September 13, 2016

Differences in Analytics between Sports and E-Commerce

Baseball folks learned that "Exit Velocity" is really important.

In other words, a bad player can hit a flair into right field - a base hit - earning credit for a hit during a poor piece of hitting. Conversely, a great hitter can hit a line drive at 100mph that is caught by the shortstop, who just happens to be standing in the right spot at the right time. The lousy player gets credit for a hit, and the batting average and on-base percentage and slugging percentage all increase. The good hitter doesn't get credit for a good at bat.

Typical metrics don't necessarily even out during the course of a season.

But when you measure Exit Velocity - how fast the ball rockets off of the bat, you get an idea who hits the ball well. Over time, a low batting average paired with a high exit velocity will yield a batter with a good batting average.

In baseball, the metrics all evaluate how players (i.e. the merchandise) perform. Gains are made that yield more wins (i.e. merchandise productivity) in the future.

How about in e-commerce? Where is all of the innovation in analytics?
  • In merchandise productivity?
  • In customer productivity?
  • In campaign productivity?
It's all the latter, isn't it? Your favorite guru is trying to figure out how to attribute customer orders to various marketing campaigns so that you know which campaigns work.

This is similar to baseball analytics folks trying to figure out the exact reasons why the Pittsburgh Pirates beat the Milwaukee Brewers 3-1 on August 28.

In sports, the analytics effort is focused on removing as much variability as possible, so that a clear story on merchandise (player) performance can be understood.

In e-commerce, the analytics effort is focused on diving into as much variability as possible, so that an unclear story can be crafted regarding how customers interacted with marketing campaigns.

The next round of competitive advantage in e-commerce comes from a shift in focus ... away from the interaction between customers and marketing campaigns ... toward a focus on the interaction between customers and merchandise sales. It's just a matter of time. And those of you who hire analysts to focus on Merchandise Productivity are already well ahead of the curve.

How many of you in marketing e-commerce have hired an analyst to focus on Merchandise Productivity? Your answer to that question tells us if you are ahead of the curve, or behind the curve.