Reaching the target customer — that is the constant focus necessary to succeed in the retailer's universal quest to fulfill their store's sales potential.

What about your investment in advertising? If executed well, advertising can communicate your message to your target audience, drive traffic into your stores and confirm your sales potential. But the cost of advertising is escalating. Is it worth it? Is there a smarter way?

Free Standing Insert (FSI) advertising in newspapers has proved to be a cost-effective strategy that allows retailers to reach their targeted customer. As compared to traditional print ads, FSIs provide maximum impact at minimal cost by having the ability to target specific consumer groups.

Doing it Right

Retailers can blanket an entire trade area, which is costly, or they can select by ZIP code, so that FSIs only go to those specific areas. Regardless, if you don't use data analysis in your campaign, you're still advertising to the masses. You are not selectively reaching your core customers. You are not emphasizing the specific stores in need of a sales boost. You are not maximizing the return on your investment.

So how can you be sure you're spending the right amount of money? Wouldn't it be great to know each store's sales potential before you commit to an advertising budget?

That's where sophisticated psychographic research comes into play. Technology now exists that provides retailers with specific and detailed information about their store's potential, giving them the ability to make better and more informed decisions. To accurately develop this measure, the analysis begins at the household level and from there, is developed to any geographic detail. Another element to maintain accuracy is the application of a drive-time gravity model. This variable takes into account the number of core customers in close proximity (measured by drive time). Households closer to a site are more valuable than those farther away.

At Buxton, we use our in-house proprietary research tools every day to create customized models with precise and measurable data that retailers use to capitalize on the dollars they spend on advertising. The model tells a retailer what sales they should receive from each household in a store's trade area, which is then rolled up to an appropriate targeting geography such as a ZIP code or sub ZIP. When you know what actual and potential retail sales should be according to each outlet, you can spend your advertising dollars more efficiently and effectively.

For example, a store's location in one ZIP code generates $200,000 — its maximized sales potential. The retailer could reapply the advertising dollars to a different ZIP code so another store can attain its sales potential. This model helps retailers fully realize potential sales.

Living Retail Success: Pier 1 Imports has reaped the benefits of our FSI model. Using ZIP codes and neighborhoods in areas where they have multiple locations, we've been able to help them use the technique to maximize the sales at specific stores without affecting those stores that are already operating close to, or at, their sales potential. Pier 1 knows which customers within a given ZIP code will tend to patronize which store and they've used that information to direct advertising into the trade areas where it's needed most.

And, when a new location opens, Pier 1 does not have to guess where to advertise to reach new target customers. They are already armed with the research, the statistics and the information to target customers for that store with a newspaper FSI.

When using psychographic research and FSIs, you can know exactly where, and where not to spend your advertising dollars — thus maximizing your return on investment.

MARKETING & ADVERTISING

RICH HOLLANDER

President of the CustomerID division of Fort Worth, Texas-based The Buxton Co., which advises retail chains on new store locations.