Full text of Ray Burke’s talk: How stores track your shopping behavior at TEDxIndianapolis conference.
Listen to the MP3 Audio here:
Raymond R. Burke – E.W. Kelley Professor of Business Administration
Thank you very much. I’m delighted to be here today.
Well, I wanted to share with you a little bit about my background and in my interest in watching shoppers, okay.
So to understand my fascination with this, we need to go back to my first job which was a Cardinal Camera Store. So I was hired as a salesperson when I was 16 years old. And this was my dream job, because I loved photography and I really enjoyed interacting with people.
But I discovered that the salespeople in this store worked on commission and it actually turned out to be very competitive. So we’d stand at these glass counters and customers would pull up in front of the store and they’d walk in and we try to size them up and see, you know, who are the big spenders.
And you know, you get different types of shoppers who come in. So one type of customer, they were just there to browse and it didn’t matter how much time you spent with them or how many cameras you showed them, if they’re going to buy anything they were going to go to the discount store that was down the street.
Other people would come in and they were there just to pick up some film or some photo processing.
But there was a third group of shoppers and they had bigger plans in mind. They may have had a wedding that was coming up or a vacation or a birthday party.
I remember one occasion where we’re standing there and this old truck, this pickup truck pulls up in front of the store. And the back was filled with junk and this guy gets out and he comes into the store and it looks like he hadn’t showered in a week.
And the other salespeople, they scattered so… but I saw when he came into the store that he was walking with intention and his eyes went to a display case that had some of the nice cameras. And we struck up a conversation and I learned that his wife was expecting their first child. And they wanted to get some really nice pictures and they’ve been saving up for this.
And so we looked at some different equipment and he ended up getting some nice gear.
So I learned from this experience the value in watching shoppers. Now I still watch shoppers today, but I have more sophisticated tools. For example, at the Kelly School’s Customer Interface Lab, we have tools that allow us to simulate the shopping experience. In some cases, we actually build out part of a store with shelf fixtures and checkout lanes and we use eye tracking technology.
In others, we use virtual reality simulations to recreate the appearance of the store. So for example, we’ve simulated mass retail stores and grocery stores, specialty retail stores. So this is an example of a gourmet food and wine shop.
Now the advantage of the lab is you’ve got a lot of control, a lot of flexibility but in some cases we actually have to go into the stores… bring the lab into the store to study shoppers in their natural environment.
Now we will, in some cases, use… you know you go into the stores and you see the security cameras that are used for property loss prevention, we use the data collected from those cameras. We’ve also looked at the shopper behavior using our own cameras in the store that use 3D imaging, so we can measure not just where the shopper is standing but their skeleton position, where they’re reaching, where their head is facing, their facial expressions. And we have software that automates the coding of this and is able to capture this information anonymously.
Now occasionally you’ll read stories about this kind of tracking and in the Wall Street Journal or the New York Times… and they tend to have headlines like big brother is watching us or spying in the aisles, and so they have a very negative tone.
So you might ask, you know, Ray, why do you spend so much time and energy watching shoppers, especially when there are these legitimate concerns about consumer privacy?
And the reason is because I believe that through these insights you can improve the customer experience, you can increase customer satisfaction and increase business performance.
So how do we do this?
Well if we watch what people buy, we can infer what their needs and desires are and even anticipate what those needs will be in the future.
If we watch shoppers we can see the points of engagement in the shopping process and in the points of friction, the obstacles to purchase. And then we can modify the experience and improve the shopping experience and observe shoppers’ behavior.
So our goal here is to optimize the shop-ability of the store. Let me give you an example from some research that we’ve done with Marsh Supermarkets. The Marsh is right here in Indianapolis and they’ve actually been very innovative in their use of technology.
Forty years ago, Marsh was the first retailer to use the UPC scanners. So you know when you go into the store and you checkout, now originally they used those to improve operational efficiency at checkout. But that information is captured, it provides a rich source of consumer research.
So let’s take a look at a receipt from a shopper. What can you learn just by watching what people purchase? Well this shopper, they picked up some sliced turkey… this is just a few weeks ago, some Roma tomatoes and some peaches, okay.
Well because this person uses a customer loyalty card and most shoppers do, we can track their purchases over time. So again we’re back in Marsh a week later and what’s this person buying? Some sliced turkey, some peaches, and some Roma tomatoes, okay.
So if we want to build the loyalty, if we want to reward this shopper for their loyalty, we can send them… we know their contact information, we have their information from the loyalty program. We can send them a mailer for peaches; we know they like that, maybe send them some coupons, even give them a recipe.
It turns out that about 85% of what you buy is basically the same from one week to the next. But we can learn more than just people’s preferences for individual products.
So now let’s go to [Kay Cook], Iowa. And this is a shopper who visited a Walmart and they picked up some Diet Pepsi, an Atkins bar and some SlimFast. Okay so it looks like someone’s counting calories here, okay. But you wonder why they’re also buying Cheetos and ice cream, and popsicles, okay. Maybe they have got kids in the in the family, okay.
Well if you look just a few days later, they’re back in Walmart again and they’re buying major league baseball cards. So it does look maybe that like they have a child… at least one child in the house. And they’re buying dog treats, okay. So it looks like they might have a dog as well.
A few days later, they’re back in the store and they’re getting some fishing hooks, so they like to fish. And they’re buying marine oil so they actually have a boat. So as you look across these transactions you start to get a picture of the household, the profile of the shopper, the DNA that’s going to drive their purchases in the future.
Now it’s not enough just to know what people’s needs and desires are. We also need to understand how that interacts with the store environment. So we’ve done research where we approach shoppers and ask them to wear a special pair of glasses that have a little camera and it tracks where they’re looking as they walk through the store.