If a tree falls in the forest and no one hears it, does it make a noise? That age-old question resonates with the specialists who provide retailers with customer intelligence. In their case, the question is: If a shopper leaves without making a purchase, is there any way for a store to know she was there? And why didn't she become a paying customer?
Until recently, customer Intelligence has focused on understanding consumers through historical data. For example, Tesco uses vast data sets culled from decades of customers' Clubcard use to make pricing decisions, influence shoppers to buy specific items, and build loyalty.
But that approach doesn't tell a firm about a new or transient customer. Can anything be learned about shoppers who don't carry loyalty cards? What about cash customers? Casual browsers? Shoppers who come in as families or as gaggles of teenagers?
The technology ecosystem known as the internet of real-time data is moving us toward a better understanding of what these consumers are thinking and doing. This ecosystem, which will become increasingly integrated into the fabric of consumers' lives and society as a whole, is an extension of the internet of things — an estimated 50 billion sensors that are capable of sending event data to anyone authorized to listen in. Many homeowners, for example, have connected their alarm systems to security companies; many drivers accept having devices such as mileage trackers in their vehicles.
In retail environments, companies are aiming to be able to identify all shoppers, connect them with their shopping profiles, and either sell them something or at least gain enough data about them to help make a sale during the next visit.
One way to do all this is to encourage shoppers to use an app while they're in the store. That lets the retailer track their movements while sending them coupons or suggesting purchase ideas. High-speed processing is a must, because customers don't linger long. Leading proponents of this approach use the data-talks-to-data concept developed by IBM's Jeff Jonas and his team in the Entity Analytics group.
An emerging and more radical approach, known as "soft surveillance," makes use of concepts such as DNA testing that are more usually associated with security services. To ensure the safety of passengers and workers on buses in the UK, drivers have been given swab kits so that if a passenger spits, for example, they can take a sample that is then compared with a national DNA registry. Policies like this have led to a 50% drop in crime in Merseyside, Liverpool.
Researchers at the Fraunhofer Institute have created a system of electronic noses that can smell explosives or other chemical substances. When combined with laser scanners and embedded into the walls of buildings such as airports, these sensors can detect threats, alert security services, and track a person carrying a suspicious substance. With modifications, this technology could identify perfumes worn by shoppers and send related ads and discount offers to video screens in elevators or corridors. Fraunhofer has also pioneered eye-tracking systems that can identify consumer preferences in stores. Retailers will soon be able to use this technology to present a shopper with a coupon or other value-added service as they browse.
Families that shop together have long represented a missed data opportunity for retailers, because there has been no way to collect information about children if their mom is the only person interacting electronically with the store at the register. That's about to change. Facial-recognition software can now identify groups' sizes and estimate members' ages, which could allow stores to provide the customers with targeted displays. For example, a car dealership could put minivan ads on monitors as a family walks up to the showroom door.
Futurist and hacker "Pablos" Holman of Intellectual Ventures has shown how an RFID reader can wirelessly glean details from a credit card that never leaves your pocket. In theory, at least, data of this sort could be gathered at building entrances.
To prepare themselves for this new age, retail executives should follow three steps.
- Decide on the overall data-collection goal and determine how invasive the company can be, given the laws and standards in each region where it operates. For example, the EU's data-protection provisions are stricter than those in the U.S. The company also needs to think about how its data-collection efforts might affect its relationships with customers.
- Develop and execute prototype solutions to gain an understanding of the opportunities that these systems and their data present, how these move the firm closer to its customer-intelligence goals, and what ethical frameworks need to be established to protect both the company and the consumer.
- Work toward creating a unified framework for the integration of systems and data. This involves combining soft-surveillance data with information from existing business-intelligence and analytics solutions.
Sophisticated new data-gathering systems are designed to both improve profitability and help the consumer save time and effort. But companies need to beware of making shoppers feel that they've entered an Orwellian world where Someone is Always Watching.