Customer behavior analytics: Leveraging big data to form smart brand partnerships

Business and Technology Writer

The Target-Lilly Pulitzer partnership turned out to be a match made in retail heaven, thanks in part to customer behavior analytics. Insights gleaned from big data offered Target telling clues of the line's potential success, and they were right on the mark. The cheap-chic discounter's limited-edition apparel, home and accessories collection with the colorful resortwear brand sold out in the blink of an eye.

This success shows how big data analytics that reveal shoppers' interests and tastes can help retailers make more informed decisions when choosing brand partners.

Social sentiment data

Target's Pulitzer line was a hit even before it reached stores last spring. The retailer promoted the collaboration on social media, and the pre-launch buzz exceeded expectations, according to Target executives.

Social sentiment data predicts upticks in product demand by applying real-time analytics to streaming social feeds to gauge what customers want and need. It taps into the streams of data emerging from online forums, blogs and sites like Facebook, Twitter and Pinterest. By applying data analytics to this rich source of information, marketers can gain a deeper understanding of consumer preferences and market trends.

Precise product demand

When the Pulitzer line did launch, it became clear that Target underestimated demand for the products, which sold out quickly, resulting in a number of disappointed shoppers.

Retailers can avoid stock-outs and overstocks by analyzing product and customer behavior analytics. Proper analysis can provide actionable insight into purchasing behavior and help create a more nimble supply chain.

The reams of real-time data available today mean the retail industry is amid a major shakeup in how inventory is managed, according to an article in the Harvard Business Review by University of Pennsylvania's Wharton School Panasonic Professor of Manufacturing and Logistics Morris Cohen.

Retailers can now look beyond historical data on past sales and out-of-stock inventory levels to forecast customer demand: Data technologies can help companies better read demand signals and optimize inventory levels accordingly. Stores can link data generated by actual and potential customers' "product interactions" — from reading online reviews to conducting price comparisons — and purchases as "indications of interest or intent to purchase, which would be relevant to forecasting future demand," Cohen explained in a recent interview. Retailers should also leverage transactions generated by suppliers and competitors who connect via websites and cloud portals.

That data can, in turn, be factored into retailers' inventory management systems and connected to the extended supply chain, which could include fabric suppliers and apparel manufacturers, for example.

This data-mining shift can generate a more precise and nuanced picture of product demand and result in "improved, coordinated decisions," Cohen said. But many retailers will need to revamp their supply chain to do just that.

Stoking 'disruptive innovation'

Big data also holds the potential to offer new insight into shoppers' unmet needs.

Macy's recently purchased beauty chain Blue Mercury. These freestanding makeup stores are popular with the millennial demographic, which the department store has been actively studying and courting. Blue Mercury's open-sell store model lets shoppers handle beauty brands without the mediation of a salesperson, similar to competitors Sephora and Ulta Beauty. It's a format that stands in stark contrast to the department store model, where makeup is locked behind glossy counters and manned by store associates.

That's precisely why Macy's embrace of Blue Mercury calls to mind big data's role in stoking "disruptive innovation." Unlike "efficiency innovation," which reduces the cost of making and distributing products and services, or "sustaining innovation," which replaces old products with new ones, disruptive innovation can create entirely new markets, according to the report from brand consulting firm Landor Associates.

"Think new ideas and new experiences. Such activity attracts a whole new set of customers to a brand," writes Mark Liney, Landor's client services director, who authored the report.

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