Retailers should examine portfolios to G.R.O.W. revenues.
In today's economic environment, retailers that are using customer analytics to drive business decisions are faring better than those that aren't. Now is the time to take a data-intensive look at each one of your locations from a customer data perspective — what we call the G.R.O.W. strategy.
Identify the stores that are performing well and then pinpoint the variables that contribute to that success. Through the G.R.O.W. strategy, you place each one of your stores into one of four quadrants.
Stores that fall in the “Growth” quadrant are the star performers in your chain — locations that enjoy a large and loyal surrounding customer base. You want to identify the exact variables that are driving success. You should continue to increase brand exposure through marketing dollars while driving additional revenue from existing customers.
“Reposition” locations seem to have the same characteristics as your Growth stores, but they simply aren't performing as well. You know that the key factors for success are there — such as good locations, excellent visibility and strong customer bases — but something is standing in the way. Is the merchandising mix different? Are the management and staff of the same quality? Your analysis is likely to reveal the obstacles — and the strategies you should use going forward.
“Optimize” locations share few characteristics with your Growth stores. Perhaps the visibility of the location is poor or the surrounding customer base doesn't match the profile of your best customers. Maybe there is simply too much competition nearby. The only options are to close the store, accept the smaller revenue numbers or try to restock the store. Whatever you do, don't spend a lot of time or money here.
For any retail chain, there will be a certain number of anomalies — “Why/What” stores that, on the surface, don't seem like they should perform well, but do. A good example of this is a banner-and-sign store located next door to a convention center. The surrounding customer base can't support the store, but temporary business from conventions results in strong performance.
Now you're ready to start driving revenue. The bulk of your resources should be spent on Growth and Reposition stores. Highly targeted direct marketing programs can help. Say your data shows that customers in a certain segment are buying both product A and product B. The data also reveals that many customers in the same segment have only purchased product A. Send this second group of customers a money-saving offer for product B. This strategy is far superior to a mass-market offer of “Buy A, get B free.” The latter will simply bring in a one-time customer who wants something for free. In the first case, you're developing relationships.
Another huge benefit is that by examining the data you can track results by store and by region, month by month, so you can quickly determine if your offers are working, if your store-repositioning efforts are effective, if your cross-selling attempts are paying off. Once you find a marketing message and offer that works, you can repeat it.
Smart retailers will use data to find locations that match their Growth stores, snap them up for a bargain and position themselves to grab increased market share in the future.