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On the G.R.O.W: what retailers should do now: identify the stores that are performing well, and then pinpoint the variables that contribute to that success.

In the current retail environment, franchisors who are using customer analytics to drive business decisions are faring better than those who aren't. With declining sales and fewer store openings, it's more important than ever to use customer data to understand everything you can about your most profitable customers and your best-performing stores. Franchisors who aid in selecting locations for franchisees are sure to protect their brand and boost the concepts' name for other potential franchisees.

It's also critical that you use the resources you have-from your marketing dollars to your brain power-to obtain the biggest possible return on your investment. In other words, there's zero room for waste. For the short term, the growth you achieve will probably come from your existing locations and your existing customers.

Now is the time to take a data-intensive look at each one of your locations, or potential franchisees' locations, from a customer data perspective-what we call the G.R.O.W strategy. Identify the stores that are performing well, and then pinpoint the variables that contribute to that success. These could include the retail characteristics of the store, the surrounding customer base, the management and employees, the merchandising mix, the marketing message, the cotenants and other factors. Then, where it makes sense, you should attempt to replicate these factors in your other stores.


Using the G.R.O.W Strategy for Success

Through the G.R.O.W. strategy, you place each one of your stores into one of four quadrants based on their actual and potential performance. Then, you implement specific tactics for each store, depending on where it falls on the grid. In essence, the G.R.O.W. strategy helps you focus your time and money on stores that have the potential for growth while placing little or no investment into those that don't.

G Stands for Grow

Stores that fall in the Growth quadrant are the star performers in your chain-locations that enjoy a large and loyal surrounding customer base. These are the stores that you want to analyze closely, and identify the exact variables that are driving success. Then, you want to replicate these factors in your new and existing stores, where possible. For these stores, you should continue to increase brand exposure through marketing dollars while driving additional revenue from existing customers.

R Stands for Reposition

These locations seem to have the same characteristics as your Growth stores, but they simply aren't performing as well. You know that the key factors for success are there-such as a good location, excellent visibility and a strong customer base-but something is standing in the way of growth. To identify the obstacles, do a careful analysis of each Reposition store versus your Growth stores. Is the merchandising mix different? Is the management and staff of the same quality? Are you spending enough marketing dollars? Take a look at what certain customer segments are buying at your Growth stores, then compare this data to the same customer segments at your Reposition stores. Your analysis is likely to reveal the obstacles to growth-and the strategies you should use going forward. These are the stores where investments of your time and money are very likely to pay off.

O Stands for Optimize

Optimize locations share few characteristics with your Growth stores. Perhaps the visibility of the location is poor, or the surrounding customer base doesn't match the profile of your best customers. Maybe there is simply too much competition nearby. For whatever reason, your Optimize stores are just not cutting it. For many retailers, this type of store can represent up to 30 percent of their entire chain, and top executives spend a large amount of time trying to whip these stores into shape. However, because the stores don't share the same characteristics as your Growth stores, they probably aren't going to perform well, no matter how much time or marketing dollars you throw at them. The only options are to close the store, accept the smaller revenue numbers or try to restock the store with merchandise that will be more appealing to the customers surrounding it. Whatever you do, don't spend a lot of time or money trying to turn an Optimize store around.

W stands for Why/What

For any retail chain, there will be a certain number of anomalies: stores that, on the surface, don't seem like they should perform well, but do. They don't share the same characteristics of your Growth stores, yet they continue to deliver strong numbers. For Why/What stores, the key is identifying why the store is successful and what, if anything, about it can be replicated. Take a close look at the variables and try to pinpoint the factor or factors that have led to success. Chances are, it won't be something that can be replicated elsewhere. A good example of this is a banner and sign store located next door to a convention center. Though the surrounding customer base can't support the store, the temporary business from meetings and conventions results in strong performance. It's best to leave these stores alone, but keep a close eye on competitive intrusion.

Growing Revenue Through Existing Customers

Once you've placed your stores in one of the four categories, you're ready to start driving revenue. Clearly, the bulk of your resources should be spent on Growth and Reposition stores, trying to create new customers and spur increased visits from existing customers. How can you get more revenue from your current customers? Through highly-targeted, direct-marketing programs. Here's a simple example. Let's say that your data shows that customers in a certain segment are buying both product A and product B. The data also reveals that many customers in the same segment have only purchased product A. This is the time to send this second group of customers a money-saving offer for product B. Chances are, you'll have excellent results. This strategy is far superior strategy to a mass-market offer of "Buy A, get B free." This offer will simply bring in a one-time customer who wants something for free. In the first case, you're developing relationships; in the second, you're wasting money.

Tracking Performance Month by Month

Another huge benefit of data analysis is the almost-instant results you receive. By examining the data, you can track results by store and by region, month by month, so you can quickly determine if your offers are working, if your store repositioning efforts are effective, if your cross-selling attempts are paying off. Once you find a marketing message and offer that works, you can repeat it successfully at your other stores in the Growth and Reposition categories.

Emerging Strong from the Downturn

Retailers who are smart about their data not only perform better in down markets; they're better positioned to flourish during the turnaround. Now, weak retailers are closing stores or even going out of business, and numerous excellent locations are opening up. Smart retailers will use data analysis to find the locations that match their Grow stores, snap them up for a bargain price and position themselves to grab increased market share in the future.

Charles Wetzel is the president and chief operating officer of Buxton. The company's focus now includes health-care organizations, consumer packaged goods manufacturers and city governments. Since its founding in 1994, Buxton has served more than 1,900 clients. He can be reached at 817-332-3681 or
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Comment:On the G.R.O.W: what retailers should do now: identify the stores that are performing well, and then pinpoint the variables that contribute to that success.
Author:Wetzel, Charles
Publication:Franchising World
Geographic Code:1USA
Date:Jul 1, 2009
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