BrainTrust Query: Does Big Data Help Retailers Really Know Their Customers?
For years, retailers have worked to collect “Big Data” about their customers. From transaction history, purchase frequency, click-throughs and annual spend to demographic, geographic, and weather related appends, retailers have spent millions trying to create a more complete picture of what drives their best customers to shop. This data is harnessed in multiple ways — from complicated predictive analytic modeling to display retargeting — all applied to a frenzy of marketing activity designed to drive incremental sales.
But does all this data really help retailers know their customers in a meaningful way?
In a recent (private) RetailWire BrainTrust discussion, I asked my fellow panelists to come up with what they considered to be the biggest retail myths being propagated today. Several members replied that the idea that retailers know their customers is a big myth. To quote Roger Saunders, “Retailers know the how, who, what, where, why, and when of their customers’ behavior in their store, but they do not know the complete customer.” Ryan Matthews concurred that knowing purchase patterns and behaviors is “not the same as knowing people.”
It appears that several prominent and successful retailers agree. According to last week’s Wall Street Journal, Lululemon, the hugely profitable and wildly successful purveyor of yoga wear, eschews “Big Data” in favor of old fashioned techniques such as walking the store, talking to customers and eavesdropping on dressing room conversations to figure out what customers want. Lululemon has built a billion dollar plus retail brand where inventory is scarce, discounting is rare and 95 percent of its stock is sold at full price.
Costco could use its membership card to track customer purchases and distinguish between loyal and occasional shoppers. Instead Costco makes its membership card a profit center, ignores complex customer data analytics and focuses instead on having a unique customer experience built on great brands at great prices, clean wide aisles, well trained store associates, a cheap cafeteria and treasures buried in different aisles.
Discussion Questions: When it comes to Big Data, are retailers fooling themselves into thinking they know their customers? What is the right mix of quantitative data, qualitative feel (through social media, in store visits, observation) and simple gut retail instinct for running a retailer today? Is there such a thing as “too much data” or is all data good data?