Right analytics can help retailers improve sales
Retail companies have to deal with vast amount of data daily and are increasingly investing in advanced analytics to understand consumer preferences to improve sales and profitability. However, researchers believe that to understand the full potential of analytics, retailers must be source and manage the right data, apply analytics that generate insights and translate those insights into effective frontline action.
There is no doubt that analytics can help retail and consumer goods companies in making better and faster decisions in their day to day business and deliver improved performance. Suresh Dangi, Chief of Technical Services, Titan Eye Plus explains with an example. He states that in Titan Eye Plus, the eyewear segment of Titan Industries, analyzing type of lens customers choose play a vital role, especially in relation to understanding customer preference and segmentation. “In Pune, a place with more students population, most customers would prefer fancy lenses as compared to Jamshedpur, where more senior citizens reside. Using of analytics in our supply chain management (SCM) and inventory management helped us improve our performance and optimize supply chain workflows, thereby reducing costs,” says Dangi.
Agrees Rohit Jalan, business development executive, Linc Pen & Plastic Limited, who believes that based on customer segmentation with the help of advanced analytics, retail and consumer goods companies can decide on what and how much to stock, which can improve customer satisfaction and subsequently the bottom line. According to him, “What’s more important is the right use of analytics can help measure the ROI for marketing spend across both conventional and newer marketing tools such as social media, which is extremely important for retail firms,” he says.
Doing analytics right
While highlighting the critical success factors in any analytics initiative, Peter Breuer, Director at McKinsey mentions in a recent article that exploiting data and analytics require three capabilities. “First, companies must be able to choose the right data and manage multiple data sources. Second, they need the capability to build advanced models that turn the data into insights. Third and most critical, management must undertake a transformational-change program so that the insights translate into effective action,” he mentions.
The article says, managing the data is the primary function in analytics. The first question the C-suite should ask is “which decisions do we want to improve?” mentions the article. For example, the company wants to make better decisions about its spending on promotion or product and portfolio management. Accordingly, the company should collect and manage the data needed to conduct meaningful analysis. Breuer suggests this entails deliberate actions including creatively sourcing data, defining data-governance standards, and establishing an IT infrastructure.
It is equally important to turn data into insights and for that the company should first understand the analytics and ensure that the business model or tool yields actionable results. Titan Eye Plus for example, saw that nearly 70 per cent of its customers belong to the age group between 12 and 30 and they are most active on social media. Therefore, the retailer used Facebook to promote its online eye test, a first of its kind initiative in India that got a phenomenal success. “We chose the right medium to collect the required data that helped us in turning our insights into effective frontline action,” says Dangi.
The final success factor in analysis is the right understanding of this technology and its strategic application by the C-suites. The McKinsey article states that it is important for top management to define newer analytics process to the teams in a simplified way they can easily understand and adopt the practice. Breuer gave an example of a large consumer goods company that implemented a new demand-forecasting system that generated automatic forecasts of each retail customer’s inventory needs, but sales managers weren’t told that the new process included shipping of safety stock to every customer. When customers did not receive adequate stock, sales managers regularly overwrote the automatic forecasts. It took a long time for them to change their behavior and develop trust on the new system.
Therefore, the crux lies in the meaningful application of analytics by decision makers as experts believe when used strategically, analytics can offer retail companies a huge platform for growth and likewise help them considerably improve on their ROI.
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