Creep alert

Michael Baker
May 22, 2013
The Age

Independent retailers are not necessarily at a disadvantage technology-wise compared to retail chains. The important thing is to prioritise technology decisions and invest in those that offer the best bang for the buck.

After all, no company, not even Walmart, can afford to do everything at once.

One of the technologies igniting retail circles right now is ‘Big Data’. Is it the pinnacle of one-on-one marketing and therefore a ‘must’ technology for all retailers? Or is it just a way of creeping your customers out?

First, let’s explain what big data is, since many who could benefit from it are not clear about what it means.

Perhaps the best way of understanding it from a retailer’s point of view is to start with the concept of ‘small data’. An example of small data is your customer’s purchasing history – what the customer bought, the means of purchase, channel of purchase (such as online or in a store) and whether the items were bought at full price or on sale.

Small data can be employed for personalised marketing by, say, sending the customer a special offer for an item related to what was purchased previously. This is done all the time. But it suffers from the obvious drawback of being backward-looking. It acts on a record of what a person did yesterday or three months ago rather than on a signpost to what he or she aspires to today.

How can it be improved? This is where big data comes in. Big data is the addition to small data of so-called ‘unstructured’ information obtained from the customer’s entire digital footprint. It can consist of information derived from the person’s Google searches, comments the person posted on social media sites, product reviews the person made, mobile phone and email interactions with the retailer and more.

This information can be analysed and transformed into, for example, a prediction of the product, brand, price level and type of marketing pitch most likely to achieve a positive customer response. We’re not talking about the same pitch to a lot of customers here – we’re talking about a customised pitch to each customer.

It’s an impersonal form of stalking, done with complex computer algorithms instead of following the target in a dark raincoat at 100 paces. And it’s done with the tacit acceptance of every shopper who interacts digitally with a brand.
But does it work? Proponents argue that it is using technology to improve the ‘relevance’ of marketing. But is more relevant marketing necessarily more successful?

In many cases, the answer will be no. In the first place, it’s the very relevance of the marketing message that can get on people’s nerves. It says to a customer: “This is the box we put you in. This is what you are like and this is what you want.” Not a particularly endearing message to many.

A second problem for big data is that unstructured information about a person has a lightning-fast half-life. For example, if you post a comment on Facebook saying you’re looking forward to your trip to Hawaii, chances are good that the holiday will have been taken within a couple of weeks and any marketing activity that is partly centred on the trip will be ineffective.

A third problem with big data is that it is essentially an engineering solution that removes the creative imagination which has always been a core requirement of marketing. IT engineers can crunch data but they can’t incorporate in their algorithms the huge unpredictable and even irrational components of shopping behaviour. For example, people often prefer variety and diversity over constancy and uniformity. What was desired yesterday may well be the opposite of what is desired today. People also tend to like surprises. Give them ‘relevant’ marketing pitches and they can be received as just, well, so what?

This is not to say more personalised or targeted marketing has no role in retail. But a combination of small data and the human imagination may be more effective – and cheaper – than crunching petabytes of data.

For small retailers there are other technology fish to fry right now. These include a mobile-friendly website, social media to build an interactive bridge with your local community, and technology for a rational pricing strategy.

While they are busy on that stuff, engineers are working hard at improving big data. Undoubtedly they will. But don’t think it will ever substitute for human intuition.
Michael Baker is principal of Baker Consulting and can be reached at michael@mbaker-retail.com and www.mbaker-retail.com.

Read more: http://www.theage.com.au/small-business/growing/creep-alert-20130521-2jybd.html#ixzz2Txxn9lNu