The next step in harnessing the immense power of consumer data and information technology may be summed up in two words: data warehouses.
to rethink and do a much more effective job in understanding their customers and responding to their needs -- on an individual basis.
But how will distributors succeed in getting their hands around the rapidly expanding mountains of store-level consumer- purchasing data now being compiled in the industry? How can they analyze and use that information effectively to make marketing decisions?
One answer may lie in the creation of large, efficient data warehouses to store and sift through the data. Here are some thoughts on how the industry may make use of these systems in the future:
SN: How far along are supermarkets in using data warehousing?
Tom Dooner: It's relatively early in the game. It's precrawl. We've been faced since the inception of point of sale with trying to figure out what to do with that data. That hasn't changed. There's still a lot of figuring going on about what to do with it.
But I think the ECR initiative and many of the tenets and concepts it has brought to the surface have made it a more intriguing concept than ever before.
Don Reeve: Although there's a great deal of work being done in this area, data warehouses are really in the infancy stage, so opportunities are endless. For the most part, I would say category-management initiatives have led the way for data-warehousing startups.
Dick Lester: We're real early in the game as far as technology in data warehousing. Most of us just thought they were great big databases. In fact, they're something quite different. They have different characteristics. They're built in different ways and have to be accessed differently.
David Reed: We're probably still just getting past the infancy stage. We're not yet adults in using data warehousing and decision support.
Lester: We all seem to have our toes in the water and we're trying things. We're learning as we go, both on the hardware side and on the software side, where you're getting fairly decent data-retrieval tools to let people phrase questions differently. But I know few people who would consider themselves sophisticated in this area.
SN: What do you see as the prime benefits of implementing data warehouses?
Reeve: Data warehouses allow businesses to store large volumes of quantitative information to improve the decision-making process.
Ed Oertli: Building and maintaining a historical database of what's been going on in your store, item-level information, is going to be a long-term part of the system, a part of what we manage, from here on out. It'll employ transaction information as well.
Dooner: The business benefits are yet to be fully understood, but it's hard to believe there isn't great value in all that data. Being able to churn it into information is something that may prove to be a differentiating factor. The people who know how to use it will have a competitive edge.
Some of the concepts associated with data warehousing may be directly related to database marketing. One major use of a data warehouse is to acquire and retain customer-level purchase activity.
This information could probably be used for various marketing programs, such as market-basket analysis, and identifying items that when placed next to each other might increase total sales.
Oertli: In the future, more people will be looking at data warehousing to understand promotional activity, how to price products and how to make those better promotional decisions. How to get in deeper into the information, including competitive pricing.
SN: What are the biggest challenges in this area?
Dooner: The biggest challenge associated with data warehousing is finding the people who will creative ways to analyze the data. We're faced with an incredible trend in the rate of growth of consumer data and it's going to continue to expand exponentially.
Reeve: The supermarket industry in itself lends new meaning to the words "data volumes." There's a significant commitment in time and money required to create and manage a data warehouse, so clearly the benefits must be effectively planned and measured.
Oertli: The technology tools are out there and they're working in many of the retail environments today. There aren't any real technology issues. There's an investment issue. You have to invest in hardware and software to support it, and in people to support it long-term.