Friday, August 8, 2008

Instinct vs. "Super Crunching" ?

Google is changing our lives. How ? By turning data into profits. His data mining and capacity to deal and sort out conclusions that makes sense from terabytes of data has changed everything. We’re switching from the power of the experts and experience to the realm of standard deviation and logarithmic formulas (formulas better kept that Coca-Cola recipe !).

Ian Ayres book’s describes amazing examples of application of “Super Crunching” in fields as different as Wine testing (predict future value of Bordeaux vintage upon average summer temperature and rain level during harvest) or Casinos. I was impressed to learn that Harrah’s Casinos predict how much his gamblers are ready to lose and still enjoy the game to be able to come back. The “pain point” of the gambler is estimated with information like age, sex and wealth through his zip code area. Passed the determined "pain point" or maximum estimated loss, a gift / invitation is gently offered to the selected customer ! How to transform a big loss in enjoyable experience...

The interesting point with Super Crunchers is the way it describes the switch between instinct or experience vs. quantitative analysis to predict outcomes.

Transposed to the Retail area, it seems that defining the product to be promoted is, in most cases, more the result of an opportunity rather than a deep analysis of its profitability, cannibalization effect or capacity to attract new customers.For example, this photo shot in Carrefour where all kind of shampoo are in promo in the same time.

1 comment:

Nicolas Schriver said...

I think that we are in two very different cultural world.
On one hand, the Internet field, with a strong engineer mind and programming. On the other one, a market based on negotiation and conviction power.

This is very difficult to change the culture of a market. For instance, try to find some bankers and financial advisors wearing tee shirts and caps like a start up geek of the Silicon Valley...

I actually think that it will come eventually for the retailing market though.