Question

what are the different approaches retailers can use to identify customers by their transactions? What are the advantages and disadvantages of each approach? Assume you are the grocery buyers for channel fruits and vegetables at a five- store supermarket chain. Del Monte has told you and your boss that it would be responsible for making all inventory decisions for those merchandise categories. It would determine how much to order and when shipments should be made. It promises a 10 percent increase in gross margin dollars in coming year.Would you take Del Monte up on its offer? justify your answer.

Answer 1

1. Customers that buy merchandise through non-store channels like internet need to provide their contact and personal information to ensure that their purchases are sent to them. Retailers can issue their own credit cards, through which they can collect customer information when the customer applies for the card. But when the customer pays through check, third-party credit cards or cash, identifying nearly all the customers making in-store transactions becomes very difficult.

Hence, to identify customers by their transactions, retailers can use three approaches:

• Directly ask the customers for their identifying information: Some retail stores for e.g. M.A.C., The container store, etc. have their sales personnel ask the customer directly for their indentifying information like name, address and phone numbers, when the customer is closing the sale.

Advantage: the biggest advantage of using this approach is that the retail store gets the attest and accurate customer information that can be used to identify its customers.

Disadvatage: some customers are reluctant to provide their information as they might take the same as a potential attempt to their privacy violation. Also, in busy periods, when the store’s footfall is high, asking every customer for their information and recording it accurately can be tedious and can slow down the billing lines.

• Offer them with frequent shopper cards: Loyalty programs or frequent shopper programs identify and reward customers with big or frequent buys. When getting this card, customers have to provide identifying information. Like loyalty cards, some retailers also use interactive loyalty cards (ILC) or cardless, cashless payment loyalty systems.

Advantage: : firstly, customers here provide their demographic and other information when signing up for the card, and hence are motivated to be identified with each transaction. Secondly, customers in this approach are motivated by the rewards they are offered, which can increase their number of visits and sales volumes.

Disadvatage: these cards are often squeezed out of wallet by other cards or the customer might forget to bring it or chose not to use in hurry or with smaller purchases. To overcome this disadvantage though retailers use customer’s phone numbers linked to their cards.

• Connect internet purchase data with the stores: when the customer uses the same credit card for online or catalog purchase and retailer store purchase, the store can update the customer’s purchase record and get information like customer’s contact address through the shipping address of the online purchases.

Advantage: this approach does not need additional personnel or administrative expenses to record information with the customer transactions.

Disadvatage: the store gets only limited information in this case, which the customer provides while shopping online or through catalog. The biggest disadvantage is here is that if the customer uses different payment mode like credit card from some other account or cash payment, the transaction cannot be linked to the customer.