Selling Illusory Joy: Emotions, Big Data and the Coming Retail Renaissance

By Christopher Surdak and Ed King

Today the world is awash in massive amounts of context-rich data. Whether it’s GPS position information, social media posts, emails, digital audio or video, – even bio-sensor gathered data – customers are creating an endless stream of contextual information just waiting to be mined.   In this article, Christopher Surdak and his guest author Ed King explore how big data can help retailers remain relevant and connected with customers on an emotional level.

 Originally published at http://www.europeanbusinessreview.com/?p=7329

Among his extensive works, 17th Century French philosopher René Descartes often wrote of the distinction between our thoughts and our emotions. Descartes believed that there was a distinct “separation of mind and body, rationality and emotion.” This distinction allows us to make decisions that make sense, and in this manner we are all rational human beings who make optimal decisions where ever and whenever possible. If this is true, contemporary retailers are significantly challenged to stem the overwhelming move to online commerce.

However, in his 1994 book, Descarte’s Error, psychologist Anthony Damasio suggests that emotion, rather than logic, guides behavior and decision making in the brain. Damasio studied people who suffered a significant brain injury. Specifically, he focused on those who had fully-functioning “logical” brains, but lacked the “emotional” center. The subjects were able to apply logic to a variety of situations but struggled to make a decision.

Without emotions, Damasio contends, people lack the drive, motivation and “spark” to make decisions. In other words, it’s emotion, not logic that triggers decisions and purchases. Who is right? More importantly, how can you possibly connect with customers on an emotional level, and remain relevant to them despite their addiction to mobile shopping?

In this article, Christopher Surdak and his guest author Ed King, VP of Strategy for MaxMedia, an agency focused on crafting digital experiences for retail environments, explore how big data can not only help retailers survive this digital onslaught but how effective use of data can transform your relationship with your customers.

 

Retail in the Age of “The New Normal”

As we approach the mid-point of 2015 it’s often hard to imagine our world without smartphones, apps and analytics. These technologies are just entering their adolescence as they really only started to take hold roughly ten years ago. Youth notwithstanding, these three technologies, the “digital trinity” as I call them, have fundamentally and permanently altered our world, and these changes aren’t technical, they’re sociological.

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The digital trinity has brought about six social trends that are part of our “New Normal.”

These six trends are:

1. Quality: Today, people expect perfection.  Deliver less and they will abandon you forever.
2. Ubiquity: People expect everything, everywhere, all of the time.
3. Immediacy: People expect immediate gratification.  Just-in-time isn’t anymore.
4. Disengagement: People care about the ends, the means are irrelevant.
5. Intimacy: People hunger to feel connected and part of a community.
6. Purpose: People crave a sense of purpose.

These trends are pervasive and affect every aspect of our society.

As each of us becomes ever more wedded to our smartphones, we become ever-more appified. We expect our every need to be met in 30 seconds or less, for a Euro or less, or we simply look elsewhere. We expect perfection in all of our transactions with vendors, anything less is simply unacceptable. And we are experiencing an increasing disconnect between the things we want and the value chains that provide them.

These trends have made the business of retail exceedingly difficult. The rules of retail have changed, and dramatically so. Because of the digital trinity all pricing power is now literally in the hands of consumers. Retail is being polarized; meaning businesses must provide commodities at the lowest possible price against ruthless competition or they must provide a rich, meaningful, quality experience.

Unless you intend to out-Amazon Amazon, or out-Tesco Tesco you’re going to lose the price game, which implies that you need to provide experiential value to your customers. Further, the convenience of digital retail means that maintaining physical locations must be turned into an advantage; otherwise it’s a huge disadvantage.

If you’ve spent any amount of time in a shopping mall or high street recently you’ve likely noticed that appification has dramatically changed the landscape of retail. Many retail locations are seeing reduced foot traffic, and frequently those customers that do visit a favourite store appear to be “showrooming;” the infuriating behaviour of browsing through physical merchandise, then ordering the same item online for 20% less with next day shipping. There is evidence that showrooming is on the decline, however this due to either customers’ greater comfort with online shopping, in-store price matching policies, or both. In any case, many people believe that retail is dead, and it is just a matter of time until all of our retail stores board up their windows and close shop.

Did you know that over 90% of all retail purchases are still made in a physical, brick and mortar location?2 Even more shocking, did you know that 83% of millennials prefer shopping in a physical environment vs. online?

When Fast, Easy and Cheap Aren’t Enough

We live in a society engineered for efficiency. Thanks to technology, shoppers can now get virtually anything delivered right to their doorsteps—and at the lowest possible price. Surely, technology will spell the end of physical shopping and onsite retail is dead, isn’t it? Did you know that over 90% of all retail purchases are still made in a physical, brick and mortar location?2 Even more shocking, did you know that 83% of millennials prefer shopping in a physical environment vs. online?3

The lesson to be learned from polarisation is that efficiency is not enough to satisfy our shopping instinct. To the contrary, many of us are becoming increasingly annoyed by the dramatic drop in customer service most of us experience with most of our purchases.4 Inefficiency, when properly applied, can be a positive differentiator, rather than negative.

As stated by Nadia Shouraboura, CEO of the retail consultancy Hointer and former technology VP for Amazon.com, “eCommerce has reached a plateau. The opportunity lies in brick and mortar experiences. It’s hard to make online shopping cool and exciting, and make you feel beautiful.”

While eCommerce has enjoyed success, it’s clear that physical shopping isn’t going anywhere. Looking to gain an unfair advantage of their own, brick and mortar retailers have started to bring a technology and analytics lens to the physical shopping space. Traffic, dwell time, basket analysis, time spent—terms that were once the domain of online analytics packages like Google Analytics—have now become the domain of savvy physical retailers.

The hope is that by applying analytical rigor to measure the physical shopping experience, retailers can use data to replicate the ease and convenience of shopping online. In retail, what is most easily measured gets the most attention, and typically the most funding.

 

Shoppers Don’t Buy Until They Buy-In

Despite the convenience of online purchases people still want to “go shopping.” To these consumers shopping is an experience, an event, an activity. There is more to this activity than acquiring some object or service, otherwise, the consumer could achieve the same result faster, cheaper and more conveniently online. This implies that something other than these factors is at play, and figuring out what that is becomes the key to customer satisfaction.

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These factors are based upon emotion, not efficiency. If a customer takes the time to visit a store they are likely motivated by something other than price, and this is the opportunity to engage their emotions. Indeed, if you can figure out what is motivating your customers emotionally they may become extremely price-insensitive as their emotions overcome their logic centers. Do this correctly and you may achieve retailer nirvana; where customers actually act irrationally and their visits to your store become impulsive and habitualised.

The mere act of walking inside the store tells us that they’re seeking something more than a product; but what might that be? What they crave is meaning. Your shopper doesn’t consciously realise it, but they want to scratch an emotional itch, not merely satisfy a tangible need. They want to buy into what your brand stands for and, ultimately, they’re concerned with how the shopping experience will make them feel. Shoppers are giving you a gift by walking into your physical locations. They are offering you the opportunity to engage their hearts, not just their heads.

 

Changing the Game: New Data, New Questions, New Results

Physical retailers potentially have an incredible advantage over their online counterparts. Brick and mortars can immerse the shopper in a physical manifestation of a brand. They can tap into peoples’ emotions, trump their logical centers, and feed their deeper, intangible need for connection and purpose. Short of the omnipresence of the Oculus Rift, Microsoft’s Hololens and other expensive virtual reality solutions, this is an advantage that physical retailers will hold for years to come.

The physical retail space represents an opportunity to become deeply relevant to customers and the path to get there is from data. This may cause some skepticism. After all, retailers have been analysing customer data for decades. However, in a mobile, social, context-rich world, there are now entirely new sources and types of data whose value is only starting to be understood and leveraged.

Retailers have been analysing structured, transactional data since the invention of the accounting ledger. Every technical advance in retail, from cash registers to loyalty cards and more recently beacons and apps, has managed to collect more and more transactional data; that is, more and more answers to the question, “what?” Transactional data answers the question “what” has happened, but rarely explains “why.” And this is the hidden piece of the retail puzzle.

Transactional data captures very little context. It reflects details such as price, inventory, specifications, etc., but not why certain things sell better than others. Alternatively, “why” questions are full of context. Asking and answering questions of “why” is how we can understand customers more deeply, more emotionally. And by connecting with customers’ emotions we can fulfill their need for connection and purpose.

Since transactional data is poor in context, retailers have traditionally looked to people to provide this missing context. They did so by using people who had the three “E’s:”

Education,
Experience and
Expertise.

People applied these three “E’s” to figuring out why customers do what they do, in a rather hit-or-miss, opinion based process.

We are no longer hindered by such guesswork. Today the world is awash in massive amounts of context-rich data. Whether it’s GPS position information, social media posts, emails, digital audio or video, – even bio-sensor gathered data – customers are creating an endless stream of contextual information just waiting to be mined.   People are connected and transmitting details about themselves 24 hours a day, where social media platforms act as digital confessionals within which people provide even more intimate details of how and what they think. As a result the old “Three E’s” are no longer adequate. In a Big Data world, we must work with a new “Three E’s:”

Eduction,
Environment and
Emotion.

Eduction is the process of taking all of the structured and unstructured information we have on a person and figure out what this tells us about their thinking and their frame of mind. It tells us their “why” as well as their “what”. Next, we use this information to manage the environment that we provide to the customer. This is a key differentiator for brick and mortar stores, and this sort of optimisation of the customers’ surroundings. In fact, if you are not leveraging customer contextual information to optimise your store’s environment, it’s hard to justify continuing to maintain a physical store. Finally, this manipulation of the customers’ environment is done in order to elicit an emotional response.

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The Store of the Near Future: Feelings for Sale

Imagine a store where technology is creatively integrated into the shopping environment so artfully that it provides an emotionally-inspiring experience. Far too often, retailers design the store to maximize sales without concern for engaging shoppers’ emotions. By making a few smart changes, retailers can see immediate results.

Digital signage, mobile technology, creative merchandising and sales associate training all make the retail environment more appealing to a shopper’s emotions—making them more likely to offer up that precious other currency of emotional buy-in.

Shopping isn’t broken, but we do find ourselves in the midst of a religious debate. One side is driven by short-term sales and looks to wring every possible dollar out of every single shopping trip. The other sees shopping as a great opportunity to inspire everyone to buy something … a product, an idea, connectedness, even reassurance.

Neuroscience and data science are clearly telling us which side will win. The only question that remains is this: Which retailers will use this powerful information to forge ahead and which ones will cling to outdated thinking and be left behind?

 

I Think, Therefore I Shop?

Given these insights, one wonders if Descartes had it right when he spoke of our split selves, either distinctly rational or emotional, and never both. Perhaps Descartes’ English contemporary, John Locke, reflected our reality more accurately when he said,

Physical retailers potentially have an incredible advantage over their online counterparts. Brick and mortars can immerse the shopper in a physical manifestation of a brand.

“A sound mind in a sound body, is a short, but full description of a happy state in this World: he that has these two, has little more to wish for; and he that wants either of them, will be little the better for anything else.”

In the context of this article, perhaps the value that brick and mortar retailers truly deliver to their customers is not the objects that change hands, but the experience provided along the way.

Properly applied, data can help you answer your customers’ “why.” In so doing, you can feed their mind and body, and place a great deal of their “what” in your register drawer.

Who’s Getting It Right?

 

Nike, Seoul Korea

Nike’s flagship store in Seoul, Korea uses digital media to create personal moments of brand exploration throughout its over 19,000 square foot space. As shoppers enter the store, LCD navigation points are installed throughout the store to guide customers through the expansive retail environment. Floor directories are transparent digital LCDs housed seamlessly within concrete support beams. Throughout the store, touchscreen mirrors dive deeper into product information when tapped by the shopper. “Digiwalls” threaded across the retail space operate based on proximity sensors, sharing rich video content via holographic projection on the wall glass when shoppers approach. As customers touch a product, relevant technical information populates the surrounding screen. The interactive customer experience technology is not solely tied to product exploration, however. In the women’s fitting room area, Nike takes a light-hearted play on the photo booth by creating an apparel photo booth. After entering the fitting room, shoppers can tap on the interactive mirrored display and snap a picture of themselves wearing Nike’s latest gear. A paper-free booth, shoppers can easily send the digital pictures to their smartphone.

 

Miele, Vianen Netherlands

Miele, the brand known for high-quality household appliances and commercial equipment, places its products in context by creating a “multisensory” customer experience. Rather than parcel out the products to disparate parts of an appliance store, Miele created the Inspirience Centre—an in-store experience blending the physical, digital, and emotional in seamless interactions. Through custom lighting, furniture, information paths, and interactive content, shoppers interact with products, enjoy relaxation areas and connect physical reactions to the sounds and smells associated with the products.

The store sign-in initiates personalization for visitors. An Apple iPod Touch is available for each visitor, serving up direct messaging, acting as a product research tool and offering recommendations based on the shopper. The GPS system in the flooring tracks each uniquely tagged iPod Touch and serves up contextual content as the shopper navigates the store. If you indicated that you liked the smell of fresh linen, the system would dispense the aroma when you entered the laundry area. However, if your partner had allergies and the system was aware, it would not dispense the scent. The Miele Inspirience Centre is the next generation in smart stores using technology to connect the emotional, physical and digital in retail.

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Birchbox, New York, New York

Properly applied, data can help you answer your customers’ “why.” In so doing, you can feed their mind and body, and place a great deal of their “what” in your register drawer.

In 2014, the online beauty subscription brand expanded to brick-and-mortar with a multi-level digital experience store. Birchbox couples in-store technology and interaction points to support its central brand theme of personalization. Customers use touchscreens and iPads to receive individualized beauty recommendations and read user product reviews. Store associates act as partners in the beauty experience, guiding shoppers through a bevy of options. The store encourages hands-on experimentation with the thousands of available products. From the Try Bar and the in-store salon to the video tutorials offered in each section, visitors can explore selections at their own speed. Birchbox uses visitor Instagram photos to line the walls at check out, encouraging both in-store and social engagement with this personal beauty brand.

About the Authors

Chris-Surdak-cover-photoChristopher Surdak is an Engineer, Juris Doctor, Strategist, Tech Evangelist, and Author of Data Crush: How the Information Tidal Wave is Driving New Business Opportunities, get Abstract’s International Book of the Year for 2014.

 

 

 

Ed_headshot_2015-e1432208999935-214x300Ed King is VP of Strategy for MaxMedia, an interactive agency creating the next evolution in digital retail experiences. Believing people want to fall in love with shopping again, Ed helps retailers appeal to shoppers’ hearts, not just their heads. He can be reached at eking@maxmedia.com or @StayingInDroves.

 

 

Bibliography

1. René Descartes, “Illusory joy is often worth more than genuine sorrow.”, Quote

2. Tom Gara, “One Useful Feature for Online Retailers” Lots of Physical Stores,” The Wall Street Journal, July 24, 2014

3. Christopher Donnelly and Scaff Renato, “Who are the Millennial Shoppers? And what do they really want?” Accenture, 2013

4. Christopher Surdak, ““I Can’t Help You:” The Dangers of Employees Disablement in the Social/Media Era” The European Business Review, January-February 2015,

5. Showrooming left in the dust as shoppers go online http://cnb.cx/1hipDnH

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