How Social Media is Changing How Retailers Predict Demand and Provide Customer Service

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How Social Media is Changing How Retailers Predict Demand and Provide Customer Service

By Mark Olivero - 12/04/2015
Social media is transforming the relationship between retailers and consumers. Retailers that can adapt how they communicate with consumers, and tweak back-end processes to better anticipate and respond to them, will be able to build strong and profitable relationships. Demand forecasting and in-store customer interactions are two areas that have the potential to be transformed by social data. When social data is harnessed correctly, retailers and consumers both stand to profit.

Demand forecasting via social media
Retailers use a number of methods to forecast demand, but each has drawbacks. Many utilize analytics to predict future sales, but a reliance on historical sales performance makes retailers slow to respond to fleeting trends. Multi-variable linear regression models are extensively used, but the models are simple and cannot handle inputs that are highly correlated with each other. The result is lower accuracy and usefulness over time. For example, holidays, promotions, weather and other uncontrolled events occur simultaneously, and these models cannot accurately assess the influence of each distinct event on demand. Emerging social media data can be leveraged to better predict demand both pre-season and in season.

Social media data can be mined to determine events that have an impact on demand. For instance, when certain celebrities wear a particular brand of merchandise, piece of clothing or accessory, those brands can see an almost immediate impact on demand, thanks to Twitter, Instagram and the like. In the same way, social media commentary (e.g. product posting on Pinterest, positive or negative tweets) can be decomposed to determine potential impacts to demand. By capturing this information, retailers can predict and respond to these fluctuations in demand much more quickly by increasing order quantities for a particular style or canceling an unneeded promotion.

Social media and cross-channel customer service
Store associates are the front-line of any brick-and-mortar retailer and they can have a huge impact on a consumer’s impression of the retail brand. Most retailers do not track customer interactions across sales channels, and those that do might not always provide this information to their store associates. In addition, store associates don’t have access to their customers’ social media commentary and are unaware of both positive and negative sentiments.

Often, the store associate is the individual best suited to solve an issue or exploit an opportunity, and not having this information puts them at a disadvantage. Today’s consumers expect a consistent experience whether they are interacting with a retailer’s personnel via a call center, online chat or at a store.

Social media commentary can be utilized to provide sales associates a portrait of the consumer outside of their interactions with the retailer. For example, associates can respond to negative sentiment gathered from an individual consumer in order to take care of perceived issues with the retailer and/or products mentioned, such as offering to return an item and replace at a discount.

In addition, retailers can potentially use social media data to exploit opportunities to win customers over from competitors. If a customer is posting positive feedback on a competitor’s item, the store associate can offer a promotion on a similar style to bring the customer over to their brand. The more information the sales associates have at their fingertips, the more likely they will be able to offer each customer an enhanced and individualized customer experience.

The success of these initiatives can be measured by improved customer sentiment on social media. The initiatives that produce the most meaningful conversations can be expanded to other stores or for particular customer segments. In addition, the retailer can utilize the results to create incentives for the sales associates to create these individualized customer experiences.

Growing importance of social
Retailers can capture and utilize social media data that, in many cases, they already possess to move beyond the traditional approaches and create the type of personalization today’s consumers expect. By utilizing social data, retailers can also empower their store associates to predict and respond to their customers’ needs, providing them with an enhanced in-store experience. The ultimate outcome, if done correctly, is satisfied customers, happier store associates, and improved financial results for the retailer — one of those rare cases where everyone wins. 

Mark Olivero is a senior manager in the retail practice at Capgemini, a global provider of consulting, technology and outsourcing services.

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