Leveraging Shopper Data

With the recent entrance of Target into an already crowded Canadian marketplace, established Canadian grocers may be feeling far from neighbourly.

The smart and successful retailer from south of the border has opened the first of 124 stores across Canada, which will also include its grocery department.

How will established Canadian grocers compete, survive and possibly even thrive?

Target has made a name for itself in the U.S. market by understanding specific customer needs and delivering highly relevant offerings.

As a newcomer in Canada, however, the company won’t be able to rely on reams of historical sales data from other established stores to help determine and satisfy the needs of Canadian shoppers.

In this crucial respect, Canadian grocers will have a significant advantage for a period of time.

By analyzing past customer transactions of actual shopping behaviour, Canadian grocers have an important opportunity to fortify themselves against the amped up competition, but only if they exploit that customer data to better satisfy the needs of their best customers.

Here’s why actual customer shopping data is so valuable.

If you ask a shopper if she’s a health-conscious consumer, she may point to her shopping basket filled with “healthy” products such as diet soda, low-fat ice cream and low salt potato chips.

But truly healthy people won’t have any of those products. Their baskets will contain bottled water, fresh fruit and granola.

The point is, there are important differences between what Canadian shoppers say and how they actually behave.

It’s axiomatic: You are what you buy.

Years of past customer purchase data enables established Canadian grocers to know those important shopping basket differences and better understand Canadian shoppers than new grocers in the marketplace.

Having an advantage is one thing, exploiting it is something else entirely.

In order to thrive post-Target, Canadian grocers must turn data-based customer insights into actions that satisfy customer needs.

Turning insights into actions depends on developing capabilities to analyze shopper data systematically, and using the insights everyday to guide marketing, merchandising and store operations decisions.

It’s natural to ask: If customer data is the secret weapon to compete with Target, why haven’t more grocers already pursued this approach versus existing competitors?

The answer is mixed.

Some grocers aren’t exploiting the value that resides in their shopper data because they’ve achieved success over the years without using it. So they don’t see the value.

But the question for these grocers, raised anew by the entry of Target, is: How sustainable will their traditional approaches be in the face of ever-more intelligent and innovative competitors?

Some grocers lack the internal capabilities to turn reams of shopper data into meaningful insights that can be digested by the organization.

Still others have embraced the date-driven approach but encountered a formidable challenge in getting decision-makers to make sense of insights and put them into action producing desired results.

Consider this store promotions example: A customer has been loyally shopping at his local grocer every week for the past five years. The grocer sends him a direct mail piece with a specific set of offers. Upon receipt, he determines that three of the offers are completely irrelevant because he’s never purchased any of the items, another three are for brands that are direct competitors of his preferred brands, and the last two are for a gas rewards program at a completely inconvenient station.

The outcome here is the customer feels his grocery store of the past five years doesn’t know him and doesn’t care enough to send relevant offers, leaving him feeling more negative about the store than if the grocer hadn’t bothered to send a mailing.

To maximize the chances of succeeding against Target and future newcomers, established Canadian grocers must tie data-driven insights directly to key decisions that their businesses already make.

Competing means going beyond telling category managers to run more customer-centric promotions. It means telling the managers exactly which items to promote in specific stores in order to satisfy the needs of valuable customers.

It also means giving category managers guidance about the right depth of discount to offer in order to satisfy valuable customers’ needs, while not encouraging unprofitable, cherry-picking behavior.

New entrants into the marketplace will learn quickly. Established Canadian grocers have a limited window of opportunity to leverage the significant competitive advantage inherent in the historical shopper data they possess.

Target soon will amass its own trove of shopper data and the retailer already has proven it knows how to use the information to maximum effect.

Canadian grocers need to start down the shopper insights path as soon as possible to build up a healthy lead and maximize their chances of staying one or two steps ahead of their new competitor.