The majority of High Street retailers’ sales failed to sparkle over Christmas as they failed to respond to changes in customer behaviour and ignored their high-value ‘hidden customers’, according to Big Data for Humans, which analyses hundreds of millions of sales transactions for companies, helping them to better understand and monetise their customer-base. What went wrong, asks Peter Ellen?
Although John Lewis experienced a 5.1% rise in sales in December by recognising the majority of its customers preferred online ordering through tablets and mobiles – and channelled customers online through its iconic advertising - the vast majority of the High Street suffered a lacklustre performance. Most notably, M&S and Next saw falls of 5.8% and 0.5% in revenue respectively. M&S focused on marketing its instore product lines instead of online channels, while Next experienced stock issues as it was unable to respond rapidly to changing customer choice due to warm weather.
What do I know? Well, I used to be CEO of the retail chain Fopp and I've been honing this platform with a range of clients across the retail, travel and consumer brand industries over the past year. And one major trend to appear out of the 950 million sales transactions we analysed in 2015 was that of ‘hidden customers’ – high-value segments of customers who were not being effectively marketed to and retained. This often included those customers who shopped both online and in-store, using different channels for different needs. These high-value hidden customers provided a 5% uplift in revenue on average to Big Data for Humans’ client-base, by the way, after being targeted via bespoke marketing campaigns that span online and offline.
What we see from the UK’s disappointing Christmas sales figures is a clear disconnect between retailers’ C-suite executives and their customers, with businesses focusing on products and channels and not the individuals that buy them. A large factor in this is the lack of effective segmentation, that works across online and offline behaviour, based on sales transactions. There is also a dearth of readily-available intelligence on what people are buying, how and when. The result is retailers are playing catch-up on customer buying patterns and not even realising some incredibly valuable segments of customers exist.
The pulse of the customer could once be gained by "floor-walking". Now, it’s about executing on big data across channels. Hidden customer segments can start as a missed sales opportunity, but are often the canary in the coal mine, where problems can lead to a serious retention issue and a dramatic effect on profits.’
Some of the hidden customers we helped to unearth last year through our new customer segmentation process included:
The Luxury Bulk Buyers Boutique hotel owners buying an exotic new range, in bulk, from a national furniture chain. Once recognised, the retailer created a targeted online marketing campaign to entice these buyers into purchasing further decorative items in addition to furniture, significantly increasing their overall spend.
The Office Fruit Evangelists Office managers ordering fruit online for their employers from a national supermarket chain, who were later won-over as fully-fledged business customers after being targeted with the supermarket’s office supplies.
The Foreign Fashion Fanatics High-value, foreign customers travelling to the UK to buy large numbers of items from a specific, luxury fashion brand, for themselves and their friends. This brand learned it could target these friendship groups in advance of travel to ensure they didn’t migrate to a competitor.
The Delivery Wrangler A European grocer was targeting online customers who weren’t purchasing fresh produce with significant discounts. By consolidating online and offline transactions, this grocer realised that the customers were already buying these products, just in-store rather than online: they were using online to buy heavy, bulky products. These campaigns were discontinued, stopping the business cannibalising itself.
The eBay Artistic Entrepreneurs Budding shoe designers buying tens of thousands of pounds worth of white Converse trainers from a national shoe retailer, before customising and selling them on eBay. As subtle changes in price would have led to these customers going elsewhere, the retailer provided these shoppers with a special price discount to retain their business.
Meanwhile, we found nearly two-thirds (63%) of customer-facing companies had unrecognised high-value ‘hidden customers’ in 2015.
The author is CEO and Co-founder of Big Data for Humans
24n Editor Note: The firm says it analysed a maximum of 200m transactions per client per quarter and a minimum of 20m transactions to derive its claims in this piece.
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