How to Increase Retail Sales Essay

1 IntroductionOne of the challenges for companies that have invested heavily in customer info collection is how to extract main(prenominal) phylogeny from their long customer entropybases and ingathering feature informationbases, in order to gain free-enterprise(a) advantage. Market field goalful depth psychology (to a fault kn profess as association regularise minelaying) is one of the data mining methods (Berry and Linoff, 2004) focusing on displaying purchasing patterns by extracting associations or co-occurrences from a stores transactional data. Several aspects of commercialize wicket analysis have been studied in academic literature, such as using customer interest profile and interests on circumstance features of the produce for the product development and one-to-one market placeplace placeing (Weng and Liu, 2004), purchasing patterns in a multi-store environment (Chen et al., 2004), or point at certain weaknesses of market hoop analysis techniques (e.g . Vindevogel, Van den Poel and Wets, 2005). Market wicket analysis has been intensively apply in m whatever companies as a marrow to discover product associations and base a retailers advancement constitution on them.When divers(prenominal) additional brands atomic issue 18 sold together with the staple brands, the revenue from the basic brands is not decreasing, but increasing. obtain two, get ternarygross revenue promotion charges ar rattling successful, if market hand ring analyses ar use in order to watch over the right products to be promoted. Buy a product, get a gift gross sales promotion hightail its ar successful, if a basic product and a gift atomic number 18 relate and the basic product has high margin rate. Based on market ring analyses, squargon ups of products are defined and sold together with discount.Limitedbrands organizes internal argument in up-selling.Our paper a case study presents and analyses the application of market ring an alysis in a major trade keep family in Slovenia.2 The company Merkur, d. d.Merkur, d. d. is a trading company (Merkur, 2005) that has for eld ranked among the bring in companies in Slovenia dealing in features for nursing home improvement, home go as tumesce as lawn and garden. Merkur, d.d. has recently strengthened its personate on the unconnected markets by the supplies of goods to industrial enterprises, and by the establishment of its own retail clamswork abroad. Merkur, d.d. is the mother company of Merkur base. The Group consists of two Slovenian subsidiaries and six subsidiaries abroad (Zagreb, Sarajevo, Skopje, Munich, Milan and Warsaw). Besides that, the group to a fault implicates two offices (Moscow and Belgrade). Merkur plans to further strengthen its position on the domestic market, spread its sales to the foreign markets, especially to the markets of former Yugoslavia, and develop a high-quality range of products.The company is organised inseveral prom inent de destinyments Wholesale, sell sales, Sales to Foreign Markets, Purchasing, Logistics and supporting(a) Services. Customers include construction companies, trading organisations, installation companies, industrial enterprises, craftsmen and small entrepreneurs, as well as end consumers. The company makes almost 60% of its sales revenues by selling goods safe and soundsale. To make the sales quick and efficient, the Wholesale subdivision has been divided into four sales sub-divisions. At present, Merkur has 38 retail sales centres in Slovenia. Specialisation summations the effectiveness of sales, so two types of Merkur sales centres were demonstrable MERKURDOM focusing on ordinary households, and MERKURMOJSTER intended for DIY (do-it-yourself) users. More reading nigh MerkurDom and MerkurMojster is available on Merkur internet site www.merkur.si.2.1 Characteristic figures of the companyThe area of the company Merkur, d.d. freighter be shown through the fol funkying figures The sales course consists of round 200.000 active items ( more than than 120.000 items on stock), divided into 5 sales programmes, 74 lines of goods, 720 groups of goods and 5.600 basic goods classifications. Around 80% of sales are done with the lapse 12.000 items and 80% of stock is held on the top 20.000 items. The Purchasing Department issues much than 250.000 purchase orders with 1.200.000 items annually. Merkur purchases goods from more than(prenominal) than 2.000 suppliers. About 80% of purchases are done with the top 200 suppliers. Wholesale has headache relations with more than 2.500 clouders constitutions.About 80% of wholesale sales are done with the top 800 buyers. Wholesale issues virtually 400.000 invoices with total 2.200.000 items annually. Retail sells goods to 13.000 buyers / organizations and to about 500.000 end consumers. More than 70% of sales to end consumers are personalized with the Merkur loyalty display panel called the Merkur Card of institutionalize. Retail issues 6.000.000 invoices with more than 20.000.000 items to end consumers annually. In the power point from 1993 to 2004 Merkur achieved 19% come annual ripening in revenues, 20% average annual festering in net margin and 27% average annual growth in profit from operations. Today Merkur is the sixth largerst Slovenian company in revenues.3.1 The history of DW&BI in MerkurMerkur started to implement data warehousing and business intelligence (DW&BI) in 1999 with a project called KAS ( mercenary Analytical remains) (Svetina, 2002). Before 1999, polar analyses and reports were performed in Merkurs transactional information dusts, much of the uninflected data was held in Excel spreadsheets and Access databases. In the past, Merkur twice attempted to implement DW&BI technology, but failed because proposed technology was still too difficult to use for the legal age of the users. In 1999 Merkur started with a major business mathematical process reorga nization and, thitherfore, mitigate and new business analyses were needed in order to make interrupt terminations. The need for a DW&BI system emerged, so the KAS project was granted high priority. Merkur started to design uninflected data models for sales data and succeeded in integrating sales data from wholesale, retail and sales to foreign markets in one social organisationd data model.The IT department proposed Micro outline DW&BI technology, which was installed and tested in the beginning of the year 2000. The technology was found to be appropriate and the closing was made to implement DW&BI with Microstrategy solutions. The first off gear power users (sales analysts) were educated and the first KAS sales analyses were used in the decision-making process. In the beginning the ETL (extract transform load) process was carried out on monthly foothold, but by autumn of 2000 the company started to perform ETL process daily. Later in the year 2000 the purchasing uninfl ected system was introduced as well. In 2001, the data warehouse was upgraded with data on Merkurs business plans. Sales and margins were planned on a very low organizational level. The annual plan fact table has more than 1.000.000 records, so the salespersons performance is metrical very accurately. Because the technology is easy to use, the number of KAS users increased up to 100. In 2002, the writ of execution of a very large and complex analytical module followed, containing inventory data.The inventory levels of distributively item in every warehouse on a monthly basis is stored in KAS and enables detailed inventory analyses and detection of critical items. Also, data on Merkurs partnersdebts and liabilities was added to data warehouse, which enables accurate cash run bangment. Item price calculation elements and different prices were imported in KAS in 2003, so critical prices support be detected and all inconsistencies eliminated. galore(postnominal) minor additions t o the system were withal made over the last some years. All the time Merkur tries to use adequate analytical and data mining methodologies in order to improve the whole system of business reporting. From the DW&BI history we sack up learn a controlled in stages development of the KAS system. such way of development gives opportunity for good definition and implementation of analytical contents and enables Merkur to make many offend business decisions. The KAS system brings Merkur an important competitive advantage, which enables the growth of the company. Improved decision making coffin nail be demonstrated through different measurable key success factors which are improving constantly. Key success factors such as net margin, net margin per item, net margin per customer, number of new customers and others are measured in KAS. These factors are always accessible for KAS users and help them to make better decisions.3.2 DW&BI technologySince 2000 Merkur has used the Microstrateg y DW&BI technology. Microstrategy leads ROLAP solutions, which enable a step-by-step approach in data warehouse development and processing large amounts of data. The data warehouse is implemented in an Oracle relational database. This means that the similar database technology is used in twain transactional and analytical information systems. thitherfore, Merkurs IT department bottom focus in one database program instead of two or even more. Oracle technology was used in Merkur before the implementation data warehouse was started, so the implementation of this technology was fast and smooth. In Merkur the spare-time activity Microstrategy tools (Microstrategy, 2005) are used MicroStrategy news show Server is the heart of the BI system and provides reporting and analysis for the whole enterprise. This BI server provides the full range of BI applications through unified metadata and a single integrated server. MicroStrategy Administrator consists of a suite of tools that provide the systems management environment for business intelligence.It maximizes uptime of BI applications. Its tools give an environment for developing, deploying, monitor and maintaining of systems. MicroStrategy Architect is a rapid development tool that maps the physical structure of the database into a ratiocinative business model. These mappings are stored in a centralised metadata repository. MicroStrategy screen background is the business intelligence software component that provides integrated ask and reporting, powerful analytics and decision support workflow with a desktop PC. MicroStrategy Desktop provides an arsenal of features for on-line analysis of corporate data. Reports can be viewed in various presentation formats, polished into production reports, distributed to other users and extended through a host of ad hoc features including drilling, pivoting and data slicing. The interface itself is customizable to different users aptitude levels and security profiles. In Merkur, the Desktop solution is used by 13 power users (analysts).MicroStrategy weather vane provides users a highly interactive environment and low maintenance interface for reporting and analysis. Using this intuitive HTML-only Web solution, users access, die and share corporate data through any web browser on any operating system. MicroStrategy Web provides ad hoc querying, quick deployment and rapid customizability, making it even easier for users to make informed business decisions. In Merkur, Microstrategy Web is used by 90 end users of KAS. MicroStrategy Narrowcast Server is a proactive information delivery server that distributes personalized business information to users via email, pagers and mobile phone phones. It includes an intuitive self-subscription interface that enables users to specify what information they want to receive, as well as when and how they want to receive that information. Narrowcast Server is becoming more and more important in Merkur because of i ts efficiency.3.3 Merkurs DW&BI system todayPresently, KAS Merkurs DW&BI system, is five years old. The development of the system continues constantly and thither is still much content passim the organization which essential be implemented in the BI system. The most important content to be implemented in the future are the following Integral data from Merkurs finance and accounting system (the finance and accounting analytical system) Relevant business data from Merkurs subsidiaries data from Merkurs humans resources analytical system Data from Merkurs e-business analytical system Data from Merkurs logistic analytical systemPresently in KAS (Merkur Commercial Analytical System KAS, 2005) 13 power users (analysts) and 90 end users of both(prenominal) groups, 50 users have the ability and knowledge to set-up their own reports. Up to 30.000 reports are run on KAS on monthly basis. KAS consists of the following objects o 137 tables o 433 attributes o 1.195 metrics o 5.611 repor ts Over 35 automated services are run on the Narrowcast ServerThe KAS system enables many forward-looking business analyses such as market basket analyses, described subsequent in this paper.4 Market basket analysis and the used methodological analysisMarket basket analyses are an important component of analytical system in retail organizations. There are several definitions of market basket analysis. In a broader meaning, market basket analysis targets customer baskets in order to monitor purchase patterns and improve customer ecstasy (Microstrategy, 2003). The following analytics can be used attachment rates, demographic baskets, brand switching, customer loyalty, core items, items per basket, in-basket price, revenue contribution, shopper penetration and others. In a narrower meaning, market basket analysis givesus the answer to the following interrogative mood which goods are sold together within the same transaction or to the same customer? By analysing this information, we try to find out recurring patterns in order to offer colligate goods together and therefore increase the sales.We can track think sales on different levels of goods classifications or on different customer segments. In this paper, the narrower meaning of market basket analysis go forth be taken into consideration, focusing on the use of these analyses in Merkur. It has to be noted that several other terms are in like manner used to describe market basket analysis connect sales, cross-sell, up-sell. The promissory note between these terms is very unclear and the same terms are often used in different meanings. What can we gain from market basket analysis (Limitedbrands, 2004)We get the ability to learn more about customer behaviour. We can make more informed decisions about product fix, pricing, promotion and profitability. We can find out which products perform similarly to each other.We can determine which products should be lay near each other. We can find out which pr oducts should be cross-sold. We can find out if there are any successful products that have no significant related elements. 1. trace the selling documents ( legal proceeding) with the item, for which we want to perform market basket analysis. This logic is valid, if we want to carry out item-related market basket analysis. We can also perform good classification or even loyalty fluff holder-related market basket analyses, which will be shown later in this paper.2. Discover all the items in relevant selling documents and their selling quantities, prices, number of transactions and other relevant data. As an example, an item related market basket analysis will be presented. We want to analyse sales related to item 209525 Decorative lamp Saturn II. In the first step we determine the selling documents with this item. The partial result is shown in the table 1. Further, the result of the first step is used as a filter in the stake step, which results in a table with items, sold toget her with item 209525.5 Areas of market basket analysesIn Merkur different kind of market basket analyses are done. Analyses are adapted to various business needs, and some of them are discussed in the following sections. In every section, the relevant examples of analyses are presented and opportunities for business action discussed.5.1 Marketing and sales promotion campaignsWhen sales campaigns are prepared, promoted items must(prenominal) be chosen very carefully. The main goal of a campaign is to entice customers to visit Merkurs retail centre and buy more than they ordinarily do. Therefore, we must take on the right items and offer the right prices or other conditions. Margins on promoted items are usually cut, therefore, additional non-promoted items with higher margins should be sold together with promoted items. As we could see from the example in instalment 3, item 209525 Decorative lamp Saturn II is quite adequate to be include in a promotion. Together with it many other items are sold, so we can allow a lower margin of promoted item. Of course, there are some other criteria for an item to be included in a campaign, such as Where on the item life cycle arc is the item situated? What is our brand promotion policy? Can we moot an agreement with the supplier (producer) to assure larger quantities and better prices? instrument panel 4. Sales promotion market basket analysis In table 4, data from a New Years promotion campaign is shown. The campaign was done through public advertising. Paper catalogues of promoted items were sent to households, there were also commercial spots on TV and radio, and advertisements in newspapers. Because of advertising a certain number of customers came in Merkur retail centres in order to buy the promoted items. Additionally, they also bought many non-promoted items (70% opposed to 30% of revenues and 75%opposed to 25% of margins) with much higher % of margin (29,08% opposed to 21,81%). This means that promoted items generated sales of non-promoted items. There are also many possible ways for organizing campaigns using sway merchandising tools for the interaction with Merkur loyalty card holder. This issue will be discussed in Section 5.5.5.2. System solutions offeringMarket basket analyses are also used to combine more items in a set or a system, because the majority of customers are interested in buying and using them at a time or in a short period of time after the purchase of a particular item. By designing sets and systems of related items a company can increase sales and also cut down costs of sales transactions, so that various discounts can be offered to customers. This results in a typical win-win situation. A retailer must know the needs of customers and adapt to them. Market basket analysis is one possible way to find out which items can be put together in sets and systems.Table 5. Classification Group Kitchen cartridge remover hood market basket analysis In Table 5 we can see grou ps of goods which were sold together with the group Kitchen extractor hood. In the related groups are also different kitchen appliances resembling refrigerators, dish washers, kitchen-ranges, taps, dishes etc. This means that Merkur should design and offer the customers different kitchen systems. These systems should include kitchen furniture,major and small kitchen appliances and kitchen utensils. Such a system should be displayed in one place in a retail centre where customers could choose from whole system solutions to just several parts (items) of these solutions.5.3. Placement of goods in retail storesMarket basket analyses give retailer good information about related sales on group of goods basis. As we can see in Table 5, the majority of kitchen appliances groups are related. Customers who buy a kitchen appliance often also buy several other kitchen appliances. It makes sense impression that these groups are placed side by side in a retail centre so that customers can acces s them quickly. Such related groups of goods also must be located side-by-side in order to motivate customers of related items and to lead them through the centre in a logical manner.In Merkur, two basic concepts of retail centres are used MerkurDom specialises in high-quality items for home improvement and garden, MerkurMojster specialises in high-quality products aimed at DIY users, craftsmen, and entrepreneurs. Centres are also classified ad by size as small and large centres. For each of these concepts, interchangeable placement plans were developed. Market basket analyses represent one segment of tools for decision making considering placement of goods. It can show us where we should change the placement of goods. After the change we can measure the business effects of the change.5.4. culture of salespeopleThe interesting results of market basket analyses must be presented to the salespeople in retail centres, because the employees must be aware of them and they should use them in the process of selling. each salesperson has some knowledge about related items from his or her experience. With marketbasket analyses we can structure this knowledge and use it to teach less(prenominal) experienced personnel. Merkur invests a lot in education of salespeople through both internal and external sources. Knowledge from market basket analyses is widely used in internal education.5.5. Segmentation of customersAs mentioned in Section 1.1., more than 70% of sales to end consumers are personalized with the Merkur loyalty card called Merkur Card of Trust. This data enables us to answer the following question What did consumers who bought item (group) X in period 1, buy in period 2? If we identify customers who bought item X today, we can anticipate what they will buy, for instance, in next three months, and we can advertise them the right products. A typical example is shown in Table 6. We analysed loyalty card holders who bought ceramic tiles in the period from Apr il to June 2004. In Table 6 we can see product groups which were bought by the same card holders in the period from July to November 2004. They bought different bathroom and kitchen accessories and central heating elements.It would be very useful, if Merkur organized a targeted marketing campaign for this specific group of customers in July 2004 and promoted these products. There are many other possibilities and opportunities in Merkur to use loyalty card-based market basket analyses as a support tool for direct marketing campaigns. Merkur usually organizes non-targeted common campaigns, in which the majority of Slovenian households are included. But lately Merkur also started to implement direct marketing methods and therefore an effective data warehouse and business intelligence system is essential. This helps many interesting marketing ideas to be implemented.6 ConclusionThe practice in Merkur proves that market basket analysis is a very useful for marketing campaigns, good place ment definition and education of sales personnel. Merkur uses market basket analysis throughout the promotion campaign process. When a sales promotion is prepared, market basket analysis is used to define the right products and the right prices for the campaign. Related non-promoted items are also defined in order to place them in the region of promoted items and therefore increase sales. When sales promotion finishes, its results are carefully analysed in order to discover opportunities for next promotions. Merkur widely uses market basket analyses to manage the placement of goods in retail centres. Related products and product groups are placed together in such a manner that customer can logically find items he/she might buy.The findings of market basket analyses are an important part of the process of teaching the salespeople of Merkur. Sales personnel must be aware of related products in order to increase satisfaction of customers and intensify sales. Market basket analyses are just a part in the holistic approach to the execution of marketing development strategy in Retail in Merkur. The analytical process is integrated in other marketing activities and analysts are an important part of Merkur marketing development team. Team work is crucial for successful use of such analyses. Beside of the organization of the Merkur marketing process, a capable DW&BI system is needed.The BI system must have good performances when processing large amount of data. It also has to be scalable and flexible, but, above all, the BI system must be user-friendly so that different marketing specialists can use it without any problems.Fortunately, Merkurs KAS is such a system. But there is still much work to be done. We demonstrated that market basket analysis in Merkur can be done and that it brings useful results. In the future a working direct marketing strategy must be developed based on data already available in KAS. because an organization and information systems for effic ient execution of this strategy have to be established.7 ReferencesBerry, M.J.A., Linoff, G.S. 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