BrainTrust Query: Does Big Data Help Retailers Really Know Their Customers?

Discussion
Mar 29, 2012

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?

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38 Comments on "BrainTrust Query: Does Big Data Help Retailers Really Know Their Customers?"

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Bob Phibbs
Guest
5 years 8 months ago

The best retailers still know it is about you first; technology second. While an algorithm can show that the person who purchases canned tuna fish is likely to buy a toothbrush and tends to buy bananas, how much of that is truly useful to moving the needle? I would offer much less than BIG DATA would have you believe, becoming more of an anecdote for those who wade through it all than “knowing their customers.”

Paula Rosenblum
Guest
5 years 8 months ago
Oh, I think retailers know they don’t know their customers. And they’ve had “big data” forever. Retailers have always been data junkies. What they haven’t been able to do is put the data together in a meaningful way to draw reasonable conclusions about the customer, rather than the product. Or as my partner Brian puts it, they’ve used product movement data as a proxy for information about the customer. So with multichannel retailing, customer patterns have become better exposed, and thanks to Moore’s Law, we now have the capacity to actually aggregate it up into something meaningful. It’s very early.… Read more »
Nikki Baird
Guest
5 years 8 months ago
I think it’s possible to spend a whole discussion on what “know” really means. I do think that retailers in some ways fall into the economic trap of sunk costs — they’ve been collecting customer data for years and they have a ton of it. It’s got to be worth something right? Or even worse, there’s that corporate myth that the secret to purchase behavior could be unlocked by plumbing the depths of that data — that the bytes and bytes of disc space that customer data occupies actually hides treasures of untold value. I’m not convinced. What does a… Read more »
Dr. Stephen Needel
Guest
5 years 8 months ago

All data is good and more data is better, until you reach the point where you don’t know what to do with it or how to leverage it. Modeling Big Data only takes you so far — the next step is to test the ideas it should generate. That’s what you don’t see much of — testing new ideas generated by the data/models.

David Dorf
Guest
5 years 8 months ago

With scale, retailers have lost intimacy. Expecting store staff to know their shoppers is tough, so retailers have tried segmentation, loyalty programs, focus groups, etc., all of which help but aren’t quite as good as truly knowing customers.

I believe so-called Big Data can help paint a better picture when both demographics and psychographics are combined, but accessing the necessary data can be tricky. Retailers need their customers to volunteer the information so there are no privacy issues.

Personal recommendations, offers, and pricing are already in the marketplace being powered by Big Data.

John Boccuzzi, Jr.
Guest
John Boccuzzi, Jr.
5 years 8 months ago
If you don’t know the questions you want to ask, neither “Big Data” nor any data is very useful. You may accidentally come across an insight by accident, but that is 1) rare and 2) when you find the insight how do you react to it? If you don’t plan on reacting to what you learned from data, stop spending time collecting and analyzing data. I like the Lululemon approach to collecting insights and it sounds like they take action from what they learn. Tough to beat old fashioned, in-person conversations to learn more about your company, brand and service.… Read more »
David Biernbaum
Guest
5 years 8 months ago

In too many instances, the data is used to look through the rear view mirror. In other words, the process they use lacks vision.

Ryan Mathews
Guest
5 years 8 months ago
The value of a tool depends on three variables: the inherent quality and characteristics of the tool itself; the skill of the tool user; and, finally, the task for which the tool is being used. One could have the world’s finest screwdriver and place it in the hand of the world’s finest mechanic but it wouldn’t do them much good if you were asking him/her to use it to pound steel into shape. The same is true with data. I suspect the food industry isn’t using the “best tool” — a balanced constantly evolving blend of POS data, social media… Read more »
Liz Crawford
Guest
5 years 8 months ago

Analyzing big data is no substitute for customer intimacy. But I don’t think it is intended for that.

Instead, I think Big Data will help retailers more effectively offer personalized products and deals to shoppers online. The integration of this data to in-store shopping is still far off.

Ted Hurlbut
Guest
Ted Hurlbut
5 years 8 months ago
Successful retailing requires a skillful blending of art, craft and science. All the data in the world is just numbers if there’s no context. The challenge for Big Retail has always been converting Big Data into concise, meaningful and actionable Big Knowledge. Distinguishing between what’s important and what’s not has always been a challenge. All too often, less is more. All that data can ever tell you is what customers have DONE. It can’t tell you what customers are likely to DO. Past performance is not necessarily an indicator of future results. Which is where the art and craft of… Read more »
Ed Dunn
Guest
5 years 8 months ago
For retailers, the best use of big data is transaction centric, not customer centric. I think it is a misconception in the industry to focus on profiling customers and collecting data on customers. Walmart does not use big data for customers and does not have a “loyalty card.” Instead, Walmart appears to focus more on using big data to move inventory to its stores, transition seasonal products to the highest visibility traffic areas, and create loss-lead scenarios such as selling soda below cost during the summer months. Creating the right environment to maximize transactions should be the focus of big… Read more »
Ian Percy
Guest
5 years 8 months ago
There is math and there is mystery. In the 17th century, Newton convinced everyone the world and everything in it is all mechanistic, all controlled by mathematical formulae. No doubt about it, math explains lots of things. But we have to recognize the mystery too. There is another dimension where the highest possibilities live that is accessed a different way. Its secrets are given to us in dreams, intuitions, imagination, serendipities, feelings and so on. Look no farther than the stock market. Do you think its ups and downs are driven by the math or by mystery? Most of us… Read more »
Cathy Hotka
Guest
5 years 8 months ago

I was once on stage and asked a large retail audience if they shopped in their own stores. Many hands went up. I then asked them to lower their hands if it was their spouse who did the actual shopping…and many hands came down.

Data is no substitute for hands-on observation, and not just during the holiday season. That said, as the technology improves and new practices are put in motion, retailers will get better at leveraging the data they already have.

Bill Bittner
Guest
Bill Bittner
5 years 8 months ago
There are a million quotations that buttress the tenor of this question. One of my favorites is that “Big Data provides us a plethora of transactions and a dearth of wisdom.” The challenge is that like most generalizations (including this one), Big Data is not always useless. Like any other tool, big data can be useful when it is put into the hands of a skilled practitioner who knows how to use it and has the additional tools necessary to be effective. For years I had a frequent shopper card whose registration was an old street address and did not… Read more »
Frank Wagman
Guest
Frank Wagman
5 years 8 months ago

There is a saying in the computer world — “garbage in, garbage out.” Whether it is big data or little data, if the process of collecting it has no integrity, then it won’t do you any good. However, that shouldn’t dissuade companies from investing in the technology that captures and collects the data, because you can’t improve anything unless you can measure it.

Tony Orlando
Guest
5 years 8 months ago
I don’t need a 50 page report to know who my core customers are. Shopping habits have changed so much in the last 5 years, and it is no secret that consumers shop anywhere and everywhere. Online sales have also taken away from brick and mortar stores which skews the data as well. Tracking someone’s personal shopping habits in your store can be done, but what’s done with it is up to each retailer. I do know that true hardcore customers are less than 20% of my base, and we do take care of their needs quite well. Building loyalty… Read more »
Adrian Weidmann
Guest
5 years 8 months ago
There is only too much data if you don’t take the time to understand what it is telling you. It is also true that that you have too much data (and wasted expense) unless you act on what the data is telling you! We designed, measured and analyzed a comprehensive in-store digital media initiative for a Fortune 50 retailer. We had extensive quantitative and qualitative data which clearly showed trends and provided guidance for what worked and what didn’t. The data strongly suggested that existing processes and methods were simply not working and changes had to be made. The data,… Read more »
David Zahn
Guest
5 years 8 months ago
My thoughts are similar to John Boccuzzi’s on this one. Ask questions that matter or the dominos will fall in unanticipated directions. The efforts that support the “actions” of a poorly implemented initiative will amount to being “the emperor’s new clothes” at best. The reliance on data, analysis, number crunching, etc., has a place in retail — but NOT at the expense of the following: 1) Standing for something or differentiating yourself from others (how few retailers or manufacturers for that matter are TRULY distinctive from competition?) 2) Being able to communicate it and demonstrate it in meaningful ways 3)… Read more »
Dan Frechtling
Guest
5 years 8 months ago
I agree with the consensus that divining patterns through big data isn’t a substitute for simply asking customers what they want. Bob, Paula, Nikki, Ryan, Cathy, Bill and others have made a good case here. “Data mining” succeeds in huge batches and works best through digital interfaces. “Asking customers” succeeds at the individual level and works best through associates in-store, as Liz suggests. It also provides good service. Analytics has the power to centralize things that were decentralized. It gives the capacity and sometimes the illusion of control. The Achilles’ Heel is that each retailer only has a sliver of… Read more »
Doug Garnett
Guest
5 years 8 months ago

A set of observational facts always appears important, but reveals little about people. Mobile data promises to make this problem even worse.

So in reality, it’s a myth driven by the most common research error — let’s call it the Einstein for his articulation: Much that can be measured does not matter and much that matters cannot be measured.

Anne Howe
Guest
5 years 8 months ago
I’m not certain there is one right answer here or one ideal mix of data. But knowing what you want/need to know by having a knowledge map and a clear sense of where your insight gaps are certainly goes a long way to help use data efficiently. I’ve also had a very long-held rule that looking for the SoWhat? is only a good thing if you’re prepared to follow it up with the DoWhat. That’s called Insight into Action! For a long while, retailers really haven’t wanted to change their long-term ways of doing business with shoppers. But, through data,… Read more »
Robert DiPietro
Guest
5 years 8 months ago
Too much data — absolutely NOT! When retailers are serving millions of customers, big data allows them to customize offers and see trends that they wouldn’t otherwise. It’s not the fact that there is too much data, but what you do with it to make the customer experience better. How you serve up relevant information that enhances the customer experience vs detracts from it. It is all about mass customization! Old school techniques such as walking the store are important for getting to know that specific stores’ customers and nuances, but is that sample size be large enough to justify… Read more »
Herb Sorensen
Guest
5 years 8 months ago

Big data, little data, no data. It makes no difference if the data does not support the retailer’s underlying business model — and it doesn’t. Retailers are highly rational in their practices, they are simply not aligned with the “reasoning” of their observers — including, but not limited to, data gurus.

Roger Saunders
Guest
5 years 8 months ago
Data is only useful if retailers (and other marketers) can develop and understand the insights that guide them to support their customers’ needs, wants, and expectations. Ryan Mathews comments are spot on — retailers need to know the complete consumer. That entails insights beyond behavior. They need to understand and appreciate consumer attitudes and sentiments, what their future plans our, how they gather information about stores they shop, and how they are influenced by media in making their purchase decisions. This all takes listening — both in a qualitative and a quantitative manner. A retailer can not come up with… Read more »
Roberto Orci
Guest
Roberto Orci
5 years 8 months ago
Our experience says that current customer data is not the best indicator of customer potential. In Los Angeles, for example, a traditional chain store in a predominantly Hispanic neighborhood may show a customer mix that is NOT predominantly Hispanic. Do you then continue with programs that appeal to your existing base? Only a physical check of that store and nearby Independent Chains would open your eyes to the fact that this traditional retailer is missing out on a huge opportunity because their store format is not relevant to the trade area. If in doubt do a comparison of sales per… Read more »
Lee Kent
Guest
5 years 8 months ago

Big data is no substitute to personally knowing your customer, but it certainly adds value to how, where, and when you interact with them. And they are demanding that!

Ralph Jacobson
Guest
5 years 8 months ago
“Is there such a thing as ‘too much data’ or is all data good data?”… Well, there IS a flood of data in our business. We can’t stop it. We should try to capture and analyze as much of it as we can. The challenge comes when we try to look at it. Literally 80% of all data is unstructured. That is, it cannot be effectively managed without some sort of deep analytics manipulation. Another piece is that some of the data may not be “good,” or more accurately it may not be trusted. Data feeds must be reviewed for… Read more »
Ben Sprecher
Guest
Ben Sprecher
5 years 8 months ago
Retail *is* Big Data. The organic pulse and flow of so many different people acting both in concert (employees) and independently (shoppers) eventually ends up as 1s and 0s at the POS. And I always marvel at how clearly the data tells the “story” of retail: the regular weekly heartbeat of sales, the seasonal cycles in tastes, the frenetic spurts and stutters around holidays and hurricanes and snowstorms. Is analyzing that data the only way to know your customers? Of course not. But it can be an incredibly powerful way. Retailers need to break down the internal silos that divide… Read more »
Dennis Serbu
Guest
Dennis Serbu
5 years 8 months ago
Ted Hurlbut nailed it. The data is the science, knowing what to do with it is the art. That said, you are looking at historical information. That which was … is not necessarily what will be. Shoppers are fad prone and certainly susceptible to economic factors which influence their shopping behavior. We all need to get out into the market, not just our own stores, but competitors too, and across channels. As the wise Yogi Berra once remarked, “sometimes you can observe things just by watching.” See how the customer is shopping, what are they putting in their baskets? What… Read more »
robert donovan
Guest
robert donovan
5 years 8 months ago

Amassing data is one skill. Interpreting it and applying the findings is something else again.

Ronnie Perchik
Guest
Ronnie Perchik
5 years 8 months ago
All data is good data, as long as it’s targeted and spliced up in such a way that you utilize it all to yield a bottom line. With the advent of emerging digital technologies, like social media and mobile, retailers and brands now have the opportunity to truly “get to know” their customers. No eavesdropping necessary: blast the right message via Facebook, and consumers will tell you pretty directly how they feel, what they expect, and how to go about it. You just have to be there to listen. Mobile allows for localization and tracking to understand how customers in… Read more »
John Lingnofski
Guest
John Lingnofski
5 years 8 months ago

It seems to me that the more removed you are from the day-to-day front lines the more enamored with big data. My experience (after having to create the reports) is that senior leadership tends to use the big data to give them some sense of control over their business when, in fact, they should just apply the 10-foot rule: If you want to know what’s going on and get some idea of what to do about it, ask the person within 10 feet of that job; in retail, talk to the customer. Pretty low tech, but pretty effective.

Mark Heckman
Guest
5 years 8 months ago
Over the years of working with customer data, I have learned (often very painfully) that neither quantitative shopping behavior nor more qualitative customer feedback in and of themselves are sufficient to operate in a truly customer-centric fashion. Even before huge repositories of customer data existed, savvy retailers would ask their shoppers through focus groups and surveys as to what they like and what they would like. While much of this information helped craft customer driven improvements, it also became evident that shoppers are often times very poor predictors of their own behavior. While certain attributes such as health, nutrition, and… Read more »
Phil Rubin
Guest
5 years 8 months ago
There is no question that the majority of retailers do not know their customers and as such have, at best, transactional relationships with them. While there are exceptions (Lululemon though their CEO collects data every day she’s in a store; and of course, Amazon) the data isn’t the challenge, it’s the strategic and tactical use of the data. Merchants use the data and the information gleaned, on a daily basis. Those insights, however, are product more than customer focused. Retailers, despite all their data assets, are still too often merchant-driven rather than customer centric. The opportunity with data is still… Read more »
Kathy Ofsthun
Guest
Kathy Ofsthun
5 years 8 months ago
Never underestimate the power of n = 1. Understanding even one customer at a deep level can trump a fire hose spewing data. Retailers need to talk with their customers, in-depth, to uncover their motivations and frustrations. Moreover, they should shop their own stores, work as a bagger, return a piece of merchandise, perform an online search and call their hotline to understand more fully the customer experience. Qualitative is at least as important as quantitative. Big Data is fine for measuring foot traffic by weather patterns and time of day, determining adjacencies and cross-promotion opportunities, etc., but to increase… Read more »
Tim Callan
Guest
Tim Callan
5 years 8 months ago
The best strategy is both. For many decades, as product management professionals have attempted to “grok” their customers, the best practice has been to collect both the hard facts and the softer impressions that come with direct involvement. Both are indispensable. It’s great that Lululemon seeks to listen to customers and get to know them. Everyone should do that. At the same time, if 70% of your customers have a certain interest or engage in a certain behavior in your stores and you don’t know that, then there’s no way you’re optimized. Big Data is an irreplaceable part of store… Read more »
Kai Clarke
Guest
5 years 8 months ago

Yes, yes and yes. The ability to data mine,as well as manage this information in the retail environment is difficult for anyone to do. Most retailers don’t use their information well, let alone manage their business with this knowledge. The sheer number of OOS at retail, as well as product shrink, two of the largest issues at retail, are clear predictors of this. Retailers need to know their business better, know their logistics better, and manage their customer’s expectations (after they know them), in order to become successful.

Jeff Elderton
Guest
Jeff Elderton
5 years 8 months ago
In our Business Intelligence work, we draw a clear distinction between “More Data” and “Big Data,” with the former being simply big transactional data volumes and the latter having a “unstructured” characteristic. The most common production instances of Big Data surround web logs and healthcare informatics, where both datasets hide their real nuggets in the sequence of events, more so than the sum of events. For us on the retail side, there are significant insights to be gained by empirically capturing the sequence of shopper behavior in a true multi-channel sense, and informed by social media analytics. If retailing is… Read more »
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