How Much Do Retailers Know About Their Customers' Buying Habits?

How much do retailers know about their customers' buying habits? The answer is, "a lot" -- and then a lot more! Retailers can track consumer shopping behavior through predictive analytics just like we, at Upstream Commerce, can track your competitors' pricing and assortment with our pricing intelligence solutions.

These kinds of technologies and data analytics represent the future of retail. Even by studying the data on simple sales receipts (date, items, cost, time, location), a retailer can learn what kind of products have been bought over time by all the people who shop there -- how many, how often, and when. Retailers can even figure out the customer demographics based on what items are bought. For instance, selling a lot of baby formula and diapers most likely means a family with child/children. In addition, selling a lot of higher ticket items typically means a more affluent, willing-to-pay-more clientele.

The pool of data is already huge. The analysis of this "Big Data" is quickly becoming more specialized and sophisticated. Retailers can figure out what day of the week or what season the greatest number of sales take place for particular items, and be prepared to feature these items in order to sell related items. This is simple stuff.

This information becomes "playbooks" for the retailers to help determine what assortment (and how much), when to carry, where to place the merchandise in the store, how much to charge, and how to make more sales.

And if customers use credit cards or loyalty cards for their purchases, the information can truly be customized and personalized for that particular customer. For example, ads and merchandise aimed directly at fulfilling that person's specific "needs" and "wants" based on their previous and ongoing shopping habits. Also, special offers, coupons, prices and come-ons to keep you a loyal customer.

Here are some more examples of pricing and product placement strategies based on information the retailers have:

Strategic Placement

It's no coincidence that baby diapers are placed in the back of the store. That's because it's a "necessity" item that the customer will come for; and thus the retailer puts out all sorts of tempting items that the customer must pass along the way to the diaper department: toys, games, cereal, impulse buys, electronics, etc.

It's also no coincidence that the retailer puts the Cheerios at floor level, so the two-year-old sees and grabs them, while, at her eye level, mom will see the Mini-Wheats (which don't have the same brand loyalty as Cheerios), but with a discount, in order to drive that product's volume.

Location Marketing

Millions of coupons are being sent out to target audiences only too happy to come to the store to redeem them. An even sharper new marketing method is for retailers to send messages and coupons to customer smartphones -- as soon as the person is known to be in the geographical area of the store.

This is called "location marketing" or "geofencing." It's also used for "personalization." For example, if the customer bought a small bottle of juice the last five times, when they approach the juice department, the store sends them a message on the spot, with a special on the large size or a complementary product to get them to try it.

In two Forbes videos, Dan Fishback, CEO of marketing optimization company, DemandTec, explains pricing and product placement strategies based on the information the retailers have on you. "How Retailers Get You To Buy;" "Tracking the customer's behavior."

Customized ads and loyalty on the smartphone will be the breakout moment for using collected data and definitely be used to inspire and create loyalty. The retailer already has tons of data about you and your demographics. This data aids retailers with assortment planning, merchandising, advertising, marketing, and selling most effectively.

If retailers know what to expect (and do) they will better reach, court, sell-to, win, and keep you, the loyal customer.