Speaking Directly: Retailing in the ’90s

The following column, which appears each issue, looks at new and emerging trends in direct marketing. Alternating columnists are Barbara Canning Brown, a leading figure in the Canadian direct marketing industry, and David Foley, a specialist in database marketing programs.Just when...

The following column, which appears each issue, looks at new and emerging trends in direct marketing. Alternating columnists are Barbara Canning Brown, a leading figure in the Canadian direct marketing industry, and David Foley, a specialist in database marketing programs.

Just when retailers were thinking the worst they had to worry about after the recession was Big Brother Wal-Mart and all its superstore siblings, along comes database marketing, and customer relationship marketing, and loyalty marketing, and a dozen other monikers that all stem from the same commandment: thou shalt know thy customer, or heaven help thee.

Do retailers know their customers? Yes, they do. They face them over the counter every day.

They know their customers are between the ages of ‘x’ and ‘y’, with low-/mid-/upper-level household incomes, married with or without children, with or without their own homes, etc.

But, do retailers have information about their individual customers’ purchases, preferences, wants, needs and wishes? Not likely, or, at least, very rarely.

Where information about individual customers does exist in retail environments, it is more likely just a mailing list.

Retailers won’t likely know what to do with their individual customer information even if they have it. Why? Because they just don’t think that way.

The first task for retailers contemplating database marketing is to start shifting their own paradigms.

The mass merchandising philosophy

Decisions are usually based on the products that have sold in the past (not the customers who have bought them), or the products that the particular industry is pushing.

I think the fashion sector will have the hardest task.

I remember a few fall seasons ago, fashion mavens decided that crushed, stretchy panne velvet in a range of colors akin to squashed fruit would stampede recession-weary women into the echoing halls of fashion retail. Not.

How could a fashion retailer’s database have helped in that situation?

Well, the first clue would be in knowing each individual customer’s (or groups of customers) preferences and past purchases.

The second clue would be the opportunity to ‘talk to’ customers – by phone, by mail, by survey – and get them to ‘talk back.’

I often see amazement that customers will actually respond to a request for feedback. They’re just waiting to be asked.

The strategic value of a marketing database for retailers is not just in the information it keeps, but, in the analysis and use of that information.

The major strategic uses for database marketing systems as identified in a Deloitte & Touche database marketing study are:

- understanding who the customer really is

- reducing the costs and improving the effectiveness of new customer acquisition

- strengthening the corporate/customer relationship

- identification of and tracking niche markets

- identification of and tracking under-performing segments

- migration into new markets (trading areas)

- tailored services and product offerings

- up-selling, cross-selling and event-driven sales promotions

- assisting product development

- merchandise selection, promotion testing and product presentation

But, for my money, the most meaningful and powerful use of database for the retailer (or whoever) is, quite simply, the capability to manage your customer.

As a retailer, customer management means you are no longer at the total mercy of the discount treadmill.

What customer management does not mean is coming up with yet another trendy way to give away margin – most commonly called loyalty programs – in reality, for the most part, thinly disguised sales promotions.

The customer management process involves:

- analysis of each stage of the customer lifecycle to identify opportunities and gaps

- analysis of the opportunities and gaps based on revenue potential

- researching the needs of key customer groups along the lifecycle

- development of appropriate communications to test, analyze roll out, reassess and adjust on an ongoing basis.

Another retail paradigm shift must be in the priority of revenue ahead of profitability. For the most part, retailing is a reactive business.

The customer management process is proactive, but takes time, and is a lot harder than running a sale ad in the Friday newspaper to drive traffic into the store on Saturday.

Yes, it makes sales, but does it return solid, long-term profits?

Barbara Canning Brown, a 20-year veteran of the direct marketing industry, is a direct marketing consultant specializing in catalogues.