What Are Your Customers Doing?

Breaking the Information Barrier

Insights from MasterCard Advisors Merchant Solutions – New Data, New Perspectives

The Robin Report - Mastercard AdvisorsWhile over the past several years there has been a huge upsurge of merchants collecting and using customer data to drive retail business performance, the power of those approaches has been constrained by what might be called the three “natural limits” of in-store gathered information: target, space, and time.

That is, merchant retail data can only show them what their customers, while they are in their store, have already done.
No matter how good their analytic tools, retailers’ sales data is limited to what happens within their own walls.

Access to a broader picture of actual consumer behavioral data is changing the landscape for retailers and other merchants, and our Merchant Solutions practice has taken a lead in providing merchants with this kind of data-driven insight. The billions of transactions MasterCard processes each year give us the ability to do robust reporting, modeling and consumer behavioral segmentation.

After cleansing the data, supplementing it, and applying proprietary analytics to it, it is possible to glean accurate, granular information on areas that until now were unknown territory or hard to gather from one source. We are able to supply insights on a wide range of topics, including customers’ overall spending behavior, competitive purchase patterns, ecommerce purchases, customer drive-distances and loyalty patterns over time.

What are consumers doing generally ?

One new capability the data enables is sense of how consumers—both a single retailer’s customers and the larger universe of non-customers—spend across industries and geographies. For instance, Master- Card SpendingPulse™ provides one of the market’s earliest reports on monthly retail spending by category and region.

It has a better than .9 correlation with the Department of Commerce’s final revision, yet is available about a week before the government’s first estimate.

Being able to identify spending patterns in particular areas, we have been able to provide the kinds of insights that can help build profitable strategies in a wide range of areas We enabled a restaurant chain to analyze customer spend in their category to identify the best prospects for a new customer acquisition campaign. Based on our spending-by-category propensity scores, the campaign resulted in a newcustomer response rate of well over 10%, an outstanding result for a new-customer acquisition campaign.

How granular can this information be? Because of the size and quality of our data warehouse, it can be reported down to the ZIP-code level. Fine-grained geographic analysis can inform decisions on everything from geo-marketing strategy to store location.

What are my customers doing when they’re not in my store ?

The implications for loyalty are massive. Insights about your own customers’ behavior at competitive merchants, or in other merchant categories, can immediately point the way to actions that will help you decrease attrition, re-capture spend, or win spending from the competition.

One electronics and appliances retailer located local prospects who were spending heavily in their category, but not in their stores. Using this information to drive a direct mail campaign, they doubled their market share among the mailed segments and saw a 129% increase in penetration during the promotion.

How am I doing compared to my competitors?

When one national retailer saw a troubling decline in its performance in a particular market and became concerned that they were losing market share, management was ready to execute an expensive customer win-back response, involving a multi-million dollar advertising campaign and significant markdowns.

MasterCard Advisors, however, took a look at the data through a wide-angle lens and reached a different conclusion. Our ability to generate performance data for an anonymized competitive set locally, regionally, or nationally, allows for the most robust benchmarking available.

When we showed the retailer that they were actually gaining, rather than losing, market share against their competition and that their losses were more symptomatic of an overall category slowdown, they were able to save themselves the expense of their planned campaign.

What is going to happen ?

Although no one can see the future, sophisticated models applied to uniquely broad and historically deep data sets can yield more reliable estimates than ever before. Through SpendingPulse Outlook, MasterCard Advisors offers spending calendars and regular outlook reports, allowing merchants opportunities to capitalize on estimated future spending, and to guide their marketing, inventory, and work-force planning.

Answers to these kinds of questions demand data that is beyond what any one merchant, survey, co-op, or government agency provides. But the data is out there, for those who have the resources and know-how to gather it, process it, and perhaps most importantly, make sense of it. So when it comes to the kind of robust information needed to drive sales growth, it may be time for the merchants themselves to go shopping.

Andrew Woodward is Global Practice Leader for the Merchant Vertical in the Information Services practice at MasterCard Advisors. He can be reached at andrew_woodward@mastercard.com