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Smart Data Smart Decisions Smart Profits

we are convinced that retailers need to find the

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Unformatted text preview: nced that retailers need to find the value of smart customer data in their organization, build smart customer databases, and use smart information to create strong customer relationships and to make better business decisions. Then they will be able to nurture and protect customers and reap smart profits as their reward. 2 ©McKinsey & Company 2000 MCKI29 - Ret. Smart Des.7 8/9/00 11:08 AM Page 3 Finding the Value of Smart Customer Data While retailers have a great deal to gain from a deep understanding of their customers’ behavior, many are still struggling to get and use customer data to pursue profit growth opportunities. Historically, many retailers have been stymied by a traditional focus on mass marketing – reinforced by financial market valuations derived mainly from top-line sales and comparative-store sales growth. These pressures tend to place customer-centered data acquisition and strategies low on the corporate investment agenda. Some also have lacked access to enough customer-level data to gain insights to make smarter decisions. And, even when data were available, many have underinvested in the new analytic talent and tools necessary to turn their customer data into actionable insights that could drive increased sales and profits (see “Building the Customer Organization”). Still, there is good news for retailers who are seeking to get smart about their customers and to make smarter business decisions: both the sources of data and the technology to mine it have improved rapidly over the last few years. Through well-penetrated loyalty programs, growth in the number and traffic levels of retail Web sites, proprietary credit databases, and "reverse appends" of third-party credit cards, U.S. and European retailers can amass a treasure trove of customer data – the essential material that retailers can use to make innovative decisions to outperform their competitors (see “The Value of Customer Data”). From these kinds of data, retailers can make smart decisions to, for example, increase customer loyalty and influence cross-channel behavior. Smart data, smart decisions, smart profits 3 MCKI29 - Ret. Smart Des.7 8/9/00 11:08 AM Page 4 Building the Customer Organization Successful use of customer data requires new capabilities within the marketing and merchandising teams, as well as among store managers and staff. • Customer mind-set – the organization needs to recognize that some customers are more important than others and make the appropriate trade-offs to capture value, from marketing investment reallocation to changes in category management store and tailoring. • Top management champions – they will ask the tough questions about how key customer segments are performing over time and what actions are needed to leverage customer insights to improve decisions across the business. • New metrics – customer segment-level reports that highlight key performance trends (e.g., downward migration, attrition) overall and key improvement levers...
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