Customer Based Decision Making: How to Grow Profit and Sales
How many times have you heard companies shout the adage “customers are our top priority?” It seems like anywhere you go companies make the claim that they put their customers as their top priority. Rarely do companies truly know the value that a customer represents or live up to their claim of customers being their top priority. A customer will tell you what is important to them and how loyal they are by where they are willing to spend their cash. The old adage "actions speak louder than words" definitely applies in a corporate setting for what a customer.
Kroger is one of the best examples of a company that tries to understand their customer. Nearly every decision from within every level of the company is driven by data that reflects customer shopping patterns. As a negotiator for Kroger I spent most of my time in analysis focusing on customer behavior and spending trends with a particular focus on repeat purchasing behavior and the price sensitivity of shoppers on specific items. While researching shopping patterns it became very apparent that strong sales performance in such a large company can only be achieved through a strong focus on the customer. While this is true for a large company it is even more important for new or small companies that are looking to accelerate growth.
After my initial negotiations with several massive corporations it was interesting to review the outcomes of the negotiations after some time. Total sales and margin performance were expanded at much faster rates in the long term when customer data was leveraged. This faster growth arose due to the strong focus on the needs of the customers. The customers, in aggregate, will tell you what they need and what they value if you take the time to analyze the patterns. Even top selling items may appear like they highly resonate with your customer but that may not actually be the case if many shoppers are simply trying products once and switching consumption to a competitor's product.
The trend in grocery towards natural and organic foods is one prime example of this behavior switching. One of the biggest reasons that Kroger has been so successful in the past several years is because they have been able to use customer insights to move into a natural and organic food space as the trends were developing. Thus allowing them to develop strong product offerings that customers want and becoming prepared for long term growth.
Sometimes this approach to focusing on what the customer wants causes a company to prioritize promotions or other products with lower annual sales over some of the tried and true brands. This approach of sacrificing short term sales and margin to satisfy the customer might seem counterintuitive to Wall Street and businesses, but if they focus on what the customer wants using data driven insights they will sacrifice a possible short term gain for long term success while maintaining relevance in a cutthroat industry that has seen significant consolidation over the past several years. Additionally, retailers or other companies seeking to focus on the needs of the customer should view this customer first mentality as an investment in their future. Making the right decisions based on customer data driven insights will keep shoppers coming back to your stores or company often and will give them the desire to spend their hard earned cash with you.
Matt Huff is a former retail strategy developer for Kroger that has turned to fraud analytics for Fifth Third Bancorp. Matt has a desire to learn about negotiation strategies and how to leverage data in diverse ways to drive decision making for companies.