The Next Decade of Data: Why Retail Marketers Will Need to Rethink Their Data Strategies in 2020
This article was originally published on Adweek.com.
Consumer confidence is high and many retailers are thriving. According to National Retail Federation (NRF) projections, U.S. retail sales are expected to be up 3.8% to 4.4% in 2019, on top of 4.6% growth in 2018.
But continued hyper-competition and ongoing assaults on brand relevance will make 2020 a year for sorting out winners and losers. To thrive, retailers must navigate a shifting environment of new technology, better data and regulatory changes.
Retailers must be able to identify their customers across touchpoints to understand how they are engaging with their brand and, then, how to respond to those engagements to best influence a sale and increase customer lifetime value. Today’s consumers expect more than a simple transaction—they want to know why they should be loyal to your brand and what differentiates you from the pack.
Several key retail industry trends continue to evolve. Experience retail—like Designer Shoe Warehouse (DSW) adding in-store nail salons or Best Buy’s in-home consultation and services—is attaining wide adoption. Lines continue to blur between online retail, social-first and brick-and-mortar. Single-product subscription services are competing strongly in several high-margin categories, from smartphones to hearing aids (e.g., Phonak’s Lyric).
And retailers are luring customers with new tools like visual search and augmented reality. Early AR adopters include Houzz, Wayfair and Pottery Barn.
Amid these changes, many retailers are struggling to retain customers. Successful brands ranging from Dollar Shave Club to Nike, however, are becoming more creative in their approach to retaining customers and driving value with constant innovation.
Driven by Data
Data fuels the engine that is driving growth and innovation for today’s retailers. And data strategies that allow retail companies to create best-in-class experiences and build high-value customers are more important than ever.
When the California Consumer Privacy Act (CCPA) goes into effect on January 1, 2020, it will raise the bar for consumer data protection standards in the U.S. and inspire fear in retailers who are afraid of losing valued sources of internal data. But for those with the right data strategy, new privacy regulations could be a boon.
Retailers that manage the changes with accuracy, transparency and in full compliance will gain customer trust. In turn, those customers will be much more likely to make themselves (and their data) available to brands in exchange for better experiences. Customers will be more aware of data, and smarter about giving permission to use their personal information. Many will be more than willing to allow brands they trust to use their data if it results in a superior experience.
But retailers have to be ready.
Developing new data strategies
The most forward-looking retailers are already developing and implementing new data strategies, tactics and analytical techniques. They are approaching 2020 as a year when their data strategy gets more sophisticated with regard to the fractional pieces of personal information known as identifiers.
These bits of data matter because, when linked together in a transparent and privacy-compliant way, they can help you build a holistic picture of the individuals and households that are your customers.
Retailers need to maintain customer identity data that is up to date, contains third-party data overlays, and is specifically engineered for changing privacy standards. Without this, identity profiles can become quickly outdated.
Going forward retail data strategies should contain these elements:
Effective customer identity management: Understanding who your customers are across data silos is a fundamental building block in today’s retail environment. An identity management platform is a core asset that helps to create customer segments, design new experiences, identify high-value customers and reveal new opportunities for enhancing customer value.
Flexible data and measurement approaches: The ability to integrate marketing mix modeling (MMM) and multi-touch attribution (MTA) into a unified measurement approach is an increasingly important capability. Unified measurement can accurately analyze marketing effectiveness and recommend improvements and predict outcomes in any environment.
Real-time data feeds and analysis: With real-time speed, retailers can drive greater media efficiency and attract the highest-value customers.
Improved competitive intelligence models: Better models are built from a wider range of data sets. Some retailers are using mobile data to build a deeper understanding of how their customers and prospects interact with competitors.
Greater attention to governance: This is needed due to regulatory shifts. Retailers must go deep to understand their data collection, governance and utilization practices in 2020 so they can prepare for what’s to come.
Data strategy might not sound so exciting to some. But look at it this way: Retailers who successfully harness customer data will have the key to unlocking enhanced customer experiences and reducing friction across touchpoints and channels. And if that doesn’t sound sexy, you’re in the wrong business.