Good afternoon, and thank you for joining us at today's Design Lounge session. My name is Jean-Pierre Lacroix, and I'll be the host today. And we're very fortunate to have with us Randy Weisberg, President of Catalyst Retail Solutions, a guru in data mining. A lot of you have heard a lot about data and how to leverage data. Well, we've got an expert here that's going to talk to us about how you convert data information into actionable results. Randy, thank you very much for joining us. Well, thank you for having me, JP. I appreciate it and look forward to having this discussion with you. Data is a big conversation, but before we get into the subject of data mining, talk a little bit about your company and what you do. The company was founded about two years ago, and we specialize really in the area of opportunity identification. We do use data extensively because we are a fact-based organization.
The key for us is really about step change. We're not about continuous improvement. There are areas of opportunities for that, but we focus on really looking for that silver bullet. I often say that Thomas Edison came about discovering the electric light not through the continuous improvement of the candle. So there are new ways and approaches to explore opportunity to discover that growth. And so Catalyst Retail Solutions, what kind of clients do you work on and Primarily in the space of retail, but increasingly we're working more with CPG or vendor side of the business. My past experience encompasses both, which facilitates it. Vendors and CPG have found themselves somewhat at odds and distant from the customer. That relationship with the retailer has increased, and what they're seeking now is new means of securing insights through data to bridge that gap, and they're working with us. But we've worked with a number of retailers like The Source, Canadian Tire,
Target more recently. And so those are really the fundamentals of our business. Now, Randy, you bring a lot of experience from a retail standpoint. Talk to me a little bit about your retail background. So actually, retailing is an area of focus for me really in the last dozen years or so. I started my career in CPG, working in the food side of the business, but transitioned into retailing as I saw also the power shift around who owns the customer shift. And for me, the focus of retailing is not too dissimilar to that of focusing on vendor side or consumer packaged goods. It is about bringing discipline. And I saw a gap in the marketplace around knowledge-based, fact-finding analysis on the retail side, which I brought over from CPG. A lot of clients talk about a shift in the marketplace between intuition and fact-based insights. Very often we're in meetings, and the conversation gravitates
towards, "Those are great ideas and great insights," but what facts have you based those insights on, and are they actionable? That's a very good point, JP, and I see that a lot at the executive suite. Intuition is clearly an important dimension in decision making. But what's happening is that because the level of business has gotten so much more complex, the downside of making the wrong decision is so much steeper and can impact severely the financials of a business. There's more reliance now on fact base. In fact, what I find is that fact base decision making clears the table, really allows focus, and there's no longer about this gut feel coming into play saying, "Well, I'm hesitant to go down this path because you feel that this is the right approach." Fact base clears the table. It says, "This truly is the way to go" and allows you to act with confidence and to really go bigger than you would've likely have gone if you were just relying on your gut.
So yes, a very important dimension at the decision table these days. So when you look at that fact-based analytical review, give me some insights on situations where that has come to play, where maybe the organization was going in a different direction and where those fact-based insights have helped re-steer their direction. So, one of the things I find is that as businesses are evolving, the nature of where their growth is coming from is shifting the profit mix of the business. Whether they notice it or not, an analysis of fact on the business' health today in the present time will give you insight to that. What I'm finding is that often leaders are relying on what's worked for them in the past, losing sight as to what's in fact working for them today, and the need to push out on that and to push harder on it. Those are real-life situations. Without mentioning any retailer names, but I've been in situations
where you're working with a retailer, and no matter whether they're small or large, they always have about 50 to 75 categories that they segmented, and the question is always, "Which ones do we focus on?" We know that the resources available to the business are only sufficient to push out on maybe five in an effective way, right? But which of those do you focus on? And that's really the defining factor. The analytics and the use of big data and predictive analytics in particular to process that big data allows you to make that decision. Which of the five categories will make a difference for our brand, which will make a difference for driving our traffic, and allow us to have a dominance in the retail environment? So I think you touched two key points, big data and predictive insights. Mm-hmm. Talk to me about what does big data mean? There's all kinds of jargon about that. What is the definition for you of big data?
Yeah, really big data is a term that's evolved in the last five to seven years. It's really come about as a result of the fact that there's so much more data that's available. The advances in POS systems has afforded more data. But more importantly, digital platforms, e-commerce, there's a lot of data surrounding the customer's purchase and their path to purchase. Big data is really about the volume of data, but it doesn't necessarily talk about how you process that data, and that's where predictive analytics comes in. It's a tool for managing big data. Often customers will tell me is, "Well, what kind of a financial undertaking is it to get into big data?" Often they are sitting on big data and they don't know it. Really, the question is not more data or should I get into big data, but how do I take the data that's available to me, or that I can acquire that will be useful for my analysis,
to really process it to get down to identifying opportunities? That's really the key question. Who is effectively using big data right now? I would say that the industry or the sector that's benefiting most from it at the moment in business is retail. Retail, just by its nature, is swimming in data. And in fact, it's actually causing a lot of challenges and issues. It's not really about more data, but more effective use of the data, which is where predictive analytics is coming in. CPG and vendor side, they are using big data. They're going more upstream in the path to purchase in leveraging it, in better understanding awareness and consideration as it relates to their brands and their categories that they wish to dominate. But I'd say that retailers have taken better advantage of big data to this point. It's still exploratory. There's still some gray areas around the effectiveness of leveraging
the higher up on the path big data, only because you don't have direct access to transaction, and correlating the insight with a sale is an important insight that allows you to facilitate better decisions. So that's how I would see the marketplace really using big data at the moment. So ultimately, it drives sales, accurate prediction of sales. We talk a lot about you're related to assortment selection as being one of the needs of and leverage points for big data. Are there other examples? I know we talked about PC loyalty program, and they've used predictive models. Are there other applications that we could see in the marketplace other than SKU rationalization or big bet? Actually, that's a very good question, only because you're right. There's a lot of work that's being leveraged around CRM loyalty programs and big data. Because what they're doing is where for brands in particular, they've
been higher up on the path to purchase in terms of the area they're focusing, whereas a loyalty program is really further down, closer to the transaction. And so what they're trying to do is bridge a vendor into a more important area of the purchase cycle. I would say, if we can focus a little bit on retailing, there is some interesting areas of work that's being done leveraging big data. One of the things that is a sure sign as to whether better use of big data can be applied for a client is their over usage of a flyer to drive their business. Mm. What that suggests to me is that they are going for what is traditionally perceived as being the a marketing tool of choice, which is flyer. Very simplistic. It's about picking the right assortment, figuring out the right price point, and then distributing that flyer to the right market. A lot different, and a lot easier to manage as a result of why it's being the default for retailers.
What we're trying to do is push retailers to think differently than a go-to-market strategy that relies on the flyer. Why? Fundamentally, what you're doing with the flyers, you're appealing to your existing customers. You're not building a new franchise or prospect customers. Today, we live in an interesting demographic shift. The millennials are playing a more significant part in the marketplace. They're evolving to become adults, and they're now in the workforce, and they're establishing families. In the next five years, the prediction is that their buying power will be greater than that of the boomers. The reality is, is that if you continue to do a flyer program, you will miss this customer altogether because you're just appealing to your existing customer group. You need to go up on the path of purchase, understand awareness, understand consideration in the context of this particular customer,
and that's an important new way of leveraging big data for retailers, and to start thinking differently about where is really the opportunity in the business. So you think of big data and these opportunities. You identified, obviously, consideration set. We identified SKU rationalization and product mix and assortment. If we've now put our hat as a CPG, consumer packaged good company, and said, "Okay, what are the leverage points for big data for them?" What would you recommend to that sector of the business? So for CPG, there's two things. One, do you have a strategy of going direct to market? And if you are, you're now going to start acting like a retailer, whether it's e-commerce or your own retail like Apple did. And it's very clear in that context where the opportunities of big data would be. But if you're not, and you're choosing to leverage big data in the context of your opportunity, think
about looking through the opportunity through the lens of your customer, your retailer. And what is obsessive for retailers is traffic, and that marginal customer. The marginal customer is that shopper who doesn't exclusively shop with you as a retailer and shops around. What you want to do is you want to-- You know you already have your loyal customer. What you want is now a bigger share of that marginal customer. So in the context of understanding that, a vendor or a CPG marketer wants to understand how does their product fit as a solution to help that retailer achieve their objective of driving traffic, and in particular with that marginal customer. Big data can offer that insight, and it does it by looking at the drivers of purchase and in what circumstances and conditions is a purchase being made, and where does their product and their category play a factor in that purchase decision.
When you look at big data right now, most of it is collected via the POS system in the stores. With the launch of Apple's new iPhone and geo-fencing and RFID, do you think that's going to shift where the center of data collection will move from strictly POS-based to mobile-based? Yeah, actually I do. And especially as mobile becomes more of a transaction vehicle as well. Mm. A lot of data is being captured through that digital space. And there's also already the advantage of insights being available and data being collected on the social media platform, which is around awareness and consideration. So all of a sudden, that's changing the dynamic. It's no longer just the retailer who captures the data. I think importantly, though, there's another dimension of insight that needs to be provided, and that's simply really getting smart insight around consumers' behavior. And yes, you can get it
through how they're transacting, but you still need to do that quantitative research of reaching out to the customer, understand how they arrived at a particular purchase. Now, they may not know consciously necessarily- Mm ... but asking the right questions will get you at that insight. And JP, this is exactly going back to what you were saying around retailers wanting to know which categories to focus on, which whole merchandising group is a priority. Now, if the vendor has access to that insight, and they can contribute to that decision making and help focus the business, all of a sudden you now have a new strategic partner at the table. And ultimately, that's what you want. You want to be where the decisions are being made. I have a sense that it's like playing a game of poker where the retailer has all the cards stacked in their favor, and that they may choose to play with the CPG companies, but it's more they control a lot of that
information. Do you see an era where truly the term partnership is going to happen? And I say that because I look at one of our clients, Petro-Canada, they have a program that we helped launch or helped support called Retail Edge. And what's insightful about their program is that they actually share the POS information. They actually share the transactions by day part, by category, by SKU, because they believe that a well-enabled partner can deliver more effective programs. But the supermarket industry has been fairly conservative. Do you see any changes at mass merchants and- I don't see it happening fast enough. Should there be change? Absolutely. There needs to be this partnership between the vendor and the retailer. They both have a common interest, and that is the customer or the consumer of the goods. The reality is exactly as you're talking about it, is that information needs to be
shared to capitalize on a joint business opportunity. Now, I would suggest to you that some retailers are more progressive than others. If you are more inclined to be a retailer who's focused on the customer rather than on the product, clearly, you're already going down that path. That's creating an opportunity for a partnership with a vendor. I see it more now taking hold, and what I would suggest to you, the changing dynamic of that customer, I talked earlier about the millennial, will force that change. The millennial has a very particular need, and a type of relationship they want to have with brands or retailers or merchants. And what has worked in the past will not work with them. They want to understand more about the story behind the products and the decisions around purchases that they are making. They want an experience. They want authenticity, and it's no longer about peddling products anymore.
It's about really telling that story. And you cannot, as a retailer, tell the story on your own without the engagement of a vendor. Mm-hmm. So I think that's where the opportunity is. So Randy, I know we talked a lot about capitalizing on big data and having predictive models. Are there areas that people are not leveraging big data that they could, that would benefit the organizations, retailers, CPG companies? Typically what happens is that when you have a business plan or a marketing plan, you typically will gravitate to what's worked before. And as I mentioned earlier, times are changing, and you need to be thinking about different types of solutions. The result of doing more of the same is that you constantly go back to the tools that you're most familiar with. And as I said, retailers are really obsessed with traffic, so by default, they typically over-invest in flyers. There is a lot of opportunity higher up on the path
to purchase to focus on other vehicles. And I'm not talking necessarily about digital or social media, which I do believe is important in building your brand, but not disproportionate to some of the other more traditional vehicles that are available, like mass broadcast media, whether it's television or radio, for instance. You'd be surprised at the impact that those mediums can still have if placed correctly in a strategy of focusing on a very particular part of the business, which is misunderstood, or either the consideration is not strong for the retailer or that vendor, and you need to put the money against it. And then you can see some fairly explosive growth. The reality of what happens is that if you go higher up on the path to purchase, it's like opening up the floodgates of new consumers to come into your business. They will just, by default, cascade into your traffic. Rather than just focusing on traffic, where the
intent is really to get more of the same people to come back to your door. So it's a lot easier to bring in new customers. That's the area that I see a reluctance or a missed opportunity most often with all the retailers, and it doesn't matter what's the size of their budget. I see a missed opportunity there continuously around consideration and awareness that could be leveraged to build the business. Randy, if you were to give advice on how to capitalize on big data, some watch-outs, some thoughts that, maybe a checklist of things that retailers need to do to stay, or CPG companies stay ahead of the curve, what would they be? So, a couple of things. I think the first thing is more is not necessarily better. So it's about smart use of the data. Sometimes you already have enough data. It's just about how do you process and cycle through that data to analyze and really mine what's available there.
The second thing is that you need to start thinking differently. It's not about continuous improvement. We live in an environment now of slow growth, and it's really hard to really ride the tide of an economy that's favorable and is bringing you along. You need to really hunt for your opportunity. You need to steal share. And in order to do that, you need to think differently about how that growth's going to come. And the analytics will allow you to open your eyes to opportunity that you may not have seen before. And they are there. Like often we say, "There is no silver bullet." That's false. I've seen it time and time again, even with old businesses and new alike. The other one I would say is really understanding what is it that you're hunting for. I would break it down into three areas. You're hunting for a business model that's creating value. You're hunting for an effective investment of resources,
namely people-focused, whether it's sales or marketing. And the third is you're hunting for margin. Analytics will help you with all these three. So those are really the sum up for me in terms of what is it that you can do with big data and how to approach it. Randy, thank you very much for joining us and sharing your thoughts on big data and predictive modeling. And I'm sure our audience have some questions. You'll see on your screen a telephone number. Please call in. We're going to leave the lines open for the next 15 minutes. You can also post your questions on the web conference chat line, and we look forward to getting your input. Thank you very much. Thank you for joining us at today's Design Launch. I'm Jean Pelois. Take care.
