Personal relevance is the key to more profitable retail marketing

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Personal relevance is the key to more profitable retail marketing

Marketers that are able to create a more targeted and personalised engagement with consumers will ultimately benefit from significantly higher returns in terms of response rates, sales uplift, retention and profit growth.

Marketers that are able to create a more targeted and personalised engagement with consumers will ultimately benefit from significantly higher returns in terms of response rates, sales uplift, retention and profit growth.

This is the conclusion from the latest Aberdeen Group Survey on customer insight and the impact of one to one marketing techniques. Whilst the benefits of using a more targeted approach to marketing are well known, its adoption is sometimes hampered by a lack of evidence to help justify the investment required.

This report helps provide some background evidence contrasting the fortunes of two sets of marketing approaches; those marketers that customise their offers according to broad market segments versus those that target based on the individual.

The difference between the performance of these two groups was significant. More targeted approaches enjoyed the following benefits over less targeted methods:

•    Campaign response rates that were 160% higher and sales uplifts that were 90% greater
•    A 30% increase on year on year transaction value, versus 1.5%
•    Customer retention rates that were 28% higher

The report suggests that higher performers were characterised by their advanced use of data to better target customers. In particular they combined both individual channel and product purchase preferences information when building a picture of the customer and making campaign decisions.  

Implications

Given the suggestion that a more targeted and personalised approach will considerably improve the performance of marketing you have to wonder why this approach isn’t being embraced more widely within retail. One key consideration is the treatment and understanding of the cost drivers when making an investment case. Many believe that untargeted approaches are more cost effective as no upfront investment is required in creating a targeting capability. However, this doesn’t consider the consequences in terms of the overall cost to the business.

Untargeted marketing can be very expensive; the use of untargeted and unnecessary discounts or promotions alone is a huge cost to business as is the cost of running mass marketing campaigns. This taken together with the potential negative sentiment cost of bombarding customers with irrelevant offers makes a targeted approach much more cost effective overall.

However, success with targeting is reliant on its effective adoption and many have tried and failed as a result of poor implementation. Whilst the temptation to build an in-house data insight capability is often overwhelming many have not understood the level of investment that is required in skill and experience. A lack of commitment to the level of in-house resource required often results in abandoned programmes and failure. Outsourcing this capability is often seen as an effective alternative by many.

Meinert Mellows of emnos comments “the Aberdeen survey provides further evidence of the power of data and personalised marketing. In our experience, the marketing advantages outlined are just part of a whole range of benefits enjoyed by those retailers that embrace customer insight and relevance. These include optimised merchandising, pricing, promotions, store design and manufacturing.”

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