Let’s play buzzword bingo. Between big data, optimization, predictive analytics, visual analytics and unstructured data processing, there’s a lot going on in the business intelligence world that has a direct impact on retailers. Buzzwords don’t win the hearts and minds of consumers however; those can only be had through the right products, the right prices, and increasingly the right combination of brand promise and service offering. According to RSR’s latest benchmark report on retailers’ analytics plans, the desire for sophisticated customer understanding is high, but the capability is low.

Customer Behavior Trumps Everything …
When it comes to understanding consumers, there are two schools of thought: One, that if you can know everything about who a customer is — how old she is, how many kids she has, does she have a dog, does she like hiking — then you can most effectively meet her needs. The other school of thought posits that you don’t need to know anything about who the customer actually is, you just need to know their behavior and how that might be similar or different to a group’s expected behavior.

Buying into either one of these extremes to the exclusion of any activity around the other is a mistake. Retailers need a healthy dose of both types of customer understanding. When it comes to analytics, retailers are starting to come down much more in favor of behavioral data than transactional or demographic. For example, 81 percent of retailer respondents to RSR’s analytics survey said that understanding customer behavior is “very important.” By contrast, only 48 percent said that promotion and price transactional measures were as important.

What do retailers want to use this behavioral data for? Fifty-eight percent report it’s to understand the customer’s path to purchase — i.e., the top business challenge they reported around analytics in 2015.

… But Customer Demographics Are Easier to Understand
Despite this affirmation that it’s customer behavior that will ultimately yield the most value from analytics, retailers report that they see the greatest opportunity around understanding who their customers are, particularly their buying habits and preferences — i.e., demographic and psychographic type information.

For better performing retailers (“winners” in RSR terminology), the issue comes down to this: they want to use more nontransactional information than they are currently, but they don’t have the people with the right skill sets who can help them make sense of the wealth of nontransactional or unstructured data that’s pouring into their enterprise. For lagging retailers, the issue is one of maturity. They outnumber winners two to one in reporting that they don’t even know the right questions to ask of nontransactional data (39 percent of laggards vs. 19 percent of winners), let alone whether they have the right people to ask those questions.

Making Sense of the Noise
Part of the challenge retailers have in marrying transactional and nontransactional customer data is that most brands don’t have the analytics infrastructure in place that can bring both types of data together into one place. However, as more retailers try to make sense of behavioral, nontransactional information, particularly as they try to understand cross-channel behavior, the need will drive investment, whether vendors are positioned to support these new needs or not.

Nikki Baird is managing partner at Retail Systems Research (RSR), a research firm focused on the intersection of retail and technology. Nikki can be reached at nbaird@rsrresearch.com.