Over the past month, news of the National Security Administration's massive data collection center and the media frenzy surrounding NSA leaker Edward Snowden has pushed the term "Big Data" into the common lexicon.
For national security purposes, Big Data refers to the mining of data points from sources such as social media, emails and phone calls. Software systems sift through the data, creating patterns and identifying outliers that can be turned into nuggets of information used to thwart a terrorist attack or other security threats.
But Big Data isn't relegated to the confines of the NSA's nearly-completed Utah compound — retailers are now using an inverse form of the process. Unlike the NSA's practice of singling out data that doesn't fit a pattern, retailers use Big Data to identify shoppers that do fit into certain patterns, enabling them to target shoppers with personalized marketing, advertising and offers.
In a recent Q&A with Ran Shaul — co-founder of Pursway, a company that specializes in data analytics for retail — we asked about the benefits of Big Data, and whether the recent NSA controversy could cause a backlash from those consumers who deem the process a breach of privacy.
How does shopper data help retailers? Can you give examples?
A: It helps retailers put the right product in the right place for the right audience. For example, a retailer could learn that customers in northern regions of the country prefer knits more than their coastal counterparts, or that some folks are mall shoppers while some respond to email. They may even learn something as specific as certain pants selling well with belts, helping the retailer arrange the store for customer convenience.
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Exploring their data allows retailers to better understand how their consumers influence others' purchase decisions. In addition, it helps retailers avoid spamming their consumers, giving them the insight they need to send the right offer to a smaller segment of their customer database, which might actually be interested in the offer and/or influence their friends' shopping decisions, rather than blasting a generic offer to all of their customers.
Overall, better understanding their data allows retailers to connect to their customers via their preferred channels and improve the consumer experience. Most of all, it allows retailers to make a profit so that they can remain in business.
Does it help customers at all?
A: Absolutely. Customers get better communication that fits their needs. They save time. They get less junk mail. What they do see is more pertinent to what they want.
Customers care about customer experience. Getting timely and relevant offers and deals does add value, that's why so many liked Amazon suggesting books that fit their taste.
However, sending a twenty-something shopper an offer for wrinkle cream discounts or sending a push notification to a mobile handset while someone is driving on a highway does not help retailers connect with their consumers or create a good customer experience.
Ultimately, with the proper use of data, retailers should be able to create a customer experience that is more like having a personal shopper or a local merchant who knows you and caters to your preferences.
Do you think these methods will be seen as a breach of privacy?
A: The difference between private businesses and government is that the worst thing that a retailer will do to you is to SPAM you. An intelligent marketing approach does not require putting sensitive customer data at risk or sharing the data with others. Consumers are smart; they will opt out, leave and never come back if their shopper data is used incorrectly. As they should!
However, if data is used correctly in the retail environment it creates an opportunity to improve, not destroy the consumer/retailer relationship, and increase loyalty. Consumers want to ensure that their personal shopping data is not shared with other marketers/retailers, but ultimately will not begrudge a retailer for using its own data to better connect with them.
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Photo provided by Wikimedia.