Today’s consumer has never had higher expectations, always seeking bigger discounts and greater service. As a commercial director, you need to understand how to balance the pressures of satisfying your customers’ demands, your suppliers’ want for higher margins and the increasing prices of fuel and commodities. On top of all of this your CEO has given you the task of increasing company profit margin. So, what do you do?
In the past, commercial directors have used two key methods to increase commercial margin. The first is to increase the retail price of less profitable products, and the second is to optimise logistics costs through more efficient stock management. However, these options are often soon exhausted - your customers aren’t willing to pay more, and your warehouse and stock management program has reached its peak.
So, what now?
Successful commercial directors base their decisions on data.
As you will know, across-the-board price increases don’t work very well as every market has a group of price sensitive customers who view any kind of monetary increase as a dealbreaker. However, what does work well is the selective price increase of certain products. To be able to do this, you need one key ingredient…and that is data.
With such data, you can better understand your customers, divide them into groups based on their shopping habits, figure out how price sensitive they are, and offer tailored products especially for them. The best part is that you already have this data available in your cash register and other internal systems. All you need now is a tool to help you make sense of this data and use it meaningfully.
Just as across-the-board price increases don’t work well, neither do across-the-board discounts as they needlessly cut profits. It’s the same internal data that will enable you to work even more efficiently when it comes to offering your customers discounts. When you only reduce the price of goods that your most price sensitive customers buy, you can benefit from it.
If you need a tool that will enable you to meaningfully use these data and will help you to make decisions about price changes easier, let us know.
Another proven method to increase your profit in retail is to reduce the number of suppliers. By doing so, you not only reduce the transactional and logistics costs, but when you buy more goods from a smaller number of suppliers, you often manage to achieve greater wholesale discounts. Therefore, choose from among your suppliers the best ones and provide them with the best care – and mercilessly cut the rest.
Optimising your assortment can also lead to margin growth. Try different price strategies for individual parts of your product portfolio to achieve the balance between revenue growth and increasing profitability.
The best commercial directors are able to sell their data insights.
The real goldmine is actually something very different. A method that few people know about is data monetisation. It’s the sale of your data insights to your suppliers.
The data from your cash register and internal systems have great value not only for you, but also for your suppliers. It can be a source of key information about what happens to their products after they are unloaded from their trucks into Retail warehouses. Thanks to your data, your suppliers can understand where their product is sold, how often it’s sold and to what type of consumer.
Suppliers then get a better idea of how price-sensitive or how loyal to the brand their customers really are. They can see what products are often bought together, the impact that discounts have on customer behaviour, or even which competitor brands their customers usually switch to.
Your suppliers can only acquire this information thanks to you, and they’re willing to pay for it. The best commercial directors know this very well, and sell their data insights to their suppliers for an adequate price.
If you would like to learn more about data monetisation and how our tool can help you increase your retail revenue, get in touch with us at firstname.lastname@example.org – we will be happy to help you.