Smart Data Smart Decisions Smart Profits

Smart Data Smart Decisions Smart Profits - MCKI29 Ret Smart...

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S I X T H O F A S E R I E S O N G R O W T H I N R E T A I L
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ABOUT THE AUTHORS Margo Georgiadis is a principal in McKinsey’s Chicago office, Katrina Lane is an associate principal in the Atlanta office, and Sue Whalley is a principal in the London office.
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1 As retailers face tougher competition across channels, they need to improve their ability to use in-depth customer data as a strategic tool to influence customer behavior and to optimize basic business decisions. By harnessing smart data about customers’ purchases and shopping patterns, some retailers have achieved increases in annual sales and profit growth of 5 to 10 percent. While the imperative to use data in new ways can appear daunting, smart data are now more readily available than ever before for smarter retail decision making both on- and off-line. Margo Georgiadis, Katrina Lane, and Sue Whalley data profits smart smart smart the retailers’ advantage decisions
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2 © McKinsey & Company 2000 L eading retailers are already enjoying huge value from smart customer information (Exhibit 1). They have combined traditional mass performance measures, such as growth in comp-store sales, with new metrics that track sales growth, retention, and wallet share for segments and individuals. Using insights from these data has enabled them to meet the needs of their most attractive customers and prospects and, in turn, generate superior sales and profits. Today, with increasing competition both in stores and on-line, insightful use of customer data is becoming a "must do" rather than a "nice to do." We are convinced 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. Exhibit 1 Harnessing Smart Data for Greater Retailer Sales and Profit Growth Retailer Smart data Smart decisions Smart profits European grocer U.S. mass merchant European hypermarket Upscale U.S. department store Assessed relative effectiveness of promotions using loyalty card data, focus group insights, and conjoint analysis Segmented customers based on shopping and credit usage behaviors and combined these insights with priority segment preferences for potential benefits packages Identified customer segment penetration and spending by subcategory and product line Understood shopping patterns of best customers, by analyzing data from proprietary card program and third-party credit providers Refined promotion strategy, reallocating spend to the most effective promotion type/item combinations Developed targeted relationship programs for both new and existing customers to encourage greater loyalty Identified new product line, promotion, and merchandising opportunities to increase spending and penetration among different customer segments Promoted stronger product selling by associates Tailored communications
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