analytics

Lessons from the Transit of Venus

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YESTERDAY I ATTENDED an event that will never be repeated in your or my lifetime. It was a viewing of the transit of the planet Venus across the face of the sun. That’s something like a solar eclipse by the moon, except much rarer and quite a bit harder to observe since Venus is much farther away.

The kind folks at the Loews Ventana Canyon Resort here in Tucson hosted the afternoon on the hotel patio, and scientists from The Planetary Science Institute, also based here, were our very enthusiastic guides. They set up several specialized solar telescopes for public viewing and presented a series of lectures which explained what was happening and what it meant, astronomically speaking.

The story of the transit of Venus is as much about cultural history as it is about science. For many centuries, natural scientists have been aware of the relative movement of the sun, moon and planets. Venus is the most visible object in the night sky, after the moon itself, but it is not normally visible in the day time. The transit itself happens in pairs, eight years apart; pairs then follow alternately by spans of 121½ years and 105½years. This makes it nearly impossible for a single observer to study.

According to the PSI scientists, it took several centuries for European astronomers, working in concert, to recognize and work out the basic facts of the transit. Once they did get it figured, it yielded important insights about such matters as the distance and size of the sun and whether more distant stars might also have planetary systems.

With the special telescopes it was easy to for us guests to observe the dark dot of Venus as it crept slowly across the solar disk. Several sunspots and solar prominences were a fascinating bonus. The lecturers had tons of anecdotes and insights about what could be learned from observing and measuring the transit.

Since I tend to view our world (and other worlds!) through the peculiar lens of the retail marketer, I was bound to consider what lessons we might derive from the transit of Venus. Several learnings came to mind:

You can see a lot just by looking.* The transit of Venus is hard to view due to the overwhelming brightness of the sun, but as I learned yesterday it’s not that difficult if you have a plan and the right scope. Active observation is key. This made me think about the challenges of in-store sensing and of capturing shopper insights in general. Valuable observations don’t happen by accident; they are a result of carefully planned and executed practices. (*Props to the Yankee sage Yogi Berra.)

Some misses are forever. June 5 marked your last chance to see a transit of Venus. It won’t happen again until 2117. Luckily astronomers recorded this event, so you may watch the video. How many merchandising opportunities and rare marketing insights pass us by just like this? What can we do now to ensure that we don’t miss out on future learnings that may enable us to to be better prepared for the next window of opportunity? In retail merchandising and marketing, it begins with active sensing and collaborative data sharing.

Long cycles are hard to track. Under the most fortunate of circumstances, an individual astronomer gets to see the transit of Venus twice in a lifetime. Many never see it once. Even the lucky ones must count on other recorded observations to grasp its periodicity. With such a slow rhythm, it’s tough to draw reliable conclusions about the nature of the phenomenon. In the product marketing world, we discover that fast-turning consumable products offer some informational advantages as compared with infrequently purchased, higher consideration products, like cars, TVs and appliances. With many fewer data points and behaviors to draw upon, slow-moving consumer goods engender a less granular picture for marketers.

Sometimes you just need a team. Understanding the transit of Venus and its implications has required numerous observations separated by both time and physical distance. The relevant data has been collected by teams of scientists and coordinated among them with a common intent. Consumer insights also accumulate from observations collected across many locations and moments in time. You can’t unlock their potential alone. The implications are too vast, and the effort must be shared and sustained over time to reveal actionable insights and best practices.

The transit of shoppers through retail stores can reveal insights that we can best capture through systematic tracking and observation. When we can get the shoppers themselves engaged in documenting and sharing their actions and preferences – as through mobile devices – even greater wins are possible.

© Copyright 2012 James Tenser

The Optimization Arc – From Black Box to the Cloud

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Joshua Trees

WHEN THE GOOD FOLKS at DemandTec asked me to commence writing a series of short commentary pieces on this blog, I accepted the assignment in large measure because the company’s story is a reflection of the story of merchandising analytics in all its facets.

Like DemandTec, an IBM Company, my history as an analyst in what used to be called the “price optimization” sector dates back more than a decade. In 2002 I was asked to try to make this very powerful new retail science more accessible by explaining its benefits and justification in terms other than technical. Price optimization was a new idea, and its target purchasers were wary of its mysterious mechanisms.

Retailers’ objections about the apparent “black box” nature of base price elasticity permeated the sales cycles of industry pioneers, DemandTec’s included. Prospects worried that using computers to model price elasticity and interaction effects to maximize margins was too manipulative. What kind of push-back would they face if shoppers found out?

It took some effort at first, but we correctly reasoned that since optimization is based on measurements of shopper response, it is inherently shopper-centric in nature. Overall, the process tends to deliver more consistent competitive value to shoppers, while retailers maintain sustainable gross margins. These ideas are familiar now, but they were new territory ten years ago.

At about the same time, other pioneers began applying the principles of optimization to other complex merchandising decision processes, notably to the depth and timing of markdowns, and the terms of in-store promotions. Other folks were advancing assortment and space planning tools from the category management side of the house. Pretty soon, it dawned on the smarter people that that the interconnectivity and interaction effects they observed within each of these areas of discipline also exist across these areas of discipline; and not just within the retail organization, but between it and its trading partners.

A simple example might arise when a lower everyday price for a popular item revs up its turnover rate. The existing number of facings may become insufficient, creating intermittent out-of-stocks. The lost sales may tend to distort apparent demand and delay re-orders, and the problem perpetuates. Fold in other concurrent events within the category, such as new item cut-ins and shelf capacity constraints and the problem grows very knotty indeed.

Fly by Wire

When I was first learning about all this, someone I respect explained to me why the mathematical model behind pricing optimization is related to the intricate “fly-by-wire” flight control systems that keep stealth aircraft from dropping out of the sky. Both critical objectives – keeping thousands of interrelated SKUs properly tuned, and keeping multiple interrelated flight surfaces properly tuned – share several traits:

  • The model is big
  • The model must be dynamic and continuous
  • The model must be highly reliable under duress
  • The model must be continuously updated at a time cycle that is rapid enough to support critical decision-making
  • The model must be appropriately accessible to decision makers

In one respect, those flight control systems may be simpler than retail demand models – there’s only one cockpit in an aircraft. A retail organization, by comparison, may have dozens or hundreds of individual decision makers and planners and trading partners interacting with the merchandising model through various dashboards. Each needs appropriate analytics and decision support according to his or her role.

To the Cloud

As DemandTec developed and acquired its portfolio of software offerings over the past ten years, it placed evident emphasis on connecting users with the data and with each other in practical and beneficial ways. It was an early advocate of the software as a service (SaaS) application business model, which placed the heavy application power in outside computer servers, relieving clients from the burden of maintaining these systems in-house.

Lately the tech industry tends to refer to service-based computing as “the cloud.” In fact DemandTec’s current positioning, “The Collaborative Analytics Cloud,” reflects that. The explosive growth of major social networks has reinforced this concept, as have some of the largest IT companies. IBM, which acquired DemandTec last February, uses the tagline, “Smarter Commerce on Cloud” to describe its core strategic approach.

The company’s DemandTec Connect™ social layer is a recent development in this regard. The platform leverages social-media-like interaction with embedded analytical applications to help shape collaboration across the merchandising ecosystem. Like any social media network, the platform is cloud-based. Its ability to provide role-appropriate access to a variety of optimization analytics is pure DemandTec.

© Copyright 2012 James Tenser
This article was commissioned by DemandTec Inc. which is granted the right of republication. All other rights reserved.

The New Voxology

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IS “SOCIAL MEDIA FOR BUSINESS” an oxymoron?

One current LinkedIn Groups discussion loudly and repetitively (2,500 posts and counting!) declares it “CRAP.” I think this oversimplifies what has become a marketing imperative, and clouds a very important opportunity.

As new marketing verbs like tweet, blog, and social networking permeate our thinking, we need to acquire a clarifying thought vocabulary that will allow us to grapple with emerging concepts and put the tools to appropriate and beneficial use. I’ll take a first whack at it here. Perhaps some wise readers can build on these ideas.

For starters, it would be helpful to differentiate between the kinds of activities that take place within online social media constructs. I group them into four familiar quadrants: C to C, B to C, C to B, and B to B.

“Consumer to Consumer” social media are probably the highest profile, as they are manifest on hundreds of millions of Facebook, MySpace, Twitter and YouTube uploads. The purpose here is primarily social and personal, and there’s certainly nothing wrong with that. If much of the content posted on virtual “walls” is silly, trivial and self-indulgent, so be it. It is also highly dynamic, interactive, and in its way, democratic. The sheer size of the community is proof of the concept’s power and cultural influence.

Businesses and political groups view the huge C to C audiences as a potential gold mine, and so there has emerged a concerted effort by marketers to deliver controlled messages within the social media platforms. I’d label activities like this “Business to Consumer.” Recent elections showcased this potential, as candidates used online groups, and “fan” pages to garner support, raise funds, and motivate voters. Brand marketers are also in hot pursuit of the social media audience, but they should be cautioned that quaint broadcasting norms may not apply here. Leading practitioners are working out ways to accumulate followers who are receptive to targeted messages and offers and whose responses may also be sources of useful insights.

Which leads us naturally to consider the arrow’s reversal: “Consumer to Business” social networking may be a source of valuable feedback from both supporters and critics. Ardent fan and cruel pan pages can spring up spontaneously – sometimes to the dismay of the brand, retailer or celebrity covered. The object of such public scrutiny typically has little control over its content, much less its veracity. This is a cold fact of life that marketers must simply learn to live with. Wise brands monitor these for insights and to counter libelous talk, but they respond with a light touch, so as not to elevate a lone crackpot into fodder for the salivating media.

Of course, brands, celebrities and pols also take deliberate action to invite communications from loyal and not-so-loyal constituents – setting up their blogs, Twitter feeds, email lists and fan pages to anchor the message and gather feedback. Perhaps B to C and C to B social media activities are inseparable, two sides of a coin.

B2BSM – A Different Animal?

Finally we have the distinct instance of Business to Business social media. This is my real interest in this discussion, actually, because it applies the tools and methods of social media to serious business purposes. LinkedIn is a very good example of a public platform that is used for career networking, personal branding, formation of subject matter communities (“groups”) and sharing current events and ideas. There is also some fairly sound (if experimental) use of Twitter by trade journalists and industry observers (search the #NRF10 hashtag on twitter.com to view interesting and extensive coverage of last week’s NRF Expo in New York, for example).

Another B2BSM realm is emerging around secure-access portals that incorporate social media-like tools. These are used for creating flexible online workgroups, sharing documents and information, even hosting internal and inter-organizational collaboration like Merchandising Performance Management among retailers and manufacturers. The platforms use some familiar functionality, but quickly go deeper to deliver performance dashboards, “fingertip analytics” and other advanced capabilities designed for decision-making experts who are not IT experts.

Some businesses are also using a combination of Web-based and social media applications and tools to manage their visibility, presence, and image with respect to their business community. The portfolio of tools may include any or all of the following: The firm Web site; blog; an email and list management service; a LinkedIn group; a Facebook company page; one or more Twitter or other microblog feeds; an online market research site like Survey Monkey; an online press release distribution tool like PRWeb, and more.

At VSN Strategies, we like to call coordinating this set of activities “management of the commercial online voice” or voxology for short.

Voxology in Practice

VSN WebVox™ is my firm’s name for this business service. We help clients combine multiple Web-based tools and services to create, maintain and propagate a commercial “online voice.”

We craft thematic consistency and interlink the elements to create a high level of Web activity that helps companies score high on search engines and expand their reputation. The result is an evolving Web presence – a combination of visibility and credibility, across the multiple linked channels of the Internet. Companies become more search-able, more find-able, more believed, more in contact, more heard.

At VSN we’re in the camp that firmly believes social media for business is definitely not “CRAP.” Furthermore we maintain that mastery of its subtleties is an essential pursuit for both B to C and B to B marketers. We’d like to see some improved vocabulary emerge to differentiate the activities that take place between individual consumers, businesses and consumers, and businesses with other businesses.

For B to B, I propose “voxology,” the new science of the online voice.

© Copyright 2010 James Tenser