Localization uses Big Data to Drive Big Business

There’s growing interest in using big data for business localization now, although the use of customer data for optimal orientation of busi


ness locations and promotions has been around for at least a decade.

There’s growing interest in using big data for business localization now, although the use of customer data for optimal orientation of business locations and promotions has been around for at least a decade.

In 2006, the Harvard Business Review declared the endof big-box retail standardization in favor of catering to customers’ local and regional tastes, fostering innovation, and – not incidentally – making it harder for competitors to copy their store formats by changing up the one-size-fits-all approach. A decade later, analytics are affordable for businesses of all sizes, giving smaller players in a variety of industries the ability to localize as well.

An example of early localization of items sold comes from Macy’s. Executive search firm Caldwell Partners describes the department-store chain’s vast localization project, which began in the mid-2000s to differentiate store inventories for customer preferences, beginning in markets such as Miami, Columbus, and Atlanta. This strategy has helped Macy’s remain profitable despite ongoing major declines in department-store sales in recent years.

Localization for stronger consumer appeal, better product offerings

In hospitality, hotel chains now use localization strategies to compete with locally owned boutique hotels and with Airbnb rentals that promise a “live like a local” experience.

Visual News reports that Millennials’ tastes and preferences are driving this trend. These younger travel enthusiasts want a unique experience at each destination, even if they’re staying in properties owned by the same hotel brand.

Hospitality Technology notes that today’s customer profile data gives hotel chains a “360 degree view of customer spending behavior across industries, channels, and over time,” for more precise location orientation and targeted marketing.

In fact, any consumer-facing business can benefit from using local-market data. GIS firm ESRI has described how individual bank branches can orient their loan offerings to match the needs and risk profiles of customers in the immediate area. Other elements that can be localized to suit area customers’ tastes and spending power include product prices, menu items, location hours, staffing levels, décor, and product displays.

Localization for more effective marketing

Outside the store itself, localization is a powerful tool for improving the return on marketing. By using detailed data about local customer behavior, retailers, restaurants and other businesses can move from overly broad promotions to segmented offers that closely align with each segment’s preferences.

In some cases, this type of marketing localization can reduce expenses (for example, by lowering the total number of direct-mail pieces required for a campaign) while generating higher redemption rates.

Localization of marketing efforts goes beyond cost savings to the establishment of customer loyalty and competitive advantage. Study after study shows that consumers expect and respond well to offers based on their preferences, but companies have been slow to provide what customers want.

An international study reported by Retailing Today in June found that 78% of consumers make repeat purchases when they receive a personalized promotion, and 74% buy something new. Despite this, the study found that less than 30% of the companies surveyed were investing heavily in personalization.

A similar 2015 study focusing on North American consumers, described by eMarketer, found that more than half of the consumers surveyed wanted promotions tailored to their product preferences, age range, personal style, and geographic location. That study found that although 71% of the regional retailers in the survey say they localize and personalize promotional emails, half the consumers said they got promotional emails that didn’t align with their preferences.

Clearly, there’s room for improvement in the execution of localized marketing, and businesses that get it right will have an advantage with customers whose expectations are going unmet right now.

Smart localization and orientation involve understanding the available data and knowing how to use it in cost-effective ways to give customers the information they want. It also involves rethinking the way businesses and consumers interact, and the role geography plays in business.

Localization and careful audience targeting may be the keys to business survival. A 2013 Forrester report proclaimed that in the digital age, “the only sustainable competitive advantage is knowledge of and engagement with customers.”

With so much power of choice in the hands of consumers, it’s up to retailers, restaurants and other businesses to earn their loyalty by delivering what they want in real time, no matter where they’re located.

Author: Charles Hogan

Charles Hogan is co-founder and CEO at Tranzlogic. He has over 20 years of experience in fintech, data analytics, retail services and payment processing industries. Follow on twitter @Tranzlogic)