Copyright 2004 Centaur Communications Ltd.
Precision Marketing
September 10, 2004
SECTION: Pg. 20
LENGTH: 1561 words
HEADLINE: SPECIAL REPORT - GIS: Bearings in mind
BODY:
It is logical that retailers and product suppliers alike should take note of regional markets and tailor offerings accordingly. GIS software offers companies the chance to glean such insights, but many are resisting this input. Richard Simpson asks why
These days every retailer worth their salt uses at least one of the myriad geographical information systems (GIS) available. But, despite the ever-increasing sophistication and specialisation of such systems, a lingering doubt remains that in-store marketing and retail support activities might not be realising the full potential of GIS.
Modern retailing is a hugely competitive business, with major manufacturers inevitably supplying most of the retailers in their sector. As a result, there is a risk that retailers might be unwilling to share store- and customer-related GIS data with their suppliers, and vice-versa. This, in turn, could result in manufacturers being unable to target their promotions, field marketing and sampling campaigns to maximum effect.
So are the manufacturers being cut out of the GIS loop, and, if so, what can be done about it? CACI senior consultant for branded goods and retail David Reeve is convinced that it is in the interests of both parties to co-operate. "Ultimately, both retailer and manufacturer share the same objective: they want to sell more."
He is in no doubt that GIS-based analysis can help a manufacturer improve marketing support to its retailers. "A GIS will enable the manufacturer to understand product potential and make more informed, targeted decisions when it comes to planning promotions, in-store activity and local marketing."
Reeve adds that many retailers now expect precisely this kind of input from their suppliers. "Increasingly, the sophisticated retailer is looking to the manufacturer for customer insight and market intelligence. In such a competitive sphere, the manufacturer that can't or won't add value and insight will almost certainly lose out," he warns.
The Blue Water Agency's sales director Richard Finch offers an example of a manufacturer using GIS both to its own advantage and that of its retailers. "Sunny Delight achieved overnight success by matching its distribution to convenience stores where school children were likely to shop," he says.
"Simply by making the product available in the right position - in the chiller cabinets in the right outlets - it firmly established its brand before any mainstream marketing took place."
Field marketing companies like Finch's are also at the forefront when it comes to using GIS in an effective, integrated manner. He explains: "By using customised GIS, field marketers can produce accurate sales and audit campaigns, to ensure that products are stocked in the vicinity of sampling activity."
He goes on: "What's more, there is a great deal of valuable information that can be overlaid onto GIS by field marketing teams using PDAs to download data instantly. This means campaigns can be tracked in realtime and activity fine-tuned as it progresses, reaping the best results."
This development of a proper feedback loop is a vital element in maximising the effectiveness of GIS-based marketing. "This is the challenge that faces many retailers - how to integrate the initial view of prospective customers and catchment area with performance measures over time," says Vertis senior technical consultant Darron Gregory. "At the heart of this is the quality and quantity of the information gathered and fed back into the GIS model."
Group 1 Software head of customer relationship solutions Andrew Greenyer agrees that retail marketing has, in the past, sometimes missed out on GIS. "Traditionally, there has been a disjunction in the retailer's mind between in-store promotions and targeted marketing," he says.
He suggests that, too often, retailers have not seized the opportunity to combine targeted marketing - such as outdoor, door-to-door and direct mail - with more traditional, in-store approaches. However, there have been recent signs of improvement.
"Through targeted marketing, new customer segments have been drawn to stores," Greenyer observes. "This allows retailers to conduct combined analyses with product manufacturers to assess the possibilities for targeted promotions in the locality." However, this development is somewhat constrained by manufacturers' reluctance. Many fear that local analyses may suggest less prospects than expected in the area, and undermine their stock positioning. Both retailers and manufacturers will have to tackle these concerns if they want to maximise the potential of GIS. As Gregory says: "Our challenge as an industry is to provide the framework for retailers and branded goods to share information without threatening competitive advantage." Despite such reservations, there is broad support for the view that better integration is the way forward for GIS. EuroDirect group product manager Leanne Douglas believes that such integration should begin at home. "The market intelligence that can be gleaned from GIS is hugely powerful. This is why different parts of a business should be able to access a single view of their market, customers and store network," she says. "The problem is, most businesses' different departments work in isolation, and do not share the intelligence they have at their fingertips." ESRI (UK) business strategy manager Peter Beaumont outlines the extent of this scenario: "Departmental silos of geographical data are still widespread within the industry. This can be due to technical issues - for example, the departments may be using legacy databases or applications that cannot easily share data. But the issue may well be that there has never been a culture of data-sharing between departments." Beaumont therefore argues that retailers' efforts should be focused on extracting more value from the data that they already hold, and that in- house GIS data should be integrated into what he calls a "corporate geo- database". Meanwhile, Douglas offers another method of achieving cross- departmental integration. EuroDirect's Mirovision technology has helped a leading travel company implement 'operational optimisation' strategies across business areas as diverse as operations, regional store management, logistics and sales and marketing. "By analysing their customers and store catchment areas, organisations can accurately match their product proposition to the local market profiles of each store, and use this to optimise brochure allocation, in-store promotions and discounting as well as the resourcing of each store," she says. While the value of GIS-derived market insights is clear, at present, retailers and manufacturers are regularly missing obvious opportunities to combine marketing and GIS-derived data. Andy Wood, Total DM managing director, suggests that many manufacturers fail to utilise promotionally-derived address data to its full potential. "By tracking coupon redemption, the manufacturer can generate personalised customer mailings, which can be further refined over time," he explains. "But inexplicably, few manufacturers are overlaying their own consumer databases, despite the existence of sophisticated GIS technology. If they were aware of redemption rates by independent retailer, they would be in prime position to link with the outlets that have the greatest potential for sales." This could be simply a consequence of the 'data silo' effect, although Geronimo managing partner Julian Dodds suggests the problem lies at a more fundamental level still: the quality of the source data that is being used. "If you are using your own recent customer purchase history - which shows strong geographical tendencies - then this is likely to reap some stunning results," she argues. "However, if you are using 'claimed purchase data' - which relates to a product area you think is indicative of your proposition - then the cost of the exercise may well not be worth paying for." This 'back to basics' approach has much to be said for it - especially at a time when so many vendors of GIS systems are seeking to achieve differentiation by offering increased functionality, which is almost inevitably accompanied by higher levels of operational complexity. In fact, it is argued that this attempt to provide a richer set of features and analytical tools can be counter-productive. The Preference Service managing director Thomas Adalbert says: "Too many GIS systems on sale appear to require a PhD in advanced IT to use. Marketers should only look to purchase GIS software that requires no more than half a day's training, allows data to be exported and imported flexibly in many formats, and allows marketers to undertake bespoke data analysis, profiling and mapping from their desktops." Perhaps the system retailers should accept some degree of responsibility for the failure to fully exploit the possibilities of GIS. Whatever the case, as long as retailers refuse to share customer- derived GIS data with their suppliers, achieving true integration will be an uphill struggle. And only by breaking down departmental data silos, establishing proper data feedback and harnessing outside agencies to maximise marketing opportunities will the power of GIS be realised.
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