Editor's Choice

Data Makes Them Kings

Reuben is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.

Disney (NYSE: DIS) is set to introduce a new ticketing system for its parks that it hopes will both improve the customer experience and allow it to better track their behavior. Tracking and analyzing customer behavior is the key to success for many firms, and is often the difference between being an industry leader and an also ran.

Disney's new MyMagic ticketing system will basically be a rubber bracelet that customers wear and use for virtually everything. That includes room keys, park tickets, in-park purchases, and ride reservations, replacing the older fast-pass system that is so popular with customers.

MyMagic can also be used to customize a patron's experience if personal information is entered into the company's computers. Thus, a child might walk up to Cinderella and find that the princess not only knows her name, but also that she just celebrated a birthday. As a parent, I can only imagine the joy on a child's face at such a personalized greeting.

MyMagic, however, will also allow Disney to capture an unprecedented amount of information. Where, when, and how for virtually every facet of a person's trip. While interesting on an individual level, it turns into a powerful and differentiating tool when spread over the millions of customers that Disney serves.

Big Brother
Some people have called this effort, which is estimated to have cost nearly $1 billion to facilitate, a bit too big brother like. There is no doubt that this is true. However, Disney is likely to find its customers very happy to divulge information to get a better experience. Cinderella greeting a child by name is a far cry from Facebook (FB) trying to target a sales pitch.

In fact, MyMagic will allow Disney to fine tune its parks in a way that no other park operator has before. Looking past the personalization, it will be able to emphasize the attractions that are most desirable and phase out those that aren't cutting it. It will be able to track customer movements in its parks, which will likely lead to adjustments to operations to make the park flow more smoothly.

It also means the company will be able to interact with customers in a more personal way because it knows what they are doing and when, and how that compares to other guests. For example, if someone is buying a character sweater, the sales associate could offer up a pen or some other item with the same character at a reduced cost based on sales trends for the sweater, the character, the time of day, the location of the store, etc. The technology may never go there, but it is a possibility.

This could be a game changing event in the amusement park industry. While companies like privately held Great Wolf Lodge have used similar technology for years, the scope and scale of Disney's effort is massive in comparison. If it pushes the needle, look for larger amusement park operators like Cedar Fair (FUN) and Six Flags (SIX) to quickly jump on board.

Past as Prolog
Google (NASDAQ: GOOG) is a powerful example of how the use of data can change an industry. While the company's slick search technology allowed it to build a loyal following, it is the data it collects about people's searches that make it so profitable. In fact, its advertising is so well done that customers often see the ads as a benefit because they are so highly targeted.

Searching for a guitar store selling vintage guitars in lower Manhattan will lead to a collection of potential locations. But it also pushes up an ad for Lark Street Music is nearby Teaneck New Jersey, which has an impressive collection of vintage instruments. This turns into a win win win: the customer found out valuable information, Lark Street Music got a solid lead, and Google got paid for the advertising space.

Google's service is so powerful, in fact, that it essentially took over the web search space. Now you don't search the web, you “Google” it. That's a massive statement to the value both customers and advertisers see in the company's services. While some have complained about Google's use of data, those complaints haven't been notable enough to slow this giant's climb to the top.

It's also interesting how many competitors have tried to mimic Google's advertising success, but have failed to gain any scale. Additionally, it's notable that some companies, such as Facebook, have tried to use the valuable data they collect and angered customers to the point that new product efforts are rolled back. Clearly using data isn't enough, it has to be used in a mutually beneficial way.

A Retailer Gets in on the Act, Too
Amazon (NASDAQ: AMZN), for example, makes good use out of customer data in a way that customers appreciate. The vast array of products the company's site sells is a huge draw. However, the lists of recommended items and items that other customers purchased after viewing a certain item are desirable and unobtrusive tools to help customers in their decision making process.

That, however, is only the start. Assuming that Amazon has the right to email a customer, it can push out items that were the focus of recent searches, it can highlight relevant sales, and push items that other customers purchased in addition to a recent purchase. Pushing out to the customer with customer centric information based on customer patterns is a huge tool to spur additional sales.

While not the only reason for the company's dominance, knowing about customer behavior and using it in a way that benefits both Amazon and its customers is a clear differentiation between the retailer and many of its lesser competitors.

Follow the Data
Investors should keep a keen eye on the collection and use of data because companies that handle these things well tend to benefit disproportionally. It's also worth watching how new competitors use the data they collect, since data rich companies like Google have changed entire industries overnight.


<img height="83" src="/media/images/user_14110/signiture_large.jpg" width="263" />

ReubenGBrewer has no position in any stocks mentioned. The Motley Fool recommends Amazon.com, Google, and Walt Disney. The Motley Fool owns shares of Amazon.com, Google, and Walt Disney. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!

blog comments powered by Disqus