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Four steps to truly understanding your customers and unlocking new opportunities

BY CSA STAFF

By Jon Weber, [email protected]

As a consumer, you’re aware that basic demographic information doesn’t reflect your personality or pinpoint why you make your purchasing decisions. Retailers that probe beneath the surface of shallow customer profiles can gain the true market intelligence required to uncover new opportunities and focus on areas with the highest growth potential.

Retailers need to identify the unique customer segments within their market, the relative value of these segments, and how their distinct profiles shape decisions about what and where they shop (e.g., their attitudes, lifestyles and behaviors). Marrying this knowledge with an understanding of how different consumers perceive your brand compared with alternatives can reveal eye-opening intelligence about a company’s most and least promising growth prospects. This clear picture of your market can then enable you to prioritize your company’s strategic agenda.

Without this baseline, L.E.K. Consulting has seen many companies run blind strategically and pursue imperatives that are destined to fail. Take the example of a CEO who looks at his company’s 4% market share and projects that the runway for growth is exponential. With this perspective, the CEO pursues a status quo strategy that supports the same programs that have propelled sales during the past five years. However, this executive fails to recognize that his market is really comprised of six unique consumer segments. Further, the brand only resonates strongly with one segment, where it already enjoys a 32% market share. Because the business may be reaching a saturation point with its core customer segment, maintaining the current strategy is unlikely to generate new growth.

Target customer segments for growth

Just as scientists monitor the earth’s interior for early signs of earthquakes and other dramatic geological changes, true customer segmentation also requires sophisticated “market seismology” to look beneath the industry’s surface, identify distinct segments and track changes in each customer group. Although every retailer has slightly different needs, L.E.K. has found that the following four-phase model enables companies to identify their key customers and then use this information to increase sales.

  1. Discover and define key customer profiles: Bring customer segments into focus by uncovering the various customer groups that exist within your addressable market. This phase further determines the size and value of these segments, and clearly defines them based on their multi-dimensional attitudes, lifestyles and behaviors. Insight into the wants, needs and aspirations of each customer segment is pivotal to locating the purchasing “triggers” for each group.
  2. Map brand positioning to market segments: Understand how your brand is positioned vis-a-vis the specific customer profile that defines each segment. Here, retailers should closely examine individual segments to quantify your current share position, understand consumers’ affinity for your brand relative to competing brands, and map the dimensions where the brand resonates with consumers and where it’s falling flat. This insight measures the brand’s “fit” within each segment.
  3. Prioritize market opportunities: Prioritize market segments based on their expected value, and also consider each market’s size and your brand’s share position. This process also pinpoints where your brand is most likely to unlock additional spend based on the relevance of your offering to distinct market segments. The result prioritizes consumer groups based on their “accessibility,” and the triggers to driving incremental share gains (e.g., product assortment and pricing strategy).
  4. Track behaviors and course correct: Survey customers periodically to measure evolving trends and calibrate operations to address market and consumer shifts. Conducting systematic “tracking” research on an annual basis will also help identify new opportunities as they emerge, and allow you to capitalize on them quickly.

When used appropriately, a strategic market segmentation program can be pivotal to identifying new opportunities with increasingly fickle customers. Importantly, a clear and common definition of your addressable customer base can also enable organizational functions to work in lock-step to achieve the same focused goal. This is especially critical today because constrained consumer spending is forcing companies to fight for increased share in entrenched markets.

Jon Weber is a VP of L.E.K. Consulting, a global management consulting firm with a focus on retail and consumer products. He can be reached at [email protected], or visit http://www.lek.com/industries/retail for additional information.

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P.Lopez says:
Apr-10-2013 12:17 pm

Just as scientists monitor the earth’s interior for early signs of earthquakes and other dramatic geological changes, true customer segmentation also requires sophisticated. Chatrandom.com

P.Lopez says:
Apr-10-2013 12:17 pm

Just as scientists monitor the earth’s interior for early signs of earthquakes and other dramatic geological changes, true customer segmentation also requires sophisticated. Chatrandom.com

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Stater Bros. acquires two Albertsons stores

BY CSA STAFF

SAN BERNARDINO, Calif. — Stater Bros. has entered an agreement to purchase two stores from Albertsons in Lake Elsinore and Hesperia.

Stater Bros. said it expects to take possession of the locations from Albertsons, a Supervalu subsidiary, in mid-May. The California-based supermarket chain also said that the stores would receive several upgrades, including wider aisles, expanded and new full-service departments and energy-efficient refrigeration, skylights and recycling centers.

"The Stater Bros. supermarket family is very proud to provide this greatly enhanced and larger Stater Bros. supermarket to better serve our long-time and ‘valued’ [Lake Elsinore and Hesperia] customers."

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How to win with shoppers in a price-transparent world

BY CSA STAFF

Consumers today are smarter and savvier than ever. Over the past decade, the continually growing use of the Internet has made it easier and faster to comparison shop. During the “Great Recession,” shoppers learned to lean even more heavily on the Web to do research and find good deals. Now, as the economy recovers, these sharp consumers are not about to go back to their old ways. In addition, future technology advances will only make it easier for consumers to comparison shop. So what’s a retailer to do?

Use their intelligence, or more specifically, their price intelligence. Rapidly becoming a best practice at online retail and consumer products companies worldwide, price intelligence refers to computer-based systems that identify, compare and analyze pricing and other revenue-related data for a business’s own operations as well as its competitors – data that is critical to making informed pricing decisions. Providing the ability to instantly evaluate the market impact that competitor price changes create, price intelligence allows retail management to gain a deep understanding of what each change means for margin and market share.

And, as important as price monitoring is, today’s price intelligence systems move beyond simple price analytics to monitor every aspect of a product a retailer needs: product descriptions, model configurations, assortments, warranties, service terms, taxes and, now, quality ratings for specified products and seller rankings. Since consumers are making buying decisions not only on price, but also on availability, shipping charges and other terms, qualitative product reviews and sellers’ reputations, advanced price intelligence solutions offer retailers the same information. In short, price intelligence lets retailers see what their competitors are offering, as well as everything their customers see when they are researching and shopping online.

The decision to bypass manual data collection, the traditional method retailers have used to track competitive offerings, and move to an automated intelligence system may seem obvious. But it has only been in the last few years that advanced providers have been able to offer automated systems with the speed and coverage required to keep pace with fast-changing online dynamics.

Along with monitoring hundreds (or thousands) of products, price points, terms and quality rankings at multiple competitive websites, today’s advanced price intelligence systems provide individual sorting, filtering and report configuration for all available product criteria, exception reports, configurable alert notifications, time series analysis and meet/beat ratios. Aggregated rate information allows retailers to conduct incisive rate analytics and integrate online competitive comparisons with in-house price and forecasting solutions.

Access to this type of data is beneficial to a retailer only if it is in usable, easy-to-understand formats. The most advanced price intelligence systems on the market turn the data into true information, giving retailers full trend analysis with detailed analytics on specified product categories and competitors.

Solid market price intelligence also facilitates comprehensive modeling and ongoing “what if” analysis that is crucial to price optimization. In fact, a lack of this type of information leads directly to market paralysis — the inability to rapidly update and optimize prices in response to market forces, which places the ability to meet revenue and profitability targets in serious risk.

The bottom line: The retailer has the ability to respond with fast changes to maximize the customer’s benefit. For online retailers, abandonment rates can drop significantly, positively impacting sales, revenue and profitability. Perhaps most importantly, the retailer can confidently establish itself as the source of the best and most up-to-date offerings available, creating often-dramatic long-term impact on brand.

With access to a precise and complete market picture, and the ability to create digital mashups of high-quality data, retailers can obtain accurate, real-time comparisons. Constant monitoring of online marketplaces and competitor portals means that they can identify critical market events — including competitor discounting, lack of product availability and even promotions — as they unfold. With this type of up-to-date information, retailers can quickly make market-smart decisions.

Christian Koestler is president and CEO of Lixto, Inc., a global leader in Web data extraction and analysis for the hotel, retail and consumer products industries. He also serves as managing director for sales and marketing at Lixto Software GmbH, the company’s headquarters, in Vienna.

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