Coles mines customer buying behaviour with SAS®.

Business analytics enables one of Australia's leading grocery retailers to better target customer offers, leverage customer loyalty and further its business transformation programme.

Coles is a leader in Australian grocery retailing with more than 150,000 employees and 12 million customer transactions a week, and is one of the two major supermarket chains in Australia. However, Coles still operates in a fiercely competitive market, with new competitors entering and others taking a more aggressive approach.

The company has been undergoing a five-year transformation programme, during which it was acquired by Wesfarmers Group. As part of the programme and as a result of the acquisition, Coles wanted to leverage the value of having the largest customer loyalty programme in Australia. Together with SAS, Coles investigated improvements to its solutions and processes for data management, marketing insight analysis and optimisation routines.

Coles consequently implemented a customer analytics, offer optimisation and reporting solution from SAS to deliver measurable and actionable customer insights. These insights now directly influence its marketing campaigns - like "Feed Your Family," "Sports for Schools" and "Master Chef" - that have driven customers to purchase more. In addition, increased efficiency of targeted customer offers forms a critical part of an agile marketing approach.

"We are trying to deepen our understanding of the current and changing purchasing patterns of our main group of customers, who account for nearly four out of five Australians," explained Professor Ian Tho, Head of Customer Analytics, Customer Knowledge & Insights at Coles.

“Australians spend about 100 billion AUD on food every year and we take about 30 billion AUD of that. My team attempts to understand not only who buys what, but why they buy, when they buy and how much they buy.  From these insights we deliver increased value to our customers, stock our shelves with the right products at the right prices and improve the quality of our fresh offerings. We now know why our customers are coming into our stores and actively translate this into activities that satisfy this need in the finest detail, thus driving customers to come back regularly and buy more. Since the Wesfarmers acquisition and the implementation of the SAS solution, we have grown significantly and customer loyalty is one component of that growth.”

According to Tho, before implementing its SAS solution, Coles struggled to have a clear understanding of the dynamics of shopping basket contents for each customer group. It was difficult for Coles to determine whether customers were coming into stores for their main weekly shopping on the weekends or other times in the week, or for "top up" shops. In other words, Coles needed a better understanding of who bought which combination of goods and what their drivers were for choosing to shop at Coles.

"We have one of the largest retail and customer databases in Australia. We collect data on every line item that is then entered into an analytical process using SAS Enterprise Miner. We then group customers appropriately or segment them by life stage, lifestyle and shopping basket contents. Once we have a good grasp of that, SAS Marketing Optimization comes into play to enable us make the right offers to the right people and to increase retention with a loyalty and discount component," Tho explains.

The entire company is now capitalising on the results drawn from the SAS solution, both for future provisioning of what products are on the shelves and for historical reporting. Tho emphasises that this translated into a tangible return on investment (ROI) within six months, both in cost savings and increased revenue. The SAS implementation facilitated all of Coles' high-profile marketing campaigns, including "Quality Costs Less at Coles," he says.

"We understand key customer drivers through simple factor analysis of customer responses. With this we have actively improved our customers' value perception by a third and quality perception by half over the period since we started to implement the 'quality costs less' strategy. All of that is built from SAS as an input into marketing. Our marketing ROI has improved and is a significant contributor to the overall effort to improving sales. As a result, sales for 2010 were more than 30 billion AUD for the first time, up 4.2 percent from last year, with a profit result of 962 million AUD - a 15.8 percent increase over last year."

As part of the evaluation process, Coles considered three competitive solutions. According to Tho, SAS came out of the evaluation process as the clear leader in being able to provide Coles with a solution to help it understand customer behaviour and undertake segmentation and marketing optimisation. The feedback throughout the organisation has been excellent, he says, but admits that Coles has hardly scratched the surface yet.

"We've picked all the low hanging fruit and convinced the organisation that insight is critical. The next phase deals with the mining and collection of specific insights. So we have a long way to go, but to date I am extremely pleased with the results," he concludes.

The results illustrated in this article are specific to the particular situations, business models, data input, and computing environments described herein. Each SAS customer’s experience is unique based on business and technical variables and all statements must be considered non-typical. Actual savings, results, and performance characteristics will vary depending on individual customer configurations and conditions. SAS does not guarantee or represent that every customer will achieve similar results. The only warranties for SAS products and services are those that are set forth in the express warranty statements in the written agreement for such products and services. Nothing herein should be construed as constituting an additional warranty. Customers have shared their successes with SAS as part of an agreed-upon contractual exchange or project success summarization following a successful implementation of SAS software. Brand and product names are trademarks of their respective companies.

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