By Rishad Tobaccowala & Sunil Gupta
IN an age where data is the new oil, how are smart companies extracting insights from vast data reservoirs to fuel profitable decisions?
Consider these three cases:
Amazon.com’s Prime Now
Prime Now allows its members to order products for home delivery within two hours. How can Amazon deliver thousands of products to millions of households within hours when other online businesses take three to five business days? Amazon uses its customers’ past purchase behavior to predict what they’re likely to order. This insight helps Amazon optimally locate and stock its warehouses. Amazon knows the products you’re likely to order even before you do. Better predictive ability from rich customer data has another important benefit: Amazon doesn’t keep most of its products in inventory for long. In fact, its cash conversion cycle is 14 days, compared with nearly 30 days for most retailers.
Heineken’s ‘Cities of the World’
In 2014 Heineken faced a challenge: Its consumers, especially the young, were beginning to prefer local craft beers. Heineken saw that people in cities were using social media to determine the hottest bars, restaurants and events to check out. The company launched a campaign called “Cities of the World,” supported by a Twitter-based service called @wherenext. Consumers simply tweet @wherenext and geotag their location to receive recommendations of restaurants, events or clubs in their area. Heineken fueled the @wherenext algorithm with insider information, mobilizing consumers to post about their adventures. The social-media campaign led to a volume growth of 5 percent in the top 20 markets.
BuzzFeed’s Native Ads
Native advertising, or sponsored content that often blurs the line between ad and editorial, is all the rage. BuzzFeed, a leader in this field, now generates 7 billion views from 200 million unique visitors every month. Advertisers value BuzzFeed’s ability to create sponsored content that achieves 30-percent to 80-percent social lift, a measure of its “virality.” Jon Steinberg, former president of BuzzFeed, explains, “There is a lot of creativity [in producing content], but once the posts are published the system takes over.” The company uses insights from data that allow algorithms to feed the winners and starve the losers.
Rishad Tobaccowala is chief strategist of Directoire at Publicis Groupe. Sunil Gupta is a professor of business administration at Harvard Business School.