The magic formula for data monetisation
Article originally appeared on Retail Sector
As we approach the end of January, there’s a good chance you already have a fairly clear idea of your company’s objectives over the next 12 months. And if finding new ways to generate revenue is amongst them, you’ll be unsurprised to learn that your company is not alone.
We recently commissioned Forrester Consulting to conduct a study into the pressures and priorities driving global grocery retailers. For 85% of the 600+ surveyed, developing new revenue streams will be one of their top priorities for the year ahead.
As I say, this alone shouldn’t come as any great surprise. The past decade has been one of monumental change in grocery retailing, and as margins become tighter and the competition more fierce, casting a wider net in response is entirely logical. The real question, of course, is how to diversify revenues against that already tightly competitive backdrop.
Data monetisation dominates the retail mindset
For many, the answer to that conundrum lies in extracting greater value from their customer data (or data monetisation as we like to term it). Four-fifths of those surveyed by Forrester plan to grow revenues by using insights to improve customer-centric strategies and decision-making. Confidence is high, too; most retailers believe they are already adept at harmonising their internal and external data (82%) and combining it for analysis (84%).
In spite of this, only a third of retailers are currently monetising their data, and just 15% are what Forrester considers to be ‘leaders’ at doing so. So why don’t more fall into this category? And what issues stand in the way of those hoping to use data monetisation as a revenue springboard in 2020?
Underutilisation of data is one. Asked which data sources they use to make decisions about customers, only half (53%) point to information gained via loyalty programs. Fewer still say they use insights drawn from social media (49%), point of sale (47%) or mobile apps (46%).
While it may be a problem in and of itself though, underutilisation is also just a symptom. Digging deeper, Forrester determined that it is a company’s behaviour in four key areas that governs their success in monetising insights from their customer data.
Excellence is built on four pillars
Exploring those four areas in greater detail, it becomes easier to see why only 15% of retailers qualify as ‘leaders’ in data monetisation. While each in isolation would give many businesses plenty to think about, achieving excellence – and harmony – across all four categories is another challenge entirely.
- The first of these is strategy, something which is never truly complete according to Forrester. Not only do retailers need to link insights to customer experience and business outcomes, they also need to be proactive in their management and maintenance of customer data, ensuring that they are continually evolving and actioning the information they accrue.
- While many retail businesses (31%) say they lack the data management technology needed to help drive strategic decisions around customer data, leaders are likely to have invested in advanced data science tools, integrated analytics and created technical environments that measure KPIs.
- There is, of course, no point in having those tools if you don’t have the people who can use them competently. Maturity here is best represented by an innate understanding of analytics and insights running right across the organisation and a proactive approach to collaboration with data analytics and insight partners.
- Do you package and sell your customer insights to suppliers? Can you change your pricing and promotions – even your product range – based on customer data? Have you connected your data, insights and actions into a self-evolving feedback loop? All of these capabilities point to advanced maturity around the processes essential for sustainable data monetisation.
These are, of course, predominantly internal factors. And while these four pillars undoubtedly provide an excellent data monetisation structure for retailers to aspire to, it bears mentioning that Forrester also highlights the quality of supplier relationships as another barometer for data monetisation success.
Procuring and analysing your customer data is only one part of the process, after all; providing it to suppliers in a way that makes it easy for them action is just as important. Creating a culture in which that kind of insight-sharing is the norm should also be a priority.
Small changes can yield big results
Where to begin, then, for any retailer looking to build an environment in which data monetisation can flourish?
To me, this is not about sweeping change. Some retailers that we speak to at dunnhumby already have good foundations present beneath each of those four pillars. The challenge for most lies not in rebuilding, but making small adjustments and continual improvements that empower them to fully embrace the data monetisation opportunity.
And have no doubt, it is a compelling, proven opportunity too. Those businesses that have made their move on monetisation are already reaping the rewards. Almost half (48%) of retailers that monetise their insights from customer data already say that they’ve grown new revenue streams as a result. That’s in addition to improvements to innovation (52%), existing revenues (56%), and customer experience (61%).
No matter whether you’re already on the way or yet to even begin, if revenue growth is on your list of new year’s resolutions, then data monetisation must play a significant role in your strategy for 2020 and beyond.