Setting accurate KPIs for performance reporting
Part 2 of 3-part series as the biggest challenges facing retailers in 2019 and beyond. We discuss the need to capture clean data for accurate performance reporting using KPIs to measure and evaluate the success of an activity or campaign.
KPIs: what do they really mean?
Key Performance Indicators (KPIs) are used to identify whether a retailer’s commercial efforts are being successful from their marketing and supply chain efforts to their in-store sales. KPIs provide a benchmark for retailers to base their targets on.
When analysed in detail they provide in-depth insights into where operations may be inefficient and costing money. Reporting and analytics solutions have enabled retailers to become more reactive meaning they can take immediate action to cut losses or increase profits.
Frequently used KPIs within retail include:
- Sales & gross margin
- Sales per square foot
- Average customer spend
- Stock turnover rate
- Sell through rate
- Customer retention
The importance of clean data for accurate reporting
Retail is one of the most competitive industries with a strong focus on retaining customers and increasing sales. Reporting plays a crucial role in aiding retailers to understand their sales, stock and customer base whilst identifying market trends, opportunities and threats. Armed with this information, retailers can make better informed business decisions in order to improve customer loyalty and drive repeat spend.
In part 1 of this series, we discussed the data challenges retailers face with customer data spread across multiple systems within the business and how poor-quality data can cause misinformed or under-informed business decisions. We outlined the importance of having clean data first and foremost before proceeding with any digital transformation project where customer data is involved. Failure to do so will result in inaccurate metrics and figures which can cause marketing initiatives to fail.
How retail reporting can accelerate insights & competitive advantage
Key performance indicators such as conversion rates, average transaction value and online sales relative to brick-and-mortar locations can highlight key information about your customers such as where, why, what, and when purchases are likely to occur so that your teams can plan accurately to reduce waste.
For example, once you understand the relationship between online sales and brick-and-mortar stores, and include the average transaction value for each channel, and start including extra information such as conversion rates for each channel and which products sell well in each channel, you can start to better target sales and marketing activities to increase sales and ROI.
Using personalisation and segmentation you can tailor each marketing campaign to each set of customers which will encourage repeat spend and enhance the customer experience.
Once the data being used to generate your key performance indicators has been cleaned to ensure that it is accurate, you can begin to build a 360-degree picture of your customers to truly understand their buying habits and behaviours as well as their actual net worth.
Strategic, tactical and performance reporting are essential. Data is used to provide financial data and operational and commercial insights in order for the business to increase spend and customer loyalty. Ensuring data is clean and engineered correctly is crucial to ensure the numbers are correct.
After all, you can have the most expensive reporting and analytics software solution in the world, but if your data is not correct to begin with then you are wasting a considerable amount of money.
In Part 3, we discuss what we see as the future of retail and discuss the hype around AI and machine learning.