Getting To Know Them

Who are your shoppers and what do they want? Find out by collecting the right data, in the right way.

Years ago, it was somewhat easy to meet shopper needs. Corner grocery stores were run by folks who got to know their regular customers. Personal interactions helped managers determine which products to keep, which to cut, and which to introduce or improve.

Today, things are different. Populations have grown, and the small corner grocery store has given way to larger national and regional chains. And retailers are relying more on technology to gather shopper data to help inform operations — particularly when it comes to uncovering unmet customer needs that could be satisfied with store brand products.

But before retailers can leverage the data, they have to capture the data, which means they need to identify the types of data they need and the best ways to capture them. Many retailers already purchase syndicated data from companies such as Chicago-based SymphonylRI Group or The Nielsen Co. of New York. But what other types of data and data-capturing methods are available?

Where loyalty lies

Perhaps the most popular method retailers use to capture data is the loyalty card, which tracks what's in the shopper's basket at checkout. Todd Walls, chief innovation officer at Buxton Co., a Fort Worth, Texas-based provider of market planning and marketing services, believes that hands down, the shopper loyalty card is the best way to capture data.

"You simply capture a greater percent of your customers with loyalty cards," he says, adding that a rewards-based loyalty card program typically captures 20 percent of a retailer's best customers.

According to Neil Stern, senior partner at McMillanDoolittle LLP, a Chicago-based retail consulting firm, retailers have a strong advantage when using data acquired from loyalty programs to conduct deeper analytics.

"With shopper loyalty data, retailers like Tesco or Kroger can look deeper into a particular customer's basket to correlate what they're buying with their degree of spending and profitability," he explains. "They can understand who exactly is purchasing their products and how valuable a customer they are. And those retailers can shape promotions against this information and really understand the impact on sales and profitability."

Adam Holyk, vice president, client solutions at Cincinnati-based dunnhumbyUSA, says some retailers use points-based loyalty programs where customers can add up points for special incentives, while other retailers use instant-discount programs. If a retailer has to choose which of the two to employ, Holyk says the points-based programs tend to have much lower capture rates, as customers prefer the immediate benefits received from an instant-discount program.

A similar take on the shopper-loyalty form of data-gathering is electronic financial transactions, Holyk adds.

"Some retailers ... try to discover patterns in customer behavior by linking up credit card numbers that are used over time within a retail location," he explains. "They have no idea of the person's name or address, but they ... try to track credit card number 1 -2-3-4-5, and every time that card is used, they link those transactions together."

Stern cautions retailers against believing that one method of gathering data is more effective than another, however — adding that one method really isn't enough. For example, the Cincinnati-based Kroger Co. is known for its partnership with dunnhumbyUSA to gather sophisticated data from shopper purchases. The data help Kroger understand its customers and better develop and promote product assortments for them. However, the retailer combines this approach with the traditional "shopalong" method.

According to a November 2010 Associated Press (AP) article, David Dillon, Kroger chairman and CEO, told Wall Street analysts that even though Kroger uses customer data that none of its competitors can match, he still interacts with shoppers throughout the stores. Shoppers are led to believe he is an independent market researcher, which gets them to speak more openly. He also visits consumers in their homes and peeks into their cupboards, shops Kroger stores alone and incognito, and drops in on Kroger employees without notice. And according to the article, other top Kroger executives do the same.

"dunnhumby tells me what to look for, and I go in and see," Dillon told AP.

John Younger, director of consumer insights at WD Partners, a Dublin, Ohio-based design and program management partner for retail brands, says his company often tries to get a mix of both sales information pooled from loyalty cards and shopalong observations. Younger also notes that in recent times, WD Partners has been looking into "video diary" technology to "capture the voice of the customer," which allows his company's retailer clients to see and hear reactions directly from the customer. Depending on the scope of the project, Younger says the research can be done in-house or in partnership with Qualvu, a Lakewood, Colo., company specializing in online qualitative research.

"It's so much more powerful that way," Younger notes. "Let's face it: We are a media-based culture now. It's just what we expect."

Ask yourself: 'Why?'

Together, the customer loyalty card and shopalong data help retailers understand not only what products their shoppers are purchasing, but also why they're purchasing them — something that cannot be answered with a loyalty card program alone. Understanding why a customer purchases certain items can help retailers reveal specific needs not met by national brands that store brands could satisfy.

This is also where non-traditional methods of data-gathering might come in to play, Younger says — methods that listen to what customers are saying about a retailer's products, services and more outside of the store.

Over the past few years, many consumers have taken to social media utilities — including Facebook, Twitter, blogs and more — to share their thoughts on anything and everything retail-related — especially brands and services.

To analyze the vast amount of information in the social media sea, Nielsen and McKinsey & Company of New York recently formed a joint venture. The resulting solution, dubbed NM Incite, builds on the social media and online brand metrics, consumer insights and real-time market intelligence of Nielsen BuzzMetrics (which is now part of NM Incite). In a nutshell, NM Incite offers several products that help "uncover and integrate data-driven insights" gathered from approximately 130 million blogs, groups, boards, social networks and other consumer-generated-media platforms. Nielsen says NM Incite can help brands understand their customers, identify opportunities for — and potential threats to — brands, and more.

Going mobile

The popularity of smartphones and "apps" also is a boon to retailers in their attempts to gather important shopper data. And as more consumers start using smartphones, retailers will have even more opportunities to use them in data-gathering operations.

Obviously, certain apps help consumers access social-media utilities such as Facebook and Twitter, while retailers can use others to send out and track coupons for their store brand products. But retailers also can use newer, more-intuitive apps for the iPhone and Android platforms — such as CauseWorld and shopkick — to help analyze consumer behavior by tracking and impacting traffic.

Particularly popular in recent months, shopkick relies on a store being set up with walk-in and walk-around location technology (called the "shopkick Signal"), which detects when a shopkick user enters the store and where he or she spends time in the store. Through a smartphone, the app could display in-store offers on any products of a retailer's choice, award special "kickbuck" points (which can be redeemed for gift cards, music downloads, charitable donations and more) for entering a certain store section or scanning the barcode of a store brand product, and more.

"Now retailers can glean information about traffic patterns within different stores, where shoppers spend the most time, what products drive purchase simply by interacting with shoppers, etc.," says Cyriac Roeding, CEO of Palo Alto, Calif.-based shopkick. "And, most importantly, grocery retailers can find out which parts of the store users never visit and address that on an individual basis."

At least one retailer already is working on promoting store brand products through shopkick, Roeding adds.

shopkick, a smartphone "app" for ¡Phone and Android platforms, allows retailers with special signal setups to track and impact foot traffic both in their stores and among departments within each store.

Of course, no matter what data the retailer collects or what method it uses to collect them, it still needs to leverage those data to inform store brand development and promotion. Progressive Grocer's Store Brands covers this aspect of shopper data in the February issue's Innovation Toolbox — stay tuned.

Together, the customer loyalty card and shopalong data help retailers understand not only what products their shoppers are purchasing, but also why they're purchasing them — something that cannot be answered with a loyalty card program alone.