Driving Profit from Data in Commerce - The Concept of Data Triangulation

Posted by James Dunford Wood 4 Mar 14

Knowing Your Customer

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Once upon a time a shopkeeper would know a lot about his customers. They'd know who was married to who, who's son was going to university, who had been on holiday and above all, if they were a butcher, what cuts of meat they preferred. Nobody moved much, and service was personalised. They had the knowledge to be able to sell the right product to the right customer at the right time, and if they were savvy, for maximum profit.

Most retailers lost that sort of familiarity with their clients a long time ago, and have focussed, instead, on an aggregated view of their customers - derived from data they are able to collect at the till. When the internet arrived, these data signals were magnified by a factor of 10, as retailers were able to track aggregated behaviour from page to page and site to site.

But hidden in these data signals is a personalised view of the customer that is only now being uncovered, and retailers once again have the chance to reconnect on a one to one basis with their customers. Not to the degree that they could before, but in terms of the knowledge that matters - what cuts of meat they prefer - the clues are all there. Once again retailers have the power to be able to sell the right products to the right customer, for maximum profit.

Trading online, like traditional trading, is all about products and customers. The old way of doing e-business was to shove all your inventory onto a database and see what sold best. This takes little account of who is browsing the products at any particular time, or where in the listings the products appear. With today’s more advanced, integrated tracking, Ometria is able to distinguish between customers and visitors, and within customers, to recognise repeat customers, high value customers, customers who are stocking up for a new home, customers who buy at certain times of year, customers who prefer to shop with voucher codes - the list goes on. Armed with this intelligence, retailers can start to optimise their websites and marketing activities to put more relevant products in front of people they recognise.

Knowing Your Products

The other side of this equation concerns product intelligence. Normally this is the preserve of the merchandiser, who knows everything about merchandising and stock control and reordering from a bricks and mortar perspective, with access to all kinds of inventory reports from back end ERPs, but who had little or no expertise of what goes on online. In fact the whole online experience is the preserve of the digital marketing department - who typically have little knowledge of product. What's clearly missing is a joined up view - and a new role has been created, the web merchandiser, but as yet most retailers still don't have one.

Key to this role is understanding not just which products are selling, in the traditional merchandising sense, but how products are selling relative to interest. Just as in the old days a store manager could spot a market opportunity when he saw crowds of people browsing his small greeting cards selection on Valentines day, so online-savvy merchandisers need to be able to spot potential before the event, not react to sales already made. The key questions they need answers to are 'what is the maximum potential sales I could make out of the product selection I have, knowing what I know about my customers?' This is all about tracking and understanding product level, category level and where applicable, brand level conversion rates, so that high converting products can be put in front of more of the right customers, and low converting products can be re-configured, re-priced or retired.

Know How Much You are Actually Making - Doh!

The last piece in the triangle is profit. Most retailers who trade online - especially those who have developed websites from traditional stores - have a disjointed view of sales performance between online reported revenues, and offline reported profit. All too often the online sales channel has one aggregated profit line, and there is no understanding of the levers and controls and sensitivities that have contributed, unseen, to produce that profit.

What today's performance driven commerce managers need in order to optimise properly is visibility of profit at website level. Why? Because if you are choosing between two high converting products to push, you will want to know which one drives you the most profit. It's also useful to be able to distinguish between high revenue customers who typically shop in the sales, where your margins are tight, and those who buy full price items. Finally, and crucially, when assessing your Adwords campaign, wouldn't it make sense to know how much money you are actually making from your keyword campaigns? If all you are driving is revenue, then you could easily be throwing money away - and many retailers are. Let’s face it, that’s how Google has got rich - largely on the ignorance of the longtail.

The point is, with cost and margin data, you get can see exactly how much you can afford to spend on promoting particular products.

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