McKinsey: Understanding shifts in consumer behavior

June 2012Le Web, LondonAny use of this material without specific permission of McKinsey & Company is strictly prohibitedFaster than Real TimeUnderstanding shifts in digital consumer behavior

McKinsey & Company | 1So where does all this data come from?Exabytes of data …1,2001,00040080020060001986 1993 2000 2007 2012One exabyte =4,000 x info inU.S. Library ofCongress95%+ nowdigital, vs.25% in 2000

McKinsey & Company | 2This trend will only accelerate: BIG and BIGGER dataInternet users worldwide2020 5 B2010 1.9 BDigital information in the world – videos, photos, music, texts, etc.53 zettabytes2020800 exabytes2010Mobile subscribers2020 10 B2010 5 B

McKinsey & Company | 3The rise of personal mobile phones is a key driver of this trend,especially in emerging marketsIndia internet traffic by type, desktop vs. mobile, 12/08–5/12

McKinsey & Company | 4A smart phone now has computing power superior to the computersneeded to send a man to the moon in 1969…

McKinsey & Company | 5Data storage, exabytes5030025020015010002007200019931986Global installed,optimally compressed, storageTechnology performance has increased exponentially, opening the door tobig data …1212 million instructions per secondOverall2010200019931986This computationalpower is equivalentto almost 3 billionlaptopsAnalogDigital

McKinsey & Company | 6… and more sophisticated analytics that help make big data relevantfor business decisionsExample analytic methodsVisualization toolsSocial network mappingPredictive modelingNeural networks

McKinsey & Company | 7Big data is now better, quicker and cheaperLimited, one-shotvs.Massive amountof experimentationLaggingvs.Real-timeLaggingvs.Sometimes aheadof timevs.Separate sets of noninteroperable dataEasy mash-upvs. StatedBehavioral- andintent-basedData in nodes vs. Separate

McKinsey & Company | 85101520253035404550556065% of buyers in categoryResearch online0 5 10 15 20 25 30 35 40 45 50 55 60 65 70 75% of buyers in categoryPurchase onlineThe second e-commerce “big bang” now touchesevery product categoryStill instoreGroceryHH ProductsDigitalbattlegroundFurnitureFootwearDIY ClothingHome DécorHealth& BeautyMobilephonesGoneto digitalElectronicsDVD/VideoBooksVideo GamesComputerHW / SWMusic

McKinsey & Company | 9Online research50%+22%20122010 41%Percentage of respondents who used online research before buying% Internet users, EuropeOnline research is becoming a major channel for shopping relatedresearch, especially via mobile phones21%+75%20122010 12%Online research via a mobile phone

McKinsey & Company | 10Social networks are becoming gateways to other activities …First place tolog in on thecomputerFirst place toget access tocontentVideodiscoverytoolsPercent of respondents who selected social networks+73%201120102009200819211711+162%201120102009200835312013+130%2011201020092008141096

McKinsey & Company | 11Number of days before and afterthe launch of Free mobile-4-6 0-2 2 6402,0001,000… which makes online communities a highly cost effectivemarketing channelOnline buzz for Free mobile was much higher than any competitor…Buzz volume; Index, as part of total normalized researches

McKinsey & Company | 12The end of average – online consumer is diverse and sophisticatedOnline consumer segments and attributes relative to average respondentSize of segment, indexed16"Digital media junkies"30"Traditionalists"13"Digital communicators" 9"On-the-go workers"21"Video digerati"9"Professionals"11"Gamers"

McKinsey & Company | 132.92.72.52.32.1Offline buyersOnline buyersAcceptance of targeted online adsIndexFinancial situationDeclared responseIn greatdifficultyIn difficulty Makingends meetWell-off Very well-off% of the population: 10%The “de-averaged” online customer requires highlytargeted marketing in this data rich world

McKinsey & Company | 14What if we get it wrong and get lost in zettabytes?

McKinsey & Company | 155 areas where you need to actA wealthof data outthere: use itIt appliesto yourorganisationData baseddecisionmakingManagingthroughBig dataRealbusinessimpact

McKinsey & Company | 1601020304050607080901002006 2007 20082005 2009 2010 2011 2012Economic recessionEuro crisisGreek debt crisisIntensityFree data holds insights+516%+223%

McKinsey & Company | 17People can predict flu epidemics –and you can watch in real timeStomach FluFlu07/11/11 13/02/1230/01/1216/01/1202/01/1219/12/1105/12/1121/11/110102030405060708090100Number of searches on‘flu’ doubling impliesyou have more than 1/3chance of catching it inthe next 2 weeks

McKinsey & Company | 18Big data permits “nowcasting,” eg. consumer product launchand searchIndex; normalized 100 at launch dateLaunchSalesOnlinesearchesIntensityPercentWeek 5Week 4Week 3Week 2Week 1One weekbeforelaunch020406080100120140

McKinsey & Company | 19Big data permits “nowcasting,” e.g. movie box office and socialmediaBox office index vs. social mentions; 2 weeks in advance, worldwideTweet rate correlationoutperformed existingmarket-based predictorscorrelation coefficient betweena movie tweet-rate and its boxoffice performance

McKinsey & Company | 20A whole „flora‟ of start-ups using Big data is emerging…Crunch geolocalized dataMAP MY MOBILES

McKinsey & Company | 21…with diverse approaches and objectivesUnderstandingtime usageCrunch TwitterMarketingInvesting

McKinsey & Company | 22Kaggle is generating very unusual and insightful contentthrough large data analysesUnusual insightsInnovativesolution forstatistical/analyticsoutsourcingIn the Eurovisioncontest, Israel willvotedisproportionatelyfor BelarusIf you watch a movie thatends in a number, youwill probably think less ofit than if it had a differenttitleQuality of online photospredicted by captions:▪ Higher-rated captioned Peru,Cambodia, Michigan, tombs,trails and boats▪ Poorly-rated captionedSan Jose, mommy,graduation and C.E.O.

McKinsey & Company | 23Obama campaign and Big DataFull team of non political tech innovatorshired to develop highly specific profilesof potential votersThis allows strong tailoring of messagesConstant enrichment of the databasewith results to tested approachesObama’s 2012 campaign organized as a real digital operation

McKinsey & Company | 24Amazon continually runs tests and analyzes vast amountsof data to optimize web site design – EVERY MINUTEdifferent versions of websitefor same user in sessions 1 minute apart 25+ PhD’s 7+ parallel different versions Statistical and empirical Real time

McKinsey & Company | 25Example of bestpracticeAverage forkey competitorsEBITDA 2000–10Compound annual growth rate (%)Granular customer insight has becomea crucial competitive differentiator6.010.85.011.7-2.226.6-4.929.51.756.5MediaBankRetailerInsurance

McKinsey & Company | 26Big Data can generate significant financial value across sectorsUS health careUS retailEurope public sectoradministrationManufacturingGlobal personallocation data

McKinsey & Company | 27eric_hazan@mckinsey.com(@Eric5555)philipp_nattermann@mckinsey.comhttp://cmsoforum.mckinsey.com@McK_CMSOForumThank you!

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McKinsey: Understanding shifts in consumer behavior

by McKinsey Chief Marketing & Sales Officer Forum on Jun 20, 2012

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