Blog postsApril 01, 2019
3 Ways to Use Customer Data to Determine Your Best Delivery Strategy
Retailers and brands have a wealth of customer data at their fingertips. Between your website, retail store, and loyalty program, the amount of insights you have on your customers is truly astounding. And maybe even a little overwhelming.
You’re probably already using customer data for inventory planning and allocation, but does it influence your delivery promise and the options you give to your customers? It should.
Customer expectations around delivery speed and cost are constantly changing (thanks, Amazon). But, not every business can offer same, one-, or two-day delivery, and not every business should.
Today, shopping is contextual and it really comes down to convenience. For example, your customer might be willing to wait a few days for their couch to be delivered if it means they can schedule a delivery window. However, they won’t wait for the dog food they just ran out of, or the birthday present they need for tonight’s party. What the product is and what it’s needed for significantly impacts your delivery promise options and what you’ll offer your customers.
The good news is, you have all that data available to you. Customer and sales data does more than just inform your business about which products are the most popular. It has an enormous amount of information that you can use to determine your delivery and logistics strategies.
Here are 3 ways to start:
- Identify the most commonly selected delivery promise on your website
- Determine if delivery promises vary by product
- Discern your customer demand pattern
3 insights you can use to establish the right delivery promise
1.) What is the average delivery option selected?
The first place to look is the most obvious. Of your existing delivery options, what are most people choosing? Is it free, standard delivery, indicating they’re price-sensitive and more willing to wait for their order? Or do more customers pay premiums for expedited delivery times, indicating speed is the most important factor for them? Likely it’s a mixture of both.
In our recent 2018 eCommerce Fulfillment & Logistics survey (soon to be published), we found that customers prefer free shipping over fast shipping by a 2:1 margin. Yet, only 50% of businesses offer 3-5 day shipping for free. The majority of businesses offer fast shipping (two days or fewer), but with premiums associated to offset costs.
The ideal scenario, of course, is to offer free, fast shipping options. However, this gets expensive quickly and becomes increasingly difficult to offset as volumes increase. A good first step is reviewing the trends in your delivery options to get a good understanding of what your customers value most so you can optimize for their needs without impacting margins by trying to do it all.
2.) Do delivery preferences vary by product or by customer?
Now that you have a baseline understanding of what delivery options are important to your customers, it’s important to determine if that varies within the different products you sell and within your customer segments.
It’s entirely possible that shipping speed doesn’t matter for some of your products but matters a great deal for others. It’s also possible that different subsets of your customers value delivery speed and price differently or want additional options like buy-online-pickup-in-store (BOPIS). Armed with this information, you can create tailored promotions for certain products and/or people.
3.) Where are your customers located?
The last thing to look at is where the bulk of your customers are located. Are they localized in one region, or are they spread out all over the country or globe? Once you determine where they are, you can start to identify what it will take to improve your delivery promise.
Should you add more warehousing and fulfillment nodes to your network to shorten your delivery times? Should you reallocate inventory to meet regional demand? Should you include free add-ons to differentiate the unboxing experience? There’s a lot to consider and no one right answer.
Doing nothing: Losing customers at the last mile of delivery
Unless you’re selling custom-tailored products, shoppers have near-infinite options to find what they need. And thanks to the internet, those options don’t require running another errand—they are just a click away. If your delivery promise doesn’t help incentivize a sale, it can be an easy way to lose customers.
According to the Baymard Institute, a staggering 70% of online shopping carts are abandoned. The top reason for cart abandonment—cited by 55% of respondents—was high extra costs such as shipping, taxes, or fees, and an additional 16% said they left their carts because the delivery time was too slow. With this many sales at stake, customer preference isn’t something you can afford to ignore.
Unfortunately, the last mile of delivery is expensive. Like, over half of your total shipping costs, expensive. Consider this: the only way Amazon can provide fast, free shipping is because it spends more than $21 billion on shipping costs each year
Amazon is its own animal. For everyone else, continual and incremental improvements to your delivery strategy starts with taking a look at your data and figuring out what your particular customers want. That way, as customer demands continue to evolve (and they will), you can stay relevant without eating away at your margins.
How modern logistics solutions can improve your delivery promise
Shortening your last mile of delivery or offering more free delivery options isn’t as cost-prohibitive as it once was. Consider your warehousing and fulfillment network, for example. Retailers and brands don’t have to build out their own distribution network or proprietary software to drive results—they don’t even have to enter into long-term contracts or lease agreements with individual 3PLs.
From freight forwarding to warehousing and fulfillment to parcel shipping and visibility, on-demand solutions are available to help offset your supply chain budget so you can be more agile and responsive. New logistics technology companies provide businesses with innovative solutions that help create better supply chain strategies and drive more options for delivery.
There is no one perfect delivery strategy. The right delivery promise will depend on your product and your customers. Start with your data. Once you’ve established what your customers want and what you can feasibly offer them, you have a multitude of logistics technologies available to help you deliver on your delivery promise.
Read the rest of our 2019 predictions in the "8 Retail and Logistics Predictions for 2019" whitepaper >>