The threat for retailers is real. A recent study by Yankee Group, “How Brick-and-Mortars Can Thrive in a Smartphone World," found that “46 percent of U.S. consumers use their smartphones to check prices and reviews while shopping at retail stores, up 5 percent from 2010. And armed with that information, nearly half buy a less expensive product elsewhere.” http://www.yankeegroup.com/about_us/press_releases/2012-08-07.html In many cases, brick-and-mortar stores are becoming overhead-loaded, free showrooms for consumers—not a sustainable business model (witness the ongoing struggles of Best Buy).
On the flip side, several recent articles in the Wall Street Journal have shown just how much technology is helping retailers shift the power balance in their favor. In June,http://online.wsj.com/article/SB10001424052702304458604577488822667325882.html, the paper wrote about how one company is using data analytics to take consumer segmentation to a new level. Orbitz discovered that Apple computer users typically spend significantly more—up to +30% per transaction—and are more likely than other computer users to book specific properties and types of hotels. Orbitz is now experimenting with serving tailored search results to Mac users. The company says it is not increasing the price of products, rather just prominently featuring the higher priced options that Mac users tend to prefer. A glowing example of a company striving to offer better service? An alarming instance of creepy, tech-enabled exploitation? Perhaps a little of both.
A second article, http://online.wsj.com/article/SB10000872396390444375104577591304277229534.html, gives a taste of the increasingly sophisticated analytical tools that companies are now using to service customers. In “Automatons Get Creative”, Christopher Steiner writes: “We are all familiar with the words ‘this call may be recorded for quality or training purposes.’ Though that message may sometimes mean just what it says, it often means that an algorithm has been invited in for a listen. Using only the words you say in a three-minute conversation, more than five million eavesdropping algorithms, created by a company called Mattersight, determine your personality type, what you want and how you might be most easily and quickly satisfied by the customer service agent. The electronic psychological analysis divides people into six sorts of personalities. Steve Jobs, for instance, was a “reactions-based” person, someone who responds strongly to things: “I hate that!” The next time you call, the algorithms, recognizing your phone number, will route you to an agent with a personality similar to your own, which results in calls that are half as long and reach happy resolutions 92% of the time, compared to 47% otherwise, according to an assessment of 1,500 customer service calls at Vodafone, the European telecom company.” Yikes. Call Big Brother. I wonder how people would feel if they were fully aware they were the focus of this (and likely similar tech-driven targeting and analytics) happening behind the scenes. How far off is an updated disclaimer message: “This call may be recorded for quality or training purposes and may involve electronic psychological analysis….”?
Whether this makes you happy that companies are striving to understand and serve you better, or makes you feel manipulated and 1984-ish, one thing is clear: We should all get used to this. Looking ahead, sophisticated analytics will become increasingly critical to corporate strategy, with companies not operating in this paradigm experiencing a significant competitive disadvantage. And as Big Data gets even Bigger, spawning increasingly sophisticated tools, consumers can expect to be observed, analyzed, and engaged by companies in ever more surprising ways. It’s all part of our new, ever-evolving digital normal.
Originally published 9/3/12