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Adding Value To The Shopper Experience With Big Data

You may not have directly felt the impact of big data, but make no mistake, it’s already having an effect on your daily life. Big data is the term assigned to the gathering, management and mining of the ever-expanding store of data we create. Data overall is doubling every two years according to some estimates. As we use data, we create more of it, producing a cycle that feeds on itself and learns as it grows.

One example: the New York Police Department monitors Google searches, paydays, sporting events, arrest records and even weather patterns to predict where trouble spots might erupt, and routes officers accordingly. This sounds like the premise for a television show about the future — but it’s happening today through the use of “big data.”

Most of what we think of as big data fits into what’s known in data circles as “unstructured,” meaning it overwhelms typical database formats, and is much more challenging to mine and catalog. Advances in technology are improving our ability to manage and manipulate these data stores, and the algorithms designed to find patterns are learning from what they study. Artificial intelligence is not far off.

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According to Erik Brynjolfsson, a professor of economics at MIT’s Sloan School of Management, in a study released in April 2011, businesses using data-driven decision processes were 5% to 6% more productive than business that did not. As companies become more adept at the use of big data and continue to refine their processes, the gap between success and failure will widen.

Target’s data prowess recently was profiled in a New York Times article, specifically about the fact that Target has the ability to learn things about its customers that the customers didn’t know themselves. According to the article, Target is able to predict consumer behavior in a way that can be unsettling for many. Shopper concerns led to Target disguising its marketing behavior so that it appeared to customers to be more random than it actually was.

Daniel Boorstin, the late historian and 12th Librarian of Congress once stated: “The greatest menace to progress is not ignorance, but the illusion of knowledge.” This is truer today than when Boorstin uttered it; what we think we know is our biggest obstacle to gaining true knowledge and big data shows how big an obstacle that really is.

The challenge for marketers is to actually listen to those insights that the data provides. Too often we form an opinion, and look for facts to support that opinion. If we expect to benefit from big data, we must be willing to have our views changed. Hypotheses are a necessary part of any research, but if the data indicates something other than what we surmise, the only logical response is to change our view based on that data.

For retailers, this means tossing out many of the old ways of thinking and reacting; this is not easy for anyone. It also means that some sort of data gathering and management system needs to be in place; traditionally we might think of a loyalty program, but it need not consist of a key tag. All that is needed is a way to uniquely identify individual shoppers, which can be done using payment media, since the vast majority of shoppers use some form of plastic for payment now.

The major challenge for business is of course investment costs for the right people, and the best technology. Much of the technology is new and undergoing radical change. And the people needed aren’t just data hounds. Even more critical are people who know how to ask the right questions, those who can formulate the right hypothesis to test, and who also understand how to act upon the result.

Gartner recently projected that within a few years CMOs would become greater users of technology than CIOs, and spend more money on that technology. Businesses wanting to stay in business have little choice but to make these investments today. The five percent productivity differential quoted earlier will only grow over time, and only the informed will survive.

The benefits of big data to shoppers and retailers alike are numerous. Shoppers will receive offers that are relevant and valuable, which will make them feel more valued as a customer. Retailers will be able to focus less on price to the masses, and more on keeping current customers engaged and delighted.

Privacy Concerns Come To The Forefront

Privacy concerns from the use of big data have yet to become a mainstream topic, but it’s only a matter of time. While people willingly share much of their lives in social media, with a tacit approval that their posts are being monitored in order to provide ads to them, once they learn just how much marketers know — and how accurate that information is — the backlash will surely follow.

Consumer privacy must be addressed head-on, and retailers need to be prepared to respond to questions quickly and with transparency. Those who ignore the question or hide behind bureaucracies will suffer the swift and merciless attention of the same social media outlets that gave them much of the information to begin with.

That concept leads to another retail sea change: shifting from acquisition mode to satisfaction mode. Today most marketing budgets are upside-down, with 80% being spent on getting new customers, and only 20% being spent on keeping existing customers, and keeping them happy.

As big data provides greater insights to customers, their habits and their needs, investment will reverse and place the current shopper up-front as the target, leaving less on the table to chase after new customers. The good news is that as marketing gets more accurate, the dollars any given company can invest in both of these activities will increase, because marketing ROI will become quantifiable in a way it’s never been before.

Big data is here to stay, and it will soon become a dominant force in every aspect of our lives. For retail marketers, it’s time to invest in the people, technology and practices to make the most of its potential.

Jeff Weidauer is vice president of marketing and strategy for Vestcom International Inc., a Little Rock, Ark.-based provider of integrated shopper marketing solutions. He can be reached at jweidauer@vestcom.com, or visit www.vestcom.com.

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