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Article
Demand Means Customer. Can I repeat that again?

Rechurning history won't get you there. You need data and analytics. So, DemandTec acquired ASI.


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Managing demand goes way beyond the forecasting techniques of the 1800s. Evaluating the history of forecasting, we have focused too much attention on history. No doubt, often that is what was available, without making efforts to ask your customers what they wanted. Certainly in those olden times, the custom and craft brought sellers and buyers closer together to provide Mademoiselle exactly what she wanted within the boundaries of budget.

But in modern times, our shoes and clothing are not made by the cobbler in the village or the tailor from his cottage. We have millions of products with dozens of channels and millions of customers. This scale brings obvious challenges that we have only modestly begun to tackle.

Art credit: LongAgo.com

It’s the 21st century, and we need to move on!

We need to think a bit about the selling model. Selling products is about ‘pushing.’ It may be ultra subtle, but let’s face it, it’s taking what you have and trying to convince someone else that they need to buy it. They might, actually. And if they don’t go for it on the first round, we try ‘demand shaping,’ a nice euphemistic term meaning to play with a few dials—mostly price—to get it sold.

Having enjoyed the fruits of missed labor, the after Christmas mega mark-downs, taking the additional 50% off and seeing so much stuff!!!!!!!!!!!!!!!!!!!!!!! I know the challenge of better Demand Management has not been met. And it costs a fortune to keep missing.

Shopper Insights

So rather than just focusing on the product, why not focus on the customer? The Holy Grail for companies is serving markets of one (see pioneering leadership work here from Strategic Horizons, as well as the ground breaking book, Markets of One, by Joe Pine). Not a new concept, but if we could build and serve to markets of one, we would have no waste and only happy customers. 

The challenge is how to get accurate customer insights and scale it.

Firms like DemandTec have crafted, through science and art, methods to scale, taking the bits of data and creating methods to model the data and design their own approach to their customer segments. It is so critical for companies to spend the time on both current customer models and desired customers for the future. But let’s start with what you have, since it can be the source of your future, if nurtured properly.

Create a segment and test it. Do these models sufficiently represent the customer? (There are deep analytics associated with all this, which you can commit yourself to learn, but that I won’t go into in this brief). These models can be shared and tested with trading partners—a novel idea—and validated, whether these work for the products, the channels, the companies, and fairly and accurately represent the markets that this cluster of partners serve. A retailer might have other segments with other suppliers, too. 

Here is an example: I saw a talk about Hy-Vee grocery. Retail, grocery in particular, is a super huge challenge due to all the categories and the ‘fine’ price points, and its many customer and product segments. I found this intereview with Ric Jurgens the CEO, to be very insightful on segments, geographies and individual customers, the markets of one. He uses so many sources to reach customers for his understanding. Analytics, social networks, direct emails, etc., all are part of his mix. 

This is progressive, since it won’t all come in one paradigm.

Another step forward then is to use the insights to change behavior—Wahoo! This takes care. Applying what we have learned and seeing if performance changes. Are we able to get customers to behave in more positive ways, such as buying without promotions, reducing returns, and of course buying more of high margin items? What is working and what is not has to be analyzed. A lot of analytics go into the mix here—this is not demand forecasting! To that end, DemandTec has acquired AIS that is a leader in behavior/pattern recognition and analytics.

Source: Computer History.Org

Though a young company, AIS has strong thought leadership in softline, a very wily segment. This wiliness means no real demand history. Fast fashion new product introductions tend to have no history to rely on, and a current technique by others is to pick up the history from the past and paste it onto the future. You're merely guessing, then—not really trying!

I encourage you to think a bit about this challenge and how you might improve your business performance by applying some new approaches.

Conclusions, Recommendation: Customer Insights Initiative

For lack of a better expression, I suppose that a Customer Insight Initiative will do. . . saying ‘get to know your customer’ sounds like ‘take your kid to work day’—few do, and companies are not as friendly on that as they say they are. The same is true with understanding the customer. But I can feel it when I am in the presence of true care. Can’t you? So why don’t we have our own companies pursue a better understanding of the customer?

Start your exploration. How will you reach real customers (not channels, though they count, and we will come back to them next week) and begin to understand who they are and what they want? What information channels will you use to reach them? Mobile, web, direct? Data bases from 3rd parties? Your own sales? Yes, probably all of these. They all bring a different dimension to the understanding of the customer.


To view other articles from this issue of the brief, click here.




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