Data drives e-commerce
Data drives powerful results for retailers
When JCPenney's management said the company would revamp its entire merchandising and marketing focus in January, it spent a large portion of its meeting with investors showing off reams of consumer data that supported the decision.
The retailer's CMO, Michael Francis, said diving into databases was the starting point of shaping the company's strategy to drastically cut back markdowns and concentrate its marketing on a monthly schedule. “We went through a vast amount of quantitative and qualitative data,” he says at the time.
Retailers are increasingly taking deep dives into consumer data to create a shopping experience that's relevant to shoppers, especially in the online space. Not every revamp is a total brick-and-click overhaul like JCPenney's, but multichannel retailers are looking at everything from social media feeds to Quick Response (QR) code scans to old-school email click throughs to shape their digital presence.
Whether it is a supermarket linking loyalty program data with display ads to deliver digital circulars with relevant offers, or a dealership that offers personalized websites to car buyers that follow them along the ownership cycle, retailers are leveraging data to custom tailor every stage of online shopping.
“In the past, marketers were using the information in their databases to determine a consumers' lifetime value to the brand,” says Mark Miller, SVP and CRM practice lead at Digitas. “Today, marketers must use their database to figure out how to position their brand in a way that provides value to the consumers, instead of the other way around.”
The incremental results can be notable, and spread across product categories.
FordDirect, the joint digital marketing venture between the automaker and its dealers, has achieved 35% increases in service retention and 10% hikes in repeat vehicle sales through its Targeted Marketing program. The system ties into the dealer's database to provide personalized, targeted communications to shoppers, and customers in the database get a personalized website that tracks their service history and provides them with special offers.
“Targeting customers based on product features that align with their interests, lifestyle and purchase history helps us anticipate their questions and provide information that better commits them to the sale,” says FordDirect CEO Stacey Coopes. The targeted communications increase the likelihood of purchase by about 10%, she notes.
Personalized communications based on data build stronger bonds with a brand than can be done with “batch and blast approaches,” says Michael Fellner, manager of email marketing at online retailer Zappos.com. He says the shoe e-tailer has thrived by using data to drive segmentation and content for email and direct mail and to shape email contact strategy.
Marketers should not underestimate what's at stake here: Among its predictions for the next three years, analyst firm Gartner forecasts that 80% of multichannel efforts implemented through 2015 will fail because retailers will stick to strategies centered on products or retail channels, rather than focus on the customer.
“The biggest change that we have seen is a shift between silo-based marketing to being smart about looking at the consumer and looking at the consumer's ecosystem and saying: Where does my marketing fit in to this entire ecosystem?” says Jason Harper, VP of analytics and marketing intelligence at marketing agency Organic.
He says that Organic used consumer data to help develop a WalMart shopping app for tablets, which included the ability to navigate the store's extensive stock by curating the types of products they wanted to look at and building from that list.
Supermarket companies such as Ahold USA, parent company of the Stop & Shop chain, are experimenting with digital circulars to replace newspaper inserts, combining their loyalty program data with display ads to deliver offers to their customers. Harper says Ahold is showing seven-to-one ROI on targeted emails thanks to its analytics work.
Slicing and dicing email efforts is still the most popular use of databases among retailers, say experts. Not coincidentally, email and search remain the most popular forms of online marketing.
More involved tactics like microsites are expensive, and email is inexpensive, thanks to new affordable solutions, says Steve Grosklaus, EVP of the optimization practice at agency Arc Worldwide.
Email optimization is incredibly sophisticated now, with real-time modeling that allows for matching a subject line to an individual, as well as arranging for optimal time sends and far more extensive creative variety than in the past, Grosklaus says. The technology now allows for 100 different versions of an email by using different creative look and feel and not just varying offers, he says. The ability to segment email 100 ways means working more closely with creative teams to build a look and feel that works better with each segment, he adds.
“The thing that allows us to do that is all the information that's coming together,” Grosklaus says. In the last four to five years, there has been an explosion in both the amount of data available and the analytics infrastructure to handle it, including cloud-based solutions that put data mining and segmentation within the reach of more users, he explains.
Q&A: Aaron Magness, VP of marketing at Coastal.com
Coastal.com VP of marketing Aaron Magness on the growing importance of creating a personalized experience.Click to read full Q&A.
“Within the next few months, it's going to feel like everybody is doing it … The market infrastructure is really maturing,” says Organic's Harper. “You have this really nice evolution where you have partners who are really smart about database management and segmentation that are linking these disparate sources together. That's the backbone,” he says.
However, even as analytics are expanding to keep pace, the retail market continues to become even more complex with the addition of mobile shopping and the surge in the use of tablets, which have added another channel to segment and understand. According to IBM, 90% of the data available today has been generated in just the last two years.
One of the biggest challenges in tailoring retail experiences to shoppers is just sorting through often redundant data from multiple touchpoints, experts say. Getting shoppers to part with information is becoming less of an issue than dealing with the mass of data being spun off from every channel in the new “omnichannel” retailing industry.
A recent Forrester Research study noted that most retail transactions involved at least two touchpoints, some both online and offline; attributing the sale to one or another is a challenge that retailers will increasingly face as they create online experiences that dovetail across in-store, online and mobile shopping channels.
“Marketers must start thinking about how to turn their big data into smart data,” Digitas' Miller says. “They're paralyzed by their own research.” The first step, most industry observers agree, is focusing on what the retailer wants to offer customers, the better to sort out which data will help to that end.
“The onus though is still on the retailer. What are we trying to accomplish and what are we trying to fulfill? That is the experience that's at the front end. Then you can figure out what's the best tool to use,” says Aaron Magness, VP of marketing at Coastal.com.
The eyeglass e-tailer is carrying out a business intelligence review that includes acquiring IT to better parse customer data. Coastal.com already serves up content based on a visitor's past shopping patterns or the type of display ad that a new visitor clicked on to arrive at the site, and it has added a recommendation engine. However, in this competitive environment, that's not enough, sites need to be continually improving and personalizing the online experience, Magness explains.
“The amount of data becomes manageable if you know what data is relevant,” Arc's Grosklaus says.
Developing a comprehensive strategy is going to require marketers to develop new skills to handle social media and mobile shopping data, but also to integrate silos to marry data from one channel to another as the tools allow, experts say.
“The biggest database developments that I've seen don't have to do with infrastructure,” Digitas' Miller says. “The real developments are [finding] marketers and statisticians who know how to work with data in real time to drive their business forward. The biggest developments are the new statistical skill sets [and] how marketers are using the new tools for their databases, ” Miller adds.