Predicting Consumer Behavior
Retailers both big and small are looking to stand out in a proliferated marketplace. To better meet the needs of shoppers, companies are pulling out the stops to keep track of customer preferences and behaviors by implementing predictive analytics and data mining solutions.
“Despite the economic woes of 2009, business analytics investments actually grew,” said Diana McHenry, the global retail marketing manager for Cary, N.C.-based business intelligence software and services provider SAS. “Retailers are realizing that an investment in business analytics gives them a competitive advantage with short- and long-term results.”
Associate editor/Web editor Samantha Murphy spoke with McHenry about the state of business analytics and how to leverage technology to reach the evolving consumer.
What major trends are you seeing with business analytics and intelligence in retail right now?
Retailers have long collected mountains of data that include point-of-sale transactional details, demographic information and ever-increasing volumes of unstructured data generated from blogs and social media sites. But now more than ever retailers of all sizes are leveraging business analytics to predict what the customer prefers and how the customer behaves.
What are some of the major challenges retailers are facing in this field, and how can they overcome them?
Now that consumers have even greater access to information via the Web and other resources, they have become more selective, sophisticated value seekers. In response, retailers have to be more conscious of the consumer and must find ways to innovate and differentiate themselves. By leveraging business analytics to optimize sizing and pricing, retailers, for example, can provide customers the products they want in the right sizes at the right store locations at competitive prices.
How has this area changed over the last few years?
Not only can retailers optimize prices and tailor local assortments, retailers can extend the art of merchandising with the help of business analytics. Innovative retailers are beginning to mine unstructured data in social media sites to expand their “intuition networks.” With a meaningful social media strategy, retailers can build profitable relationships with thousands of customers. We’ve also seen retailers bring the store to the individual customer through the use of Web and mobile applications. Customers who access a retailer’s Web site and merchandise using an iPhone, for example, can tap into product choices and promotions tailored just to them.
Where is the industry headed this year?
Retailers will continue to invest this year in technologies with a rapid payback, such as size optimization (which combines size profiling and pack optimization), price optimization (regular, promotion and markdown price optimization) and forecasting. Smart retailers will invest in solutions such as these while mapping out an overall integrated business analytics framework. Retailers also will recruit or develop people who combine business and analytical knowledge, and build small cross-functional teams to leverage social media, customer insight and analytics.
How about the next five years?
We see three trends in the retail industry: increased retail technology spending; more people and organizational changes; and lower-cost, higher-capacity computing resources. Retailers have traditionally invested less in technology than other industries, but this standard is shifting with the availability of technologies that predict and optimize merchandise. Retailers also will invest in people who can combine business and analytical savvy.
What can retailers do to stay competitive without breaking the budget?
Retailers can innovate without breaking the budget thanks to lower computing costs and deployment options, such as technology being delivered through the software-as-a-service model to reduce investments and offer flexibility. Retailers that take advantage of solutions offered through a hosted model often see top- and bottom-line results more quickly.
What criteria should retailers keep in mind when seeking out a business analytics and intelligence solution?
Choosing the right technology provider can open the door to an invaluable extended vision into your operations and your customers’ expectations.
Retailers should look for a solution provider that combines progressive technologies with capable, knowledgeable people who work in a stable corporate environment. They should also seek out retail technology providers that create solutions known to infuse retailers’ business practices with the power of predictive analytics built on an integrated framework. And, finally, they should choose a company whose employees combine deep, broad retail expertise with extensive business analytics experience.