Organizing for insight: How retailers can collect and gain advantage from meaningful consumer insights
By Joel Alden, Hana Ben-Shabat, Bobby Wehmeyer and Basil Wuson, A.T. Kearney
To continuously delight customers, most retailers constantly alter product assortments, adjust prices or service offerings and refocus customer experiences. But how often are these actions based on meaningful consumer insights? When the phrase “consumer insight” is misused to refer to simple market research or interesting tidbits of information, then resulting business actions are often hit-or-miss.
For these business actions to consistently drive value, consumer insights must provide a clear, relevant, measurable and trusted view of the customer. Such insights are sadly rare — a study conducted by A.T. Kearney found that nearly 40% of retailers with loyalty programs fail to use data to fully understand their customers. Worse yet, some retailers who gained that understanding failed to ever translate it to action.
On-the-ground executives see these types of problems every day. Maybe an individual store increases sales with an innovative product bundle — but lacks a way to quickly transfer that knowledge to other outlets. Maybe a business unit leader requests information from an internal consumer-research group — but the survey that comes back isn’t relevant to the needs it was supposed to address. Or maybe the market researchers, field staff and point-of-sale data miners all come up with information that points in the same direction, but the insights are piecemeal. There’s nobody to say, “Hey, we’re hearing the same thing from this other source!”
Most major retailers have sought to address these challenges through some form of consumer insights unit. But many have struggled. We believe their problems have been structural: hampered by processes, reporting arrangements and cultures that limit the retailer’s ability to turn insights into meaningful business action. Through our work with top retailers, we have seen that collecting consumer data from multiple sources and analyzing the data centrally is essential to success of a consumer insights staff, which is embedded in the business unit.
Using these principles, we have helped major retailers build effective consumer insights units. Although these functions are “enabling” (difficult to quantify through direct return on investment), evidence of success at one newly insight-driven retailer includes a display change that increased unit sales by 5%, three new initiatives that drive sales of at-risk inventory, and a process clarification that improved a service revenue by 43%, while improving customer satisfaction by 68%.
Collect consumer data from multiple sources, and analyze the data centrally.
Data on consumers can come from multiple, disparate sources: POS systems, contact center logs, website trackers, customer-facing employees, social media and consumer research. But information becomes insight when sources corroborate each other to generate a connected, holistic view of the customer.
For example, Tesco is well known for incorporating customer and employee feedback to generate new-product profits. CEO Philip Clarke said, “Our world is changing fast, and when the customer changes, we change. For any company, gaining these insights requires a dedicated team analyzing POS and loyalty databases, as well as input from surveys and focus groups, to create a cross-functional and global view of the business.”
Best Buy was generating many insights, but not effectively connecting them.
“Our insights power plants were up, but the lines were down,” says Bill Hoffman, SVP of Best Buy’s new Consumer Insights Unit.
A Best Buy Consumer Insights pilot project sought to integrate employee suggestions at 16 stores — and in the first week, 37 different employees across 12 of the stores mentioned that customers were looking for ways to connect their personal computers and televisions. It was a clear, urgent message — but it could only be heard when there was somebody to connect the dots.
Segregated information resists synthesis. So a single central unit must analyze consumer research, data analytics and employee knowledge. Furthermore, leaders should require that insights from one data source be corroborated by the other sources. What are the keys to success for this unit? We believe that people and structure, rather than technology, make the difference. After all, not all of this data is numeric, and so you still need a dedicated team of data analysts (people!) to make the mental connections among different types of data. In our experience, the majority of consumer insights functions can be set up with limited new technological investment.
There’s one source of data that’s best positioned to gain insights about consumers: store associates. These employees, who interact with thousands of consumers every year, can:
- Capture unsolicited customer commentary on pricing, promotions and store policies;
- Observe customers’ in-store behavior and how they interact with store layout and displays;
- Poll customers through in-store conversations about how they use competitors and the company website; and
- Collect feedback from customers who do not make a purchase.
Many retailers never share this knowledge with the corporate office, but you can help maximize this information:
- Make sharing information part of the job expectation and company culture.
- Develop a quick and easy process for information sharing. The process needs to be simple and the tools easy to use.
- Train employees on the types of information that will be helpful. More specific and explanatory insights lead to revenue-generating action.
- Showcase actions that stem from associate knowledge.
Embed consumer insights staff within the business unit.
Once you’ve gathered insights, how do you act quickly on them? This is where organizational structure is particularly important: key staffers of the centralized Consumer Insights Unit should be embedded in business units, attending the meetings, understanding the challenges, and using that intimate knowledge to mold the questions that research must answer. The insights team thus develops relevance, because they are providing insights that are timely and helpful, both proactively and reactively. The team also develops credibility as it works in an advisory capacity alongside management
Every retailer knows the perils of failing to innovate — or innovating in ways that fail to account for ever-changing consumer preferences. Consumer understanding is the industry success factor. It’s critical that retailers not only generate meaningful consumer insights, but allow executives use these insights to drive business actions. By bringing together information from multiple sources, embedding the consumer insights team into business units they serve and ensuring accountability, retailers can make the right innovations to maintain a real competitive advantage.
Joel Alden and Hana Ben-Shabat are partners in the retail practice of A.T. Kearney, a global management consulting firm. They can be reached at Joel.Alden@atkearney and Hana.Ben-Shabat@atkearney. Bobby Wehmeyer is a consultant based in Dallas and Basil Wuson is a principal based in San Francisco.