Data Science for Retail Series Part I: The Individual
By Bob Deakin
Retail analytics: the crystal ball into your customer’s world. Not a secret or the sexiest topic; this subset of data science is the gateway to more sophisticated insight for businesses from Etsy resellers to Apple.
What is data science? Microsoft Azure defines it as “The scientific study of data to gain knowledge.” Similarly, Amazon Web Services (AWS) calls it “the study of data to extract meaningful insights for business.”
However you define it, retail analytics is predicting what your customers will do. Ironically, psychological profiling, normally politically incorrect, is fine as long as you’re selling something..
Just Do the History
Before the digital age, television, radio and print ads took a crudely proactive approach to consumer behavior by inspiring them to take action. In the old days, ads hit you over the head with name repetition and catchy slogans. It worked. You’d hear the lines repeated as jokes by everyone from TV show hosts to your teachers. Free advertising.
The celebrity endorsement also worked, and still does. If it’s good for a football player, how could it not be good for you?
Businesses and retailers of the 80s and 90s took marketing in new directions, putting customer input and retail analytics to use as technology advanced. Brand creation through imagery became the thing.
Nike’s Just Do It is the perfect example. Whether or not you could run a mile or throw a ball, Nike not-so-subtly tried to prevent self-doubt from holding us back. If Michael Jordan or an 80-year-old man can do it, why not me?
Retail Analytics For the Individual
For individual retailers or resellers, using data to segment demographics and seasonal trends can provide valuable insight into who their customers are. More importantly, it can let them know who their most profitable customers will be.
Fraud protection is one area where the use of data science helps on a small scale. Data Scientist Ritesh Pratap A. Singh explained in a story for KnowledgeHut that conventional fraud protection rules are ineffective against the finest of fraudsters.
“We can use massive amounts of data already acquired from online transactions to create accurate predictions about fraudulent ones. At the same time, the conventional method is rigid and cannot adapt to changing circumstances.”
Retail Analytics: The Crystal Ball
Enterprise-level organizations have been collecting data and using retail analytics to use for (or against) us since before we were born. It takes a massive budget to utilize those levels efficiently, but that doesn’t mean the same principles don’t apply to the individual entrepreneur.
On that note, here are a few analytics quotes attributed to industry professionals:
“Data is the nutrition of artificial intelligence. When an AI eats junk food, it's not going to perform very well.” - Data Professional Matthew Emerick
“Since most of the world’s data is unstructured, an ability to analyze and act on it presents a big opportunity.” - Michael Shulman, head of machine learning at Kensho
“In a world of more data, the companies with more data-literate people are the ones that are going to win.” - Miro Kazakoff, MIT Sloan School of Management
“Data is like a faint light when you're lost in a dark room. Follow it, try to make sense of it, and you might actually know where you are and what's around you,” - David Sides of NextGen Healthcare.
A Picture Is Worth a Thousand Lines of Code
For sheer visuals appealing to the human psyche in retail analytics, Business Insider’s 24 Magazine Ads shows recently created images playing on a deeper level of customer behavior.
The days of classic marketing propaganda such as the hard sell, jump-on-the-bandwagon, or celebrity endorsements are still with us. But today’s consumer is wise. They’ll read reviews and decide. Propaganda is a dirty word. Merriam-Webster defines it as ideas, facts, or allegations spread deliberately to further one's cause or to damage an opposing cause.
By contrast, Oracle defines retail analytics as using software to collect and analyze data from physical, online, and catalog outlets to provide retailers with insights into customer behavior and shopping trends.
Have we, as consumers, learned to recognize deception in advertising when we see it? Yes, but there is so much that we expect it. Retail analytics plays on the subconscious level. We know we’re being watched, but we’re getting better at showing them what we want them to see.
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