Vindico Blog Research Whitepaper: Unlocking Growth in Retail Through the Application of the 80/20 Rule

Posted by: Rick Bruner, VP of Research & Analytics, ViantBelow is a sneak peak of the Executive Summary from Viant's new research whitepaper commissioned from Nielsen, "80/20: Unlocking Growth in Retail Through the Application of the 80/20 Rule."As the shopping experience continues to evolve and become more complicated with the increase of mobile device usage and scattered content consumption behavior, retailers are having a harder time than ever identifying where their advertising budgets should be focused. Many retailers generally know who buys their products and services, and now more than ever, are leveraging their CRM data to connect with their loyalists. However, new customer acquisition is still critical and the strategies for targeting these new customers are often ineffective.The conventional approach to ad planning and targeting still relies heavily on demographic segments, a legacy of the golden age of TV advertising, when audience demo composition was about as good as it gets. Fortunately, in today's digitally-driven environment, there is a better way forward. Consider a common target segment like females ages 25 to 54 or the group commonly referred to as "moms". That segment spans multiple generations from Millennials to Baby Boomers - who we can all agree are pretty different in their behaviors and media consumption. If you considered the difference between a young woman 3 years out of college and a 54 year old mother of 3 grown children, would the same creative or message appeal to both? This type of strategy is hardly nuanced targeting.Moreover, demographics aren't nearly as predictive of real buying segments as are observed shopping behaviors. For example, our research found that the highest spending segment among all Best Customers for Department Stores, are a persona we labeled "Digital Introverts. They spend nearly three-times more than the average department store buyer, but nothing about their age or gender is a clue to their identities.The real marketing goal is to go beyond just identifying a retailer's customers, to be able to segment and analyze those customers and find out which drive the most revenue, offline and online: the true high-value customers."The 80/20 Rule," or the "The Pareto Principle" states that 80% of revenue comes from 20% of customers.Three key research objectives:Validate "The 80/20 Rule," aka Pareto Principle for customer purchase behaviorIdentify what traits set best customers apart, and most importantlyFind new and better strategies and tactics to inform media planning and message strategiesThree key research findings:The Pareto Principle, or 80/20 Rule, holds trueAlthough there are some differences, these best customers have certain key characteristics in commonBest customers consume media differentlyThe big opportunity for retailers lies in leveraging their own customer database to identify their best customers. Marketers can leverage tactics like on-boarding their customer lists to activate them digitally. In order to expand their lists and acquire new customers, marketers should also leverage segmentation strategies based on key traits of heavy spenders.To take advantage of the shift towards mobile consumption and shopping, retailers must deliver these messages primarily through digital channels across all of their customer's connected devices with a focus on both tablet and smartphone, as well as leverage emerging platforms including SmartTVs and OTT content services.Download the full whitepaper to learn more about the research methodology, as well as the marketing and advertising applications of the full research findings.