Customer Recalibration Amidst An Economic Crisis
WHAT EXTERNAL DATA SHOULD I BE LOOKING AT?
BY SHELLY ROSENBLUM – DIRECTOR OF DATA SCIENCE
The coronavirus has fundamentally shifted our behaviors and priorities as we rightly focus on our health and livelihood. As we grapple with the fear of the unknown, evolving government policy, and a changing labor market, people are realigning spending habits to meet these new priorities. This means customers are tightening belts in certain categories and boosting spend in others, causing unprecedented volatility within traditional internal customer data sources. While this data now needs to be monitored more closely than ever, in order to understand how customers are engaging with your company’s value proposition in this new normal, it is becoming increasingly important to look outside your organization for signals that unpack the “why” and “what should we do next.”
The most obvious and important external data to be tracking at this point are those related to COVID-19 itself—specifically, case and mortality rates by region, the rate of expanded access to testing, and the easing of government social distancing restrictions. Until the virus is contained, and for an unknown period of time after, we will continue to face market volatility. Your proverbial customer “health” is now, more than ever in our lifetime, dictated by the actual health of your customers and their communities, so first ground yourself in the realities your customers are facing.
Beyond public health data, though, you should be monitoring the pulse of your industry and consumer base through the use of external data. External data sources can be effective indicators of upcoming trends, opportunities, and risk factors that should be considered as you plan your go-forward strategy. There is no shortage of external data categories, and it can be a daunting task to identify which matter most. We propose you focus on four key sources to make sense of your customer needs and supplement what you know from your internal data. Those four are:
These sources can also be used to build reliable benchmarks that help you more accurately gauge whether your strategy is effective. Let’s step through these four core categories to ensure you are making informed decisions and staying responsive to fluctuating consumer needs.
Technically speaking, we are not in a recession yet, but in the last few months our global economy has taken a massive hit putting us on a trajectory to fall into a recession in the coming quarter. The economic indicators in this climate will unlock insight into your customers’ willingness and ability to spend, identify early signs of stabilization, and ultimately detect when we are emerging from this recession.
Economic metrics are classified into two general categories: leading indicators, which detect change before the broader economy displays a shift, and lagging indicators, which tell us more about what has already happened, confirm current trends, and enable more stable predictions about the future. With government policies shutting down entire industries and significantly dampening others, the traditional combination of leading and lagging economic data we relied on have become increasingly unstable. Since it’s likely your company does not have the luxury of waiting on sufficient data from lagging indicators to react, we suggest prioritizing leading indicators. Make sure to note the frequency with which the indicators are updated as some will be more relevant at different points in time. The following measures are examples of strong indicators to use for assessing customer spending power and early signs of stabilization:
- Jobless claims – Unlike the unemployment rate, jobless claims are reported weekly and are a measure of the number of people filing for unemployment insurance benefits. Tracking this metric at a state level will help you understand the basic economic health of your customer base.
- Consumer confidence index (CCI) – Reported monthly, CCI measures the degree of optimism consumers have in the current and future state of the U.S. economy.
- Weekly Economic Index (WEI) – This is one of the newest indicators reported weekly by the New York Federal Reserve in response to the rapidly changing economy stemming from the coronavirus; this measures a combination of consumer sentiment, jobless claims, contract and temporary employment, steel production, fuel sales, and electricity consumption.
What you might notice missing from this list are some of the traditional indicators such as the stock market and GDP. These are important economic measures but can also be misleading in unstable times. In the case of the stock market, activity is not always a true reflection of consumer sentiment, but instead a reflection of algorithmic reactions to the economy. As for GDP, that is only compiled quarterly, and can be misleading as it cannot decouple activity stemming from financial policies such as quantitative easing and other government spending decisions like the Payroll Protection Program.
It’s critical to know what is happening across your industry, how your performance and response measures up to competitors, as well as how consumer behaviors are reshaping the industry itself. Industry data can specifically help you understand the macro and micro trends, track early warning signs of impending market shifts, assess consumer engagement, and detect competitor reactions.
There are several types of data, but the most important to make sense of are industry news, public and private competitor performance data, and government actions including legislation, advisories, and industry-related policy changes. Industry news and competitor performance data will highlight if and how your competitors are shaking up the industry through innovation, creative new delivery models, and positioning. Conversely, it can also highlight where competitors are exhibiting signs that they are unable to adequately serve their customers, such as performance drops or store closures, and thus expose opportunities where you may be able to expand or restructure your offering to grow market share. As for government action, you are likely already monitoring this on a regular basis, but systematic monitoring of relevant government action such as health travel advisories, international travel restrictions, and mandatory business closures will help you stay ahead of potential negative impact to your business.
There are several subscription-based databases that can help you track this information, such as IBISWorld and Statista. We recommend researching which makes the most sense for your business and investment threshold. Another good source are trade associations. These can be industry-specific such as the American Medical Association and the U.S. Travel Association, or these can be cross-industry associations such as the U.S. Chamber of Commerce. Depending on your industry, you may have well-developed trade groups who provide up-to-date information on legislative advocacy efforts, relevant industry news, and general guidance in these uncertain times.
SOCIAL LISTENING DATA
The abundance of idle time that the stay-at-home orders have afforded has resulted in a spike in consumer digital engagement and dialogue across social media platforms. Consumers are giving us insight into their mindsets around your brand and products. Social listening can help you unlock this insight and identify ways to boost their engagement and loyalty.
Social listening goes beyond the more straight-forward social monitoring which typically involves tracking campaign performance, product or brand mentions, and likes. Social listening is the process of taking thoughts shared online through conversations and mentions and translating that into action for your businesses. Relevant data for social listening includes products people like (and don’t like), issues they may be facing in your industry or with your brand specifically, sentiment about competitors and threats to your business, questions about relevant products or topics, and identification of key influencers for your target customer base. All of this data translates into valuable insight on how to expand your marketing reach and relevance, improve your product strategy, and mitigate threats to your business—all to better meet your customers’ evolving needs.
There are several social listening tools that stitch together data across various platforms and sources (e.g. Twitter, Facebook, Instagram, blogs, and forums) so you don’t need to worry about embarking on a complex data engineering adventure. These tools offer you the capability to search topics or keywords to analyze trends, assess brand sentiment, compare your digital presence to competitors, and identify influencers. While the actions you take resulting from these insights extend beyond digital marketing campaigns, insight from social listening can also help you improve your share of voice in a positive way and ultimately enhance your business performance.
You likely already leverage geodemographic data in some way. As a reminder, the premise behind geodemographic data is to derive insight based on the assumption that people who live in the close proximity to one another are more likely to have similar characteristics than people who live in different areas. As you can imagine, this view presents several weaknesses. Think about your own neighborhood as an example—sure, your neighbors are likely in a similar economic situation, perhaps even have children the same age as your own. However, they likely have different preferences, are buying different products, and interacting with brands in different ways than you. Geodemographic data glosses over these behavioral differences, and because it is often surreptitiously obtained, it can also be fraught with errors. Therefore, we don’t advise using it for targeted, personalized communications. In the aggregate, though, it can be useful for market-level analyses, especially in areas where your business has little insight into customer behaviors.
Geodemographic data can be especially helpful during our current crisis as it can help you understand how the economic climate and future decisions you make about your business may disproportionately affect your target market across geographies. For example, a low-cost grocery chain may use geodemographic data to decide where to proactively divert resources based on anticipated demand growth to preserve access to food for lower-income geographies. More generally, geodemographic data should be considered where you think market-level information will enable you to improve your response to customer needs and enhance their overall experience.
In closing, the most important indicators of how you should grow and protect your business are always found within your own internal data. However, these times are like no other. The collapse of the economy and the reaction of consumers to this ongoing public health crisis has likely turned your internal data into a hot mess of noise with high variability, and in some cases, may have even shut down aspects of your business. This means that a renewed emphasis on external data sources, such as those in the four categories outlined above, will be essential to provide clues about how shifting consumer patterns may impact your business going forward. Those businesses who learn how to effectively navigate and harness the power of external data to refine their post-COVID-19 go-to-market strategies, in conjunction with a concentrated focus on the shifting patterns in their own internal data, will be best positioned to emerge from this crisis in a way that is most relevant and meaningful to their customers.