Mastercard On Helping Retailers Strike The Right Innovation Balance

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Mark Twain famously said there are three kinds of untruths: lies, damned lies and statistics.

And nowhere is that aphorism better illustrated over the last decade than with the statistic that more than 90 percent of all retail sales took place at brick and mortar stores. It gave retailers the illusion that digital was the retail cart driven by the physical store horse.

But, as Karen Webster and Michelle Carter, senior vice president global retail sales, data and services at Mastercard, discussed, the devil can very much be in the details. Once categories like auto sales, gasoline and restaurants are stripped from the total retail sales numbers and retail segments, like books and toys and sporting goods, are examined, those numbers begin to look very different.

The good news, said Carter, fresh off her most recent trip to the National Retail Federation (NRF), is that merchants and are very well aware that retail — and the role of physical retail in it — is changing.

“There is a firm idea that brick and mortar is changing, not going away. Overall there is a lot of energy from the omnichannel perspective, as well as a lot of interest in taking the data they have and incorporating it across channels to see how they can reach out to their customers in a way that is most relevant,” Carter explained.

The question for the 2020s, and the focus of her remarks at the big show in New York last week, is about innovations itself — what is truly leading in innovation and what constitutes being a laggard? The answer, she noted, is complex. On a basic level, retailers of all sizes have to ask themselves whether they are looking to do what they’ve always done with a slight tweak, or are they considering doing something completely different in terms of how they approach the market. The latter is innovative; the former is, well, just a tweak.

“Brands need to think about how they are innovating, and ask themselves how they are stepping out of their comfort zone to stay relevant when there are a lot of exciting completely out of the box ideas already out there.”

Testing Innovation 

The problem with innovations in digital retail, Carter noted, isn’t in finding it. It’s in picking the right ones and then operationalizing them. It is why, she said, Mastercard rolled Test and Learn capabilities into its platform in 2015 with the acquisition of Applied Predictive Technologies — to allow merchant partners to incorporate a host of rich data points to understand how potential changes they might make to their organization will play out. It creates a host of comparable business data points incorporated into one place to give merchant insights into what they can expect to see pre- and post-enactment of any innovative change.

As of today, nearly five years after Test and Learn came to Mastercard, Carter noted, 45 of the nation’s top 100 retailers are using the platform to test a whole host of use cases. The most popular, she said, is testing and learning about the impact of conversation on prices, specifically raising them, by either eliminating promotions or raising MSRP. What they’ve found is that concerns about raising prices and driving away consumers can be adequately met with adding a price matching possibility for consumers who found a lower price elsewhere.

“What the data tends to show is the vast majority of consumers don’t price match, and aren’t all that affected by a slight uptick is MSRP,”  Carter noted.

There are also Test and Learn scenarios around the interplay of certain factors. Sustainability was a frequently recurring theme at NRF and the desire to meet the growing demand among consumers for sustainable products. However, she noted, the data there is more nuanced. Though broadly speaking, what they have seen is that consumers are willing to pay more for sustainable products — that decreased price sensitivity is focused regionally, demographically and by product in many cases.

The retail experience is changing and becoming a more blended model where a consumer might start in a store to get a feel for the product and continue that journey online and on mobile. Retailers are now tasked with using data to determine how they want to guide that journey and ultimately expand it in terms of what the customers buy and repeat it.

Hitting A Right Balance 

Consumers don’t want to feel stalked or like they are being watched too closely. However, they do like seeing relevant marketing and personalized curation in the products put in front of them. This creates a bit of a puzzle for retail, Webster and Carter discussed, as building personalization requires gathering data about consumers, but too much data gathering and the attempts at personalization don’t feel helpful so much as creepy.

Part of that, Carter said, is about learning how to handle data better. Mastercard, for its part, anonymizes the information and categorizes it — so they aren’t looking at individual customers, but instead, customer types.

And just as critical, Carter noted, retailers need to develop an idea of the fine line between personal and cloyingly close.

“We’ve seen retailers that are sending customers two communications by email a day. It is way too much and we’ve had to step in and say ‘OK, first let’s try scaling this way back.’ There is a wealth of opportunity to text messages, messaging and channels so that you are helping the customer — not making them feel encroached on.”

Because Carter noted, ultimately, customers and their preferences will be doing the driving. The retailers who use data the best will be the ones who use it to discern the direction they’re going and be the ones who provide the easiest journeys to get them there.

“There is nothing in retail that can’t be fixed,” Carter said, “but a lot of these very old, established brands have to think beyond what they’ve been doing for the last 30 or 40 years and start asking: ‘What are the things that [they] can be doing to bring really innovative ideas to their organization?’”