Retailers at risk from the 'anonymous customer'

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By: Wise Marketer Staff |

Posted on June 29, 2009

Retailers without means to consistently identify shoppers and link them with their transactions will become increasingly disadvantaged, regularly underperforming compared to their peers and being penalised in the financial markets, according to a paper by Hawkins Strategic.

The company's latest position paper, entitled 'Retail 3.0: Shopper Data', suggests that a growing divide is emerging in the retail industry, between two classes of retailers: those that are customer-aware, and those that are not. The paper defines customer aware retailers as those that have some ability to regularly, consistently, and accurately identify shoppers and their transactions.

According to CEO Gary Hawkins, 'For too long customer data has been synonymous with loyalty marketing, but this is a misconception. One must separate the means of linking the shopper to the transaction from whatever marketing initiatives may be enabled by that capability."

In other words, a loyalty is simply a way to label the shopper, so they can be made part of the transaction record along with the products they purchase. But while loyalty cards, accompanied by their usual marketing programmes, have so far been the most prevalent way to identify shoppers, other means of doing so are now at hand. For example, biometrics, RFID (radio frequency identification) cards and tags, mobile phones with NFC (near field communication -  a subset of RFID), smart cards and other technologies are proving to be quite suitable shopper identifiers.

These new tools, when combined with digital communication channels, have the potential to open the door to true individualised retail consumer marketing - something of a quantum leap beyond today's standard loyalty marketing techniques, according to Hawkins.

The Retail 3.0 concept identifies and heralds a shift of industry power to the individual shopper, driven by competition and understanding of shopper value - and enabled by technology. Shopper-identified transaction data is the foundation for this movement and, without it, retailers are likely to find themselves at a significant disadvantage compared to those who do.

"This growing schism might be loosely compared to the growing divide between those consumers with broadband internet connections and those inhabiting the offline world," explains Hawkins. "At a time when everyday services are increasingly delivered online - such as vehicle registration, banking, and travel bookings - those consumers who are unable to participate are disadvantaged, instead being forced to spend hours waiting in line, unable to quickly search for the best deals. There is therefore a productivity gap between the two worlds that will inevitably lead to an economic gap."

And so it is with retailers that lack shopper identification. While those in the technological 'dark ages' will fall behind, enlightened retailers will be able to deliver relevant promotions and information to individual shoppers using low cost digital channels (i.e. email, the web, mobile, and so on). Customer-aware retailers both large and small have already begun a steady climb to superior business and financial performance, while their less-aware peers may be heading for years of underperformance using mass advertising, undifferentiated marketing, and uneconomical communication strategies.

Green Hills, a large independent New York supermarket has served as Hawkins' laboratory for gathering, understanding, and using shopper data since the 1993 launch of its loyalty programme. Bu the intelligent use of shopper data at Green Hills took an giant leap forward two years ago with the creation and launch of SmartShop, a personalised marketing system created by Hawkins Strategic. The system allows the supermarket to deliver a new, personalised ad flyer to its loyalty programme members every week, providing personally relevant promotions based on their shopping history.

Members receive the promotions sheet via email, on the web, or even through in-store kiosks, with impressive results. According to Hawkins, across every customer segment these shoppers spend more, shop more frequently, and have higher annual retention rates than non-members, and the system has greatly reduced overall markdown expense.

Having witnessed and understood the inefficiency of one-for-all ad flyers and coupons, many retailers are already following suit and implementing technology to provide more differentiated and relevant promotions to their shoppers. But this kind of personalisation is possible only with shopper-identified transaction data, and that's where smart retailers can gain a competitive advantage. Moreover, as these efforts gain momentum in the industry, the divide between the haves and have-nots will widen.

As a result, the paper suggests, shopper identification is rapidly becoming the price of admission for retailers in an increasingly online, digital world of consumer marketing and services. This objective is often most cost-efficiently achieved by a loyalty or customer club card (or any form of unique shopper identification, whatever the format) that links the customer to their purchases.

The full position paper has been made available for free download from Hawkins Strategic's web site - click here (contact details requested).

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