//The 5-step approach to stimulate growth in retail

The 5-step approach to stimulate growth in retail

 

 

Most retail marketers are familiar with the apocalypse concept of retail . Traditional retailers are losing ground more and more because of the one-click convenience, price transparency, and the endless assortment of Amazon and similar disrupters.

But not everything is dark. Traditional retailers such as Sephora, Zara and Nike are reversing the trend. The same goes for e-commerce superstars such as Bonobos, Warby Parker and Everlane. These brands place outdated customer information and have invested in technology to provide a seamless customer experience across all channels.

As the hottest season of the year for the retail trade approaches, a new research the company's analysis of the Custora's clientele (disclosure: my employer) has unveiled surprising information about driving retail customer growth. The study examined more than 40 of our retail sector customers to determine the indicators most correlated with positive revenue growth from one year to the next.

Acquisition of customers in relation to the average frequency of orders

The conclusions? For obvious reasons, high-growth brands are investing heavily in acquiring new customers. It's a surefire way to increase your income. But it's actually relatively inefficient. In fact, a 1% increase in the frequency of orders is three times more impactful from the point of view of growth than a similar increase in the number of customers acquired and a frequency of steering wheel orders. is often much less expensive.

In other words: if the average customer buys once every 180 days, reducing the replenishment lead time to 178 days can generate revenue growth of almost 3%.

This is a pretty amazing discovery – and savvy retailers have noticed it. They are investing more and more in tactics such as the welcome series, hybrid subscription models and customization across different channels and devices to drive brand engagement and product discovery, all in the hope to reduce the time of purchase.

Impact of the increase in the average value of orders

Another powerful discovery buried among the research findings will also be useful to retailers looking to boost growth. Specifically, a 1% increase in the average order value (AOV) is correlated, on average, with a 1.3% increase in revenue.

How, in this case, do retailers increase the size of the basket? Our research suggests that the best-performing, data-driven retailers excel in one of two dimensions:

Increasing the number of items per order (cross selling): A fast fashion brand uses the expected affinity scores of individual products to suggest complementary products that may be of interest to a customer.
Rising average price of an item to rise: A clothing and footwear retailer rates customers based on their estimated optimal price and displays top quality goods and new ones arriving at full price.

The problem is that overall, increasing the size of the basket is considered more difficult than repetitive shopping. As one retail manager explained: "There is a single manual for repetitive orders. Promotions and contact points are tested in time. But increasing the number of AOV requires customization. "

The truth is: AOV's most effective growth strategies begin with a thorough understanding of the customer base. But many retailers do not realize how easy the game book – and the results – can be.

Most Successful Retailers Follow 5-Step Methodology

Global Customer Data: collects transaction data, customer relationship management and customer engagement to create a complete picture of each customer's relationship with the brand.
Setting Goals: Determine if your brand's greatest opportunity is to cross-sell or sell up, and set goals accordingly. An empirical rule: to increase the number of items per order is generally a good starting point for retailers of relatively low-priced, impulse-buying products or from a wide assortment of goods. Retailers of homogeneous or high-priced products could instead focus on raising the price of items .
Identify the relevant information: depending on the lever of the AOV on which you choose to focus, analyze your customers' data to determine what types of products tend to be purchased together – and which customers tend to to buy at the premium or budget level of each category.
Experience: The most successful retailers take a crawl-walk-run approach – starting single (for example, in a channel or focusing on a single segment ) and gradually by iterating as they find what works. For example, a retailer seeking to implement a cross-sell approach may start with a single e-mail sticker or a unique product recommendation on the checkout page. Measure the impact on the goal in question when you are browsing different tactics.
Optimize and Automate: Once the retailer has identified the tactics that work – for example, customizing the site to the price predicted by the customer – it is essential to ensure that the information is constantly updated and integrated directly into the marketing execution tools.

In the end, the growing number of AOV represents an untapped opportunity space for brands struggling not only to survive – but to grow – into the new era of global commerce. detail.

The opinions expressed in this article are those of the invited author and not necessarily those of Marketing Land. Associated authors are listed here .

About the author

Jordan Elkind leads the product team of Custora an advanced customer analytics platform for e-commerce retailers. Prior to joining Custora, he earned an MBA from Wharton and worked in marketing analysis at Citi Cards.