Customer-centric retailing â Now you know what ... - Roland Berger

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CUSTOMER-CENTRIC RETAILINGHOW CUSTOMER-CENTRIC RETAILING CAN CHANGE YOUR BUSINESSBEFOREAFTERUNDERSTANDINGTHE CUSTOMERRANGEMANAGEMENTPRICEMANAGEMENTPROMOTIONALBUSINESS/MARKETING/DIRECT MARKETINGMANAGEMENTMANAGEMENTLittle understanding of the customerstructures, purchasing patterns or needs.If customer segmentation exists at all, it isprimarily based on sociodemographic data.Range decisions are based primarily onclassic indicators such as sales revenues,sales volumes and customer reach.Traditional price strategy: decisions areclearly focused on top-selling items acrossall categories; competitors' prices arematched.Selection of products for advertisingcampaigns and promotions is very muchindustry-driven. Internal management isprimarily geared to revenue and volumetargets. Specific customer interests arehardly taken into account.Purchasing, category management, salesand marketing use different KPIs, some ofwhich are not properly integrated. Marketingand consumer research do not interactwith category management.Clearly defined customer segmentationbased on actual purchasing patterns.Clear idea of which customer segmentbuys what, when and why.Range decisions and merchandisingare consistently geared toward customerneeds. Decisions on product chronology,shelf arrangement, listing and de-listingare based on quantifiable customerbehavior patterns.Pricing decisions are made on the basisof quantitative analysis. Pricing is basedon baskets of goods for specific customersegments, their competitive price indices,and the customer segments' price sensitivities.Promotional products are consistentlygeared to the target-customer segments –this can significantly improve the attractivenessand profitability of promotionalbusiness.Customer-related targets are definedalong the entire value chain; customerbehavior patterns are systematicallyassessed; the effectiveness of the rangeand processes is improved to the benefitof target customers.12
PROF. NITIN SANGHAVIINTERVIEWCustomer-centric retailing"The majority of retailers have not grasped thestory yet. They still lose sight of the customer."Nitin Sanghavi, Professor of Retail Marketing and Strategyat Manchester Business School.Prof. Sanghavi, could you please outline some of thekey trends in the European retail industry?We currently see a fundamental change in the consumermarkets. There is a shift taking place in consumer shoppingattitudes and buying behavior patterns. Consumersare becoming much more concerned about spending. Inaddition, we have to face some fundamental demographicand socioeconomic changes. Furthermore, the industryhas to deal with rising cost pressure. Retail prices aresuffering from stagflation or deflation in many productcategories. In this market situation it is very difficult toraise the prices and sustain them in response to increasingcosts. We have a very high level of ambiguity, uncertaintyand complexity among consumers and the markets.We have never faced a situation with a dynamic momentumlike this before.Offerings are managed in the stores using out-of-datemetrics, and nobody understands what sort of productsor services customers really want. Right or wrong?Yes, absolutely right. Many retailers have lost sight of thecustomer. They act without thinking about the customer.For categories, they think too much about sales volume,sales revenues and suppliers instead of understandingthe customers and specifically targeting them. Categorymanagement is all about defining ranges, recording allrelevant metrics on a category scorecard, organizationalskills, information technology and the relationship betweenmanufacturers and retailers. These elements need tobe aligned to the consumer. If they are not, in other wordsif there is no customer focus and no real understandingof the customer, then category management cannot beeffectively used as a tool.What's the conclusion of this? What kind of transformationdo you expect for the retail industry?This extremely harsh climate will leave its mark; retailerswill have to change and adapt. We will get much moreconsolidation in the marketplace compared to what wehave seen before. The number of players will disappearor will have to consolidate. At the end of the day, theconsumers will have access to a decreasing numberof retail brands.I would like to challenge you with the following theoryof European retail management: Traditional categorymanagement dominates; the industry is increasinglyrelying on volumes, sales, terms and promotional rebates.There is hardly any real focus on the customer.Nitin Sanghavi has been Professor of Retail Marketingand Strategy at Manchester Business School (MBS)since 1985, after holding senior positions for a numberof major retail and retail-related organizations in theUK and overseas. He is a frequent speaker at nationaland international retail conferences. He also acts asa non-executive director for several retail and retailrelatedorganizations in Europe and India.13
Page 1 and 2: CONSUMER GOODS & RETAILConsumer Goo
Page 3 and 4: Contents3 EditorialJochen Hiemeyer
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Customer-centric retailing â Now you know what ... - Roland Berger