Building a Clear View of Your Customers
The infographic highlights the key challenges faced by businesses as they create a customer view through unified data, analytics, and more.Download the Infographic
In today’s competitive retail landscape, customers expect high-quality experiences to accompany high-quality products and services. Data and consumer insights are the tools needed to provide valuable information to help businesses, especially consumer packaged goods retailers, exceed customer expectations. Learn why consumer insights are important and how they can help you stay ahead of the competition.
What are Consumer Insights?
Consumer – or customer – insights are “the understanding and interpretation of customer data, behaviors, and feedback into conclusions that can be used to improve product development and customer support,” according to TechTarget.
These insights help businesses obtain a 360-degree customer view to better understand customer behavior when it comes to purchasing decisions. Such insights also provide a deeper understanding of how customers think and can help business owners answer important questions, such as:
- Why are sales down for a particular product?
- How likely are you to succeed in a new target audience?
- How is your brand perceived by your audience?
- What do customers think of a new or a potential new product?
- How can customers purchase more expensive items, upgrades, or add-ons to an existing product?
- How can you sell an existing product or service to your customers?
- What can you do to increase conversion rates of marketing campaigns?
- How can I get great insight into market basket analysis?
Customer insights can be collected from a variety of sources: customer service data, product and service reviews, market research (such as how weather impacts shopping and where consumers are spending their money), purchase history, and customer sentiment.
Why are Consumer Insights Important?
Consumer insight can provide a business with the opportunity to better personalize and tailor products to the needs, wants, and demands of their customers. Organizations that leverage their customer behavior to generate insights outperform their peers by 85% in sales growth, according to Microsoft.
Businesses can use these insights to expand their product/service offerings, develop new marketing strategies, create detailed customer personas and customer journey maps, and enhance current offerings. Because smart use of customer insights is intended to improve customer experience, it can also mean more revenue. According to Microsoft: “A moderate increase in customer experience generates an average revenue increase of $775 million over three years for a company with $1 billion in annual revenues.”
Customers also have higher expectations when it comes to customer service. According to a Microsoft survey, 54% of consumers had higher expectations in 2017 than in 2016, and that jumps to 66% for consumers in the 18-34 age range. Why is this important? A great customer service experience will earn loyalty and “turn customers into promoters with a lifetime value of 6 to 14 times that of detractors,” according to Bain & Company. Additionally, companies that do well with customer service grow 4-5% above their market.
Benefits of Harnessing Customer Insights
By using customer insights to inform strategic and tactical decisions, you can develop relationships with your customers, better understand the connected customer, and generate meaningful and quantifiable results. Additional benefits and actionable steps CPG companies can take based on retail analytics and customer insights include:
- Predict churn — better understand future expected revenue and identify areas where you can improve customer service and potentially decrease customer churn.
- Maximize customer lifetime value — simply put, the higher the customer lifetime value, the more revenue your company can expect.
- Deliver personalized experiences — consumers in the retail space increasingly expect personalized experience and interactions. In fact, a survey by Epsilon and GBH Insights found that 80% of respondents want personalization from retailers. By leveraging consumer insights, you can more effectively deliver tailored experiences.
- Better inventory planning for smaller inventories and fewer markdowns — Leveraging consumer insights, particularly sales data, will help you more accurately forecast the amount of inventory you might need. With more accurate inventory levels, your business will be less likely to have excess product that has to be marked down.
- Promotions targeted to customers most likely to buy — with great insight into customer buying history and other relevant data, you can target specific promotions to customers most likely to utilize them. Retailers can increase operating margins by 60% through efficient promotions and other data and analytics-related initiatives, according to research by MGI and McKinsey.
- Determine optimal product pricing — the ideal product price is whatever customers are willing to pay. However, on average 30% of pricing decisions retailers make every year are off, which ultimately leads to lost revenue. With retail analytics providing greater customer insight, you can effectively set product pricing that will deliver the highest returns.
- Expand into new markets or leave underperforming markets — more accurate customer and sales data will impact many areas of operations, namely sales performance. With these insights, you can determine what new markets to consider entering and what areas are not delivering enough return on investment.
CPG Data & Customer Insights
Merchandise managers and other leaders in the consumer goods industry should be utilizing all available data to make more informed decisions. This data will largely come from CPG data analytics, which uses predictive analytical tools and solutions that provide actionable insights by aggregating data about products, suppliers, customers, and the business operation as a whole. CPG data can be sorted into two primary categories — observational and sales data.
Observational data includes in-store activity, inventory, promotions, competitor’s activity, customer behavior, and other similar metrics.
Sales data is straightforward information that looks at what product is selling, how frequently, how one product sells vs. another, and other related metrics.
How CPG Data Analytics Improves Efficiency
When properly utilized, CPG data can help your organization make improvements across all facets of your operation. Some of the ways retailers and CPG companies use data analytics to improve efficiency include:
- Predict Consumer Activity and Plan Ahead: Analyzing historical customer data can help forecast future behavior, which can ultimately help you more accurately plan production, need, and sales.
- Ensure Display Compliance at Key Retailers: CPG displays have the potential to move the needle on sales by as much as 193%, but are only properly executed less than 50% of the time. Using data analytics, you can compare sales metrics from different stores to see quickly what displays are not in compliance (based on lost or slow sales) and make the needed corrections.
- Track KPIs and Get Closer to Your Goals: Data analytics as a whole will help you identify what metrics most closely impact and correlate with success. Once you’ve identified these KPIs, you can then focus your efforts on improving performance in these areas and hitting your goals.
- Inventory Management: Predictive analytics can optimize inventory for CPG based on forecasted demand, historic trends, and other mitigating factors. Retailers can forecast based on many variables, from seasons and holidays to events and even the weather.
Customer Insight Use Cases
Many organizations now see that customer interactions and personalized engagement are essential for growth and customer retention. Operational silos of customer interactions, however, must be broken down and integrated to stay competitive. Successful organizations can better provide a unified experience across all marketing and sales channels by understanding the end-to-end views of the customer journey.
Online seller ELOQUII used customer insight and retail analytics data to determine a new market to target their marketing to. After seeing a trend in product returns, ELOQUII found that customers were ordering multiple white dresses and returning some of their order. Using this data, ELOQUII found that consumers were actually shopping for wedding dresses. Their marketing team took this information and started actively targeting promotions and ads to hit this previously unknown demographic.
Wayfair, as another example, introduced new features in November 2019 to their mobile app, which now includes an augmented reality (AR) tool, an interactive photo component, and the Room Planner 3D feature.
Since half of their customers place orders on mobile devices, Wayfair enhanced their app, and now customers can see how the furniture will look in their homes or offices with just a few clicks. Customers can create an interactive 3D room and see how furniture and other products look and fit into a picture of their particular space. This helps consumers find things they like while also providing Wayfair with a better idea of each customer’s unique style.
Consumer insights also help organizations maintain their status as thought leaders and trendsetters. Kidiliz Group is a French company with a brand portfolio including Kenzo, Levi’s, and Marc Jacobs. To stay a step ahead of trends in the children, teenage, and adult demographics, they consolidate data from two major ERPs that allows them to distill retail activity into significant customer purchasing patterns to influence real-time sales and inventory decisions.
How to Get Started Using Customer Insights
One of the most important components of using customer insights is setting a goal. It’s also important to determine where the data is coming from, how the data is collected and managed, and whether the ability to collect high-quality data exists.
You also need to plan how to use the data, and data governance is key. It’s important for businesses to not only manage the data, but also ensure that it is secure and available. Determine areas of your business that will be affected by the data collection/management process and identify how different departments can interact and utilize the data.
Microsoft Dynamics 365 for Customer Insights
Data-driven customer insights like those described above are proven to enhance and personalize customer experience in ways that strengthen customer relationships and drive revenue.