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Jamie Tenser
I WAS ASKED RECENTLY to address a group of consumer products managers about the possible future of Category Management.
The request came at a time when I had been devoting serious thinking to several topics that at first seemed only tenuously related. Computer-generated ordering is one. Optimization of markdowns is another. The impact of social, mobile and local media is a third. Then there was this trendy concept — Big Data — that keeps getting lots of mentions, but seems to defy clear understanding.
So what was I to make of Category Management in a world where these disparate forces swirl? More importantly, what practical insights could I deliver to this audience of the best and brightest that CPG companies had on their brand and account teams? I probably couldn’t tell them much they didn’t already know. Maybe I could try to make their heads explode instead.
Thought Experiment
I challenged this audience with the following thought experiment: Try to visualize what life could be like for Category Management professionals in a world with vastly more information and a good deal less control.
The diagram accompanying this post identifies ten factors or sources of input that a Category Manager of the future might incorporate into planning decisions. Many are already familiar — optimization of assortment, price, promotion and markdowns are well-established techniques built into software suites like those from IBM DemandTec. Other vendors offer macro space planning solutions, automated replenishment, capacity planning, In-Store Implementation and competitive analytics. These factors all interact in a dizzying matrix. But wait! There’s more!
Now fold in the massive influence of social/mobile/local media and online shopping and search behaviors, which are manifest as Big Data. We are witness to the vanishing boundaries of the in-store environment, due to the advent of personal digital technology, changing consumer habits, omni-channel business models and the immense flows of unstructured and structured data that these are creating for Shopper Marketers. I call this The Incredible Dissolving Store.
Big Data postulates that we will soon be routinely mining these external data flows for relevant behavioral insights and applying those insights on a continuous basis to enable shopper success and sustain meaningful competitive advantage.
Mix Mastery
It’s kind of like the marketing mix management problem. Heck, in many ways it’s a core part of the marketing mix problem. Shopper success — and therefore, the success of our category and promotional plans — are influenced by all these factors. Simultaneously. Continuously.
The increasing intricacy of the merchandising decision process reflects the proliferation of intersecting, measurable and optimize-able factors within the store. All these new data-based influences mean the locus of power is rapidly leaving the store and distributing across your customers’ mobile devices. The shopper is always in the center — no matter where you go, there they are.
It becomes increasingly apparent that Category Management in the Incredible Dissolving Store will not be about solving the equation — it will be about tuning the system. New analytics tools make the keys to relevance more accessible and more automated than ever. The life cycle of your decisions, shorter than ever. The power resides in the network and in the hands of individual shoppers.
Category Management, like it or not, is rapidly shifting from an orderly, controlled, recursive, planning process with boundaries and well-defined metrics into a deliberately dis-orderly, multidimensional, broad, shape-shifting and organic process that incorporates planning, detection, response and continuous strategic reconsideration.
In the Incredible Dissolving Store, we need to get used to the kind of ongoing discomfort this implies and think very carefully about the metrics we use to define success. If we listen actively and shed our bias, the shoppers will tell us what those must be.
THE New York Times Magazine made people nervous with its February 19th cover story by author Charles Duhigg. Its chilling headline, “How Companies Learn Your Secrets,” seems to have compelled readership as a matter of personal protection. I make this inference from the number of acquaintances who asked me about it.
[Author’s Note: This column was originally published on March 13, 2012 in the TradeInsight CPG Chatter blog.]“Creepy” was the adjective repeated most from individuals who read about how Target Stores applied data mining techniques to shopping baskets to infer which shoppers were most likely pregnant, then sent them promotional offers for pre- and post-natal products. Motherhood is pretty personal business, so I can’t say I disagree with the folks who were offended. What gives them the right?
Focusing on this creepy surveillance was a pretty crafty editorial decision by the editors at NYT Magazine, who used the cover line: “Hey! You’re Having A Baby!” The analytics behind pregnancy detection was actually just one example from Mr. Duhigg’s just-released book “The Power of Habit: Why We Do What We Do in Life and Business.” Having a baby, as it turns out, is one of a handful of predictable moments in life when our consumption habits change big time. For eager marketers that information is, well, mother’s milk.
Even if we look past the intrusiveness of offering coupons for cocoa butter lotion to stretchy young mothers-to-be, Mr. Duhigg’s larger thesis about the enduring nature of habit remains compelling in a different, less sensational way.
It tends to strengthen my own observations of long-lasting retail shopper behaviors, such as trip planning, coupon clipping, list-making and response to promotional cues within the store. In “Shoppers’ Perspective,” research I helped co-author for CPG manufacturer Henkel USA in 2009, we learned that shoppers could be sorted into fairly stable groups based on these enduring habits. It took the pain of the subsequent economic downturn to disrupt the patterns. As a result, coupon redemption statistics turned upward to what we may hypothesize to be a new norm.
The central example of the Duhigg article – Target’s effort to target “new natals” in its promotion marketing – is interesting too, but it offers little, truly new insight about behavioral segmentation analytics. Food, drug and mass retailers have understood the buying traits of new and soon-to-be parents (and other behavioral segments) for decades, without the need for sophisticated data mining tools. These insights are easily inferred from examining the contents of shopping baskets from the store’s point-of-sale transaction records – or better, from frequent shopper data.
It is not necessary to know individual identities, but such knowledge does enable the delivery of more personalized offers and services. These may be welcomed by opt-in frequent shoppers, but can be downright creepy when they seem to be the outcome of cyber-stalking.
The NYT Magazine editors correctly surmised that an article excerpted from Mr. Duhigg’s book could quite possibly be a snooze for readers not already fascinated by human behavior, retail analytics and segmentation and targeting. So they focused – perhaps a bit unfairly – on Target’s stalker-ish behavior toward new moms.
For us retail pros, however, divining the nature of repeat behavior is solid stuff – part of our every day thought work. It reminds us that when we try to influence purchase behavior positively, we also take on the challenge of overcoming pre-existing habit.
IN MY MEANDERS around the vibrant NRF Expo hall (#NRF12) in New York this month, I tried my best to spot the visible stars of the show and detect the invisible three-degree background radiation that lurks behind the retail firmament.
The atmosphere was energized, the crowds were large and buzzwords were flying. Shopper insights swirled in the cloud, mobile technology hype charged the atmosphere, and business intelligence oozed out of every software booth into glowing puddles on the Javits Center exhibit floor.
Ultimately there was too much for one greying, recovering journalist to absorb. This is surely why I wound up at the bar in Manhattan’s Landmark Tavern one evening with a group of senior retail business writers (a.k.a.,”ink-stained wretches”) who gather each year to drink beer and tell lies.
We talked about how NRF has become primarily a retail operations exhibition, and how that had evolved to be primarily about software solutions. Egged on by my fellowship of professional cynics and emboldened by many lagers and stouts, we began evaluating the first day’s bullshit quotient. The BSQ is a pretty simple ratio – buzzword repetition divided by genuine new ideas. (This is a party game only old journalists could love.)
The buzzwords were easy: “Insights” (every retail software solution promises better ones); “Analytics” (every retail software solutions promises faster ones); “Business Intelligence” (how every solution promises to deliver the insights and analytics); “Big Data” (what results from gathering so many insights and analytics); “Cloud” (the place in cyberspace where every vendor proposes to house its Big Data); “Dashboard” (a screen where retail practitioners are supposed to want to access their BI); and “Omni-Channel” (a state of retailing where online commerce coexists with mobile commerce and bricks & mortar, empowered by – you guessed it – insights, analytics, Big Data and BI).
As ever, the genuine new ideas were harder to detect. “Performance Management” may be a good one (the quaint notion that retailers might want to measure the outcomes of their insight-driven plans to see if they are really paying off). “Retail Industry Creates Jobs” is another, presented as a core theme by the NRF itself.
Readers familiar with basic arithmetic will quickly reason that for the umpteenth consecutive year, the BSQ on the exhibit floor was off the charts. The principle factor here is buzzword repetition, which drives the numerator toward infinity, while really genuine new ideas to pad the denominator are rare indeed.
Da BOMB
There is a lot to say about each of the major buzzwords and concepts that enlivened the NRF Expo. Right now let’s focus a little on “omni-channel retail,” which is recent nomenclature for an idea that has been around for quite a while. As far back as the dot-com boom in 1998 we began discussing the interplay between virtual and physical stores, catalogs, kiosks and call centers. By 2000 we identified several multi-channel players – like Eddie Bauer, and JCPenney – who had succeeded admirably (we thought then) in melding online, offline and catalog businesses to the benefit of shoppers.
The “shop anywhere, buy any where, return anywhere” principal was captured in the final edition of VStoreNews, where we labelled it “Broadband Merchant,” re-purposing a popular adjective. By then much of the industry had adopted “multi-channel” as the nom de jour.
At NRF this month, alot of folks were calling this “Omni-Channel,” I think because of the stunning influence of mobile technology within the mix. We can (and will!) argue long and hard about the appropriate understanding and application of mobile technology in retail, but for now let’s just stipulate that mobile is colossal in its influence. Explosive even.
Which is why I’d like to humbly offer an “omni” alternative. Call it BOMB retailing – Blend Online, Mobile & Bricks into a single entity where every channel shares a common information platform and consistent shopper interface. One brand, one shopper relationship, one inventory, one set of service standards, many moving touchpoints.
Surely after 14 years on the interweb machine, the omni-present, omni-channel, but hardly omniscient retail industry is ready to blow up the status quo.