At the turn of the 20th century, the retail industry looked very different. If someone wanted to open a theater featuring those newfangled “moving pictures,” they simply had to open the 1902 Sears, Roebuck Catalog to page 156. By sending in the order form with $160.50 in cash (roughly $4,500 by today’s standards), Sears would ship the “Complete Animated Moving Picture Outfit” that included:
1 combined 1901 model Edison Kinetoscope with stereopticon, fitted with arc lamp and rheostat
1 12×12 screen
1 set of stereopticon views, 25 in number, customer’s selection
300 feet of best-selected film
Rubber printing outfit, for filling in dates and places of giving entertainment
Everything the budding entertainment entrepreneur needed to start a theater in their home town.
Of course, the Sears Catalog contained much more than that: Anvils, pain medications, yards of cloth, rifles, cabinets, even livestock. All these items were delivered to your door with standard shipping costs printed on the first ten pages of the catalog.
(This is a blog post I co-wrote with Luke Shave of Microsoft. View the entire blog post here.)
Luke Shave, Microsoft’s Senior Industry Marketing Manager for CPG and Retail, recently sat down with Prevedere’s Pawan Murthy to discuss common mistakes in implementation that are preventing retailers and consumer goods companies from reaping the full benefits of predictive analytics.
Luke Shave: Recognizing the potential benefits of increased demand forecast accuracy, many retailers and consumer goods (CG) companies are already leveraging predictive analytics to guide their demand planning. But not all of them are finding their demand forecasts to be significantly more accurate. What explains this?
Pawan Murthy: One common mistake among retailers and CG companies is trying to boil the ocean. Where once they struggled with limited information to guide their demand planning, today the potential datasets available are virtually endless—from customer behaviors and internal performance metrics, to third-party industry statistics, to open data available on economies worldwide. This is the double-edged sword of digitization: while it is the availability of massive amounts of data that makes predictive analytics possible in the first place, the quantity of data makes it difficult to use effectively.
Trying to glean meaningful insights from all the data is an exercise in futility. Retailers and CG companies need to focus solely on the key metrics that most affect their business.
Consumer goods and retail marketers spend a lot of time, money and effort on the four “P”s: product, price, place, and promotion. However, no matter how refined a product is or how much testing is done before launching a promotion, the four “P”s cannot help companies accurately anticipate consumer behavior. Without being able to accurately predict consumer behavior, it becomes challenging to pinpoint forecast demand.
The solution is to consider a wider variety of external factors that potentially can affect a company’s performance in addition to the four “P”s. Brands can further benefit from integrating the three “A”s of consumer behavior, for a holistic view of their customers.
Predicting consumer behavior
1 Affinity – Consumers’ likelihood to purchase certainly stems from their trust of an affinity toward a brand and its products. The four “P”s can all be classified as affinity building, and maintenance strategies and manufacturers and retailers spend the vast majority of their efforts here getting the product just right, optimizing marketing, obtaining feedback and then starting the cycle over again. Consumers’ reactions to packaging, store experiences, websites, advertising and more all go into the building and maintaining affinity, and its impact on consumer behavior can be significant.
Companies today face a perfect storm as it relates to maintaining employee satisfaction. First, you have fast growing, profit-focused companies with tighter budgets that immediately nix items deemed “non-critical”. Second, you have a young workforce that appears, at first glance, to never be satisfied with any attempt of recognition by their employer. They feel their work isn’t valued or acknowledged. This is interpreted by the HR department as, “We need more opportunities of recognition and more awards.” But then to do so requires money which was addressed takes us one full circle.
My feeling is that the young workforce doesn’t require as much the CEO giving them a pat on the back for showing up for work on time. I feel that such employees simply need peer recognition for daily achievements, much the same way Facebook does this for their personal lives.
My team worked with a Canadian vendor, TemboSocial, who thinks the same way. Together we launched the “HiFIVE” platform within our company’s intranet. It acts much the same way as Facebook – but you can ONLY post topics of praise. As sender creates a HiFIVE on the intranet, selects the recipient(s), selects a picture that best describes their action, and includes anyone to CC. After hitting submit, the HiFIVE is posted to the intranet where others can “like” or comment.
In a very short time, thousands of HiFIVEs were developed and shared. Looking through this vast repository of praise, you can really see how much impact these daily achievements are to yearly goals. Employees also are informed of problems in other areas and have offered help through this platform.