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Kroger Deal Highlights 3 Reasons Blended Data Is A Must In Retail

Partnership with data provider IRI enables the retailer and manufacturers to share the same customer insights, for more customized experiences. If other retailers do not follow suit, they could lose in the battle for the consumer. Three reasons data continues to change the retail game.


 

At Kroger stores, a box of Oreos may soon tell the greatest story a cookie has ever told.

In July, Kroger entered into an agreement with data provider IRI that will enable the supermarket giant and its manufacturing partners to see the same customer data and then compare the results with those of the rest of the industry. The tool making it possible is IRI’s Liquid Data platform, which includes factors such as weather, gas prices, macroeconomic trends and information from loyalty cards and social media.

Photographer: Daniel Acker/Bloomberg

Photographer: Daniel Acker/Bloomberg

But key to the tool’s effectiveness is the collaborative aspect of working with vendors. This industry-wide, blended data “will lead to better insights and help us create even better experiences for every customer,” Mike Donnelly, Kroger’s executive vice president of merchandising, said in a press release.

Kroger is not the first to realize the significance of sharing such wide-ranging, real-time data. Albertsons entered into a similar agreement with IRI in the spring.

If other retailers do not follow suit and find ways to collaborate with their vendors through shared data, and have quality conversations about joint outcomes, they risk losing relevance with customers in the aisle. Worse, they risk being casualties in the battle for the consumer.

IRI Talks Liquid Assets 

To find out more about the IRI partnerships, I posed a few questions to IRI’s vice president of public relations, Shelley Hughes. She said Liquid Data enables retailers to track the sales of millions of products at their own stores and others across the United States. They can then cross-reference these figures with a number of sales variables, including TV viewing by household, gas prices, loyalty card data, local weather and even local flu outbreaks.

So, for example, the data can contrast how well Oreos sell on a sunny Saturday in Seattle compared with a soggy Saturday in Saratoga.

“This precise ‘rest-of-market’ outlook coupled with specific sales variables will enable Kroger and Albertsons to unlock new opportunities and relevant insights,” Hughes said. “For instance, they can overlay this real-time data with in-store displays and Twitter activity to tweak marketing tactics.”

Partner manufacturers can track sales of their products using the same “rest-of-market” outlook. “This will allow retailers and suppliers to move away from manual joint business planning to real-time collaboration,” Hughes said. “Category managers can now work with their key suppliers to boost sales in the future, not just explain how consumers behaved in the past.”

When retailers and vendors have access to the same data, they can customize the shopping experience down to the store level, Hughes said. “Shoppers at Mariano’s in Chicago, Kroger in Indianapolis and Fred Meyer in Portland can all have a different experience that is targeted to their personal wants and needs.”

Kroger’s in-house analytics company, 84.51˚ (formerly DunnhumbyUSA) will continue to collect data as well, Hughes said. Kroger, which co-created DunnhumbyUSA with United Kingdom-based Dunnhumby in 2003, acquired the 50-50 balance of its stake in April. That Kroger is now partnering with IRI in addition indicates that retailers are seeking added interpretations of, and dimensions to, their data

Atomic Growth For Vendors

A recent story by Chicago Crain’s illustrated the importance of blended data as a sales tool, even among the makers of such small products as Atomic Fireballs.

Todd Siwak, the CEO of Ferrara Candy, said IRI’s blended data is playing a key role in his mission of doubling Ferrara’s revenue to $2 billion by 2020. The data shows him in real-time how many Fireballs are selling by store and enables him to adjust in-aisle marketing tactics based on information about his in-store displays and social media activity.

“We’d be hard-pressed to grow as aggressively as we are without it,” Siwak told Crain’s. “We’d be flying blind.”

Many manufacturers, and retailers, still are flying blind to a degree. To prove our point, I’ve tapped into the experts at Precima, our global retail strategy and analytics company, to reveal three little-known but fundamentally important truths in retail.

60-20 is 20-20: Lots of retailers and vendors abide by the old Pareto Principle, or the 80-20 rule. In truth it plays out more like 60-20, or better – 60-75. Twenty percent of the best customers generate 60% of retail sales and 75% of profits. And they shop in complex ways. A retailer’s best customers not only spend more, they also buy from different stores on different days and have varying preferences on quality, selection, service, convenience and price. Blended data enables the retailer, and its CPG partners, to capture those variables.

Loss leaders have a decent loser rate: While some loss leaders, such as milk and bananas, may be effective, 25% to 50% of all loss leaders – products sold below market cost to stimulate sales of other items – fail to increase retail traffic or lead to ancillary purchases. They may, in fact, cause the retailer to lose money. Real-time blended data, combined with store-based basket data, is essential to identifying which products will succeed as loss leaders, not losers.

Pricing to compete: Lots of retailers allow a competitor’s prices to influence what they charge on the shelf. Kroger may set its prices to fall within 5 percent of Albertsons, for example. This approach is not based on consumer data, however, and therefore risks treating all categories and items the same. Customer insights on price sensitivities, combined with external influences such as gas prices and social media campaigns and then competitive price information, would deliver a more accurate pricing strategy.

There are a number of solutions out there to engage the shopper in ways that result in higher sales, but more power comes with collaboration. The question is whether the retailer and the vendor can shift their approach, share their data and have productive conversations about their results. In my experience, these have sometimes been lacking in the world of vendor-retailer relations.

But if this changes, the insights can lead to millions of dollars or more in sales and savings. Considering how much is spent on in-store marketing alone, that’s a lot of Oreos.

This article originally appeared on Forbes.com, where Bryan serves as a retail contributor. You can view the original story here

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