By Dan Alaimo

Tough marketing challenges, such as measuring loyalty, require sophisticated research methods. “Retailers want to do one of two things: They want to either increase trips or they want to increase the basket size,” said Candace Adams, president, global retail strategy, SmartRevenue, Stamford, Conn., and a former Wal-Mart executive. “It may sound easy or intuitive, but getting there is the hard part. It really does require the (scientific) rigor. It requires a scientific approach to get to the answers that become actionable and that you can actually develop into strategies,” she said.

Marketers need to rely on advanced analytics, such as structural equation modeling, to get the information they need. Structural equation modeling allows for the modeling or testing of causal relationships, she noted. “My contention is to drive loyalty and increase basket ring, one must rely on the more sophisticated tools that are in the analytic tool box,” Adams said, speaking recently in Chicago. She was among several presenters at the annual Integrated Marketing Conference of the Association for Integrated Marketing (formerly the Promotion Marketing Association) based in New York.

Using structural equation modeling, SmartRevenue is researching different channels to see what drives loyalty in each. “It’s our hypothesis that if you are in food, you are going to have different drivers, as opposed to mass, drug, club, convenience or dollar. Consumer behavior in each of these environments is going to be a little bit different.” The study is expected to be completed in the third quarter of this year, she added.

Retailing is a very dynamic process “with a lot of moving parts,” and customers are demanding relevance, solutions and the right product at the right price,” Adams noted. “Connecting with consumers and shoppers and increasing their lifetime value becomes a daunting challenge. One of the ways that you measure that is loyalty.”

Whether the goal is increasing the share of wallet, or increasing word of mouth – whether a consumer recommends a particular retailer to a friend – only one in four shoppers are loyal to retailers or brands, according to Adams. “The strategic framework to drive shopper loyalty and retail business growth requires that both the manufacturers and their retailing partners develop customer-centric strategies that increase trips and basket ring,” she said. Doing that requires getting answers to questions like:

• What is the right marketing strategy?
• What is the right media mix?
• How can I differentiate myself from competitors?
• How do I increase the basket of loyal customers and get trial from non-shoppers?

“It’s important to use the right tool for the right job,” Adams said. The impact of whatever analytic method used will depend on the type of questions asked, she added.