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July 27, 1994

IBM DEVELOPS RETAIL INFORMATION ANALYSIS SYSTEM

By CBR Staff Writer

The Retail Business Division of IBM Corp has developed a retail information analysis system based on data capture from point of sale equipment. It will analyse customer purchases and develop customer loyalty schemes. According to Noel Rees, director of IBM Retail Business, enhanced customer service is the retail agenda for the 1990s. IBM believes its system will provide retailers with a competitive edge because it can increase their knowledge of customers and their purchasing behaviour. But there are other retail information systems out there that have the same aim in mind. So what is new about IBM’s? The company says its customer purchases analysis system is the first to make full use of customer data. Basically, this means that the system is rules-based so users can modify promotion schemes regularly and hence monitor their effectiveness. To take an example, if a supermarket has a current basic loyalty scheme giving customers one point for every pound they spend over ?20 and, over a Bank Holiday weekend managers decide to award double points for all baskets over ?40, users of the IBM system are guided through a simple rule to reflect this business decision. They can then drag and drop the rule onto the scheme and it will be automatically implemented the next time the criteria are met. The system is object oriented so more complex rules can be specified more easily without the need to modify the code. The rules-based system can act on purchase transactions, so the retailer can give the customer a free purchase with every four products of a particular type that have been bought by looking at the data from shoppers purchases, for example. Or rules-based algorithms can act on the awards themselves so that customers could get a voucher after spending money on a particular product consistently over a given period of time. At the moment customer credits are stored on a credit card which can only be accessed at point of sale – we are all familiar with Marks & Spencer’s in-store charge cards for example.

OS/2 and DB2/2

But IBM envisages that in the not too distant future, customers will be issued with Smart Cards identifiable in shoppers’ bags or pockets. Retailers will then be able to monitor customers as soon as they enter the store – a frightening thought. The customer loyalty system runs under the OS/2 operating system and works from a DB2/2 relational database. Users can also add the Visual Age for OS/2 application development tool kit and Visualizer for OS/2 toolkit to the system. It will interface any electronic point of sale system. The system also incorporates data mining software that can analyse customer information data and identify the confidence levels shoppers have in particular products, the system will then identify how many times this pattern occurs and convert these results into text format so that retailers can plan purchasing and promotions around salient trends. IBM says that the system will initially be piloted in supermarkets, DIY stores and fashion retailers in the UK only, and will cost from ?20,000 upwards.

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