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Watson And The Future Of Marketing

We all know that IBM's Watson computer plays an awesome game of "Jeopardy." But the technology behind Watson could soon help retailers increase both sales and customer satisfaction.  

By competing against humans at the highest levels, IBM's Watson is something completely new -- a computing system that can analyze human language and answer complex questions extremely fast. On "Jeopardy," Watson correctly responded to the kind of complex clues that the show is famous for. An example, from a "Jeopardy" category called "Dialing for Dialects":

Host Alex Trebek: While Maltese borrows many words from Italian, it developed from a dialect of this Semitic language.

Watson: What is Arabic? [Correct]

Watson represents a tremendous breakthrough in the ability of computers to understand natural language -- which humans use to capture and communicate knowledge -- as opposed to specially designed or encoded language just for computers. It can evaluate the equivalent of hundreds of millions of pages of material -- books, reports, articles and so on -- in three seconds or less. It is not stymied by intricate wordplay.

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This kind of amazing question-answering capability could help retailers solve one of their most difficult customer service problems, which we call the perpetual stranger dilemma. Today, the typical large retailer has many thousands of loyal customers who regularly patronize the store, Web site, mobile application or catalog, spending lots of money. But still, they're strangers. By this we mean the retailer doesn't really know these customers or even have a basic understanding of their individual needs, tastes or what they might want to buy next.

You've no doubt experienced this dilemma firsthand. Maybe you've shopped at a particular store for years -- spending thousands of dollars annually. And you recently spent a significant sum there on new clothes or a television. Yet, the next time you walk through the doors, it's as though you are visiting for the first time. The salespeople have no idea who you are. They don't know your sense of style. They might even try to sell you something that you just bought.

Watson technology can fix this. It could be integrated into a retailer's core systems, including databases, CRM, inventory and order management plus all points of interaction with customers. The system's analytical capability could enable businesses to ask a virtually unlimited series of questions -- instantaneously -- about individual customers, such as: "What is the next contact we should make with John Smith? When should we reach out to him? What should we say? And through what medium?"

Watson could analyze all the information the retailer has on that customer -- purchases (and returns), brands that John usually buys, what he has been browsing online (if he identifies himself), the complaints he has made and the type of customer he is (for example, a loyal customer ... or only shops sales ... or prefers shopping the Web rather than the store). It could integrate that data with massive amounts of product data and available solutions and come up with the right answer: Tell John about the availability of a new product with a specific warranty plan and free installation. Give him this message in the evening as a notification on his iPad app, and offer pre-purchase with free delivery.

In the same way, Watson could empower salespeople to interact more effectively with consumers by giving them real-time coaching about John -- turning him from perpetual stranger to recognized and known regular customer being engaged on his terms when he has a need.

Why Real Time is Critical

Jeopardy-Watson

Watson is particularly adept at taking new information, in real-time, and interpreting its meaning. Historical data is very helpful in understanding what's important to customers -- their motivations, triggers and needs. But it isn't very useful in predicting a customer's mission. There are just too many variables at play. However, with even a small clue, such as a bit of browsing data from the Web site or mobile app, or the customer's current location in the store, a retailer can make much better guesses. This is Watson's forte: understanding the meaning of a clue based on a vast repository of knowledge. Why is this important? Because the relevance of a message, offer, or action a retailer takes with a customer is directly proportional to how well the retailer understands what the customer wants or needs right now. This capability is what it will take to transform the billions of emails, text messages, social media interactions and digital coupons retailers are sending customers from spam to something useful and relevant -- something worth reading, responding to and acting on.

Watson technology is needed in the retailing arena, where a profound shift is underway: for the first time in modern history, the consumer is in charge. Shoppers are bypassing traditional advertising campaigns and listening directly to their fellow consumers on Facebook, YouTube and blogs, learning about which products to buy -- and which to avoid. Anyone can walk into a retailer and use a smartphone to compare prices offered by that retailer's most aggressive competitors while standing in the store. Merchants are confronting this new world with a mixture of fear and guarded optimism -- they know that the old way of doing things is over, and they want to figure out the way forward -- while gaining an advantage over other companies.

The retailers who will survive and thrive going forward will be the ones who understand their customers -- and can serve them on their terms -- as individuals even when these retailers are simultaneously serving millions of customers.

Watson could help retailers evoke a time when personalized service was common among the Mom and Pop stores that ruled the retailing landscape. This personalization -- the feeling that a retailer understands you -- is what inspires customers to remain loyal.

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