Using Point-of-Sale Data to Improve Profitability
Not long ago I made a trip over to the local Radio Shack to
purchase an electronic plug for my cassette recorder. As I
paid for my item the retail clerk asked me for my name, address,
telephone number, birth date, and even my email address (something
every retailer should be asking for today!). Although I felt
a twinge of discomfort giving out my personal information,
I went ahead and gave it to him and went on my way. Driving
home I reflected on Radio Shack’s checkout process and
was reminded of the power of information gathering at the
point of sale. I had just given Radio Shack three ways to
contact me, not to mention, information on what I had purchased.
In the hands of a skilled marketer, this information is powerful.
The recent economic slowdown has brought increased competition
to small businesses. And with that, retailers across North
America have described their sales as "flat." Small businesses
should be looking for low cost, high impact marketing activities
to drive prospects to their business. One of the most effective
and cost-efficient ways to add profits to the bottom line
is the use of database marketing, which uses information collected
at the point-of-sale. Using personal data, purchasing data,
and contact information from a customer database, a spa and
pool retailer can make offers to customers for complimentary
products and services and engage in loyalty marketing activities.
Database marketing has four key elements, (1) gathering customer
data, (2) building a customer database, (3) creating targeted
offers for specific customer groups, and (4) tracking results
to improve responses.
Step 1: Gather customer data.
The easiest way to begin this process is to develop a simple
form for customers and salespeople to fill out every time
a customer purchases a product or service. Include personal
information such as names of spouses, children, profession,
and birthdays, as well as, product information such as manufacturer,
make, and model.
Step 2: Build a database to store your customer information.
Start simple using off-the-shelf software such as Microsoft
Access. Later on you can begin to modify the database to either
include different types of information or to print special
Step 3: Start sending offers and personal messages
to your customers.
Don’t wait until you have a large mailing list. Begin
sending notes to customers right away thanking them for their
purchase, to celebrate birthdays, share holiday messages,
and inviting them to come in and take advantage of special
offers. There is an old saying that goes, "Business goes where
business is invited, and stays where it is appreciated." A
personalized invitation to drop by the store to take advantage
of a specific incentive is sometimes all that is needed to
keep your customers coming back into the store. Instituting
a program of personal, hand-signed notes that coincide with
birthdays or special events addressed to the customer's significant
other that offer gift ideas, can have surprising results.
Step 4: Track the results of your database marketing
By knowing who you sent offers to and who responded will help
you identify your best customers, allow you to more effectively
allocate your marketing dollars, and help you tweak your marketing
pieces to get higher response rates.
What Information Do I Collect?
It’s important to determine in advance the type of information
to collect. To do this, make a list of common special offers
you might be presenting to your customer. For instance, if
you sold a product in the health industry and many of your
customers have lower back problems you could joint venture
with other businesses to develop special promotions on products
that help to relieve lower back pain. To capture the fact
that your customer experiences lower back pain, simply place
a check box on your form that says, "Do you experience lower
back pain?" If your customer has small children, consider
presenting follow-up offers for products targeted for small
children. Imagine being a consumer and receiving a letter
from your business with an enclosed birthday card for little
Joey who just turned eight years old and a discount offer
for a basketball hoop or other relevant products. You think
to yourself, "What a great gift. Joey would love that!" This
is the power of database marketing.
Collecting Accurate and Consistent Information
Database marketing all starts at the point of sale. Without
accurate, complete, and consistent data this type of pinpoint
target marketing can’t be done. To ensure that your
information is accurate and consistent, help your customers
fill out the data collection form and review each information
form for completeness. You might experience a hesitancy from
your customer to give out all their personal information,
similar to how I felt at Radio Shack. However, after explaining
that the information will only be used to send out special
offers during important events, is completely confidential,
and will not be shared with anybody else, you’ll find
that most of your customers won’t have any problem giving
out their personal information.
Cost Effective Loyal Customers
Marketing to your current customers is one of the most effective
and cost-efficient strategies you can do to reduce your marketing
costs, enhance your customer / retailer relationships, and
produce long-term loyal customers who, over a period of months
or years, become your biggest source of referrals.
Copyright 2010 David Frey