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Little Book On Big Data - Understand Retail Analytics S and Optimize Your Business, The - Mahogany Beckford
Little Book On Big Data - Understand Retail Analytics S and Optimize Your Business, The - Mahogany Beckford
People
Beacons can be used both to speak directly to customers and to help
improve the customer experience by equipping sales associates with rich and
targeted information about the needs of repeat customers. Beacon technology
is, in short, a way to use a customer’s location (and usually their smartphone)
to send him or her a relevant message in real-time. So, for example, a customer
could enter the dairy section of a supermarket, and this action could trigger the
delivery of a coupon for milk to his or her smartphone.
The reason why this IoT-enabled technology is so powerful is because
it can allow a retailer to react immediately to customer behavior. Since the IoT
is really many smart “things” broadcasting messages amongst themselves, the
retailer can use this technology in many different ways to help simplify the
shopping experience for a customer and improve the way that the shopper
interacts with the retail space. A specific example of its usefulness with repeat
customers is couponing. Since a company is likely to already know a
customer’s shopping habits, it can tailor offers to that shopper’s unique needs.
For example, Catalina, a company that helps retailers send
personalized coupons to its shoppers, uses past history to tie into a current
need that a customer may have. In an interview about its technology, the
company noted that it “make[s] decisions not based on what you bought today
but what you have bought over the last two years ... [we] can recommend a
product you buy every four months. You don’t have to know, but we know”5.
Customers appreciate these efforts. A 2014 Swirl study found that sixty percent
of customers actually do open and engage with beacon-transmitted messages,
and thirty percent redeem offers sent in this way6. The study also found that
customers enjoy and want more personalized offers. This situationally-aware
way of interacting with customers is appreciated by them and is also a way to
give them more of what they want as they shop in a store. Companies like
Euclid Analytics and RetailNext provide technology solutions that cater to
these needs.
Products
Inventory management is an area of retail that tends to cause a lot of
headaches. A shipment arrived, was signed for, but cannot be found in the
store. Where is it? Are there ten items of product X remaining, or seven? Has
all of the labeling been updated to reflect the price changes that went into
effect last week? Managing inventory is tough, and this is an area that can
impact not only business operations but also customer service - especially
when looking at the effects of stock-outs. A study done by the retail analytics
firm DynamicAction found that “‘out-of-stocks’ accounted for $634.1 billion in
lost retail sales for the year ending in the spring [of 2015] — 39 percent higher
than in 2012”7.
In this situation, good news comes in the form of RFID technology.
Again, the use of RFID technology is not new in retail. Also, its use is already
beneficial. The same study found that by using “RFID tags, retailers can expect
99% inventory accuracy, a 50% reduction in out-of-stocks, a 70% reduction in
shrinkage, and sales lifts in the 2% to 7% range”8. Furthermore, what is
important to note here is that RFID technology is simple and inexpensive to
integrate, meaning that the barriers for putting this technology to use are quite
low.
Smart shelves can use the IoT to take things even further. Imagine
being able to quickly, digitally, and efficiently update pricing, update
inventory, and alleviate unnecessary mistakes in the updating process, all in
real-time. That is the promise of smart shelves, and they are already here.
Panasonic has released a line of smart shelving units that it calls Powershelf.
Powershelf units do not need batteries, use weight sensors to detect stock-outs,
and can be placed in freezers because they are not sensitive to cold9. Mondelez
International, the parent company of Kraft Foods, also has plans to release its
own line of smart shelving units - ones that it says will even be capable of
using “image sensors to capture basic demographic information from
customers as they wait in checkout lines and offer targeted promotions”10. But,
bells and whistles aside, the key additional benefit here is that this technology
can help retailers stay on top of inventory-related matters; and that value is a
vital thing that can help to make operations more efficient.
To look more closely at the concept being used in real life, a great
example is one retailer who is already putting the technology to use to make
quick improvements to operations in its retail locations. Since pricing can be
updated digitally across an entire store in real-time, “Kohl’s, with nearly 1,200
stores in America, now holds sales that last for hours rather than days,
pinpointing the brief periods when discounts are most needed”11.
Another use case example can be a smart shelf that has only the
function of keeping track of items. The shelf recognizes that an item has been
taken off of it, and that activity triggers a wait for either placement onto another
shelf or receipt generation at the point-of-sale (POS) system. If neither of those
activities are detected within a given timeframe, an alert is created in real-time
to allow for speedy replenishment. Also, a note could be added to the smart
system’s daily activities report. Integrating this kind of awareness can really
help with not only staying on top of things like where items are going and how
many are left, but it can also go a long way to help service teams be more
available for customers, as opposed to those teams spending heaps of time
managing inventory tasks.
Planning
The industry-shifting effect of e-commerce has many believing that
customer shopping decisions are now being made mostly online. While it is
indeed the case that online resources are being used to help inform customers
and simplify certain types of shopping, a lot of decision-making still happens
during the in-person shopping experience. In fact, an upward trend exists in
that behavior. Research carried out by POPAI – The Global Association for
Marketing at Retail has shown that “the in-store decision rate has climbed from
70% in 1995 to 76% in 2012”12. Also, this POPAI research echoes the
Corporate Executive Board’s Customer Contact Council research findings that
noted simplicity (or ease of gaining access to the item(s) that a customer
wants) as being the most compelling factor for customer loyalty13. A key
component of ease of access and shopability is how a store is laid-out.
Walmart’s founder, Sam Walton, was notorious for paying very close
attention to the details of effective store layout practices14. This attention to the
customer experience can be argued as being one of the reasons for Walmart’s
immense success. He paid a great deal of attention to shopper behavior
amongst different layouts - both in his own stores as well as those of his
competitors. Unfortunately, though, an understanding of shopper behavior
within a retailer’s store is still a big puzzle for many retailers. According to a
November 2015 study released by Forrester, “62% [of retailers feel] that
understanding the customer experience in-store is critical to a holistic CX. Yet
retailers overwhelmingly struggle to measure shopper behavior”15.
The startup Scanalytics has a solution that utilizes the power of the IoT
to help retailers out. Its floor sensor analytic technology can be used to gain
insights that can help inform a store’s understanding of customer behavior.
After collecting that valuable data, the business can then use those insights to
improve its store layout. The floor sensors work via IoT mats that are laid
throughout a space, capturing all foot traffic. The mats can detect not only
visitor numbers but also something like dwell time, a behavior that can be
measured to help with understanding which store areas or displays have the
most engagement around them. In addition to how this IoT technology can help
with planning store layouts, it has the real-time benefit of being able to alert
sales associates of activity in an area where customers may be waiting and in
need of service.
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4. CREATE A COMPELLING ENVIRONMENT
As stated in the chapter on the inherent power of retail, brick-and-
mortar retail already has a few distinct advantages over e-commerce retail.
With that noted though, paying attention to the reasons why customers are
coming into retail stores is still important. If the only reason they are stopping
by is because a certain store offers very low prices and is located near their
homes, then that specific store’s advantage is not very unique. It is more
coincidental than anything else. In that way, not taking anything for granted as a
retailer makes sense. Following that line of thinking, a store owner giving
careful thought to what they could do to create an experience for customers
who shop with him or her also makes a lot of sense. This chapter will spotlight
a few retailers who are doing a great job of that.
Diesel
Diesel takes the stance that the future of retail “lies in combining
traditional browsing with the wealth of information available on the Internet
and giving customers something in return for their data,” and it opts to use
technology only where it adds value to the customer experience1. One move
towards delivering that technological compliment came when the retailer
paired with the London-based innovation consultancy The Upside to enhance
its in-store customer experience within its Shepherd’s Bush location. Through
a mobile app called “Tapestry,” customers entering the store could use their
smartphones to have a more engaging experience with the items of clothing that
they were considering. Special tags had been made that allowed customers to
scan each garment’s tag in order to bring up standard information such as the
size, price, and laundering options. They could also gain access to the item’s
story (including any available video for the item), as well as information on
magazine features related to the item, any celebrities who had been spotted
wearing it, blogger reviews of the item, and so on. Then, after getting further
information about the item, customers could also choose to add it to a wishlist
or post it to their social network for feedback from their friends.
There is a trend of customers carrying out research on items online and
then making their final buying decision inside of a physical store2. Information-
loving customers would likely enjoy the ease of curation and the compilation
of so much information about a potential buy being at their fingertips,
accessible without requiring any further work on their part. In that way, this
sort of technological integration can help provide more of an incentive for trips
to a physical store by allowing both the research and the purchase to happen
more easily there.
LEGO
Customers who walk into a LEGO store (or any toy store that has a
LEGO “Digital Box” setup in its toy section) are in for a treat. Previously,
when buying a LEGO set, the customer had difficulty trying to get a sense of
what the end result would be like after assembly. LEGO sought to change that
for its customers. Getting help from an expert 3D animation team at Metaio, the
company was able to bring its idea to life3. The “Digital Box” augmented
reality stations that Metaio and LEGO developed create a really cool and
informative experience. The experience is informative because now customers
have the ability to hold a box of LEGOs up in front of a screen to see what the
final model will look like after assembly. They can even twist and turn the
model to view it from all kinds of angles.
This augmented reality use case is really the tip of the iceberg for what
could come. It is merely one step away from the creation of context-aware
computing. EY (formerly Ernst & Young) notes that combining the IoT and
augmented reality creates a technology combination that can use environmental
factors to help improve the customer experience. Specifically, “[this]
technology uses situational and environmental information about people,
places and things to anticipate immediate needs and proactively offer enriched,
situation-aware and usable content, functions and experiences”4. An example
that EY gave of this sort of context-aware computing being put into action is a
bank’s app recognizing that a customer is at an airport and then noting that the
account should not be flagged for any foreign transactions that may happen in
the near future.
Brooks Bothers
In 2001, Brooks Brothers made the news with its introduction of a new
service that helps customers get the perfect fit5. Its “computer tailoring”
technology uses lasers to scan a customer’s body and then transmits the very
precise measurements (accurate to one-hundredth of an inch) to a computer,
making a file for each customer. Then, an expert in-house team will use the
data gathered, along with customer style options (i.e. - choice of collar, fabric,
colors, et cetera), to cut a suit that is promised to have an amazing fit. One
journalist described the process of being scanned as feeling like a Disney
experience where the comfort, smoothness, and dazzle of it left him “feeling
entertained and even special”6. Initially, the service was targeted towards
Brooks Brothers’ core customers - men. When news of the technology spread,
however, women also began lining up to be scanned.
The Brooks Brothers case study is a really good example of a retailer
creating a highly unique and highly beneficial reason for customers to enter its
brick-and-mortar location, and the technology behind the experience is not
proprietary. This same computer tailoring technology first hit the public in
1999 when Levi Strauss installed a body scanner at one of its stores in a city
that is known for its appreciation of technology - San Francisco. There, it was
used to help customers get a great fit in the jeans that they bought. Victoria’s
Secret is another company that is using the scanners in its retail locations. It is
calling the scanners “Body Match” technology, and the scanners are helping
women find the best-fitting bras within the Victoria’s Secret collections.
Brooks Brothers’ intention with the technology (and perhaps the other
retailers’ as well) was to:
improve the customer experience by reducing the number of times a
customer needed to be fitted for an item that would fit them well.
simplify the reordering process since having data points for an entire
body meant that the store could easily cut additional garments that
were not included in the first order.
reduce the size of the inventory that it needed to have in-stock
because with the efficiency of the technology, the retailer could better
anticipate its stocking needs and optimize its inventory accordingly6.
In these ways, the scanners not only benefit the retailer in what they can do for
clothing fit and customer service but also in what they can do for a store’s
bottom line. Not all categories of retailers need to solve problems around
clothing fit. Still though, this is a great example of how technology can help to
both improve a customer’s in-store experience and optimize how data is
collected to better serve the customer as well.
5. BOOST CUSTOMER LOYALTY
Loyalty programs have been a part of the retail experience for many
years now. Today though, with the addition of data-enabled customer
intelligence, these programs can be used as a tool in ways that were not
possible before. In the past, these programs tended to be fueled by a
gamification component, whereby some psychological hook was involved with
a customer staying loyal to a store or a brand. A desire to build up enough
points, stamps, stickers, et cetera in order to be able to get some sort of reward
like winning a toaster or having the tenth cup of coffee be free, for example.
In the case of the toaster, the customer would have shopped enough
times and earned enough stamps/tokens/points to trade his or her accumulated
earnings in to “win” the toaster. In this way, the process, as well as the end
result, could be compared to a game. Similarly, a customer who is loyal to one
cafe can feel his or her repeat visits are being rewarded when, upon presenting
the loyalty card for the tenth time, the loyal customer sees that he or she has
sipped enough coffee to be given a free cup1. That feels like a reward.
With both loyalty scenarios mentioned above, the customer feels a
reward after having had frequent transactions with the business, and usually,
the series of purchases would have already paid the incurred costs of the
reward (or paid enough for the difference to be negligible). However still, the
customer feels a sense of earning or being rewarded, or a sense of
accomplishment, and he or she also feels a sense of being a valued customer.
These are good feelings, and imagine that now data can be used to both amplify
these kinds of feelings and the overall positives of the shopping experience.
After spending six years studying the topic, McKinsey & Company
found that some of the approaches mentioned in this chapter are keys to
building the most effective consumer decision journeys moving forward.
Specifically, it concluded that “companies building the most effective journeys
master four interconnected capabilities: automation, proactive personalization,
contextual interaction, and journey innovation”2. Furthermore, they advise that
using the automation of collecting information on previous interactions
between a business and its customers to inform its customer personalization
efforts is a good idea.
The coupon company Catalina was mentioned in the Applied Big Data
chapter. Catalina uses technology and previous purchase history to develop
unique customer profiles for the shoppers who visit the brick-and-mortar
locations of its clients’ businesses. Once a business has customer profiles in its
Catalina system, it can then use the insights gained from a buyer’s shopping
habit patterns to send out highly targeted offers and personalized promotions to
that customer.
This system of increasing personalization for customers on an
individual basis is an effective strategy even without an element of
gamification. For example, being able to know what a customer has bought in
the past informs the couponing system in ways that serve to improve it over
time. Having that data means not only being able to present a customer with
offers that are targeted to his or her tastes, but also being able to use predictive
analytics to anticipate an upcoming purchase (i.e. - this person bought shampoo
on date X and may be running low soon)3. Predictive analytics can also be
used to gauge new products a customer is likely to be interested in trying if he
or she were presented with a promotional offer. This could be done in a low-
risk way for them, such as a trial offer or a deep discount to test the new
product. Having access to past purchases means that a customer’s taste profile
could be combined with a low-risk offer for an item that aligns with previous
items they have bought. This nudges them to expand their purchase profile in a
way that is highly-likely to be successful in generating a sale. Timing can help
to nurture more sales after a brand interaction as well. Issuing highly-targeted,
time-sensitive coupons at the end of the customer’s purchase gives the
customer a reason to return to the store again soon.
These ideas about improved personalization are key because in
addition to being able improve the shopping experience for customers in
traditional ways via things like points and rewards, data can now add to the
shopping experience as well. Activities like putting purchase history data to
use and having technology be used to closely match products to tastes allow
for a level of personalization that was not possible before. In this way, both the
brick-and-mortar and the customers win because personalization is good for
business. That is largely because in addition to personalization being a nice
tool to have (as in the McKinsey example), it will also become a standard
component of the shopping experience moving forward. The reason stems from
the reality that this sort of added value is becoming an expectation among
consumers. According to Bill Chamberlin of IBM, “Increasingly, customers
expect personalized service based on their shopping histories and value, a
one-on-one relationship with a brand”4. Thusly, being slow to (or failing to)
increase the level of personalization that customers experience with a
company’s brand is likely to create negative impacts with its customer
relationships over time.
These personalization trends do not relate only to couponing and other
offers that explicitly urge a customer to make a purchase. For example, the
body scanner technology being used by fashion retailers also greatly increases
personalization. So it must be noted that, overall, being able to expose
customers to a level of personalization that was not possible before the options
that Big Data has allowed for has now become an important area for building
customer loyalty. Making improvements around personalization and loyalty
programs, however, is not enough. In a study involving seventy-five thousand
people, the Corporate Executive Board’s Customer Contact Council found that
simple things can be done to increase customer loyalty. Specifically, its
findings suggest that:
Reducing their effort—the work they must do to get their problem
solved—[helps to build customer loyalty]. Second, acting
deliberately on this insight can help improve customer service,
reduce customer service costs, and decrease customer churn5.
Disney World provides another prime example of data technology being used
for both reducing effort and also acting deliberately.