Executive Briefings

The Payoff of Customer Preference Planning

The days of planning based on history or store volume have gone the way of the buggy whip. It is no longer enough for buyers to arm themselves with a spreadsheet and a prayer. Omni-channel commerce requires companies to re-think their planning processes in order to profit. In this new retail environment, old paradigms have been shaken, replaced by much more complicated planning tools that answer the omni-channel commerce questions that can make or break a business.

The most dynamic new trend in planning is localization. How do I take what I know about my customer in a specific channel or specific location and tailor my assortment and presentation to that customer? Each store and department within the store has certain selling behaviors, certain customer types specific to that store.  The information could be demographic, it could be sales volume or weather or selling space on the floor, or a combination of many attributes. The days of relying on sales volume are gone as retailers realize each store has its own personality and customer profile and to profit on a global basis means it is essential to profit on a very local level.  The question has become "What do I know about my customer in his or her location?"The second major trend, then, is thinking about location and customers in an attribute-driven fashion. Planners need to get to a more granular level in their knowledge about the location, the products and the customers. Once those defining adjectives, or attributes, are known they will allow the planner to look at those locations, or channel-specific qualities, and then look at the products offered and choose the most profitable assortment of products that matches the needs of the channel or location. The simple fact is that with the new shop-any-channel-anytime commerce, retail has become not so much what you, the retailer, want to sell, but what your customer wants to buy.  The difference is substantial. And can mean the difference between profit and loss. There are two serious challenges in planning for localized, attribute-driven product assortment decisions. The first is that almost all planning is done in the central office.  Unlike much of the supply chain, where solutions can be installed in DCs or any number of warehouses, or even stores, planning is a head office centralized function, disconnected from the stores or other remote buying locations. The second challenge is that most planning, to date, has been done based on historical fact or trends.  Today, with so many channels in which to sell product and in a society where social media can affect shifts in buying habits day to day, relying on tried and true historical planning can prove disastrous.  Plus, the function of planning has changed drastically to keep up with consumer trends. Planners must know a great deal more about their customers than they used to.

There are two other trends also worth mentioning.  One is the disappearance of the channel-specific retailer.  Retailing has moved into omni-channel commerce and this presents its own challenges. How do I have corporate-level visibility to all the activity underneath and still meet the needs of the customers, and the needs of the company?  When I was a planner I didn't think about as large a universe as planners must do today. Omni-channel commerce requires a much deeper understanding of each customer's specific choices and this requires much better intelligence not only about my channels, but also my products and my customers' preferences. The other impact is the disappearance of shipping as a profit center. To provide a seamless experience for the customer across all channels pricing must be consistent across all channels. This requires careful decisions on how to arrive at profit without arousing suspicion in the eyes of the customer who may shop several channels before deciding where or how to buy. With shipping no longer cushioning pricing, assortment decisions across all channels must be carefully weighed. With this new landscape, planning and forecasting become more critical and much more difficult. Today it's all about customer preference planning. It's not about where the customer spends their money. It's not about where the transaction takes place. It's about customers specifically. The best planning solutions are designed so that it does not matter so much which channel you are working in but which customer you are serving.  In fact, without employing the newer technology solutions that provide visibility throughout the supply chain, planners run the risk of flying blind in their efforts. The good news is that the newer planning and forecasting solutions greatly reduce exception management, reduce the touches and are much more intuitive and simple to use, designed to provide intelligent suggestions that will keep planners from needing a lot of intervention. By extrapolating existing information from a company's ERP and leveraging that information, planners are armed with an entire new arsenal of information with which to make their assortment selections by channel, location or any number of factors, be it weather, demographics or geography. And with this specific data planners can build extremely localized assortments or specific promotions aimed at very targeted markets or customer profiles.  On the web promotions can be localized down the ZIP codes supporting individual stores, while on an enterprise level planning is channel-agnostic in fashion. Being able to "see" the entire supply chain and the activity down to the in-store level gives planners the ability to target specific channels if they want with specific activities and specific product assortments, but at the same time, in real time, see what the entire company is doing. At any moment in time they can immediately see what products are offered in what channels, how much they are being sold for and to whom. This kind of immediacy can be critical in responding quickly to changes in buying behaviors. And with things moving so quickly due to social media and interactivity, planners really need to think about what the customer is asking for. Because of this barriers to channels have broken down. The days of separate efforts for different channels, separate policies, separate pricing and separate product selections are gone. This presents a strange challenge because on one hand you must be all things to all people, but on the other, you must be very localized to meet the customers' needs.  It goes beyond localization and attributes, it's about individual customer preference.  Thinking on a granular level makes planning much more complex than it used to be. Planners need tools that are connected across the entire process so they can balance the top-down plan from corporate, their own bottom-up plan and the assortment. Do they balance and give me the results I need? And if they don't where do I adjust to make them balance? Without a completely integrated tool that I can see real time the changes that each constituent has made in my work, I can't find the balance. The right planning tool allows data to be re-rolled in many different ways around those attributes to arrive at the correct balance. Today the customer preference planning ability of the newest solutions takes the historical information, the marketing goals and augments them with science-based forecasts. Business is changing so much and things are moving so rapidly with so much more focus on the customer that it is possible, without looking at the data correctly, to guess wrong and miss really big.  If planners don't have a way of viewing the data and planning it they can never be sure if they are meeting the customer's needs or the company's goals.  Today to profit globally a company must plan locally and must do it around customer preferences.

Source: Manhattan Associates


Keywords: Retail, Forecasting & Demand Planning, Customer Relationship Mgmt., Order Fulfillment & P.O. Mgmt., Supply Chain Visibility, Technology, Business Strategy Alignment, Supply Chain Analysis & Consulting, Global Supply Chain Management, Retail Localization, Targeted Retailing 

The most dynamic new trend in planning is localization. How do I take what I know about my customer in a specific channel or specific location and tailor my assortment and presentation to that customer? Each store and department within the store has certain selling behaviors, certain customer types specific to that store.  The information could be demographic, it could be sales volume or weather or selling space on the floor, or a combination of many attributes. The days of relying on sales volume are gone as retailers realize each store has its own personality and customer profile and to profit on a global basis means it is essential to profit on a very local level.  The question has become "What do I know about my customer in his or her location?"The second major trend, then, is thinking about location and customers in an attribute-driven fashion. Planners need to get to a more granular level in their knowledge about the location, the products and the customers. Once those defining adjectives, or attributes, are known they will allow the planner to look at those locations, or channel-specific qualities, and then look at the products offered and choose the most profitable assortment of products that matches the needs of the channel or location. The simple fact is that with the new shop-any-channel-anytime commerce, retail has become not so much what you, the retailer, want to sell, but what your customer wants to buy.  The difference is substantial. And can mean the difference between profit and loss. There are two serious challenges in planning for localized, attribute-driven product assortment decisions. The first is that almost all planning is done in the central office.  Unlike much of the supply chain, where solutions can be installed in DCs or any number of warehouses, or even stores, planning is a head office centralized function, disconnected from the stores or other remote buying locations. The second challenge is that most planning, to date, has been done based on historical fact or trends.  Today, with so many channels in which to sell product and in a society where social media can affect shifts in buying habits day to day, relying on tried and true historical planning can prove disastrous.  Plus, the function of planning has changed drastically to keep up with consumer trends. Planners must know a great deal more about their customers than they used to.

There are two other trends also worth mentioning.  One is the disappearance of the channel-specific retailer.  Retailing has moved into omni-channel commerce and this presents its own challenges. How do I have corporate-level visibility to all the activity underneath and still meet the needs of the customers, and the needs of the company?  When I was a planner I didn't think about as large a universe as planners must do today. Omni-channel commerce requires a much deeper understanding of each customer's specific choices and this requires much better intelligence not only about my channels, but also my products and my customers' preferences. The other impact is the disappearance of shipping as a profit center. To provide a seamless experience for the customer across all channels pricing must be consistent across all channels. This requires careful decisions on how to arrive at profit without arousing suspicion in the eyes of the customer who may shop several channels before deciding where or how to buy. With shipping no longer cushioning pricing, assortment decisions across all channels must be carefully weighed. With this new landscape, planning and forecasting become more critical and much more difficult. Today it's all about customer preference planning. It's not about where the customer spends their money. It's not about where the transaction takes place. It's about customers specifically. The best planning solutions are designed so that it does not matter so much which channel you are working in but which customer you are serving.  In fact, without employing the newer technology solutions that provide visibility throughout the supply chain, planners run the risk of flying blind in their efforts. The good news is that the newer planning and forecasting solutions greatly reduce exception management, reduce the touches and are much more intuitive and simple to use, designed to provide intelligent suggestions that will keep planners from needing a lot of intervention. By extrapolating existing information from a company's ERP and leveraging that information, planners are armed with an entire new arsenal of information with which to make their assortment selections by channel, location or any number of factors, be it weather, demographics or geography. And with this specific data planners can build extremely localized assortments or specific promotions aimed at very targeted markets or customer profiles.  On the web promotions can be localized down the ZIP codes supporting individual stores, while on an enterprise level planning is channel-agnostic in fashion. Being able to "see" the entire supply chain and the activity down to the in-store level gives planners the ability to target specific channels if they want with specific activities and specific product assortments, but at the same time, in real time, see what the entire company is doing. At any moment in time they can immediately see what products are offered in what channels, how much they are being sold for and to whom. This kind of immediacy can be critical in responding quickly to changes in buying behaviors. And with things moving so quickly due to social media and interactivity, planners really need to think about what the customer is asking for. Because of this barriers to channels have broken down. The days of separate efforts for different channels, separate policies, separate pricing and separate product selections are gone. This presents a strange challenge because on one hand you must be all things to all people, but on the other, you must be very localized to meet the customers' needs.  It goes beyond localization and attributes, it's about individual customer preference.  Thinking on a granular level makes planning much more complex than it used to be. Planners need tools that are connected across the entire process so they can balance the top-down plan from corporate, their own bottom-up plan and the assortment. Do they balance and give me the results I need? And if they don't where do I adjust to make them balance? Without a completely integrated tool that I can see real time the changes that each constituent has made in my work, I can't find the balance. The right planning tool allows data to be re-rolled in many different ways around those attributes to arrive at the correct balance. Today the customer preference planning ability of the newest solutions takes the historical information, the marketing goals and augments them with science-based forecasts. Business is changing so much and things are moving so rapidly with so much more focus on the customer that it is possible, without looking at the data correctly, to guess wrong and miss really big.  If planners don't have a way of viewing the data and planning it they can never be sure if they are meeting the customer's needs or the company's goals.  Today to profit globally a company must plan locally and must do it around customer preferences.

Source: Manhattan Associates


Keywords: Retail, Forecasting & Demand Planning, Customer Relationship Mgmt., Order Fulfillment & P.O. Mgmt., Supply Chain Visibility, Technology, Business Strategy Alignment, Supply Chain Analysis & Consulting, Global Supply Chain Management, Retail Localization, Targeted Retailing