The State of Retail: Know Thy CustomerNovember 02, 2016
Retail seems to be taking a beating. For many companies foot traffic – and earnings – are in decline. The health of the US department stores and malls are “wavering between merely unwell to terminally ill,” depending on who you ask. Revenue from e-commerce is steadily increasing but can’t yet fill the gap created by weak in-store sales. (In Q2 of 2016, e-commerce sales accounted for only 7.5% of total retail sales).
The problem is consumers are shopping differently today, with a focus on online shopping and buying ‘experiences’ over ‘stuff.’ Smartphones and fast Wi-Fi / LTE are accelerating the change.
Industries that have been slow to respond are hurting. Department and discount stores like Macy’s and Sears have been forced to close brick-and-mortar stores. Even Wal-Mart decided to close more than 150 stores in 2016, in order to focus on improving their position in e-commerce with its $3.3 billion acquisition of Jet.com.
It’s yet another internet-age saga of change happens, adapt or die and all of that. But it’s true, the status quo keeps failing us lately.
Gary Vaynerchuck recently summed up the times very bluntly but honestly: “If you are running [TV] commercials for a brand that targets consumers 22 and under, you’re a fuckface.”
It’s hard to know why we systematically resist change, but what we do know about the market today is this — know your customers. Really. Do it.
Do You Know Your Customers And Prospects?
The American retail industry was once facilitated by face-to-face transactions and dominated by predictable consumer shopping patterns. That’s gone. Today, retail is in the hands of the consumer – and the consumer wants one-touch purchasing and free overnight home delivery.
Retailers have reacted to changing consumer behavior in a wide variety of ways, including closing down physical stores, creating made-to-order products, offering in-store pickup, coordinating multi-channel offers, creating differentiated products, conducting brand collaborations and partnerships, and focusing on e-commerce.
All of these strategies are important and should be based in one critical piece of the puzzle—accurate, true customer profiling. Marketers are still relying solely on either old-school fictitious personas from creatives, based on anecdotal evidence. Or they use some data and do predictive modeling, but do it all manually, relying on human power instead of computing power.
Creative development, messaging and customer acquisition (prospecting) are lagging far behind, even as many other aspects of marketing today have become rigorous, highly automated and data-driven.
Improving these specific marketing disciplines is certainly the job of predictive marketing—which is essentially the practice of customer profiling and prospect discovery. Yet, predictive marketing is a large hurdle for brands and agencies today.
This is because, when it comes to predicting which consumers will love and buy your brand—and how to best message and reach those prospective consumers—even the most advanced retailers and their agencies still rely on large physical data science teams and predictive methods that are decades old.
“74% of marketers using dynamic content powered by predictive intelligence, rated it as absolutely critical or very important in helping them create cohesive customer journeys.”
— Salesforce Research
Brands and agencies have yet to automate predictive marketing and move it to the cloud.
Fortunately, there’s a marketing platform that does just that.
If retailers commit to building better, data-driven profiles of their customers and the same for finding net-new customers, they’ll improve their ability to draw and retain more valuable customers. By learning to love automation, retailers might be able to – not just keep up with changing consumer behavior – but even get in front of it.