5 Ways to Leverage Product Information to Grow Sales
Retailers today face an intensely competitive marketplace with unprecedented challenges and opportunities. With the emergence of a greater variety of channels, an abundance of product options and easily accessible online price comparisons, consumers now demand better service and lower prices. The ability to ensure that the right product is available at the right place and at the right time is critical. Organizations that can react faster tend to come out on top.
As more and more companies begin to operate 24/7 through a growing number of sales channels, the volume of strategic business information grows exponentially in both size and complexity. This, in turn, increases the difficulty of successfully managing product, supplier and consumer information as this influx of strategic information must be proactively managed as it flows across organizational channels. In fact, the ability to leverage operational knowledge as a performance success tool is key to increasing business profitability, mitigating risks, enhancing agility and enabling better decision making.
Unfortunately, operational information is typically siloed in many organizations. It resides and evolves independently in multiple applications, sales solutions and spreadsheets where it cannot flow efficiently. Worse yet, an alarming number of critical business decisions are based on information that's most often inaccurate or incomplete.
Traditional Efforts to Combat the Challenge: What C-Level Execs Need to Know
Previously, IT professionals would turn to their ERP system vendors in hopes of a quick, cost-effective solution to manage the increased volume of data. However, what they soon discovered was that the major ERP suite vendors lack the ability to manage every business unit's strategic information as it flows across both internal and external channels. In order to emerge stronger and prepared when the economy recovers, senior executives must take an immediate, direct approach to solve their multichannel strategic information challenges.
Retailers have come to realize that to strategically manage their information assets they need a combination of technology and an organized philosophy and process. This new strategy must have a strong focus on using a full-cycle approach to integrating business units, vendors, product information and other critical information assets into one repository. Strategic information management doesn't represent an incremental change in function or process; it's a much more comprehensive and integrated approach to managing operational information as it flows through the business.
As today's retail environment becomes increasingly challenging, brands are looking to strategic information management technology and processes in order to drive value-added initiatives, including the following five:
1. Speed up time to market. Reducing the time it takes to introduce new products has become a top priority for retailers. By speeding time to market, companies can generate revenue earlier, increase margins and establish a sustainable competitive advantage. In fact, studies have shown that high-performing companies on average generate 61 percent of their sales from successful introductions of new products and services. Furthermore, companies that experience an 80 percent revenue growth from new products typically double their market capitalization in a five-year period.
The process of developing and introducing a new product can be inherently complex. Even the simplest products can have hundreds of attributes, all derived from multiple systems that reside both within and outside the organization. Introducing a new product also requires the coordinated efforts of dozens of individuals within the company — not to mention multiple geographically dispersed external partners and suppliers.
A strategic information management platform enables retailers to streamline the process of gathering all product data from suppliers and partners. It cleanses and manages that data centrally, allows for branding and versioning of the information, and feeds all business systems needed to consume that data.
As a result, a business can share more accurate information with its websites, e-commerce applications, marketing initiatives, point-of-sale systems, customer service applications and other channels with more speed, reliability and security. A strategic information management platform also ensures that all sales channels have the information they need to educate consumers and sell products faster and at a higher return.
2. Reduce product returns. Product returns represent one of the most overlooked and significant causes for profit and margin reductions. The typical product return involves so many steps and has such a far-reaching impact on every area of the business that the total annual costs now affect 2 percent to 3 percent of an average retailer's sales. And this doesn't begin to address the significant impact on customer loyalty. A recent study found that 25 percent of consumers who return a product are unlikely to buy from that brand again.
A number of recent studies, including an analysis by Accenture, discovered that most returned products don't have a defect at all; they're returned due to false or insufficient product information. Needless to say, these inconsistencies lead to consumer dissatisfaction and frustration.
Having a strategic information management process in place can reduce product returns by managing correct product information across the supply chain.
3. Optimize inventory levels. Inventory accuracy is a staggering problem that leads to costly challenges for retailers. Studies have found that merchants generally only have accurate inventory information on 35 percent of their items. Research has also shown that 47 percent of out-of-stock items with poor forecasts result in inconsistent, inaccurate and incomplete data being housed in supply chain, merchandising and inventory systems.
A strategic information management platform enables retailers to centrally manage all of its product operational information and automatically feed each consuming system, sales channel and business process individually. This approach provides a single, consistent view of product information without forcing business units and suppliers to have to standardize on the same system or data format.
Optimizing inventory levels starts with having one version of the truth across all divisions, departments and channels. This ensures that you have the right products at the right levels in the right locations.
4. Streamline the onboarding process. There are two common obstacles retailers face when delivering products to market: one, ensuring that the product information they're acquiring from suppliers is correct and, two, supplying this information across multiple channels to support the selling of the product itself.
This onboarding process is often cumbersome, error prone and time consuming, frequently resulting in a costly, manual approach to correcting the information.
AMR Research recently concluded that companies could potentially reduce their supplier management costs by nearly 85 percent just by improving information visibility with suppliers. For someone in retail or even manufacturing who is charged with managing hundreds of vendors and tens of thousands of products, the efficiency costs alone are staggering.
In fact, after implementing a strategic information management solution, a major global retailer was able to reduce its average onboarding costs from more than $200 per item to less than $3 per item. Considering the tens of thousands of SKUs this retailer introduces each year, this cost savings alone can have a significant impact on business performance and competitive advantage.
5. Improve upsell and cross-sell conversions. By taking a holistic, full-cycle approach to managing product information, sales and marketing, retailers have the opportunity to improve cross-sell and upsell conversions. After all, when a business has greater operational control over product information, then sales and customer service representatives have access to more timely and relevant information at the point of sale. Online channels can also provide more relevant product links, recommend complementary or similar products, and improve product categorization for easier browsing and increased conversions.
Additionally, this level of information flow and control helps support an improved cross-channel experience. Consumers today want to use their smartphones to check local inventory. They want to research and compare products online, receive detailed and accurate answers about an item they saw in the company's latest catalog or website before making a trip to one of its stores.
If product information isn't strategically managed as it flows through a business, then it becomes virtually impossible for that business to manage its growing customer expectations.
Operational Knowledge as a Performance Improvement Tool
Over the last two decades, retailers have worked feverishly to optimize their physical supply chains. Virtually every discussion about improving the supply chain has been centered on the flow of products from raw materials to consumption.
However, a growing number of companies are now taking a similar interest in optimizing the flow and management of the information related to these products. In a highly competitive global economy where information is now a core enabler, using business operational knowledge as a performance success tool is paramount.
Retailers understand this and are integrating their critical data into one management platform in order to completely change the playing field in their industry. Not only are they improving their overall profitability, they're also breathing new life into businesses that are all too often caught in a downward spiral of reduced discretionary spending, higher customer expectations and tougher market competition.
Mikael Lyngsø is the CEO of Stibo Systems, a worldwide provider of strategic information management technology and solutions. Mikael can be reached at StiboSystemsCEO@Stibo.com.