One of the most popular times of the year on the retail calendar, End of Financial Year (EOFY) sales, is fast approaching.
In 2018, Australian shoppers spent upwards of $25 billion in EOFY sales, as they searched for ways to maximise their tax return through purchases like laptops, handbags, or office furniture.
It’s a peak promotion time – but how can retailers be poised to gain the most advantage and ensure the promotions they set aren’t wasteful?
EOFY is, at its core, a land grab, with an inundation of advertising and promotions to entice shoppers to part with their cash.
However, it’s exactly this flood of offers that can negatively impact brand equity, as promotions are often ill-thought out, making them unprofitable for the retailer. It’s called ‘panic promoting,’ and it often rears its head in busy retail periods. A recent report found Australian retailers are wasting $11 billion per year on unnecessary promotions. 40% of products are on promotion on any given day, and this is likely to increase at peak promoter times like EOFY.
Retailers need to be more strategic about their approach to pricing and promotions, and the start of the new financial year offers a great opportunity to think introspectively about driving greater value for customers. There are two key areas they should be focusing on to maximise profit and better meet the needs of customers – personalisation and hyper-localisation.
Use customer data cleverly to leverage hyper-localisation
Through leveraging customer data at your disposal, hyper-localised approaches will create better and more relevant customer experiences, which have profitable outcomes for businesses. This is because people will be able to buy the products they really want and need, how and when they want to buy them.
The concept of hyper-localisation means stores or groups of stores can be targeted based on range, assortment, price, promotions and layout. It starts with a segmentation of customer groups with different needs, which are then overlaid with a geographical view of the pattern of stores, so you can group similar stores and apply similar category plans.
By starting to tailor the store clusters, retailers make natural moves towards personalisation.
Once you get store targeting right, you can start to look at individual personalisation through digital channels, for example. With their emphasis on personal finance and organisation, EOFY sales are a great moment to test this approach.
Taking a longer-term view, it’s this relevant approach that will make sure hyper-localisation strategies reap benefits for the business and the customer ongoing.
Where’s the data coming from?
Many retailers already have strong customer data at their fingertips down to details about customers’ level of affluence, sensitivity to price, or ethnic needs – and it’s possible and beneficial to make assessments based on this data about what products customers actually want if you know how to utilise this valuable resource.
This can help store managers build winning strategies that drive profitable business growth, but also economise learnings at scale – from one store, to the whole business. And delivering plans designed on actual customer wants is key to driving an enhanced and more personalised customer experience.
Hyper-localisation is a core way to get pricing and promotions right
Once retailers get the right assortment for the right customers in the right stores, the next step is optimising pricing and promotions. This is where data can be so impactful in understanding price elasticity, where everyday low prices should be applied, or HiLo pricing strategies.
There are five quick, but golden rules of hyper-localisation:
- Keep the customer at the centre of every decision, using the data to build your strategy .
- Ensure you have the right customer data and capability to draw insights from it.
- Segment your shoppers to understand how groups differ.
- Identify stores that have similar customer profiles and cluster them together.
- Apply test and learn strategies to scale your success.
The best way to stand out from the crowd this EOFY is to make sure your stores or brands represent the first choice for customers by giving them the shopping experience they crave. It’s important to then replicate this not just at EOFY, but all year round, for the best results.
Using customer data can provide you with all the answers you need, the end result is knowing your customer better than your competitors – and as such, being able to give them exactly what they want, over time earning their loyalty.
By prioritising local market needs, down to the hyper-localisation of the store strategy and a personalised approach to pricing and promotion, retailers can be successful now and into the future and customers better off from an enhanced shopping experience.
By Kylie Gleeson-Long, Managing Director ANZ, dunnhumby