Like the Universe, the Web is continuously expanding. Online users are not simply engaging each other more easily, they have become data generators. In this role, they are transforming the global economy.
Today, we can find and purchase every kind of item – from the exotic to the mundane – we could ever want, in the color and size we need. No matter where it is now stored. And we can often acquire it for an amount more attractive than the prices changed by local distributors.
Changing the Game
As consumers, we are no longer reliant on local suppliers – and no longer expected to remain as loyal to regional department stores and neighborhood Mom-and-Pop shops as our parents and grandparents were, as many of us once may have been. Because of this, retailers – from national chains to specialty boutiques – are leveraging every available tool to attract new customers and keep the ones they have.
To accomplish this, an increasing number of retailers are digging deep into Big Data. By running advanced analytics software, they are better identifying how and where to improve e-commerce and marketing operations. This insight – into customer patterns, market trends, and competitor initiatives – is providing retail executives with they knowledge needed to make fact-based business decisions.
“The potential of big data,” writes journalist Masoom Gupte, in India’s Business Standard, “lies in the kind of insights it can offer businesses and the kind of questions it can help answer.” Through interviews with Indian retail executives, Ms. Gupte has noticed a growing trend among Indian retailers: They “are working to harness consumer data from every available source to make their enterprises agile and hard to beat.”
Her findings suggest nine tactics which can help retailers use the insights they glean from Big Data – and the analytics tools they run – to improve business performance:
- Track – in real-time – customer buying patterns and product preferences
- Define customer behavior on a granular level
- Develop fully articulated customer personas
- Promote product recommendations, product bundles, and customized offers, via targeted online advertisements and text blasts delivered to in-store customers
- Prevent stock-outs and surpluses by maintaining inventories determined by local customer demand, shopping patterns, and product/brand preferences
- Provide employees with the information to swiftly resolve customer complaints
- Develop and nurture personalized relationships with partners, suppliers, and customers
- Establish risk practices for managing possible supply interruptions and market fluctuations
- Monitor news and events affecting suppliers, competitors, local markets, and global economies
Unlike most new concepts, Big Data is delivering on the hype it promises. For example, retailers running advanced analytics solutions can leverage Big Data findings to “better utilize distribution networks and delight customers with improved on-time deliveries,” writes Mark Ledbetter, global vice president for SAP Retail. How? “Radio transmitters on trucks along with bar codes or RFIDs on each package are combined with real-time mapping and traffic information to allow dispatchers to better monitor and visualize the progress of every delivery.”
Need a more persuasive argument to convince a pragmatic executive? Three McKinsey directors give a sound explanation:
Customer-facing companies have long used data to segment and target customers. Big Data permits a major step beyond what until recently was considered state of the art, by making real-time personalization possible. A next-generation retailer will be able to track the behavior of individual customers from Internet click streams, update their preferences, and model their likely behavior in real time. They will then be able to recognize when customers are nearing a purchase decision and nudge the transaction to completion by bundling preferred products, offered with reward program benefits. This real-time targeting, which would also leverage data from the retailer’s rewards program, will increase purchases of higher-margin products by its most valuable customers.
– Tim McGuire, James Manyika, and Michael Chui
To thrive in our digitally connected marketplace, retailers must disrupt their conventional business practices and quite simply, change the way they operate. Only by leveraging Big Data insights can they identify unique opportunities to tactically expend their resources in ways that most efficiently increase revenue and drive business growth. When they do, they will reposition themselves to compete globally by focusing on what they can best do and by providing customers with the offerings they most want.
Is your company tapping Big Data to get new insight? Has it leveraged these insights to better drive campaigns and profitability? Have these insights enabled it to identify areas to improve operations and offerings to better serve customers? Has it made any other significant operational changes because of knowledge it gained through Big Data?