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This Festive Season, Gift Yourself Higher Profits

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Indian cities are witnessing growing demand for all kinds of retailers – big-box, mid-end as well as high-end luxury segments. This demand is backed by a growing economy, population and income. However, Indian retail is industry is still at a nascent stage and the majority of purchases are still made the traditional way in a brick-and-mortar store and people across different demographics predominantly buy on festive occasions.

Customers are expecting loyalty privileges and rewards across the year. With these loyalty rewards, the retailer makes sure its most valued customers keep coming back for more. With increasing competition, it becomes a key task for the retailer to be relevant to its customers and send them unique offers that they can monetize.

Creating loyalty amidst festive seasons

We researched how festive season sales were affecting consumer businesses and retailers. Besides the short-terms benefits of increase in sales, a notable surprise was that retailers gained long term benefits such as a highly loyal customer base.

Here are a few trends that surfaced through our research.

Trend 1: Increase in number of registrations during festive season sales

The Indian shopper loves the festive season and the resultant festive season sales. People flock to the nearest shopping centers and malls as the season approaches.

The average spend by customer increases by more than 13 percent. The period also sees an increase in the number of store visits to make a purchase by customers; this figure goes up by 14 percent in Q3 as compared to the other quarters. The retailers can avail benefits from these customers throughout the year if the retailer can engage its customers well.

The average yearly repeat spend of the customers gained in Q3 is a whopping 12percent higher as compared to customers gained in Q1. Also, the average yearly repeat visits from customers gained in Q3 are 13percent higher as compared to those gained in Q1.

 Insight # 1: Customers having higher lifetime value
 Q3 is the best period to acquire new customers, and Q1 is the least favorable time frame
 Q3  Q1
 9,215 (2.22)  8,183 (1.95)
 Average Yearly repeat spend (Average Yearly repeat Visits)
 Plan: Spending on ATL in Q3 would be a better to increase the customer lifetime value

The OND (October-November- December) quarter is the best period to acquire new customers. Let the newborns roll in. Research shows that the customers you win during festive season are the most loyal customers throughout the year.

Trend 2:
Higher customer retention and win back during festive sales than in non-festive time

Did you think that season sales do not build customer loyalty? Think again. Our study shows that the win-back rate for lapsed customers is 200 percent better than in non-festive period. That’s not all of it. Active customer retention in festive seasons increases 35 percent more than non-seasonal periods.

Does no. of products purchased affect the return duration?

Customers who buy more no. of distinct products come back earlier than those who buy less

Repeaters
-Avg no. of days for next visit
Number of distinct purchases<= 2Number of distinct purchases > 2
9478
New Customers
-Avg no. of days for next visit
11588

Trend 3: A dip in sales post festive season sale

There are seven weeks post Diwali that would see a huge dip in sales until the winter season starts. In order to manage the post festive slack, here are some recommendations.Identify the customer segment who did not visit during festive season sales. Target them with relevant communications and give them a reason to come back. The probability of these customers visiting your store is more than those who have already shopped during festive sales.

Use predictive analytics to identify target customers. Identify the behaviour of customers who have historically shopped post the festive season and one week before Christmas. Also identify customers who responded during the festive season and also shopped post festive season. A predictive analytics model can identify suitable customers from the overall customer base who would respond positively to your communications.

Tips to get it right this festive season

Tap into the festive season energy by adopting this simple framework.

Tip 1: Identify target market.

Relevant customer segments are necessary to ensure that the communication and offers are customized. We cannot emphasize enough on the importance of personalization. The following clusters cover more than 90 percent of customers and help map relevant communication to the right buyer.

  1. The family shoppers – festive season is a great reason for family get-togethers. Send them promotions on gifts they can give their family members, friends and purchase for themselves.
  2. The newborns – These are the potential loyal customers who need to be attracted by the brand’s offerings. Customize the brand experience for these, and they’ll come back for more.
  3. The elites – These are shoppers with deep pockets and discounts have little to no effect on their buying decisions. Shower them with extra privileges such as exclusive sale previews to increase their affinity towards the brand.
  4. The loyalists – They are the customers who give genuine feedback and spread positive word of mouth. They are real treasures, and every business needs to have and nurture them. Invite them for exclusive promotions and ‘first glimpse’ sales and keep abreast of their needs. If you say something relevant to them, they’ll respond very kindly.
  5. The lost stars – They are the inactive loyal customers who have not visited your store for a very long time now. They need to be rejuvenated with mild discounts and other offers that are relevant to them based on their history with the brand.
  6. One time wonders – Customers who are inactive and were one-timers need to be enticed with heavy discounts to bring them back into the fold. It’s also a good idea to understand why they are one-timers only and what it is about the brand and its products that is not relevant to them.

Tip 2: Time it right.

Diwali and Navratri are the most important part of the shopper calendar across the nation. While these two festivals account for 90 percent of festive season sales, a significant growth has been observed in festive season sales pertaining to other festivals as well.

We went a step ahead and analyzed the right time to schedule the sales during  festival.

Better sales before Diwali

Also known as the ‘festival of lights’ signifies the victory of good over evil. Hence, the days before Diwali witness huge jump in sales. The sales are back to the pre-seasonal trend during the Diwali period. Aggressive offers can begin two weeks before the festival since that is the time when shoppers need to be enticed into buying more. A week before Diwali and at the day of Diwali when there is already a high footfall in stores, retailers can gradually reduce discounting and encourage buying by engaging the customers within the store.

Tip 3: Entice customers to buy distinct products

Our research establishes that customers who buy more number of distinct products come back earlier than those who buy less.

Hence, cross-selling and increasing penetration across multiple product categories should be the theme for this festive season. We studied buying pattern of repeat customers who visited the store more than ten times and shopped prior to the festive period and again during the festive season.

We found that over 57 percent customers spend more on festive sales and 65 percent of customers purchase same or more items.

Using insights derived from analytics, retailers can avoid the decrease in the average basket size and promote aggressive cross-selling. Relevant customers can be targeted with cross-sell opportunities based on their predicted propensity to buy distinct products.

Propensity targeting enables retailers to run promotions and sell premium category products during the festive sales. As per our the apparel industry sees a minimum 5% increase in average bill value during festive season sales.

Make sure you extend the success of your festive season. You want your bottom line increasing all year round, not just October through December. The festive time is the perfect time to add to your customer list, create new loyal customers and expand your social media reach. Keep your momentum going even after the festive season is over.

About the company:  Capillary Technologies, help their clients by combining big data with a robust, cloud-based analytics engine, they optimise the relevance and profitability of discounts and personalised offers to consumers in real time, significantly increasing both loyalty and sales.