The Opportunity Big Data Brings to Retailers

By Jeff Weidauer, jweidauer@vestcom.com

Current estimates show Facebook will log its billionth user in August of this year. Facebook hasn’t even celebrated its 10th birthday, but has become a dominant force on the Internet around the world. Twitter, for its part, is expected to reach half a billion users by mid-February.

Facebook, Twitter and other social media platforms have had a tremendous impact on what is being called “big data” -- that is, datasets that are so large as to surpass the abilities of typical software to manage or query. As social media grows, every post is logged and warehoused, adding to this overall data store.

Just when big data becomes “big” is a moving target; numbers are expressed in petabytes and zettabytes (1 followed by 21 zeroes), which are essentially far too large for the typical person to comprehend. To illustrate: a zettabyte is roughly equivalent to the amount of data that would be generated by everyone in the world posting messages on Twitter continuously for a century. But even if we can’t really wrap our heads around the size, it’s critical that we start now to understand how to use big data.

For retailers, big data is really the logical next step in a progression that’s been taking place for years. Thirty years ago, we spent our marketing dollars on mass media, aiming at the largest audience possible with little to no targeting. With the growth of the Internet, we’ve narrowed our focus, and begun to develop segments. The next step is true one-to-one marketing, which is where big data enters the picture.

Loyalty cards came on the scene way back in the late 1980s, but even today these programs offer little to shoppers beyond a perceived discount. Some studies show that 80% of shoppers feel they have never received any benefits from having a loyalty card. Retailers, for the most part, were ill-prepared to manage and mine the massive quantities of data that loyalty cards were gathering. Privacy concerns also made much of that data unusable, as some retailers offered cards to shoppers with no exchange of personal information.

The data generated by loyalty programs is just the beginning. As retailers engage in social media many of the benefits of those loyalty programs bubble up, but once again, the data gathered is vast, uncategorized and can be intimidating. However, for those who take the time needed to learn how to manage and mine the massive databases they are creating, there can be significant benefits.

The realization of those benefits will require internal changes for many retailers, particularly in how they view outsourcing and management of data. Loyalty programs were often managed in-house by IT teams with little or no experience in managing datasets that grew exponentially each week. The outcome was massive data warehouses that added little value for the retailer or its customers.

The growth of mobile use by shoppers will be a critical element in retail as well, offering the ability for marketers to develop one-to-one relationships with customers, while allowing two-way conversations. More data will be needed to create relevant offers, and more data will be created as an outcome of those offers and relationships.

Clearly, retailers looking to succeed will need to outsource the management of this data. The specialized skills required to glean useful insights are quickly being snapped up. Marketing leaders who understand how to make the best use of those insights will become a valuable commodity on the open market.

The retail industry -- once relatively simple -- has become much more challenging. Price transparency is an expectation, and customers want to be courted, connected and communicated with. The only way for retailers to effectively compete in the new world of information is to embrace it. That means investing in resources, getting comfortable with outsourcing and perhaps most importantly, being willing to listen to the data and act on it.

Jeff Weidauer is VP of marketing and strategy for Vestcom International Inc., a Little Rock, Ark.-based provider of specialty marketing services for the retail industry. He can be reached at jweidauer@vestcom.com, or visit vestcom.com.

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