New data analytics approach helps retailers improve customer delivery

Major e-grocer in the United Kingdom saw a 4 per cent increase in profits on average over six months when doing a test simulation of the data-driven approach to customer home delivery

Using data analytics to predict when customers want to access home delivery services can help retailers lower delivery fees and become more efficient, researchers claim.

Representatives from Warwick Business School, Lancaster University Management School and the University of Southampton have undertaken new research into a “foresight approach” to home delivery, which predicts when people want their shopping delivered based on what delivery prices or incentives are being quoted for different delivery time slots.

By mining customer data, the new approach takes into account accepted orders to date as well as orders still expected to come in, and creates dynamic pricing for home delivery time slots. This allows retailers to optimise price and timing of delivery and offer discounts on certain time slots.

“Traditionally, online retailers would collect orders including delivery time requests until a certain cut-off time and plan their delivery schedule accordingly,” said Dr Arne Strauss, assistant professor of operational research at Warwick Business School.

“Therefore, maximising profits is a problem because the final set of orders for a given delivery day are not known until shortly beforehand, yet decisions on the pricing of delivery time ‘slots’ have to be made in advance based on an estimate.

“With our new approach we demonstrate that analysing the customer data already at retailers’ fingertips and using it to predict the impact of future expected orders in the estimation of delivery costs produces higher profits than only using orders accepted to date in this estimation.”

Why predictive analytics matters
How predictive analytics is tackling customer attrition at American Express
The keys to smarter data analytics Using data analytics to power customer lifetime value

The researchers conducted a simulation test of their new approach on a major e-grocer in the United Kingdom and saw a 4 per cent increase in profits on average over six months.

Tight profit margins can be an issue for many retailers, especially as more retailers are offering same-day delivery such as fashion retailer, The Iconic. The increase in online shopping spurred on by the growth in adoption of smartphones and tablets is also pushing retailers to find ways to differentiate themselves through their delivery service.

“Business failures such as Webvan who went bankrupt in 2001 after trying to offer a same-day delivery service brought home the message that while small delivery windows appeal to customers, they do cost the retailer money,” Dr Strauss said.

“It is important to incentivise customers and steer them to particular delivery times,” said Dr Strauss. “This could be in the form of ‘points’ or vouchers or even something along the lines of asking the customer to consider the environmental impact.”

Follow CMO on Twitter: @CMOAustralia, take part in the CMO Australia conversation on LinkedIn: CMO Australia, or join us on Facebook: https://www.facebook.com/CMOAustralia

Signup to CMO’s new email newsletter to receive your weekly dose of targeted content for the modern marketing chief.

Join the CMO newsletter!

Error: Please check your email address.
Show Comments

Supporting Association

Blog Posts

Why there’s more to content marketing ROI than just numbers

Most brands are producing more content than ever before. Even those still operating predominantly in campaign mode are finding social media demands an always-on content pipeline.

Jacki James

strategic planner, Zuni

Six lessons from Mobilegeddon

Google’s Mobilegeddon is the lesson many big companies and their marketers are learning the hard way.

Rob Marston

Managing director, Zeus Unwired

Against Net Promoter: A new way of interpreting the customer data deluge

One thing that frustrates marketers is the sloppy use of digital research.

Jason Juma-Ross

lead partner, PwC Digital Intelligence

The next Advertising medium is Augmented Reality, Just when individuals thought promotions couldn't get any more interactive and close to...

Siddhu

The old billboard gets the flick as digital OOH advertising takes over

Read more

Augmented Reality is the most immersive and interactive medium at today and that works for all kinds of real world requirements. It allow...

Siddhu

Sunny Queen launches egg-citing augmented reality collectible cards

Read more

It's really helpful that you were able to share this kind of information in order for some people to know on what is this kind of word re...

best essay sites

It's time for CMOs to embrace ‘agile’ as a noun - Technology chief - CMO Australia

Read more

You nailed it Mark, not nice, not popular but true.

CruiseFactoryData

CMO Council: Marketers lack right customer metrics for digital transformation

Read more

An insightful post and I wholeheartedly agree that without clearly defined business goals any content strategy will be ineffective. The d...

Alastair Kane

Why there’s more to content marketing ROI than just numbers

Read more

Sign in