At a time when customer analytics rules retail, it's jarring to hear about a company backing away from data collection. But that's precisely what the supermarket chain Shaw's did.The New England-based regional grocer recently announced it was discontinuing its customer rewards program -- and with good reason it seems.
Acquired earlier this year by private equity firm Cerberus Capital Management, Shaw's has more to worry about these days than customer rewards programs, according to Greg Girard, program director for merchandising and marketing strategies and retail analytics at the Framingham, Mass.-based consultancy IDC.
"Shoppers have been defecting [from Shaw's] for fundamental reasons -- high prices, dingy stores and poor customer service being the most pressing," Girard told me.
Before its new owners spend another dime on collecting and analyzing customer data to figure out who should get what coupons and how many, Shaw's is in line for a major makeover, Girard said, as a low-cost, well-run grocer.
Claudia Imhoff, president and founder of the Boulder, Colo.-based consultancy Intelligent Solutions, said the decision to abandon the program is probably not as jarring as it seems at first sight. Long gone are the days when shoppers embarked on their weekly food shopping run armed with the same set of coupons. Successful customer rewards programs are highly personalized, with discounts tailored to the shopping history and likely preferences of each shopper, Imhoff said.
Shoppers have been defecting [from Shaw's] for fundamental reasons -- high prices, dingy stores and poor customer service being the most pressing.
Shaw's customer rewards program wasn't that. Instead, customers either had a loyalty card and got a generic set of discounts, or they didn't. Mining the data collected by the loyalty cards would take a much more sophisticated program than Shaw's had exhibited up until now. "I don't think they have the analytical prowess to use the information that's being given to them, and that's a shame," Imhoff said.
It's an example of what some might consider one of the first laws (clichés?) of analytics: Collecting data is essentially worthless if you don't do something with it. But an analytics program that can produce enough of an ROI to make it worthwhile means sinking time, skills and money into it. For an industry that walks a razor thin margin between profit and loss -- i.e. grocery stores -- that's easier said than done.
Of course, Shaw's first has to cement its customer base, or so apparently its new owners believe. "Fundamentals are the cake of customer loyalty; personalization is the icing. Cerberus has to bake the cake of customer loyalty from scratch -- and in a hurry," IDC's Girard said.
The rich get richer analytics
Shaw's may be taking a step back from analytics, but other businesses continue to bulldoze their way into data collection and analysis. And as they do, there are hotshots out there willing to steer the way -- if you can afford them.
One fertile source of talent apparently is politics, or rather the technology whizzes who helped give the Obama administration a second term. The New York Times recently reported that Obama campaign techy Chris Frommann has teamed up with Analytics Media Group (AMG), a company founded by other campaign alums and that promises to help target media dollars to the right customers a la Obama's latest victory. This time around, the prime target is not a slew of undecided voters; instead, according to the Times piece, it's customers of Caesar's Palace, a place that has seen its share of sophisticated analytics. This is just more proof that when it comes to analytics (as with so much else), the rich get richer analytics and the rest will just have to hope this field gets commoditized quickly.
"We need to get analytics to a point where it's easy to use and the cost isn't prohibitive," Imhoff said. "And we have a little bit of education to do with low-profit businesses so that they can see a return on investment quickly and in a tangible way."
Don't believe the hype
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Maybe technology and education will close the gap, but in the meantime, companies are probably going to be wading through a lot of hype from media types like us. Just last week, the BBC ran a piece about an analytics tool that recognizes sarcasm.
The breakthrough the BBC was touting was based on technology developed by a French company named Spotter that helps catch social media remarks that say one thing but really mean something else entirely. Isn't that wonderful. (Note the sarcasm?) That's assuming the technology can keep up with us; one hotshot is not so sure.
As Harvard professor Gary King, who has developed technology to help page through vast amounts of text and find new patterns, told me recently, language is constantly evolving. As words change meaning or as new words take on meaning (i.e. an emoticon), they'll have to be coded to reflect that change. It's not impossible, King said, but it's certainly inefficient and can lead to very stupid analytics.