First of all, if you’re in the financial, distribution, restaurant/hospitality, transportation, consulting, energy or consumer industries there’s a higher-than-average chance your CEO is new. So that covers nearly all of us. In fact, those industries are responsible for 73% of all CEO turnover in the Fortune 500 and S&P 500 companies (674 in total) through August 20231.
The result of changes in CEO are obvious: new focus, change in strategy, eagerly sought growth as a new broom sweeps. The problem is keeping CEOs, new or old, focused on the most important business metrics. Knowing that the CFO position is the waiting room for CEO roles, we also know that the measures a CEO wants to focus on are most usually financial measures, primarily top and bottom lines.
For those outside the two ‘Offices of State’ (CEO and CFO), the challenge is that sales, margin, profit and TSR are outcomes of your strategy and resource investment. They are blunt instruments, which say a lot without saying anything at all. When any of these four primary measures change, the immediate question is ‘what drove the change?’. The four primaries are never self-explanatory. And when they go decline, that blunt instrument can sometimes hit you…and it’s painful!
For anyone operating a business from C-suite downwards, outside of the CEO and CFO, the most powerful measures are related to the number of customers and what / how much they buy. In other words, market penetration (customers’ trips) and yield (transaction margin / volume).
The challenge is to make sense of the segmentation of trips and yield to grow both. The holy grail being driving both simultaneously, to swell shopper numbers and the yield of their transactions. But new shoppers tend to have relatively low weight of purchase (low yield), and high yield shoppers tend to be difficult to grow. The outcome being if you grow trips yield measures may go down, and actions to grow yield don’t tend to appeal to non-shoppers. They have equal and opposite outcomes.
So what’s the answer?
The answer to both shopper trips and yield lies in identifying individual customer behavioral groups and creating cohorts. In recent years this has been solved by having a loyalty program of some sort which encourages customers to identify themselves at the point of purchase (check out).
Identifying customers in the e-Com channel is necessary for the transaction to complete. But in bricks and mortar retail it’s much more dependent on having a persuasive loyalty program and ensuring the operational discipline that it’s reinforced. When this works, it can be extremely powerful in fueling growth in yield using incentives that entice shoppers to buy more or buy different (higher margin) products. This process has been exhaustively written about via examples such as Tesco in the U.K. (via Dunn Humby), Kroger in the USA (via 81.54) and others.
Both these examples relied heavily on two things: Firstly, the virtuous circle of being a big player in the market created volume opportunity which entices CPG supplier partners to support the promotions. Secondly, having enough existing customers with sufficient headroom to drive the growth. Dunn Humby, Tesco and Kroger executives might argue these two market conditions are ‘egg and chicken’ (i.e. the success of the program created the situation to thrive), nonetheless, neither of these examples directly addresses how to get non-shoppers to start shopping.
Because a non-shopper cannot be identified from a loyalty program – they don’t exist in the database. Hence the reason why Tesco and Kroger still plough huge marketing investment into mass media / ATL advertising; to keep their brands top of mind with non-shoppers.
If you want to keep your brand top of mind with the non-shopper without investing the huge sums of these #1 market players, how do you do that? Using DecaSIM AI you can accumulate enough insight into your promotional advertising to understand which ads in which channels have the widest appeal to non-shoppers. This is what we call creating efficiency in mass media. Furthermore, DecaSIM can help you understand which promotional mechanics and prices created the highest effectiveness, meaning you can pull back on wasted promotional dollars and focus on promotions and prices which drive the highest engagement, i.e. those promotions which grow non-shoppers. Using these trips and yield objectives as input got the DecaSIM AI platform gives you your own mini-Dunn Humby, without the heavy IT integration or SaaS expense. DecaSIM gives you the opportunity to execute the strategy of a #1 competitor in your markets…and we have the empirical data to show it works.
At DecaSIM, we don’t have all the answers, but we know what a CEO wants: better return on your promotional investment.
- Volatility Report 2023 America’s Leading Companies (PDF), https://www.cristkolder.com/volatility-report ↩︎