B2C revenue growth while maintaining or increasing net margin is one of the most challenging arenas to succeed in, particularly when you include the unification of Amazon and brick-and-mortar stores.
For the last decade, customers have driven the unification of customer experience, product packaging, marketing strategy, and product availability, which was noticeably increased during COVID.
Retail Strategy refers to a business’s comprehensive plan and approach to attract and retain customers, maximize sales, and achieve long-term profitability in the retail sector. It encompasses a range of decisions and actions related to the following key areas:
- Target Market: Identifying and understanding the specific group of consumers (or have you stepped up to a “client” relationship?) the business aims to serve, including their needs, preferences, and purchasing behaviors.
- Product Offering: Determining the range of products or services to offer, including decisions about product assortment, quality, and brand positioning.
- Pricing Strategy: Setting prices that balance competitiveness, profitability, and perceived value. To succeed, analyze discount, premium, or value-based pricing strategies based on your financial goals as well as the positioning of your brand. All the while, you continue to monitor the current and projected economics affecting your current and ideal customer.
- Store Location and Layout: Choosing strategic locations for physical stores and designing layouts that enhance the shopping experience and drive sales can cost considerable money. Effective packaging and ideal placement within a store can also be costly.
- Marketing and Promotion: Developing effective marketing campaigns and promotional activities to attract customers and build brand awareness. This should include a seamless online and offline marketing strategy while maintaining a budget that is a reasonable percentage of your cost per item sold.
- Customer Experience: Ensuring a positive and memorable shopping experience through excellent customer service, engaging store environments, and convenient shopping processes. During research for Store Location and Layout (Item 4), asses the overall shopping experience and include customer service in each store as part of your customer experience analysis.
- Supply Chain Management: Efficiently managing the flow of goods from suppliers to stores, ensuring product availability, and minimizing costs. Everyone has learned their lessons about how just-in-time can come back to haunt you, which has resulted in the continuing growth of warehousing. This was compounded by many companies relying on a single key supplier, which became the weak link in a particular supply chain.
- Technology Integration: Leveraging technology to enhance operations, improve customer experience, and drive sales, including e-commerce platforms, mobile apps, and data analytics. In these areas, artificial intelligence (AI) is making inroads by helping us handle complexity and, in some cases, assisting in research and code writing.
- Sales Channels: Decide on the various sales channels to utilize, such as physical stores, online stores, and omnichannel strategies that integrate multiple channels. Over the last several years, omnichannel and online have taken the lead, driven by customer demand.
- Sustainability and Ethics: Incorporating sustainable practices and ethical considerations into business operations to meet consumer expectations and regulatory requirements.
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Example of a Retail Strategy Success
The consumer food industry is one of the most challenging industries in which to succeed due to the understandable demands of customers:
- Immediate availability of every product, both online and in physical stores
- Low costs
After working with my first dozen small- and mid-size food producers, the trend for success and failure became apparent. I helped successful producers to:
Unify their packaging, marketing, and pricing strategies based on the demographic and psychographics of their current and ideal clients (target markets).
1. Packaging
Apple continues to be the leader in packing. When you invest in high-quality packaging, your customers turn the reception of their new purchase into an event! Multiple people on TikTok and YouTube will make unboxing videos that feature your product.
You paid for that “free earned media.” Still, the Return On Investment (ROI) can be considerably higher than that of a typical paid social media advertisement because it’s authentic.
Granted, most consumer food producers don’t have the retail value or net margin required to create an Apple-style package. But depending on your product, higher-quality packaging and good package design, which includes a good color palette, can go a long way towards selling more of it. Just ask Kellogg.
What I Did
I dug deep into our data on current customers and research (surveys) of our ideal customer persona using a database, SQL searches, and Artificial Intelligence. Our customers want durable, bright-colored packing that is easily resealable.
This required a substantial investment from my customer because “easily resealable” meant a durable system.
It’s hard to beat a twist-on-and-off system. But they’re often not used due to cost and space constraints in an Amazon warehouse or on a retailer’s store shelf.
But the bottom line is that our ROI was 5% when we combined this feature with the bright colors demanded by our current and future customers. That’s a high ROI in the food industry.
Just as importantly, we began receiving “earned advertising” (more on this later).
2. Marketing
Build it, and they will come, unfortunately embracing the same philosophy of artists–if a potential customer doesn’t know about your product or how great it is, they can’t purchase it.
To be blunt, the ROI on most social media continues to decline, with the current exceptions being X (Twitter), Pinterest, and YouTube.
What I Did
For my consumer food clients, there were three things needed for success:
- I increased the percentage of revenue allocated to advertising, which I offset by efficiencies in the supply chain management.
- Developed a database (CRM) and reached out to middle-tier influencers (Active YouTube and Pinterest followers in the 10,000 to 50,000 range) to gain “earned advertising.” Note that “active” followers are critical. A “like” doesn’t count. Only re-shares and comments count as part of an influencer score.
- As you might have guessed, this client’s current and ideal clients are active on Pinterest and YouTube. Some are also active on X (Twitter), but their advertising system is currently undergoing a major upgrade. I continue to run A/B/C tests on X, and when their system analytics become a bit more sophisticated, I may add them to the paid advertisement mix.
Our goal was a revenue increase. Over a 12-month period, we saw a 27% increase in revenue with no decrease in net margin.
This was the most significant success of these three initiatives.
3. Pricing
It’s very easy to run nonstop sales. But the effectiveness is almost gone because everyone expects discounts, and nearly every week is Black Friday or Cyber Monday in one form or another.
What I Did
Another look into our data showed that while only partially tolerant of significant price increases for a food product (who is these days?), our current and future customers would likely not reduce spending with a reasonable price increase.
Using the Apple analogy again, when your food product doesn’t cost thousands of dollars, an increase of less than a dollar can mean a substantial increase in gross margin.
If your product costs US $20 and you increase the price by only US $0.57, that results in a gross margin increase of almost 3%. For the food industry, that’s a substantial percentage increase. And the less your product costs, the less you need to increase the price to increase your gross margin substantially.
Secrets to Success
- Data analysis with the use of SQL and AI assistance.
- Marketing decisions are based on ideal client personas and historical data, again with SQL and AI assistance.
- Updated pricing strategy, again data-driven.
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