When Science Collides With Retail: Giving the Public What They Want
The fashion times are a-changin’. New products have an estimated failure rate of 50 percent, costing over $400 billion each year collecting dust on store shelves. With that kind of risk involved, a systematic assessment of consumer preferences should be par for the course. However, retailers are constantly struggling to determine what styles consumers are going to buy.
Enter the fashion critics and gurus. With their connection to popular publications, these individuals have long held sway over the public’s attraction to and demand for fashion and style. Retailers have also been at their mercy, at least when it comes to predicting what consumers will really buy. Times have changed, however. Consumers have more say and power than ever before. Social media now serves as a platform for loud and opinionated consumer voices. Retailers must not only listen, but respond as well. Otherwise, they’ll just hear the sound of moths shuffling in clothing racks, not potential customers.
How to Listen
Decades ago, if a retailer wanted to know more about consumer preferences, it would visit stores and talk to customers, conduct in-store testing, and possibly run focus groups. Now, with hundreds of stores and styles that change every month, these tactics are no longer practical — nor are they reliably predictive of what will sell. They've largely been replaced by a new set of ways for consumers to give their input and for retailers to listen and learn.
Today, one of the most powerful methods of listening to gain insight into expected consumer buying behavior is through crowdsourced data. This can take place in a variety of ways. One approach is to look at conversations users are already having on various social channels such as Twitter or Facebook. Social data is a great repository of consumer sentiment; however, the problem lies in the fact that this information can be difficult to quantify in terms of tone, value and influence — not to mention it’s quite sizable. The answer is to create a context for consumers to provide pointed feedback that can easily be structured and translated into real strategies regarding timing, pricing and offerings.
When retailers use predictive analytics, consumers can weigh in on specific products and share their thoughts on everything from design to price. Their feedback is gleaned through games and surveys, with benchmarks set that help identify tastemakers and the winning (or losing) products they select. Engaging with consumers in this way streamlines the process and elicits more genuine input. Predictive analytics enable marketers to use data to anticipate customer preferences and needs, deliver a more personalized experience, and increase growth across the board.
This type of approach is crucial because, as a recent HRC Advisory report found, retailers aren’t leveraging customer data in a structured way. Only 9 percent of retailers studied have a systematic approach to using data as part of their merchandise buying and planning processes.
How to Respond
Once retailers have data that's structured and predictive, they can begin to implement strategies that go beyond a shot in the dark. The first and most obvious way retailers can use this data is by giving people what they want — i.e., making sure the products they’re interested in are actually on shelves.
Once product orders are placed, retailers can get into more personalization for customers. Pricing based on segmenting your customer base can better help in setting up targeted sales. For example, if customers of a certain demographic or psychographic profile won't make a purchase unless the product is discounted 15 percent to 20 percent, then give them what they want to nudge them to buy. If another group will buy the same product regardless of price, then there’s no need to offer a discount and potentially leave money on the table.
This personalized approach goes beyond pricing. Once you have predictive data, you can connect with your marketing team to improve email campaigns, signage and tone across various channels (online, social, in-store), leading to a better customer experience that will generate more purchases and awareness.
Give the Power to the People
As Farla Efros, executive vice president and COO of HRC Advisory, noted recently, “retailers need to recognize there has been a meaningful shift in power towards the consumer resulting from today’s numerous ways of purchasing and much increased price transparency.”
It’s obvious that this is one of the most vocal and transparent consumer generations in history. Now retailers need to make their own offerings more personalized and vocal. Data is the key to giving them that voice.
Greg Petro is founder and CEO of First Insight, a technology company transforming how leading retailers make product investment and pricing decisions.
Greg has a 25-year history in the retail industry with a career spanning merchandising, sales and management. But while at one of the world’s leading supply chain technology firms, he saw a need for retailers and brands to re-engage with consumers to determine which products would be top sellers well before costly investments are made to bring them to market. In 2007, Greg Petro founded First Insight Inc., a technology company that delivers what is now the world’s leading predictive analytics platform for consumer-testing new products. Through engaging consumers online and mining social data, the First Insight platform empowers retailers and brands to introduce the right products at the right price, and target them to the right customers. Today, he serves as its Chief Executive Officer and President. Greg is a member of the Board of Advisors of the Fashion Institute of Technology, as well as a frequent speaker at the graduate business schools of Columbia University and the University of Pittsburgh. Greg also speaks and at a number of industry conferences, where he educates his listeners on how retailers can use technology to identify and deliver what their customers really want. Mr. Petro holds both MBA and Bachelor’s Degrees from the University of Pittsburgh.