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For decades, grocery store managers have run promotions at their stores simply because they're successful — limited-time offers, specials and discounts drive consumer engagement and bring in revenue. In fact, with the current range of marketing vehicles — from traditional tactics, like direct mailers and newspaper inserts, to today's explosion of digital offers and social media marketing — reaching consumers with promotions is easier than ever.
The challenge for grocery chains is that promotions can't always be executed with a one-size-fits-all approach. What works in one area of a city or region may not work in another, making the task of planning, implementing and monitoring the effectiveness of promotions difficult.
While some are initiated by the supermarket chains and some by the product manufacturer, many grocery store promotions are driven by product sales goals, and don't take into account consumers' needs or the different makeup of stores. To maximize branding, foot traffic and sales opportunities, grocers must take an active approach to understanding their customer demographic and what drives customer purchase decisions at individual stores. Chains can do this by leveraging the Store DNA.
Defining Store DNA
Like human DNA, every store’s DNA is unique. It's made up largely of the types of customers who shop at the store, and different demographics have vastly different demand trends and purchase patterns. Income, ethnicity, life-stage and lifestyle factors all come together to drive flavor profiles, price sensitivity, brand affinity, and more. To run a successful promotion, it's important to examine, by store, what product categories are selling well, what price levels resonate and the consumer factors that drive these results.
Another important consideration is the local market. Factors such as location or the climate of the area can affect promotion success. Additionally, areas with higher competitor density may offer more convenience for customers who have options regarding where to shop, but add complexities for store decision-makers. To drive traffic, grocers must monitor what competitors are doing and consider where customers are traveling from to do their shopping.
These considerations are especially important for those running multiple-location promotions, or promotions across a broad geography, as there's often disparity in the consumer makeup and purchasing decision trends of stores throughout a grocery chain. Seek and leverage input and support from local store operators who know and understand the market.
Overall, the store DNA can be complex, depending on factors like the size of the store, the number of SKUs and the number of locations in operation. Grocers must take a strategic approach and think creatively about everything that makes up the store DNA to calculate the right metrics, and make effective use of this information to drive promotion success.
Never Overlook Insights
Managing data is more than just a technology function -- it's the foundation for smart promotions and supply chain decisions. While today's Big Data tools and business intelligence (BI) platforms can help gather and process data, the ability and resources needed to translate the information gathered into actionable intelligence are often lacking. Other times, the wrong information or metrics are being examined.
Monitoring the quantity of a product being sold and the rate of inventory turnover yields useful metrics, but this kind of analysis doesn't take into account consumer trends. A more comprehensive view can help recognize where all data is coming from and help combine the necessary consumer data with the data used to manage the supply chain.
On a local level, some of the most impactful insights can come from individual transactions, with data collected at the point of sale when the product's bar code is scanned. If a loyalty card is also scanned during the transaction, grocers can monitor the consumer's purchase history and response to promotions. Other relevant information can include the date of the sale; how long it took the customer to redeem a promotion; if a physical coupon was scanned; the price point of the sale item relative to other purchased items and other items within the category; and whether any affinity items were purchased with the discount product. For extremely seasonal or weather-sensitive products, even associating the weather in the market on the day of purchase can provide insight on consumer promotion response.
Simply put, every sale garners useful data, which can then be translated into greater insights for grocers' local promotions, integrated promotions and inventory plans that deliver quantifiable returns on marketing initiatives, as well as accurate and timely identification and interpretation of consumer behavior and sales trends at the local level and higher.
Grocers that ignore the proliferation of data mining and analytics could find themselves struggling to catch up with competitors that take a more proactive and strategic approach when calculating their own Store DNA.
Act on Insights
According to a survey by Downers Grove, Ill.-based compTIA, while 78 percent of U.S. businesses and IT executives believe harnessing their data would make them much stronger businesses, 73 percent concede that they're struggling with translating data into actionable insights.
In the grocery context, it's all about earning the shelf space and knowing what’s going to sell well in one area compared with the next. Understanding a store's DNA not only ensures a higher promotion success rate, but also can assist overall target marketing from the start by ensuring that the promotions are delivered in the most strategic way to the right target customer. This type of analysis can also assist in inventory management when supply chain data are leveraged to predict demand trends and ensure stores don't run out of products or find themselves with too much inventory.
Grocers can lean on software and other technologies to gather and model data, but must have the right expertise in place to understand, interpret, and make recommendations on how to act on the data. By working with a managed service provider, grocers can leverage a variety of supply chain reporting and analysis tools for analytically driven, collaborative promotion planning based on accurate demand forecasts, demographics and geographic trends. Overall, it's important to have greater access to the expanding technical capabilities in data collection, management and analytics, as they'll enable grocers to realize the full potential of promotions through flawless logistics execution.