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

4 key findings on the state of B2B marketing

The ​2016 B2B Marketing Outlook Report​ was recently published by Green Hat in conjunction with ADMA for the sixth consecutive year. It highlights the most significant trends from 2015 and shows B2B marketers what’s in store for the year ahead.

Andrew Haussegger

Co-founder and CEO, Green Hat

Why app engagement must be personalised

Research from Nielsen late last year reported Australian smartphone users over the age of 18 spend 33 hours per month in apps, and a mere four hours per month in browsers. But what does it take to actually maintain an app customers will engage with?

Rob Marston

Head of Airwave, A/NZ

Customer experience investments more vital than ever

The global commodity slump has hit Australia in the last few months. Companies that obsess over these developments might be tempted to cut spending on customer experience (CX) programs. Here's why that's a a terrible idea.

Harley Manning and Thomas McCann

Research leaders, Forrester

I hope this trickles down to job opportunities and more analytics based careers on the government.

Ale Xandra

Australian Open details data analytics improvements driving digital fan engagement

Read more

what does this article means when it refers to "elocker technologies" ? Thank you. I am not sure what this is,M

Martin W. Jordan

Adelaide Zoo deploys iBeacon technology to enhance visitor experience

Read more

Now you make creative Facebook ads

Mike Smith

Why AAMI turned to Facebook mobile and segmentation to drive brand favourability

Read more

Rob - great article. Here at Pure Oxygen Labs we could not agree more. When considering retail mobile apps deep linking is woefully unde...

Scott

Why app engagement must be personalised - Mobile strategy - CMO Australia

Read more

Project Leader?? Kim Portrate is one of the most ineffective leaders I have ever had the displeasure of meeting. She single-handedly cost...

Anonymous

Helloworld scraps CMO role

Read more

Latest Podcast

More podcasts

Sign in