You might think that the top Internet retailers ranging from Amazon, Staples and Apple to daily-deal purveyors like Ideeli or Groupon have turned Orwellian as they serve up shoes, watches, printer ink, HDMI cables and restaurant offers as if they can read your minds. Well it is likely that they are just executing a meticulously orchestrated Next Best Offer strategy. Next Best Offer (NBO) is the analysis that determines, often within 200 milliseconds, which marketing offer is most likely to entice customers. On line shopping today accounts for 9% or a whopping $200 billion of all retail sales in the US. With web shopping carts checking out 10% of all retail sales in the UK, 3% in Asia Pacific and 2% in Latin America, retailers globally in 2012 will emulate the success enjoyed by early adopters and unleash technologies and business practices to support techniques like the Next Best Offer to gain larger wallet share.
Executing against Next Best Offer strategies will require retailers and brand owners to analyze consumer attributes, attitudes and behaviors as well as their demographics, shopping patterns and purchasing history continuously and in real time. A recent Harvard Business Review article describes how Internet Retailers would leverage NBO methodologies to create on-line incarnations of your familiar in-store salesperson who would walk the aisles with you and help you find what you wanted and even make tacit recommendations leading to impulse purchases.
Objectives: It is important for retailers to carefully craft Next Best Offer strategies by focusing on what the end-goal is. Is the goal to attract new customers, get existing ones to spend more money, steer customers towards more profitable products, achieve competitive takeaways for specific brands etc. These objectives aren’t cast in stone so NBO strategies must be nimble enough to push a certain brand of perfume for Valentines day, while getting you to “like” a particular car’s page on Facebook based on your plans to attend an upcoming car show in your city.
Data: The desire for retailers to cross-sell and up-sell products to you is perhaps as old as retailing itself. Data mining and analytics was key to the famous “parable of beer and diapers”. A retailer in the early 1990s supposedly moved their beer closer to the diaper aisle to facilitate new dads – who rarely got the chance to leave the house to quickly grab a six-pack as they fulfilled their primary mission of procuring diapers. Well, the whole concept of Next Best Offer involves the personalization and optimization of the cross-sell/up-sell model. By collecting data ranging from consumer demographics, shopping history, shopping patterns, product and purchase characteristics including pricing and event triggers, retailers have started to set the stage for “big data” to step in, connect the dots to dynamically serve up the Next Best Offer before you click away from the retailer’s website.
Execute & Deliver: Next Best Offer, using predictive analytics can only take the proverbial horse to the water. To make it drink, a company’s supply chain must be ready to deliver. To deliver on NBO, the entire retail supply chain will need to mobilize around efficiently and cost effectively delivering against these on-the-spot offers. The extended retail enterprise starting from vendors, agents, distributors and carriers to their own distribution centers and store employees must embrace agility and efficiency. If an offer of free next-day shipping results in 3-day delivery or if a 50% off offer for the second pair of jeans can’t be fulfilled because of incorrect product master data or invisible inventories, the Next Best Offer will be the Last Ever Offer this customer will entertain.
As the power of “Couch Commerce” continues to drive on-line sales in 2012 and beyond, techniques like the Next Best Offer will take center stage in the transformation of bricks to clicks.
Image Courtesy, Valdo / FreeDigitalPhotos.net
One Response to “Supply Chains to ensure that the Next Best Offer is not the Last Ever Offer”
[...] #4 – Next Best Offer Forces Marketing to Align with Supply Chain Next Best Offer (NBO) is the analysis that determines, often within 200 milliseconds, which marketing offer is most likely to entice customers. To deliver on NBO, the entire retail supply chain will need to exchange price and promotions information in real time. <<Read more>> [...]