District A
Store #11
District B
District C
District D
District E
This Customer-Centric Journey Might Not Be
as Long as You Think
WHAT RETAILERS
PREDICT
WHAT WE KNOW AT
LOYALTYONE
It takes
1 to 4 years
It takes
<1 year
TO BECOME MORE
CUSTOMER-CENTRIC
TO SEE IMPACT OF
CUSTOMER CENTRICITY
QUESTIONS & ANSWERS