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

Is your content marketing missing the mark?

Does it ever seem like the content you create falls flat on its face or that the leads you’re generating aren’t worth following up?

Dan Ratner

managing director, uberbrand

​ Creating a purpose-driven brand

So you want to be a brand with purpose. But what does it actually mean to build a brand with real meaning?

Paul Chappell

Partner and managing director, Brand + Story

Customer experience crisis: Proactively mitigating the risk of broken promises

Last Friday, three weeks after United Airline’s spectacular customer experience disaster, customers received a letter from the company’s CEO, Oscar Munoz.

Very rarely have I come across views so true. There are so many gems in this article, reflective of reality, onec can read it again and a...

Shyam Mishra

ANZ digital chief: Tackle the ‘frozen middle’ of your organisation or face irrelevancy

Read more

STOP STEALING BUISNESS CLASS TOILETS from A380, new 787's and A330's!!!!Thats what you call customer experience ONE toilet for all Busine...

Joe

Qantas CMO: What it's taking to evolve our customer experience

Read more

Dare i suggest that a "CEO" role in a peak industry body like Think Brink is not really much of a leap from CMO because it is also a mark...

Sventana

CMO to CEO: Think Brick chief reveals what it takes to make the jump

Read more

Grate post, thanks for the post.No matter what your business is, if you do no not rank among the top most search results of Google, Yahoo...

Rahul

Image intelligence:10 must-see infographics for marketers

Read more

Thank you Shane Blandford for carrying my Smarketing vision into KM !

Peter Strohkorb

​CMO Interview: Why aligning sales and marketing drives innovation at Konica Minolta

Read more

Latest Podcast

More podcasts

Sign in