The Christmas season may still be a recent memory, but many marketers are already casting a hopeful eye upon 2012 as the year they finally turn into mercantile versions of Santa Claus: omniscient beings who know everything about their customers, and not just whether they've been bad or good. (And yes, the marketers believe they're doing it for goodness' sake.)
In the past few years, companies have amassed trillions of digital bread crumbs: from credit card transactions, from people's online wanderings on social media and search sites, from GPS devices embedded within smart phones. Last June, the market intelligence firm IDC said the amount of data produced by our ever-digitizing mass of humanity is more than doubling every two years. Companies are drowning in data. But they're also recognizing an extraordinary opportunity, and after a series of studies of so-called big data published by research firms over the past year, many are predicting it will become a major focus of marketing executives in 2012.
Already this year, Big Data has received a big endorsement. On Wednesday, after being appointed president of Yahoo, the ex-PayPal executive Scott Thompson was pledging that data would be the key to his new company's future just as it powered his last company.
"I am certain that the battle of the next generation of Internet businesses will be made up of who has more data and who knows how to use it better than anyone else," he told a reporter for the trade publication AdAge.com. "I'm not talking about your classic segmentation stuff," he said, referring to the demographic categorization that companies use to group individuals into broad target markets. Companies such as Yahoo will increasingly focus on individuals. "It's the segmentation of one and what the data of one tells you," he said.
In the middle of December, the live entertainment colossus Live Nation acquired Big Champagne, a consumer data analytics firm that had gained notice for developing the Ultimate Chart, a ranking of the most popular songs and artists according to chatter on social networks and other online sites.
Big Champagne will help Live Nation crunch the information it has on the 200 million ticket buyers in its database, and also help design the company's dynamic pricing model: the practice of altering ticket prices depending on real-time supply and demand. Old industries are also getting into that act. Over the past year, Broadway producers have capitalized on dynamic pricing to charge much higher ticket prices for especially hot shows, and nimbly offer discounts when demand fell away.
Even very young industries are being remodelled by the use of more specific data. Last year, after trying to slug it out with Groupon and Living Social, the two-year-old San Francisco-based local offers provider Bloomspot took a different tack. The company realized it could confront the main reason for merchants' disenchantment with the sites – a belief that too many people merely take advantage of discounts and never patronize the merchants again – by sifting data in order to find the most valuable customers.
With the permission of both the participating merchants and the customers, "we are able to effectively get access to the stream of consumer credit card purchases belonging to a particular merchant by going through the credit card processors," said Jasper Malcolmson, the Canadian-born president of Bloomspot, which received $40-million (U.S.) in funding last summer.
Mr. Malcolmson said that analysis of that data enables Bloomspot, which operates in 10 U.S. cities, to determine which customers who have bought, say, a 60-minute massage at New York's Broadway Chiropractic for $39 (a "$270 value") end up "acting like penny-pinchers and don't spend well and don't return," and which ones instead treat the discount as an incentive and end up spending more money at the merchant: the goal of making the discount offer in the first place.
"The customers who are good receive follow-up offers, effectively in recognition of their spending behaviours," he explained.
But Big Data isn't just being used for newfangled loyalty marketing; many companies are using it to provide better service to customers in new ways. Kenna, a data analytics firm based in Mississauga, designed a mobile app to be used by customers of its client BASF Canada, the farming chemical company. BASF cross-references its customer purchase data with information on weather patterns to generate real-time information for farmers on when to apply the chemicals for greatest crop yield.
"That's the compelling future of marketing, to use information to add value for people," said Kenna president Glenn Chilton. "That's one of the opportunities with the rise of Big Data – to use data for good, not evil!"
By referencing "evil," Mr. Chilton was nodding at the concerns that privacy advocates and others have over the use of customer purchase and other data. Still, he suggested that millennials – the generation of twentysomethings who are more inclined to hand over their personal information in exchange for something else of value – may be on the leading edge of a cultural change, which is one of the primary drivers of the rise of Big Data. If it weren't for that shrugging acceptance, Facebook wouldn't exist.
"There seems to be a softening of the concerns about the use of data to create more tailored and meaningful experiences," he said.
Still, by some measures, Big Data is in its infancy.
"If you think about the big data companies – Facebook, Google, Twitter, or just a data aggregation company working behind the scenes, I think the big challenge now is that nobody from a customer marketing perspective really has a complete picture of what the customer relationship looks like," said Rick Ferguson, the vice-president of knowledge development at Aimia Inc., the parent company of loyalty marketer Aeroplan.
"Facebook can see certain things about you, Google can see certain things about you, but nobody can really connect the dots yet to create a complete view of the customer."