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Part 3: Exploding The World of Retail Opportunity - Individualized Value with Smarter Big Data

This is the third of a five part series.

Read: Part 1 - It’s time to have a crisis
Read: Part 2 - Follow the Product Home

Customer delight is often conveniently defined as a great purchase experience. There’s no debating that a great experience inside the retail store - finding exactly what you want, enjoying the ambiance, and receiving friendly service - is a genuine joy. Shopping inside the crate, whether it’s a brick and mortar or online experience, can be a lot of fun. However, it is far from the only joy or challenge in life.

Retailers who see their customers as genuinely three-dimensional people and can act on this rich contextual insight – who customers are, what problems they are trying to solve in their lives, who they are solving these problems with and how they define value – have the opportunity to differentiate themselves in a compelling way. This is good news in a crowded marketplace, because as stores become ever more polished, a fine shopping experience will become an increasingly commoditized customer expectation.     
Really engaging with individual lives requires another escape from the traditional retail crate.

Beyond Stick Figure Customers

Since the advent of mass market retail, retailers have cast customers as groups of one–dimensional stick figures, with simple easy to understand needs, who fit into neatly drawn segments. The retail store replaced the custom creations of individual craftspeople with a pre-defined product to be sold to as many people as possible. It didn’t matter who those people were as individuals. Even as organizations work to build 360-degree views of their customers, these perspectives are often constrained within the narrow boundaries of stocking and selling products. The retail crate was founded on the efficiencies of scale that came from serving a broad market in roughly the same way. The current focus on customer-centricity aims to change that.

But even a decade’s worth of purchase history and an up to date reading of a customer’s family, home, and financial profile creates only a stick figure view of someone’s life. This wealth of big data has little to say, for example, about what next Tuesday morning will look like for them or how their needs shift moment to moment.
Much of the investment in so-called personalization has been about getting a better fit between unique individuals and the preset choices available to them.  Programs that delivered targeted offers were really more of an operational improvement to the mass market business model - good for the retailer and the coupon sponsor, but hardly transformational for the customer.

“Others who bought this also liked this” type recommendations are only marginally better. The mere fact that someone looks at a book on cooking for diabetics is just one data point. What a three dimensional customer genuinely desires will vary dramatically depending on whether she is doing a report for school (“Please help me pass my class”), looking for a gift (“I want to show that I care”), or buying it for my her own use (“I’m worried and really need some support”).     

Personalization Grows Up

Real lives encompass shifting, complex and messy definitions of value, which demand a deeper kind of understanding. Ultimately, purchases are not about the acquisition of a “thing”, but about the role those things play in our lives.

If a retailer’s only goal is to put a coupon in someone’s hand, there is little value to understanding a customer more deeply. However, if retailers are willing to escape the crate and actively involve themselves in each customer’s unique life, then there are almost immeasurable opportunities to create micro-markets of one, each with their own metrics for delight. Success will be driven by the ability to create unique brand experiences, products and services that customers perceive as valuable.

How might narrow retail services be extended? Think about what you might expect from a friend who knows you. That friend might enrich your life by:

  • Curating: Almost everything works together with something else. If your friend has a sharp sense of style or in-depth knowledge, she would be the one you seek out to find the right combination for your personal style and life need.  Fashion is an obvious area where this matters, but it is just as relevant to someone undertaking a new home improvement project, preparing for the birth of a child or even trying to figure out how to prepare for a new career.
  • Discovering: As choice explodes in every aspect of life, individuals have a growing desire to discover new possibilities and stretch their world.  Exploration is a highly personal act.  A genuine friend would draw on more than your purchase history and a few mobile phone data points to help you discover new possibilities. They would be aware of the kinds of personal questions and aspirations that underlie your interests: Who am I?  Who do I want to be?  What things have fallen by the wayside in my life?  What’s new and exciting?  
  • Tailoring: Remember the custom craftspeople and tailors of yore? Their products were customized to the needs and preferences of each customer. Consider the power and promise of custom crafting what you offer to the individual. Let’s revisit the diabetic book example.  Imagine you were a friend who wanted to help.  You might propose radically different types of aid (“Can I help with your research this weekend?”; “Do you want me to gift-wrap that while you go pick up the kids?”; “Would you like me to hook you up with the support group my sister attends for people who are managing their diets?”)

Note the common theme with all these strategies: they are all about creating unique improvements in individual lives. None focus on selling products inside the retail crate.

Today – StitchFix Personal Curators

StitchFix is an online personal styling subscription service for women. It curates a selection of clothing pieces and sends them to the customer’s home at predefined intervals.

The service taps into a challenge many women face. They want clothes that work with other items in their wardrobe and that fit the range of wearing occasions demanded by their lifestyle. It is often challenging to pull individual pieces together into the right collections, or to imagine the multiple ways that an item might work with what you already own, when shopping in the moment.

StitchFix uses analytics to combine information from a detailed questionnaire that includes questions about personal style, lifestyle activities, body type and other preferences, with customer ratings of prior recommendations, to propose even more tailored suggestions.

However, StitchFix doesn’t stop there. They combine this digital insight with the judgment of 300+ human stylists who deliver customized selections, taking into account each client’s unique circumstances.

Ideally, it is like having a friend with great taste on call. This is how one of the authors learned that her personal style is Boho chic.

Real Time Context: Life in Motion

When you enter a store, time stops. Whether its opening an app or walking through big glass doors, the customer puts her life on pause while she shops. This of course can be a good thing, a welcome respite from the bustle of real life. But it also places the retailer in an isolated bubble separate from the real business of living.

Real life is in motion. The best opportunities to create unique differentiated value are tied to changing moments of experience.  Everyone knows that the shopper is more than a demographic data point who enters a store or types a URL. But what does this mean, and how many retailers truly embrace the concept of the shopper as a unique, three-dimensional individual?

Context as viewed from a customer’s life is rich, diverse, and changing. We process a dizzying array of inputs all the time as we determine what really matters to us in any given moment. If you’re running late, it matters if there is a meeting first thing in the morning. The importance of stopping for a coffee may be linked to how late you were up the night before. Your patience for the traffic backup on the road ahead is deeply influenced by whether the children are fighting in the back seat.   

Context produces intense but fleeting needs. These needs dominate our daily lives and create opportunities impossible to fulfill within the fixed mindset and physical constraints of traditional retail. Choosing to serve these needs grants permission for wild thinking. How about a drone that dips into the traffic jam with your specific coffee preparation? Talk about context-dependent delivery!

The Near Future – Fernanda’s Real Time Date

Data-driven insights combined with the Internet of Things create the possibility to provide personalized value in real time. Consider Fernanda’s date.

Alert the team. Particulars of her date arrive in a text and are quickly shared with friends via an army of smart devices.

Getting smarter.  More information is automatically marshaled from a suite of digital sources. It’ll be raining … the weather service. The table will have low lighting … the restaurant’s building management system. Her afternoon client meeting is across town and won’t end until late … the calendar app on her phone.

Her closet steps in. Remembering everything she’s worn since college, her closet knows she will want to look sharp. It recommends an outfit, matching Fernanda’s personal style with insights from on-trend fashion sites.

A problem.  The only shoes that match the outfit are suede. The closet knows that’s bad in the rain, so it sends a description for the planned outfit to a stylist who knows Fernanda. She curates shoe suggestions from a half dozen sources around town, and during a break at the office, Fernanda picks a favorite. They’re automatically delivered to a locker near her crosstown parking spot.

Personalized look. Fernanda dashes home and sits in front of her smart mirror. It detects the tan she picked up over the weekend. Knowing the closet’s recommendation and the restaurant’s expected lighting conditions, the mirror sends instructions for a makeup formulation that’s mixed by maker technology sitting on her dresser.

She’s running late! Thankfully her home’s information system knows where the closest Uber cars are and which driver will be willing to come out to meet her with an umbrella.

Adjusting in real time.  At the restaurant, the date is going well!  Her wearable tech notices her heart rate is up.  So, when she makes a trip to the restroom, her interactive pocket mirror recommends a few makeup tweaks to deal with nervous perspiration.

Does this seem fanciful?  Be careful, there are no miracles here, just data science and engineering. They create highly individualized business opportunities in apparel, delivery, cosmetics, transportation and a host of personal services. Where is the traditional retailer? Absent.

Bigger Big Data

For all the terabytes of information that have been gathered, this is still a technology in its infancy. Traditional retailers, with their focus on simple product recommendations and targeted offers, provide a small stage for Big Data’s performance.

Personalization and real-time engagement change all that. When retailers can engage richly-drawn individuals when and where they act, there are enormous opportunities to apply sophisticated and nuanced insights. Big Data can finally strut its stuff.

  • Ecosystems of Data: The network of data can grow well beyond the simple tracking of purchase history and personal demographics. Many of these diverse real-time sources will lie outside the retailers own systems.
  • Real Time Thinking: Personalization focused on offers and recommendations has relied on offline processing for the heavy lifting. That works fine if your goal is to assign a coupon to a customer. However, real impact comes from assessing context and shaping a sophisticated individual response in real time. Expanded machine learning capabilities will further open the door to dynamic evaluation and recommended courses of action optimized for the specific circumstance and moment in time.
  • Deeper Brilliance: Big Data is not just about the data. The real power lies in the ability to choose a course of action that is genuinely appropriate to the moment. More data and richer problems are creating a fertile environment for these more sophisticated and elaborate insights.

People have been talking about a 360-degree view of the customer for some time now. We believe that it is not the 360-degree view that matters but rather a context-dependent view. Improved analytics and integrated omni-channel capabilities will allow retailers to map customers across their path to purchase. Sensor technology in-store coupled with the geo-location on customers’ own mobile devices will allow retailers to deliver tailored communications and support based not only on where customers are on their path to purchase but on their physical location as well.

We’ve tackled the possibilities that open up if retailers think about the product journey in a new way. We’ve explored the opportunities to think about new approaches to personalized service individualized value creation. Next, we will consider what happens if retailers escape the crate by fundamentally rethinking what being a retailer actually means in the 21st century and beyond.

Read: Part 4 - Create the Responsive Supply Chain

Disclaimer: The statements and opinions expressed in this article are those of the author(s) and do not necessarily reflect the positions of Thoughtworks.

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