Actionable Insights From APT's Retail Practice

Using the Call Center to Generate Revenue

December 28th, 2010 | Posted by Will Weidman in Uncategorized - (Comments Off on Using the Call Center to Generate Revenue)

Banking Technology News just wrote an article on how the call center has become a major revenue driver after being treated in the past as simply a cost center.  Specifically, the article discusses how the caller center can be a source of cross-sell and up-sell when customers call in.  A key aspect of maximizing revenue from inbound calls is to know how to best direct each incoming call.  There are a variety of options to service each call from the call center location (outsourced, US-based facility, remote agent) to the qualifications of employee (training, tenure, past experience). 

The cost implications of these different options are clear and easy to measure, but the impact on revenue is much harder to quantify.  The challenge in measuring the impact of a given channel is to find comparable customers who did not call in or were routed to a different channel.  Customers calling in tend to be inherently different, so this requires careful matching.

After getting this matching right, we have found that in general the more expensive call center options do result in more cross-sell and up-sell, but only for some customers.  As a result, some customers should be routed to low cost channels while those with more revenue potential should receive the more expensive and higher level of service.  It is difficult to tell which customer falls in which bucket, but getting it right can drive millions of dollars of profit improvement.

The Non-Paradox of Choice

December 23rd, 2010 | Posted by Marek Polonski in Retail - (Comments Off on The Non-Paradox of Choice)

Washington D.C. – Note: In this week’s guest entry, APT’s founder and current chairman, Jim Manzi, revisits the famous jam experiment and the (non) paradox of choice.

The jam experiment

Over the past decade, some academics have claimed to have shown scientifically that humans tend to become paralyzed by too many choices. This is often called the “paradox of choice”. Probably the best-known piece of evidence is the “jam experiment,” in which shoppers bought more jam when presented with fewer flavors than when confronted with many flavors.

But what if one of the crucial experiments at the foundation of this mountain of inference showed no such thing?

Libertarian writer Virginia Postrel opens her recent New York Times review of a new book on the topic of the paradox of choice with this:

Sheena Iyengar is the psychologist responsible for the famous jam experiment. You may have heard about it: At a luxury food store in Menlo Park, researchers set up a table offering samples of jam. Sometimes, there were six different flavors to choose from. At other times, there were 24. (In both cases, popular flavors like strawberry were left out.) Shoppers were more likely to stop by the table with more flavors. But after the taste test, those who chose from the smaller number were 10 times more likely to actually buy jam: 30 percent versus 3 percent. Having too many options, it seems, made it harder to settle on a single selection.

Wherever she goes, people tell Iyengar about her own experiment. The head of Fidelity Research explained it to her, as did a McKinsey & Company executive and a random woman sitting next to her on a plane. A colleague told her he had heard Rush Limbaugh denounce it on the radio. That rant was probably a reaction to Barry Schwartz, the author of “The Paradox of Choice ” (2004), who often cites the jam study in antimarket polemics lamenting the abundance of consumer choice. In Schwartz’s ideal world, stores wouldn’t offer such ridiculous, brain- taxing plenitude. Who needs two dozen types of jam?

It turns out that I was also told the story of the jam experiment – for the umpteenth time – at a business conference a few months ago. But it was Postrel’s characteristic highlighting of a telling detail that I had never before heard which piqued my interest: those who chose from the smaller number were ten times more likely to buy jam. I’ve designed and analyzed a lot of retail experiments, and causing a 10X increase in sales by changing a shelf assortment would be a truly astounding result. (more…)

The End of Price Obfuscation?

December 19th, 2010 | Posted by CCorman in Uncategorized - (1 Comments)

In one form or another, price obfuscation has always been part of the retail game.  This is item is $19.99 … after a $40 mail in rebate.  That item is three payments of $29.99.  This item is 25% cheaper, but contains 50% less stuff.   This item is $99.99, but for today only, there’s a 25% discount, and a “stackable” BOGO 50%, and a special 10% discount on any one item before noon.

The mechanisms abound, and most benefit from the fact that consumers are not great at math.  No large scale retailer, by the way, is quite as bad as the mattress industry, which introduces the same product under different names and UPCs, simply so that consumers cannot price compare easily.


Google Ngram Viewer

December 17th, 2010 | Posted by Guru Raj in Uncategorized - (Comments Off on Google Ngram Viewer)

Google released a new feature, Ngram Viewer, that allows one to search for keywords in books across time.

On a whim, I searched for our favorite topics: the connection between testing and prediction, as well as the interplay between correlation and causation.


The Branch of the Future

December 17th, 2010 | Posted by Will Weidman in Financial Services | Uncategorized - (Comments Off on The Branch of the Future)

Retail banks are investing in building the branch of the future.  An American Banker article describes how Citi’s new branches look more like an Apple store than a traditional retail bank.  There are a lot of elements to building this new type of branch – redesigning the branch layout for a more open floor plan, making the staff more versatile, extending hours, and adding capabilities to ATMs such as remote check imaging. 


What’s Causing Sales to Go Up … or Down?

December 16th, 2010 | Posted by Guru Raj in Retail | Uncategorized - (Comments Off on What’s Causing Sales to Go Up … or Down?)

A frequent question every retail manager asks is “what’s causing sales to go up … or down?”  We’re not pointing any fingers, but, when sales go up, the answer we hear is that “the increase is caused by the latest media / promotion / merchandise change / operational initiative / etc,” and when sales go down, we hear “the decline is due to unfavorable weather / macro-economics / competitive actions / etc.”  The fallacy is obvious — if we blame poor weather conditions for poor sales, shouldn’t we also credit good weather conditions for some of the good sales?


1. Get ready to compete with Wal-Mart

Wal-Mart has continued to make inroads toward becoming a full-fledged retail bank, and banks are worried about this to say the least.  A Forbes article details how Wal-Mart now has “Money Centers” with bill payment services, as well as a pre-paid debit card program.  Essentially Wal-Mart has “4,300 platforms to sell stuff,” and why not include products traditionally sold by retail banks?

Wal-Mart will offer two major benefits to potential banking clients – price and convenience.  Wal-Mart will without a doubt have some of the lowest fees in the industry, and with 4,300 locations, it will also be extremely convenient, particularly for those who already shop there regularly.  To compete with Wal-Mart on price, banks will need a competitive fee structure.  This does not necessarily mean having the lowest fees, and banks will need to determine the right fee level relative to Wal-Mart and other competitors to balance the goals of keeping customers and maintaining profitability.

Banks will also need to compete on convenience.  This includes having accessible branch locations, a high quality branch experience, and a strong online presence.  Getting fees right and improving convenience will not only help prepare banks to compete with Wal-Mart but will also help banks become more competitive in general.


The Problem with Redemption

December 9th, 2010 | Posted by JMarek in Promotions - (Comments Off on The Problem with Redemption)

In Restaurant SmartBrief’s list of Top Ten articles of 2010, there is an interesting cautionary tale about Groupon.  Well worth reading.  Yet again, the curse of redemption without incrementality strikes.

After A Decade of Effort, Walmart Still Searches for Its Smaller Self

December 6th, 2010 | Posted by Dan Schreff in Retail - (Comments Off on After A Decade of Effort, Walmart Still Searches for Its Smaller Self)
Washington D.C. – While it is most frequently associated with sheer massiveness, Walmart continues to wrestle with strategies to erect smaller stores optimized for urban neighborhoods. “Going small” may not be as simple as it sounds.It’s hardly news that the nation’s number one retailer has been experimenting for more than a decade with alternative formats like Neighborhood Markets (conventional-sized supermarkets about 42,000 square feet) and for three years with Marketside (15,000 square foot corner grocery stores).

The challenge

The challenge is one other retailers can only dream about: Walmart has erected a full-sized store or supercenter in nearly every community with enough real estate for a 100,000 – 230,000 square-foot structure and parking lot and a sufficient population to sustain profitable sales. Locations that meet both criteria are almost always suburban and they are growing scarce. Sparsely-populated rural areas lack the volume potential; and densely populated urban areas seldom have enough open space available.

But with over 2,800 Supercenters and over 700 discount stores already operating in the U.S., Walmart needs to grow in large leaps in order to sustain shareholder expectations. It sees American cities as target markets with significant untapped potential.

The Wall Street Journal recently quoted Bill Simon, Walmart U.S. stores chief, who indicated intent to add additional Neighborhood Market stores, as well as “hundreds” of smaller urban stores modeled after bodegas the company now operates in Latin America.

The trend

To some extent, Walmart may also be influenced by the growth trend exhibited by other smaller-footprint, low-frills retailers, such as the Aldi grocery chain and the fast-growing “dollar store” segment which has reached 20,000 stores operated by Dollar GeneralFamily Dollar and others.By comparison, Walmart’s progress on the small side has been neither rapid nor particularly impressive so far. The company has erected about 150 Neighborhood Market stores, but Marketside locations have been limited to just 4 locations in suburban Phoenix, AZ. For a company with annual sales north of $405 billion last year, that barely moves the needle.
In Walmart’s defense, it has continued to post sustained growth through full-sized format stores and overseas operations. For a retailer of its size, the Neighborhood Market venture might be construed as a controlled market test that merely hints at what’s to come next. The same may be said about those hundreds of bodegas south of the border that until now have flown under the radar for most U.S. analysts and competitors.

Learn more

Both store groups offer sufficient numbers of sites to allow for controlled testing that can lead to significant refinement of the store concepts prior to roll-out. APT clients including Dollar General, Family Dollar,  Big Lots and Wawa, do this kind of analysis routinely, applying a Test & Learn methodology to improve profits on new formats, store design, and other investments.

Test & Learn Summit May 2011

December 4th, 2010 | Posted by Marek Polonski in Retail - (Comments Off on Test & Learn Summit May 2011)
Washington D.C. – Registration is now open for the  annual Test & Learn conference that brings together companies passionate about in-market testing. Join peers from your industry to learn how world’s leading companies are designing, executing and analyzing tests. Share your own experiences and learn from others about current testing trends and best practices.