It’s no mystery that customer loyalty is declining. IRI, a consumer intelligence firm, reports that “the amount of food and non-food goods sold on promotion increased 2.7% in the past year—yet volume sales have started to decline.” In other words, after the economic downturn, brands began pushing their products with sales and competing with price tags. This helped cash-strapped consumers, but eroded customer loyalty in the process, making it difficult for brands to return to sustainable price points.
How did discounts erode customer loyalty? The problem is not the low prices themselves; it’s the tendency to overemphasize perks, points, and promotions and neglect personality, preference, and practicality. To correct the imbalance, you need to gain fresh insight into the needs and behaviors of your customers. Fortunately, the insights you need are right under your nose, buried in the data on your existing audience. You can gain deep understanding of their needs and behavior by simply zooming in on your small data.
Magnify Your Small Data
Digital marketers are overwhelmed to distraction with data: Big Data, third-party data, testing, analytics, etc. No doubt data is a useful, powerful, and essential asset for predicting the behavior of a target market, but deep customer loyalty is still sown and nurtured through one-on-one interactions.
To deepen customer relationships, turn to your small data. By small data, I mean data that’s been pared down to its most essential components. Allen Bonde of Small Data Group offers an elegant definition:
Small data connects people with timely, meaningful insights (derived from big data and/or “local” sources), organized and packaged—often visually—to be accessible, understandable, and actionable for everyday tasks.
More specifically, for digital marketers, small data includes social media likes and shares, customer behavior measured on branded apps, point-of-sale data from brick-and-mortar locations, comments recorded by customer support representatives, email and landing page click throughs, blog comments, and any other data set you can conceive of with controlled and defined dimensions. Combined, these bite-size observations can compose rich customer profiles that help you personalize digital experiences.
What’s more, small data can be drawn from anywhere, integrating multiple earned, owned, and paid sources from a “decentralized data” ecosystem. What small data lacks in quantity it more than makes up for in quality. As you take a more selective approach to your data, the most significant patterns of information will stand out. Specific and actionable customer insights will soon be “elementary.”
Sherlock Holmes: The Original Small Data Analyst
Holmesian deduction, or Sherlock’s method of unraveling mysteries, is known as abduction. Abductive reasoning starts with an observation based on evidence, then forms a hypothesis to explain the evidence. Sir Arthur Conan Doyle summarized abduction with this sentence: “From a drop of water, a logician could infer the possibility of an Atlantic or a Niagara without having seen or heard of one or the other.”
Deduction is about proving something with certainty, but abduction makes a guess—albeit an informed and carefully considered one. It reasons that based on A and B, I have a strong feeling that C is true. Abductive reasoning is open minded, discouraging preconceptions and encouraging inspiration. Digital marketers will do well to apply this same outside-the-box thinking to their customer experience strategies.
Being a small data Sherlock means observing and listening to the most significant details that emerge from your pool of data. You can’t know with 100 percent certainty what your customers want, but you can be hot on the trail, testing your best predictions and learning a great deal in the process.
Small Data Is Useful Data
Here’s something you might not know about Sherlock: he knows nearly nothing about a lot of subjects, and everything about a few. In one story, he tells Watson that he wasn’t aware the Earth revolved around the Sun—that information was irrelevant to his sleuth work so he never bothered to learn it. He doesn’t know a shred of fiction, philosophy, or astronomy. Chemistry, anatomy, current events? He’s a savant.
Despite the help we get from rapidly advancing technologies, digital marketers are still people. We can only hold and analyze a limited amount, so we better make sure we fill that space with the most relevant and useful information we can find. More data is not the goal, and knowing your customers’ every move, preference, and past purchase is not an end in itself. The goal is to know and understand the data you need to better engage customers and speak directly to their needs.
Small Data Can Clarify and Focus Your Goals
Small data acts like the Sherlock to your over-analytical Watson. Watson looks at the scene and inventories the evidence, then tries to form the most rational conclusion. Then, as he’s expounding his theories, Sherlock solves the case with a single flash of insight. Identify what content and interactions have the greatest influence on your customers, and focus your problem-solving efforts where they count.
Small data leads to more focused metrics and key performance indicators based on individual behavior. Rather than scrambling to acquire more data, look to your existing customers for practical insights. The question is: How can I get to know my customers one on one, and develop engaging, valuable experiences centered on their needs and preferences?
In my next post, I’ll turn these small data methods into practical steps toward genuine customer engagement. Stay tuned for three ways brands can shrink their strategies in a crowded digital market and begin to nurture big loyalty.