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Every Item In Your Store Is Linked To Other Items
Retailing in the 21st century is no different from a high-performance, high-adrenaline sport. And like athletes, retailers are forever seeking that cutting edge through state-of-the art technology and analytics. Market basket analysis, also sometimes known as affinity analysis, has emerged as the next frontier in retail merchandising and promotions. Market Basket Analysis (MBA) enables retailers to analyze inventories in their customers’ “baskets” and identify their buying patterns.
MBA has disrupted the retail industry in a major way. According to a study carried out by the FactPoint Group, a Silicon Valley research and consulting firm, more than 50 retailers with revenues from $400 million to $24 billion, were “familiar” with MBA and were “looking to extend their capabilities” in that area. What MBA brings to the table includes quite an impressive array of qualities that most “non-MBA enabled” companies would be challenged to achieve – increase in order size and order value, improved customer service and product availability, increased sales, more customers, better customer retention, smart enterprise, and much more.
Every item in your store is linked to other items. "It is quite an amazing web of connectivity"
Understanding Your Product Affinities is Core to your business
Every retailer wants to leverage the true value of brand identity and promotions. It is hardly surprising that without proper MBA, you run the risk of eliminating one product from “Jack and Jill” items. With hundreds and thousands of items, without the right tools it is challenging to quickly see the product affinities. There are numerous examples of supermarkets pruning products only to receive a flood of calls from customers. How can I make greek salad without feta??
At the category level, the affinities can unravel how price fluctuations on one item in a category can change the dynamics of the entire shopping basket. For example cigarettes prices are constantly fluctuating, usually on the rise. In convenience store chains the fluctuations will impact all categories with strong affinities with the cigarette category. A customer walking in with a $20, will have less to spend on other items if he buys tobacco products. So – what items are those typically? What items will see a sales drop as tobacco price increases?
Understanding the product affinities is core to assortment planning, merchandising, product availability and customer service. Every item in the store is linked to other items. “It is quite an amazing web of connectivity”, quoting Roy Marsten. Emcien’s analytics unlocks that product affinity web, and presents the entire list of affinities so it’s easy to understand and drive business decisions.
This intelligence is key to driving successful retail decisions.
Your Products Are Connected!: Understanding how your products are connected in the ‘eyes of your customer’ is key to increasing sales. Every product has an average basket size and a list of items is is typically bought with. This of course can change with seasonality, promotions, price fluctuations, etc. Ranking your products on these metrics will present the best items for promotions to increase total sales.
Cross selling and up selling: Merchants go to great lengths in assembling cross-product promotions with signage, proper training, etc. If you are a home improvement retailer, you’d want to sell your services along with appropriate furniture and installation. Studying the affinities reveals whether your primary merchandising is consistent with the related cross selling. Measure the sales rate of the primary product as well as the “supporting” products.
Value your customers: Customer is always the king (or queen!). As a retailer in women’s clothing, you’d want to know what percentage of your customer’s transactions included a particular item. After this, you need to identify the value proposition of the merchandise. You can also expand your analytics across geographies and time periods, and measure the buying patterns of your customers.
Repeat business (Loyalty): Calculate the frequency with which your customers arrive at your establishment(s). Connecting the loyalty programs to affinity analysis can dramatically increase the success of your loyalty programs. From the frequency, you can identify their purchasing trends, “eyeballing” trends, consistency in purchasing a particular brand, store visit patterns, and the right space to place and promote your merchandise.
Brand and lifestyle: You can calculate brand loyalty based on shopping behavior. Whether your customers are buying high-end products or in-house products, the insights you get will help you align your brand strategy to your customers.
To sum it all, understanding what Market Basket Analysis can do for you is not rocket science, and you need not be an Ivy League graduate to comprehend its dynamics. It all boils down to listening to your most prized assets – your customers, their transactions, and formulating a comprehensive roadmap to incorporate the right analytics tools.
Grow Your Business with Value Upsell and Cross-sell Strategies
Grow Your Business with Value Upsell and Cross-sell Strategies
Gearing traffic to your website can prove quite difficult, and converting even two-thirds of the visitors into customers can be a challenging task in itself. Most e-commerce conversion rates fall between 2% and 3%, unless you are selling at Amazon (9.6%) or at Proflowers (14.1%)! Therefore, when you manage a hard-fought victory, capitalize on it through aggressive upselling and cross-selling strategies.
Benefits of Upsell and Cross-sell
When a customer enters a shop searching for a specific product, a salesman comes to their aid, provides them whatever they need while suggesting alternatives and complementary products. Perceptive suggestions by the salesperson enhance the store’s image in the eyes of the customer, since it reflects a level of thoughtfulness on the part of the store. Suggestive selling online can serve as a practical method of increasing profits.
Cross-selling and upselling have great value for e-commerce as well, since they increase:
- Average order value
- Conversion rates, since they guide consumers to select appropriate alternatives in case they are looking at the wrong product or one that does not complement the product in the shopping cart
- Exposure to high margin products
- Customer satisfaction through the recommendation of related products that will supplement the product as well as the user’s experience
- Deeper awareness about the product you are offering
Upsell and Cross-sell: Tips and Tricks
The following are certain ideas that would definitely improve your opportunity to upsell and cross-sell:
Suggest the obvious: Several cross-selling and upselling opportunities arise all by themselves. For instance, if you are offering tennis racquets, suggesting balls, bags and other tennis accessories is natural. You can also consider mentioning a few other related products and services that you provide.
Relevant suggestive selling works wonders: Overloading customers with unrelated suggestions can only serve to exasperate them and hamper purchase scope. If not immediately purchased, it will definitely eliminate chances of developing a recurrent clientele. Therefore, product suggestions should be as closely related as possible.
Expert recommendations help: Another way to facilitate upselling and cross-selling is by offering recommendations by professionals, field experts and customers. This could be anything – from a chef’s suggestion on a particular menu to a doctor’s recommendation on drugs. This is a strategy followed by Amazon.com.
Timing is crucial: The best time to cross-sell or upsell is when the customer is trying out some item. For instance, if the customer is looking for a low-priced camera and seems disappointed with a particular model’s features, the person may not mind buying a higher-priced model with more advanced features. Or, suggesting a belt when the customer is trying on a pair of trousers is quite fitting.
Offer products of a different price range: The supplementary product suggestions should be across a varied price range. If three items have been suggested, it is crucial that all three offer a welcome mix of different price points. Most often, the item that costs the least will be chosen. However, it will leave a good impression in the minds of the customers, increasing the chances of future sales from the same client.
The secret to successful cross-sells and upsells is complete focus on customer needs and requirements, instead of concentrating on increasing sale. As they say, Take care of the pennies and the pounds will take care of themselves.
How Suggestive Selling Can Increase Sales
In the hard goods industry, purchases are need based. Customers buy items for their job and projects.
When a customer comes to the checkout counter, the counter man can look at what is being purchased and recommend other items that the customer might want to purchase. Not all of these recommendations will be accepted, but those that are represent additional revenue. The recommendations that are made depend on the sales person’s knowledge of the products and experience on how they are used. The profit margin on suggested items, when they are bought is very high, because you are leveraging a customer who is already in your store!
Suggestive Selling is a Recession Buster!!
In a virtual environment such as a web-store, there is software that monitors what is being placed in the “shopping cart” and make recommendations based on the individual items or on collections of items. As in the real store, a few of these recommendations will be accepted. But the net effect will be to increase the average number of items in a shopping cart, and therefore revenue.
You might be wondering how software can make these recommendations. It is accomplished by analyzing earlier sales and discovering what items are typically bought together. Emcien’s analytics on the sales data will reveal items that are bought together for the job. For example – 90% of the times item A is bought with item B and C. If you know the items that go together (for a job), why not make suggestions to the customer? This shows that you know how customers use your products; it improves customer service and increases sales. A win-win all the way through!
Distributors typically sell tens of thousands of unique items across hundreds of thousands of transactions. Emcien’s analytics quickly reveals customer buying behavior and trends that every distributor can utilize to increase sales. When suggestive selling is based on actual buying patterns, the suggestions are more plausible, and customers trust them. It is very believable when you can say “ 90% of the times this ballast is bought with this lamp and mounting.” These recommendations are sensible, simply because they are based on the actual buying behavior of your customers. Emcien’s analytics can simulate the years of experience that’s normally accumulated by working in a store for years. I need to point out that sensible recommendations are critical because irrelevant recommendations annoy customers and may reduce sales.
To illustrate the potential of suggestive selling, here are some actual numbers. ACME hardware store carries 41,155 unique items. An analysis of 232,500 orders showed that 61% of these orders would result in at least one additional recommendation. When the store implemented the suggestive selling, sales increased by 3% in the first 4 months.
Product recommendations have been used very effectively by Amazon and reported to increase sales by up to 30%. Surprised? Here is the impact to your business – Adding one more item to 10% of the orders can increase sales by 5%!
How much money are you leaving on the table because you are not leveraging suggestive selling for your products? Would you like to know?