What can analytics help retailers solve?
TLDR: NOT everything.
You were already doing the jobs that needed to be done before you implemented analytics. Analytics is meant to help you measure, analyze and focus your efforts.
Example 1: Planning merchandising
- “Guesses” as to which product would do well.
- (If you had more than 1 sales channel, it would be too complex to manage the differences)
To provide a more holistic estimate, use;
- historical data,
- product attributes,
- price elasticity,
- traffic forecast,
- customer acquisition cost and
- marketing budgets
Example 2: Streamlining shopper engagement
- Send email marketing to all 1,000,000,000 shoppers on the newsletter subscriber list until something happens
- 1st: Segment list based on open rates (throw away those that never open)
- 2nd: Segment list based on purchasing history
- 3rd: Use product affinity analysis to see which products tend to be bought together
- 4th: Send emails based on the different purchasing history
Example 3: Optimising digital marketing dollars spent
- I know 50% of my marketing budget is wasted. I just don’t know which 50%.
- 1st: Monitor customer acquisition cost (CAC) across advertising channels
- 2nd: Drill down to the Google analytics multi-channel funnel
- 3rd: Reallocate budget from channels that are useless to those that are working
Running a business is f***ing hard.
We don’t always have time to search for the next great analytics tool so, when it comes time to invest in one, it usually falls into one or two buckets;
1. Business is going amazingly well, it is time to optimize
The car seems to be working, time to wisely invest in the engine.
How do I turn $1 into $5?
Common Questions at this point include;
- How do I replicate this success with another product?
- How do I replicate this success with new shoppers?
- How do I optimize my marketing funnel to bring new shoppers?
- What should I do to increase the lifetime value of my loyal shoppers?
2. Business is going terrible, what should I do?
The car seems to be breaking down, why?
How do I turn stem the bleeding?
Common Questions at this point include;
- How did this all happen?
If you fall into the second bucket, I’m sorry to say but it might be too late.
Running a business is hard.
Why not spend a little extra time investing in analytics early so that you won’t accidentally screw it up later?
Here is the reality:
- If you have collected NO data, tracked NOTHING and monitored NOTHING.
You have no way of improving your business, because you have no idea what was going on (besides that there was a fluctuation in sales during seasonal periods)
Assuming you invested early. What can you expect from analytics tools?
1. Augment decision-making in the company
There should be less guesswork in the business everyday that passes.
With more data points around product, shoppers and sales, you SHOULD have a clearer understanding which initiatives should be cut and which are worth investing in.
With the same data set in-front of everyone in the team, EVERYONE should be able to make the same decision (most) of the time without you having to intervene in every decision.
2. Monitor metrics and report KPIs
Bring together a holistic dashboard that can be used to organise and monitor information about everything that is going on.
Some BASIC goals that are worth monitoring include...
- Sell-through rates
- Promotional performance
- Basket compositions
- Pricing effects
- Return on investments in marketing
3. Optimise opportunities
- Funnel analysis to improve the number of completed transactions
- Improve social media ad set targeting to decrease acquisition cost
- Promotional mechanics to improve average order value
- Shopper newsletter to increase lifetime value
- Birthday coupons to increase shopping frequency
If you skipped everything else above, focus on this last section.
How to get started?
1. Write down the functional areas in your company. Some examples
- Customer support
- Digital marketing
- Inventory management.
2. If these areas where 10x better than they are right now. What would that look like?
- Lower average first response time
- Lower customer acquisition cost
- Higher average margins
- Higher sell-through rates
3. Those are your metrics. Measure EVERYTHING that you think might help improve those numbers. Find tools that help you improve those numbers !!!
Read the next section about data requirements.