Targeting groups can boost retail sales in Singapore

AS Singapore gradually relaxes its Phase 2 (Heightened Alert) curbs, it is clear that many are itching to resume in-person social interactions, such as visiting their favourite stores and dining out at restaurants with their friends and family. The easing of restrictions is expected to lead to a surge in visits by groups of consumers to retail outlets, as Singaporeans recombine their favourite passions of shopping and dining.

To lure these groups of "revenge shoppers" back to their outlets, businesses should develop new strategies for targeted advertising and promotional offers. Targeting groups should also be a priority, as research has recently established that offering promotions to groups may offer an effective strategy to increase customer engagement.

While Singapore has been known for decades as a shopping paradise, the industry has faced significant headwinds of late, with several flagship retail mainstays closing down, and online commerce being viewed as a disruptive contender.

Clearly, the region's e-commerce growth has exploded further since the pandemic's onset and we've seen shifts in consumer shopping habits too. One such example is the emergence of online-offline-and-online-again decision-making, which sees consumers conducting online research about a product initially before heading to a physical store to check out the product, and then returning online to make the final purchase (with its advantages of at-home delivery).

Due to this shift in consumer behaviour, businesses, particularly those with offline operations, have had to adapt to survive.

Despite the runaway growth of online, it was found that after Singapore opened up in phases from June 2020, physical retail trade grew. According to the Singapore Department of Statistics and Knight Frank Research, shoppers' spending at brick-and-mortar stores resulted in the proportion of online sales falling from above 25 per cent of total retail sales at the peak of the circuit breaker, to just over 12 per cent in July 2020.

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A possible reason? Consumers are inherently social and crave the interactions that physical environments can provide. This insight suggests an opportunity for businesses to target shoppers with carefully-crafted promotions when they visit stores in a group, once restrictions ease.

Group cohesiveness - a term referring to how close-knit a group is - can influence an individual consumer's shopping preferences and behaviour. A cohesive group, loosely speaking, refers to a group of individuals who know each other very well and hang out often, for example, family or friends. In contrast, a group of people who don't know each other well or meet infrequently, and for shorter durations, would constitute a low cohesive group, such as colleagues.

According to a recent study led by ESSEC Business School, along with scholars from other universities, there is a significant difference in the way people react to promotions when they are shopping in a high cohesive group, as compared to a low cohesive group. We found that consumers in a closer-knit group find immediate promotions that can be instantaneously redeemed more enticing, whereas those in a low cohesive group preferred promotions that can be redeemed later (say, a week after).

This finding has important ramifications as retailers often use promotions with delayed redemption to ensure that consumers return to their store or website, and thereby build continued loyalty. It also suggests that to form successful promotions strategies, marketers must create a mix of promotions with varying redemption periods.

ADVANCED DATA ANALYTICS TECHNIQUES

While the finding is attractive, it raises the questions: How can retailers identify such close-knit groups? And how do we ensure that this is done ethically and safely?

Firstly, to unobtrusively identify the degree of closeness between individual consumers, and thereby ascertain the closeness of groups, businesses will need observational data collected over some time. Specifically, they would need to collect the location history of individual devices over days and weeks, and apply advanced data analytics techniques to compute the closeness of the device to others.

Location tracking itself naturally generates privacy concerns. However, the beauty of the proposed technique is that such cohesiveness computation can be performed based solely on anonymised device identifiers of mobile devices, using location data collected passively by commonplace Wi-Fi infrastructure. In other words, all it's doing is collecting location traces of these devices, without having any knowledge of the owner or the actual hardware identity of any specific mobile device.

With such anonymised long-term data collection, the targeting system can determine the degree of observed "physical world" closeness between any pair of anonymised devices, and by extension, between a group of collocated devices. Subsequently, whenever one of these devices makes an actual store visit, the system can then look at these closeness metrics together with the (anonymised) identity of other devices simultaneously present in the store, and determine if they are alone or in a group. The store could then push out a personalised, targeted promotion to the device through text messages or push notifications on mobile applications.

To receive such targeted promotion though, the specific shopper must have shared their credentials and consented to receive such promotions with the store, prior. The good news is that this creates a mutually beneficial relationship, enabling businesses to tailor promotions to individual customer groups, and providing consenting customers with personalised promotions that cater to their unique needs.

What we are seeing though, is that advancements in technology has meant that many consumers have grown sceptical of having their personal data collected and used by corporations and governments. It is therefore important for businesses to be highly transparent with customers.

Therefore, as part of their recovery strategy, retailers will consciously need to emphasise high levels of transparency about their data collection and targeting practices, while reacting swiftly to shifts in consumer shopping habits.

• The writer is associate academic director of the ESSEC Global BBA and associate professor of marketing at ESSEC Business School Asia-Pacific.