In this special feature story, Creel Price explains how the application of Big Data can help SME retailers better understand who their customers are.
You can’t open a business paper or journal without some mention of how Big Data is revolutionising business. The problem is most businesses, including SME retailers, look at Big Data and panic. Most don’t actually use the data they currently have, and believe that they need to somehow gather and analyse more, which can be overwhelming.
In the early noughties, even before it was called Big Data, our call centre business started experimenting with data analytics to trace propensity to buy for a banking client (embarrassingly on a humble Excel spreadsheet). After identifying some basic indicators were showing up as a significant determinate of sales conversion, we tested the results with some immediate success.
Over the next six months we fine-tuned the model to the stage where we reduced the number of customers contacted by three quarters yet maintained 90 per cent of the sales we would have made. This dramatically increased our profitability, reduced contacting millions of customers who would not have converted to sales anyway, and gave us the opportunity to contact different customers with a variety of offers to maximise sales. I have been a huge proponent of data analytics ever since.
Google’s Executive Chairman Eric Schmidt once stated that, “From the dawn of civilization until 2003, humankind generated five Exabyte’s of data. Now we produce five Exabyte’s every two days…and the pace is accelerating.” An Exabyte is one billion gigabytes, so imagine five billion 1G memory sticks worth of data being produced every two days! This explosion of data, or “datafication”, as well as significant advances in data storage and processing capability has created the phenomenon we now call Big Data.
A DIGITAL TRACE
The premise behind Big Data is that everything we do, say, write, activate, visit or buy is leaving a digital trace, or it soon will. And that data can then be analysed to extract business insights that can help us win the game of business.
In retail, big players such as Target, Wal-Mart and Amazon are considered Big Data Gods. But it’s certainly not all been plain sailing. US retailer Target got into hot water after its big data algorithms sent a schoolgirl some money off vouchers for baby products. Her father complained to the store manager at this inappropriate advertising only to discover a few days later that his daughter was actually pregnant! Target knew about the pregnancy before her own father because of what she had bought in Target and issued the coupons based on probability.
BIG DATA & SMES
In retail, this sort of insight is the Holy Grail – knowing what your customer wants before they ask for it so you can lure them in to your store to spend their money. But the truth is, this sort of data crunching is only really viable for the big players.
However, that doesn’t mean small and medium retailers can’t use Big Data effectively. The trick is to know what questions you are seeking to answer, instead of considering what data you could, should or may be able to collect. Forget about ‘Big Data’ and focus on ‘Smart Data’.
For example, Bernard Marr, a UK-based Big Data guru, worked with a small fashion retailer to help them to improve sales using data. All they had was traditional sales data and yet they wanted to know how many people passed their shops, how many stopped and looked in the window, how many came in, and how many then bought something.
To answer these questions they installed a small, discrete devise into the shop windows that tracked mobile phone signals as people walked past the shop. Most people these days have a mobile phone so the first question was immediately answered. The sensors also measured how many people looked in the window and for how long, and how many then entered the shop. Sales data would then establish how many then bought something.
By combing the data from inexpensive sensors with transaction data, they were able to measure conversion ratio and test various window displays to increase conversion rate.
Plus, this innovative use of sensors allowed the business to save money. Initially when they were considering where to locate their shops they employed a market research company to figure out the best locations. But the sensor data showed their footfall research was wrong and there was simply not enough passing trade to validate that shop’s current location. It was closed to focus on the other remaining stores, which all significantly increased sales as a result of the data.
Marketers certainly need to listen to privacy concerns when considering how to implement a Big Data strategy. But if conducted responsibly and with the customers’ needs in mind, the future of big data will result in benefits to both large organisations, SME business owners and customers alike.
So don’t get overwhelmed or bamboozled by Big Data. Just focus on identifying the key strategic questions you need answers to in order to improve sales and performance and only collect and analyse data that will answer those questions. Good Luck.
Creel Price is a Sydney-based serial entrepreneur, author, and leader in Australia’s SME sector.
This feature was originally published in the December 2014 print issue of My Business. To read more in-depth features for SME business owners immediately upon publication, subscribe to My Business magazine now.
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