AI: Bringing Your Most Profitable Bees to the Hive
Pulling in quality, not just quantity.
Right now when you walk into a store, the store itself doesn't really have any information about what you want to buy.
Around 80% of retail sales are carried by the most loyal customers, who aren’t as motivated by price as they are by overall value—in convenience, brand experience, and relevant product offerings. Zara, for one, has embraced the fact that while they may not be the cheapest fast-fashion brand, and their highest profit margins come from targeting their most dedicated customers.
The guiding question for retailers should be “how do we attract the highest value customers to our physical and digital stores?”
The All-Too-Easy Promo
In the name of foot traffic, retailers still gravitate to promotions and discounts—30, 40, 50% off. It’s an appealing strategy, as it can certainly lead to immediate sales, but it’s short-sighted value. Promotions too often assume that customers are merely in it for the discount, using the one-size-fits-all approach instead of appealing specifically to the individual customer. And the simple fact is that someone can always beat you on price.
It’s time for retailers to steer away from blanket promotions and add value that is unique to their brand and their best customers.
Using Cloud-Based Data as Your Net
In essence, the most profitable customers are the worker bees of retail, doing the heavy lifting for the bottom line. And the way to appeal directly to them is data. Offers can and should be more segmented for both high-lifetime and new, high-net-worth customers based on the deep insights provided by AI. With machine learning, retailers can use this data to develop a complete picture of who customers are and deliver promotions, pricing structures and product offerings tailored specifically for them, leading to higher-value sales. The honey, if you will.
Alex Klokus, CEO of Futurism, sees this opportunity as largely untapped:
“Right now when you walk into a store, the store itself doesn't really have any information about what you want to buy. I think the combination of cloud-based platforms and AI allows retailers to streamline that process by having your preferences and a more detailed picture of what you're looking to accomplish before you walk in.”
If the cloud is the net that gathers data, AI is what translates that data into valuable, tactical insights. Albertsons, for example, has plans to unveil a digital marketplace consisting of smaller brands and startups—something many shoppers appreciate. The marketplace will equip them with data that can be used to better understand and cater to customers in different regions.
The Need for Individualization
An IBM study on Generation Z shoppers points to the way that retail value has changed. While it used to be centered around price and availability, now it must account for widely varying customer motivations. Yes, some may be on the lookout for the cheapest prices, but others are willing to pay more for co-branded products or items that are certified as sustainable. Retailers can’t hope to reach every single customer at the same depth, but they can be just what loyal customers want at just the right moment.
The study emphasizes customer appetite for individualization, meaning a shopping experience that reflects their own needs and desires:
- 64 percent of respondents said tailored price or service loyalty rewards were important to them
- 59 percent said having their birthday remembered was important
- 65 percent said that rewards programs influenced where they chose to shop
Loyalty programs are one of the strongest ways to offer individualization, and they can operate as the most direct way to bring customers into the store. The Nordstrom app helps loyalty members build a wish list of items to be purchased later. When they’re in close proximity to the store, the app reminds them of their list—a very immediate way of drawing these high-value customers in. Nordstrom also rewards credit card holders with first-pick of new fashions at a discount during their Anniversary Sale, an opportunity for these customers to access a higher level of service.
Individualization should be a primary focus for the store environment as well, whether it’s through interaction with sales associates or technology that empowers customers to shape their experience. For example: imagine customers having the ability to design and create their own one-of-a-kind items with the aid of a 3D printer. Retailers could consider making this exclusively available to high-value customers, offering them the sense that they are privy to the brand’s most elevated experiences.
The Power of Crowdsourced Feedback and Customer Service
It’s one thing to build a relationship with your most valuable customers and quite another to get them actively sharing their enthusiasm. A large part of customizing their experience is giving them opportunities for feedback—a two-way exchange in which they have the opportunity to champion what they like about your brand. Zara sets a strong example here, too, inviting customers to help them enhance customer service and product offerings. The result is that the valued customer becomes the “Chief Customer Officer” for their brand.
With customers doing their part as brand stewards, they're that much more likely to do your customer service for you. UK-based Limitless is a “Crowd Service” system that uses AI to crowdsource customer service from loyal fans. The platform can quickly deal with simple inquiries, freeing up human ambassadors to handle interactions of higher value.
One Bee is Not Like the Next
One dedicated (and profitable) customer will never be exactly like another. But the common theme
Once you do bring high-value customers into your store, can data also fuel the ideal customer service? Read more here.