When we talk about retail, most people think about consumer goods such as apparel, electronics or groceries. But in truth, retail encompasses the sale of any goods or services to an end-user consumer. Elements of retail exist in all types of industries — travel, healthcare, finance, even oil and gas — simply because these industries provide and sell products directly to customers.
Retail has become an omni-present business, with business strategies relevant to a number of other industries — very much like accounting or human resources. Just in the same way that best practices exist for talent management across various industries, best practices exist for retail strategies. How they are applied to any industry segment may differ, but the core business model is the same.
For these businesses outside the traditional retail sector to succeed in today’s world they need to walk, talk and think like a retailer.
Applying Retail Models Across Industries
Let’s take the neighborhood gas station as an example. Drivers tend to have primary gas stations they use most often, maybe due to location, fuel types offered or food and beverage convenience store items.
Your gas station probably has pay-at-the-pump technology which has allowed stations to operate 24 hours a day. Swiping a credit card anytime, day or night, has created the expectation that consumers can access fuel wherever, whenever. But what if it was even easier, or more customized for your preferred experience?
Mobile payments can speed up the payment process – just swipe your smartphone across a reader on the pump and payment is deducted automatically. It’s simple and convenient, enabling faster check outs, no credit card fees and a new metric for the gas station to track its fuel ‘inventory’.
Tying a customer loyalty program into the transaction can take it one step further by creating a customized experience for the consumer. Because the gas station’s database recognizes the customer through the smartphone, personalized mobile promotions and coupons can be auto-generated.
Much in the same way that some grocers print out coupons at check-out, gas stations could send coupons to a mobile device after fueling. This serves to encourage customers to come back another time (4 cents off per gallon on next visit) make an additional purchase on the spot (free large coffee with purchase of a breakfast burrito) or collect reward points based on spend to be used later.
Through “precision marketing” and big data, mobile promotions and coupons can be generated based on consumer past purchases, time of day, sales items and more. Without any additional effort on behalf of the sales associates, customers are treated as individuals and rewarded based on their purchase behaviors — automatically.
Competition among gas stations can be intense. With set fuel prices and a competitor on every corner, using personalized promotions is a powerful way to provide more value and generate higher sales from existing and potential customers.
Creating A Win-Win Situation
The benefits for consumers from this precision marketing approach are pretty clear. But how does it truly benefit the seller? The answer is simple — increased sales and revenue. Beyond just the quick sales based on personalized promotions, precision marketing can also help optimize inventory and provide insight on products that generate the most margin. For example, a company could offer discounts on products or services that have higher margins (i.e. more profit) or use a promotion to clear away stock that isn’t really selling. It can also be used to gauge interest in a new offering.
It is imperative for these companies outside the traditional retail space to adapt best practices in their own processes. Elements of the model have already come to fruition. The idea of “retail banking” — when a bank executes transactions directly with consumers — is common now. Many online banking sites already push personalized offers for loans to consumers based on customer data on file. With the growth in mobile banking, financial institutions could take personalization even further, promoting refinancing, payment plans, special edition coins or services based on customer profiles.
But many other industries are just starting to understand how to collect and analyze the data that can lead to precision marketing. Here are some best practices for creating a new precision marketing business model:
- Define the most beneficial elements of the retail model for your own industry. Not everything that is present in retail can be blueprinted to any industry. Precision marketing for consumer software would be quite different from the gas station’s model for precision marketing. Concentrate on the most easily translatable solutions, convert them into applicable solutions and strike a balanced approach that makes sense.
- Collaborate internally to change the mindset of business decision makers and ignore the initial inertia. To adopt a retail mindset, it’s important to demonstrate results by using case studies and testimonials from the retail sector and explain how these same processes can be translated to your business. Bring in experts versed in retail to lead these discussions show how a retail model can be applied on top of your preexisting business framework.
- Understand what motivates your customers to take action. If necessary, engage in third-party research to determine what marketing strategies or personalized promotions will be most appreciated — and cross reference these with the offers that will create revenue and loyalty.
- Define a business plan to incorporate retailing theories into IT systems and architecture. The algorithms of retail, such as merchandising and forecasting must be thoroughly integrated in your back-end processes to ensure the desired outcome.
The holy grail of retail has been to anticipate what consumers need even before they realize they need it. There’s no better way to beat the competition than to make an attractive offer and get a customer’s business before they even realize they need your product, or are considering evaluating alternatives. By creating a strategic plan that involves the right business decision-makers, setting up the right technology and understanding your specific industry landscape, any organization that provides products and services to consumers can adopt a retail mindset.
Dr. Thomas Vetter is an enterprise software veteran of 20 years. Bringing together business insights of financials and retail, and deep technology expertise of cloud and applications he knows what it takes to make companies run better with technology. He is currently senior vice president and head of retail and fashion product management and development at SAP.
Puru Govind is a technology enthusiast who also studies eastern philosophy and its application in modern business. He is currently director and chief operating officer for retail development at SAP.