How Social Media Reveals What Consumers Want Before Your Merchants Buy
By Matt Pillar, Editor In Chief
As if to prove his deft entrepreneurial timing, the five years that followed the founding of Greg Petro's predictive analytics company have seen the production or maturation of some near-perfect platforms for gathering real-time customer insight. He's been quick to capitalize.
Petro is CEO of the Pittsburgh-based company First Insight. He's a former retailer and veteran merchant, and he founded his company in '05 on the premise that he could help retailers understand how products will perform before merchants buy them, and long before they hit store shelves. The social media revolution has fueled his seeming clairvoyance.
At a glance, it looks like child's play. The First Insight solution begins with interactive online games that its customers (retailers) feed to consumers through social networks like Twitter and Facebook fan pages. What Would They Pay (WWTP) is one such game, which presents a player with a product (usually not yet available on the market), asks them to price it, and awards them a prize. Games like this are the basis of the company's ability to quickly amass intelligence into what the consumer knows, likes, and wants. Then it applies a layer of predictive analytics, producing what it calls a "real time, ahead-of-the-trend view of consumer behavior, which retailers can use to truly sense product demand."
Before you scoff, consider how many millions of Americans play games on Facebook alone, every hour of every day. The site boats 400 million users who spend a collective 500 billion minutes per month there.
I'm still skeptical too, but Petro told me about his board, which includes Richard Marcus of Neiman Marcus and Joel Adams of Adams Capital Management, and the success he's helping clients like Neiman Marcus achieve.
"We can often provide customers with valid merchant-level guidance within 48 hours of engagement," says Petro. "We track against sales to measure how well we help retailers define customer needs, identify category opportunities, mitigate risk, and evaluate and select products. We've been able to positively impact a retailer's gross margin by 3-5% and increase comp store sales of categories by 10-15%."
The takeaway is clear — you can make a real-dollar impact on sales and margin by engaging mediums that cost virtually nothing (service providers like First Insight notwithstanding). If nothing else, the company's approach is a creative response to the question "how can I leverage social mediums?" It's an inquiry often posed via LinkedIn and Twitter discussion groups, and one that draws a large, passionate, and informed response. Can you see the irony?