It’s not uncommon these days to see a retailer make headlines for shuttering physical locations, highlighting the trials of the brick-and-mortar retail business model. Yet, while e-commerce sales are growing quickly, they still only comprise 8.4 percent of total retail sales in the U.S. – physical stores remain the most important retail channel by far. (more…)
What do Harvard Business Review magazine, a Nobel Prize-winning economist, and APT have in common? Fighting noise.
This past month, Harvard Business Review published an article co-authored by Nobel Prize-winning economist Daniel Kahneman entitled “Noise.” According to the article, “It is obviously useful to an organization to know about bias and noise in the decisions of its employees, but collecting that information isn’t straightforward.”
Fortunately, organizations can combat these analytical challenges with a scientific approach to decision making. The best way to remove the bias and noise that can cloud judgement is by testing new initiatives with a subset of customers, employees, or stores in market before rolling out more broadly. This is the essence of Test & Learn. By judging a program’s success based on actual customer spending and behavior, leading organizations can be confident that consumers, not executives’ instincts are driving business decisions.
For some, it may prove difficult to trust data over intuition alone. However, executives must remember that adding cause-and-effect analytics to their toolbox can dramatically increase the profitability of their actions going forward. According to Kahneman, “Ideally, the people who use these tools will view them as aids that help them do their jobs effectively and economically.”
In a recent CSP article, APT SVP Marek Polonski outlines the following five lessons convenience retailers can learn from restaurants as they look to optimize their foodservice strategies:
- Run in-market tests to evaluate every new idea
- Rethink menus to keep up with new diner preferences
- Adjust staffing to optimize foodservice operations, while managing costs
- Craft pricing strategies to balance traffic and transaction size
- Introduce in-store technologies to create a more personalized experience
Polonski writes, “Winning in foodservice means thinking like the experts. Consider these lessons from restaurants, who have been in the business for years, and you may find the right balance.”
Learn more about how leading restaurants are using in-market experiments to fuel innovation across their business.
In an article featured in Information Age, APT’s Marek Polonski discusses how businesses can make the most of the data already available to them to drive better decision making and increase revenue. He outlines how to make an organization’s data actionable in five key steps. The first? Don’t be a perfectionist when it comes to data collection. Click here to read about the other four.
In a recent MarketingTech article, APT SVP Rupert Naylor discusses the importance of developing an eCommerce strategy for CPGs. “[CPGs] must prioritise selling through eCommerce channels to achieve long-term success, as consumers continue to increase their online shopping behavior.” Click here to read the full article.
In an article featured in Marketing Week, APT CEO Anthony Bruce provides his perspective on targeted loyalty offerings. “You have to ensure you’re changing behavior, not just offering the reward,” he says. Bruce goes on to discuss the increasing prominence of digital channels in loyalty delivery, explaining that “the [digital] trend is very much afoot today, and often new schemes don’t require the customer to have the plastic card with them.”
In an article featured in Convenience Store News, APT SVP Marek Polonski outlines steps that convenience retailers can take to maximize returns from their loyalty programs. “Getting real and reliable information about program performance in a rapidly changing environment can be extremely difficult, and obtaining it next month or next quarter is often too late,” he writes. “Executives need better, faster and more accurate insights today to maximize the success of tomorrow’s initiatives for all convenience retailers looking to win in loyalty.”
APT is pleased to announce that Sunoco has joined a number of leading convenience retailers, including Wawa, Maverik, Thorntons, and United Dairy Farmers, in extending and expanding its license of APT’s Test & Learn software to make more profitable decisions. In a recent article in Convenience Store News, Chris Williams, Vice President of Merchandising at Sunoco, discusses how Sunoco will leverage the software: “We will be analyzing the impact of adding Laredo Taco, the Stripes fresh Mexican foodservice concept, to additional locations to serve our customers and drive fuel customers into our stores. Similarly, we look forward to using the software to refine our promotional and merchandising strategies, as well as to generate more nuanced customer segmentations and smarter offers for our APlus Rewards program.”
APT recently announced that McDonald’s USA, LLC has chosen to license APT’s Test & Learn ® and Menu Analyzer software solutions to analyze strategic initiatives, including new food introductions and menu optimization. In the press release, Kristy Cunningham, McDonald’s Senior Vice President of Strategy and Insights, commented, “APT’s software has given us a platform to measure the cause-and-effect impact of our initiatives more rapidly, accurately and efficiently…APT’s software helped us understand that ‘All Day Breakfast’ generated incremental business by attracting new customers and leading to larger check sizes for existing customers. This initiative was a primary driver of growth in our most recent quarter.”
Returns have always been expensive for retailers, and the number of returns is only increasing with a growing percentage of sales coming through digital channels: in 2014 alone, $284 billion of product was returned. Figuring out how to lower that number without causing customer attrition is a major challenge facing retailers. Should retailers limit return windows? By how much, and on which types of items? Will stricter policies intimidate customers from transacting?
A recent Washington Post article details a study that dove into these kinds of questions, examining how retailer return policies have historically impacted customer behavior. Unsurprisingly, more lenient policies were strongly correlated with higher return rates. These types of policies, however, were even more strongly correlated with higher sales, indicating that customers were more likely to make purchases given the security of a strong return policy.
Based on the study’s findings, it appears that there may be opportunities for retailers to grow sales by making return policies more forgiving. But how will these types of changes actually play out in market? Will customers purchase more in total, netting out returns? Will a more lenient policy increase shrink? If so, by how much?
Rather than relying on intuition or correlations, retailers will need to understand how customers will react before enacting broad changes. The only way to gain this insight is with a Test & Learn approach: test a policy change in a subset of stores, and compare performance to a control group of stores that maintains the status quo. Then, retailers can isolate the action’s true incremental impact on KPIs like return rate, sales, shrink, and customer satisfaction. Using these small scale in-market experiments, retailers can answer the following types of questions:
- Return Window – What will happen if we extend our return window? Will sales increase? If so, will that outweigh any corresponding increase in returns and shrink?
- Process – What will be the impact of offering free shipping on returns? Should we move to a stricter strategy for offering refunds to cut down on fraudulent behavior and/or losses from products that can’t be resold?
- Omnichannel Strategies – How can we profitably allow online orders to be returned in stores?
- Policy Variation – Are there opportunities to target policy variations to different product categories and customers?
As ecommerce continues to grow and omnichannel customer service becomes more critical, costs associated with returns will continue to eat into retailers’ bottom lines. By testing new ideas, executives can hone in on which return policies will work best for their business.