This is the first in a 3-part series, covering trends and talking points from FMCG and retail leaders in the Freshminds’ network.
Collated by Henrietta Bamford, one of Freshminds' consultants who spends time matching talent to complex projects in the FMCG space, this piece looks at the power of customer data, and how its use is changing.
How are retailers using customer data to convert at the point of purchase?
The retail sector is one of the leading sectors in the world investing in AI.
With consumers dealing with the cost-of-living crisis, and with weakening spending confidence as a result, we asked our clients and consultants in the retail sector what organisations are doing with their customer data to add value, beyond price, for the end consumer.
There was a standout - and possibly obvious - winner on their list of priorities. Businesses are trying to obtain as much controlled and legal data about the consumer as possible, to be sure their product or service feels personalised to a consumer profile. Performed accurately, this should ensure a better chance of converting at the point of purchase.
According to market research company GfK, the overall index score for consumer confidence remained flat at -21 in March 2024. While this is a slight rise from the dip in February 2024, a spokesman from GfK pointed to a note of worry – that improvements in consumer confidence seen most months from January 2023 have fizzled out.
Alongside this, the market research firm IDC reported that the retail sector ranks second among all industries globally in its spending on AI and data technologies.
Demanding value
In the Freshminds qualitative research, a former SVP for a multinational consumer goods corporation explained that the spectrum of what provides value for their customers is very broad. It’s not just about the monetary value or quality of a product. Retailers need to attend to every level of engagement with their brand.
This includes excellent in-store/online customer service, consistent omnichannel exposure, being environmentally conscious, and providing relevant promotions – all within the imperative of every engagement being uniquely designed for the individual buyer.
We live in an age of fickle consumers. If the spectrum of value is not met, consumers will quickly look elsewhere. There is plenty of consumer choice. So, retailers are using customer data primarily to ensure a highly personalised product or service is delivered.
Is it that simple? A Global Head of Operations for a leading restaurant company pointed out that the industry has been using data for 20 years, but the way it is collected and used is fundamentally changing. This is having a huge impact on category management, customer profiling, strategy innovation cycles and supply chains.
"Effectively using data to predict lifetime customer value and behaviours is, of course, priceless, but this takes time. In practice, it requires significant investment and stakeholder buy-in to get a business to make data-led decisions". Investment Director
Freshminds also spoke with the CCO of a UK furniture retail business who confirmed that tracking and storing their customer journeys is now a top priority for them this year. This data will fundamentally improve operational efficiencies and consumer satisfaction. Moreover, collecting this data for personalisation will not only mean they outperform against their competitors, but also convert new customers into lasting buyers.
Foreseeing a consumer journey
Putting this in sharp relief from the point of view of the furniture retailer: the average household has 2.8 bedrooms and so it is likely that a customer will purchase a new mattress after a couple years. Recognising how recently someone has moved house, how many times they viewed an item before purchase, and the category of product they bought (eg a child or adult mattress), are all vital pieces of information that can be used to personalise a consumer’s experience.
A well-managed data room, containing all these data points, gives businesses the ability to interact more effectively with their buyers. For example, presenting timely promotions or recommending relevant products (e.g. mattress toppers or sheets when on sale). Once repeatable customer engagement tasks have been qualified by employees, add AI automation into the mix, and the business (in theory) becomes exponentially more profitable.
An Investment Director at an Investment & Advisory business that specialises in consumer business growth reiterated that effectively using data to predict lifetime customer value and behaviours is, of course, priceless, but that this takes time.
In practice, it requires significant investment and stakeholder buy-in to get a business to make data-led decisions. As the capabilities of AI become more prominent, retailers are building strategic roadmaps for automated solutions while simultaneously trying to align on how to collect enough data to make implementing AI even possible.
One of Freshminds’ most experienced transformation consultants supported this point. Most of his clients are still grappling with ways to collect and leverage the most basic types of customer data for forecasting demand. One grocery retailer who took part in the research admitted that they’re holding back on launching certain loyalty schemes and membership pricing models because they still don’t have the quality of data required to maximise returns.
It is surprising to hear that many well-known brands are finding it challenging to carry out a ‘simple’ current state analysis of their data. Therefore, it is understandable that many have the common idea of using data for personalisation without necessarily being able to roll out this strategy in the short term.
Is AI still in a learning phase?
The launch of AI to the public last year gave the impression that larger organisations are now in an enlightened era of advanced data management and capability.
In reality, most are only just developing ways to collect relevant data in a controlled way, let alone being able to automate their data systems to benefit consumers.
What is clear is that organisations are racing to be up to date with accurate consumer profiling in order to deliver tailored customer journeys and bring back some consumer loyalty to the market.
More information
Make sure to read the second part in this series, How are brands enhancing their O+O experiences?
To talk to our Consultants on demand team about sourcing interim talent in data analytics, strategy, digital transformation and other roles: marketing@freshminds.co.uk
.jpg)
