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JC
Penney, Red Bull, Estee Lauder Play The Numbers Game
Source: 1to1 Magazine, article by
John Gaffney
With sales revenue gains measured in the single digits
for most companies, consumer packaged goods is truly an
industry where customers are scarce and valuable
resources. However, companies on both the supply and
retail side are using business intelligence at more
aggressive levels than ever before.
A survey of 300 major packaged goods retailers from
Consumer Goods Technology (GCT) magazine and Gartner
research shows that the top ranked customer-facing
action item over the next 18 months will be the need to
provide retail associates with better information tools
(selected by 43 percent of respondents). "Which is what
you would expect to see at the top of the list if
retailers are serious about implementing tactical tools
to execute customer-centricity plans," says Jeff Roster,
Gartner VP global industries, retail. "Add something
strategic to the mix, like customer intelligence
analysis (39 percent of respondents), and it is clear
that retailers are now actively investing in both the
strategic and operational tools to improve the shopping
experience."
JC Penney enters the valuation game
Following in the footsteps of Best Buy and many retail
banks, JC Penney is looking at its customers based on
value. According to data presented last week at the CGT
conference in New York City, JC Penney included a
customer valuation report in its April analyst
briefings. Larry Selden, Columbia University professor
and author of Angel Customers and Demon Customers
said the report provided behavioral details for each of
the retailer's 10 customer value segments for the first
quarter of 2006. The most profitable of the 10 customer
groups shopped for quality of goods. They were not
driven by price.
JC Penney lost the most money per customer on its most
frequent customers. They were driven by discounts.
Selden urged the consumer goods suppliers and retailers
in attendance to use what he called "the most cash on
hand over the last 20 years" to invest in profitable
customers and drive overall corporate value.
One of the conference speakers confirmed the concept of
value differentiation that's been espoused here in this
publication for nearly a decade: "Customer centricity
simply means winning with customers," Selden told the
conference. "And winning means being profitable. If I'm
not profitable I can't reinvest in customers. If all you
had to deal with was the top 20 percent of your customer
base your stock price would be through the roof."
Passion drives profits
JC Penney is one of many GCT presenters emphasizing
customer data. Red Bull, which has ridden a surge of
sales in the energy drink category on its way to $1.7
billion in sales in just 10 years, will not sign a
retailer or distributor unless that company agrees to
share customer data.
"We have quickly gone from the 'we're doing some
interesting things with business intelligence' to a
strategic level very quickly," said Red Bull IT director
Harish Ramani. "Our company has come to depend on truly
accurate and consistent data for business development
activities." For example, the company's salesforce now
accesses real-time customer data before calling on
customers and prospects.
Estee Lauder has also used global customer data to
re-examine traditional business practices. SVP Angela
Kapp referred to the decades-old practice of
gift-with-purchase as the industry's "golden albatross"
that may or may not encourage customer loyalty. Its
customer data initiative is providing information that
will answer that question.
"To us it's all about finding out who are best customers
are and how we can keep them," she said. "We do a lot of
product sampling. Does that work? We spend a lot of
money in highly promotional global markets such as
China, Korea and Taiwan. Does that work? We're trying to
manage our global POS data to close the loop on
transactions and leverage our data."
Reprinted with permission from Peppers & Rogers Group, a
Carlson Marketing Group company. Copyright (c) Carlson
Marketing Group. All Rights Reserved.
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