Using big data to drive retail personalization

The challenge for retailers and consumer packaged goods manufacturers these days is how to make a molehill out of a mountain. Big data can seem overbearing to many as they try to ascertain how to mine actionable insights out of those reams of data, all while maintaining the speed to market that today's retail climate demands.

And those mountains are only getting bigger with each day as more retailers come to market with advanced loyalty card programs that use that data to personalize the offer.

Big business and their consumers generate 2.5 exabytes — or 2.5 billion GB — of data, also growing at a rate of 40% per year. With the proliferation of social media sites, consumers now have a multitude of possible avenues through which to engage a brand — Facebook, Instagram, Pinterest and Twitter — and each of those touchpoints generates individual points of data. "The digital revolution has forever changed the consumer's path to purchase," Appel said. "Big data is not about building massive databases or other costly technology products," Appel said. "It's about identifying the five to 10 combinations of existing and new data sources that, when combined [with] sophisticated real-time analytics, drive better decision-making."

Making sense out of big data is becoming a big business in itself.

"Big data technology and services will reach $17 billion by 2015, from [a base of ] just $3 billion in 2010," IRI's new CEO Andrew Appel told attendees of the company's 2013 Summitt in Las Vegas in March. "That's a 40% annual growth rate."

According to IRI, the U.S. CPG and retailing industries potentially could see more than $10 billion in annual value created as a result of improved application of advanced analytics to support brands and channels. "If the top 20 CPG manufacturers were able to work collaboratively with the top 10 U.S. retailers and leverage analytics to tap incremental consumer profit pools, we estimate the impact to be more than $10 billion annually for just a 5% improvement," wrote Robert Holston, EVP and division leader symphony analytics at IRI, in a recent IRI white paper based on IRI's Analytics 2020 survey of senior CPG and retail executives. "For a typical $5 billion CPG manufacturer, this equates to more than $75 million of incremental annual value created by only driving retail sales improvement 3%."

Making sense out of big data is crucial to "this new normal of driving personalization to target [the consumer]; determining a shopper's propensity to shop a channel, a banner, a category or brand; and discovering what elements determine selection and de-selection," Holston noted. "Companies leveraging average analytics capabilities are 20% more likely to drive higher return to their shareholders than their non-analytics-oriented peers; those with advanced capabilities are 50% more likely."

"Today's scale needs to be about understanding what consumers want and leveraging your scale to deliver it better than anyone else," said Ann Mukherjee, chief marketing officer for Frito Lay North America. "That's the new game in town," she said. It's about understanding the drivers of choice. "It's actually taking all the variables together — the who, what, where, why and why not — and understanding when it all competes together, what really drives choice. … If you don't understand [the] whole picture, your growth efforts will compete with each other."

It's not just about making molehills out of mountains; it's about identifying and mining the molehills that will provide the greatest return