mornin' merry makers 🎯📊🔍🧠💰

if you've been reading this newsletter for a while, you know last fall i was completely obsessed with the hottest club in america...

costco.

the $1.50 hot dog combo that's been inflation-proof since 1985. the 90%+ membership renewal rate. the fact that they make more money from you paying to shop there than from you actually shopping there.

fast‑forward to this summer: i finally got a membership.

i became a member.

that single decision probably tells you more about where my life is headed than any demographic survey ever could. it signals that i'm thinking about bulk buying & living somewhere with storage space.

it marked a shift. not in age or income or zip code, but in behavior.

this would help a retailer understand me way more as a customer than just my generational grouping of millennial. they’d know that i'm now entering the era of my life where i get excited about buying 48 count egg cartons and 3 pound tubs of hummus.

this is exactly the type of behavior today’s bts guest has been mapping.

lÿden foust & the spatial.ai team are proving that what we actually do says more about us than any checkbox ever could.

their ai powered segmentation tool helps retailers identify & reach their best customers in ¼ of the time it will take you to watch happy gilmore 2.

bts q&a: lÿden foust

Q1: can you share a little bit about you and the work that you do?

Hey I’m Lÿden. I have four kids under five years old. I live on a farm.

I host the Consumer Code podcast where we explore the retail economy through ethnography, demography, credit card data, and maps.

I am also the CEO of Spatial.ai where we help retailers gain market share through customer segmentation.

Q2: your ethnographic research and professor background is unique in the tech and retail worlds. how does that anthropological lens influence how you approach customer data?

As an ethnographer I have always been interested in what people do over their demographics or how they would respond to a survey. This taught me the power of boots-on-the-ground observational insight.

In 2016 while doing research in Nashville for Zaxby’s chicken - I got held up at gunpoint in front of my airbnb.

You see, the community I was researching had changed dramatically since the 2010 census. It had gentrified. And the demographics no longer reflected the reality of the situation on the ground.

This got me wondering. Is it possible to understand people based on what they do, rather than just using their demographics and survey responses.

Their demographics, yes.

But also what other brands they are spending money on, what they follow on social media, where they visit in their free time, the type of neighborhood they choose to live in.

Q3: spatial ai classifies customers into 80 targetable, behavior-based segments. why is this better than traditional demographic segmentation?

Demographics are a good start! I have grown to appreciate the value of demographics over the past ten years. 

And demographics are definitely part of that story. 

We take into account a number of things: credit card spend, retail visitation, social media following, individual demographics, and neighborhood characteristics.

This creates segments based on what people do.

I’ll give you an example of how that plays out for one of our segments, B01 Fusion Families. These families make 200k+, are well educated, have kids more than the national average, and represent 2.2 million households in the US. You’d expect them to spend similarly to other households with those same characteristics.

But they don’t. Not even close.

They spend at Costco 2x the national average, will spend almost nothing at traditional retailers, and spend at 10x the rate for private schooling like Goddard and Kumon, follow EdTech K-12 Magazine, and listen to How I Built This podcast.

What is going on with these people? 

Taking a look into it, they are almost all first and second generation immigrants. They have the demographics that would indicate a great consumer, but their values system is totally different.

Retailers treating these people like the traditional 200k + consumer you’d fall flat on their face.

But knowing their values based on what these people do unlocks a wealthy, savvy, and growing segment for your brand that other people fail to tap.

Q4: spatial ai helps retailers "reveal, rank, and reach their most valuable customers." will you walk us through what that process looks like for a typical retail brand?

Sure! Online brands typically have lots of customer records. And brick and mortar brands have store locations. We will either Append our segments to those individual sales records, or in the case of stores look at the mobile devices that visited them.

From there we can Analyze and rank their best segments. See what their customers are following on social media, see what other retailers they are spending on etc.

Then we can Activate that information. Either by running a targeted campaign to those customer segments via direct mail, facebook, etc. Or by mapping those customer segments and locating more stores near them.

This type of strategy work typically takes months. We are proud that this whole process usually takes under 30 minutes.

Q5: your platform also helps brands predict sales revenue. what patterns in social behavior are most predictive of purchase intent?

It very much depends on the brand.

Some brands, like convenience stores, depend almost entirely on foot traffic. Some rely heavily on co-tenancy (ie: what other retailers are nearby). I’ll give you a few independent examples of how retailers found some real lift in their models:

• Rue21 used what bands people follow to figure out what types of band t-shirts to stock in store.

• SeaQuest Aquariums found their niche market was actually single young professionals.

• Colliers found people who were already spending at similar brands were the most likely to buy.

So it is a case by case basis.

Q6: what’s one thing you wish more brands understood about customer segmentation?

Brands will often get burnt with customer segmentation when an agency sort of creates this gut-based mood board persona segmentation like “Convenience Carl” and “Busy Barbra” or some nonsense like that.

But can you go out there and actually target “Convenience Carls”? Can you place your store in a trade area with 6,000 Busy Barbras?

NO!

So if with your segmentation you don’t know 

1. How many of these people are your current customers

2. How much they spend on average

3. Where you can find more of them

Throw your segmentation away.

BTW: This bothers me enough to the point that I wrote a free guide on how to do a DIY effective customer profiling here.

retail rapid-fire round

• fave retail store of all time? 

  • Vuori

• retail center that gets it right? 

  • I try to avoid retail centers at all costs.

• can’t live without retail tool?

  • Instacart

• retail metric you obsess over?

  • Consecutive Category Repeat Rate

    • This means the % of time when someone has the chance to buy from your category they choose you consecutively.

    • This metric is key to growing market share.

• your signature style of merrymaking? 

  • Triathlon

• best retail advice you've ever received?

  • Money is spiritual energy in motion. When you get something, don’t hoard it. Keep it moving.

• what do you love about working in retail? 

  • I think humans are incredible and I love studying them.

connect with lÿden & spatial ai

lÿden combines the rigor of academic research with the practicality of real business results. turning customer insights from pretty presentations into actual revenue drivers. so if you're tired of "convenience carl" personas that look great in decks but don't help you find customers or pick locations or even connect to your data, you need to home on a demo with spatial ai asap.

🔗 link up here:

• follow lÿden on linkedin or instagram

• learn more about spatail.ai ‘s tools

• subscribe to the consumer code newsletter

there’s something surreal about becoming the story you’re writing.

i went from dissecting costco’s model to standing under its fluorescent lights, doing silent margin math while hoisting 36 lacroix into my cart.

it’s like retail inception: a consultant walks into a warehouse and becomes the walking embodiment of everything she once dissected in a deck and will later analyze in a spreadsheet.

if you work in retail, you probably live here too. somewhere between the shopper and the story; the calculator and the cart-pusher; the joke and the punchline.

there’s no outside the simulation (especially in retail).