I’ve just finished reading one of my favorite books this year. It’s called Super Crunchers and I believe it has some very valuable lessons for retailers. The central theme is that through statistical tools like regression analysis it’s possible to test for the co-dependence of variables. Finding these dependencies allows companies to exploit them. Let me explain through my made-up example…
Borders (the book store) knows sending a mailer with a 60% discount lifts sales. The discount variable is directly related to sales. This is a no brainer and gives no strategic advantage to Borders as Barnes & Noble knows that too. However, let’s assume Borders analyzes my transaction history and notices that every time I make a store visit and buy coffee odds of my purchasing a book increase 3x. Now this is a solid marketing gold-mine. Borders knows the average margin on each book I buy and can compare that to the cost of coffee. They can now send me a coupon with 5 free coffees at their store. Further, since they know what I get, mocha latte, they can specifically offer 5 mocha lattes in their promo. I’m sure this will improve conversions. Super Crunching gives Borders a tool to exploit my behavior and drive their bottom-line sales.
In the book, the author Ian Ayers cites numerous examples of Super Crunching. He shows how Super Crunching accurately predicts good wine vintage, legal outcomes and even airline ticket prices.
Ian Ayers is brilliant and I also recommend you read his other book Why Not?
So whether you are a small etailer with no stores or one with 500 think of ways to deep dive your data and discover relationships you never knew, or expected, could ever exist. Your customers will love your intuitive ability to predict their desires and they’ll reward you by opening their wallets.