Digital Lessons From Disney’s $1 Billion Experiment: Marketing and Operations Intertwined

Digital Strategy, Innovation

Digital Lessons From Disney’s $1 Billion Experiment: Marketing and Operations Intertwined

30 Mar , 2016  

Disney Does Digital…Very Well!

The Disney dive into digital has many looking for lessons from this business leader. Disney supplies customers with Disney MagicBands, wristbands equipped with RFID technology.[1] The wristbands enable customer-level tracking, creating lots of data on transactions, customer check-ins, and customer movements. It is estimated that deploying this technology has cost Disney nearly $1 billion, which is a very large investment, considering that Disney resorts generated about $13 billion in annual revenues at the time of its launch. [2][3]

Disney MagicBands is just about enabled magic! Each person gets a wristband, including the children. It is required to enter rides, can be used to buy goods, dinner, is used to enter your hotel, and allows Disney staff to find you and your children (if lost) and to provide personalized greetings. It is already creating an amazing Big Data set on how visitors to Disney resorts enjoy the parks. Where do they shop? What do they buy? When? Do rides or interactions with characters increase sales? How much? Where does Disney need more staff? Or less? These are some of the questions that can now be answered precisely and dynamically.

The bold move by Disney into digital interfacing with the guest has apparently already paid off in big ways. Chief Executive Officer Robert Iger of Disney recently shared that the technology has allowed Disney to accommodate 3000 more daily guests during its peak period around Christmas, by alleviating congestion and helping Disney allocate staff in critical areas.[4] Let’s put that in perspective, average daily attendance at its Florida resort is about 52,000 people per day. So, the RFID technology has quickly shown a 6% increase in attendance and revenues are growing at about $1 billion per year, which is about a 7% growth rate![5] [6] It is great growth for any business and most impressive for a business that is largely hotels, rides, and meals. Starwood would love that growth, btw. There are some important lessons that Disney provides all businesses looking to leverage digital solutions for growth. Let’s examine these:

  1. Marketing and Operations are Fully Intertwined: Marketing often looks at growing revenue and the operations function looks at controlling cost (labor, and resources). In most firms, these functions are highly siloed and even operate with different data on the customer and certainly different leadership and analytics teams. Going digital and getting the most from digital requires breaking down the barrier between operations and marketing. For Disney, understanding how the customer moves in the park allowed it to change its staffing (operations) in order to increase product placements and thus sales (marketing). Lesson: Integrate your marketing and operational opportunities with digital platforms and leverage analytics and Big Data to solve the intertwined problems of marketing and operations. It also suggests more deeply that decisions are not just about marketing or operations and the data is about both. Develop a leadership team that is cross-functional and a data science team that cuts across marketing and operations, too. Amazon, Apple, and now Disney show us that integrating marketing and operational decisions is immensely needed in the digital realm.
  2. Digital Reduces Friction: We often think about the “convenience” of using an app like Uber or Amazon’s one-click to buy. However, what these digital “conveniences” really do is reduce the friction to transact. In the case of Disney, the bill is not directly experienced at the transaction; Mom and Dad, buy their kids a gift using the MagicBand not cash or a credit card. Not only does it reduce the transaction to one of touching the wristband to a RFID reader, it also removes or reduces the impact of the price (which hits a credit card of course) physiologically. We know that people buy more and spend more when not reminded of the prices. It works for Disney and can work in your business, too. Lessons: Design your customer digital interface to remove friction to transact. Simple things matter – pre-populating the customer’s mailing address and storing their credit card number are now expected and are old hat. Today, the battle is on the mobile phone and reducing the number of thumb strokes it takes to complete a transaction is the new frontier. Expect voice recognition to be on the way very soon. Work to take away the steps and friction to transact. By doing so, you create value and add a service. Customer will call it convenience, but it is about your firm making a transaction easier. It is core to what makes Uber, Apple, eBay, and Amazon transactions a hit and has changed fundamentally how Disney transacts with its customers. The benefit looks like marketing, but it is all about operations – the operation of your digital platform.
  3. Examine your Staff and Resource Deployment: Of course, digital data, gives Disney lots of data about customers and where they go and when they go there. However, it says a lot about also about staff that is under or over utilized, too. Use customer data to reallocate staff and other resources to satisfy demand and enable sales. It is another example of how marketing and operations are intertwined. Lessons: Leverage digital customer data to advance your ability to flex and respond dynamically to changes, maybe daily or within the day.
  4. Mass Customization: For Disney, providing a fantasy is their business. Knowing that a young girl would like to see her favorite princess means that a princess can be sent to that girl and even know her name. It is creepy, but a great part of enabling the fantasy! Lessons: Recognize how your business can improve itself with mass customization to the customer. That is to say, examine your product or (better yet) services can be customized to each customer. Mass customization will look like marketing, but be enabled by excellent operations, again a reminder that marketing and operations are intertwined in the digital realm.
  5. Get Prepared for Hacking: Once you are creating powerful data through a digital platform, you have an immense asset. Assets attract thieves. Data on the thousands of people that visit Disney each day is of great value to any telemarketer or sophisticated phishing hacker. There is the threat of a data breach and theft. And, of course, some people will attempt to hack the system to circumvent payment and commit fraud. For Disney this means people trying to get by on another person’s wristband and breaking into the system. Lessons: When you go digital, develop a strong digital security team and keep up with updates. Being hacked can fundamentally alter the trust with your customer, so develop a privacy policy and a data security policy, too.

About Russell Walker, Ph.D.

Professor Russell Walker helps companies develop strategies to manage risk and harness value through analytics and Big Data. He is Clinical Associate Professor of Managerial Economics and Decision Sciences at the Kellogg School of Management of Northwestern University. He has worked with many professional sports teams and leading marketing organizations through the Analytical Consulting Lab, an experiential class that he founded and leads at Kellogg.

His most recent and award-winning book, From Big Data to Big Profits: Success with Data and Analytics is published by Oxford University Press (2015), which explores how firms can best monetize Big Data through digital strategies. He is the author of the text Winning with Risk Management (World Scientific Publishing, 2013), which examines the principles and practice of risk management through business case studies.

You can find him at @RussWalker1492 and russellwalkerphd.com

[1] https://disneyworld.disney.go.com/plan/my-disney-experience/bands-cards/

[2] http://www.wired.com/2015/03/disney-magicband/

[3] http://www.statista.com/statistics/193221/revenue-of-walt-disneys-parks-and-resorts-since-2008/

[4] http://www.bloomberg.com/news/articles/2014-03-07/disney-bets-1-billion-on-technology-to-track-theme-park-visitors

[5] http://www.statista.com/statistics/232966/attendance-at-the-walt-disney-world-magic-kingdom-theme-park/

[6] http://www.statista.com/statistics/193221/revenue-of-walt-disneys-parks-and-resorts-since-2008/

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By  -      
Russell Walker helps companies develop strategies to manage Risk and harness value through Analytics and Big Data. As Clinical Professor at the Kellogg School of Management of Northwestern University, Russell Walker has developed and taught leading executive programs on Big Data and Analytics, Strategic Data-Driven Marketing, Enterprise Risk, Operational Risk, and Global Leadership. He founded and teaches the popular Analytical Consulting Lab and Risk Lab, experiential classes, which bring Kellogg MBAs together with real-world projects in Analytics and risk evaluation. His is the author of the book From Big Data to Big Profits: Success with Data and Analytics (Oxford University Press, 2015) which examines data monetization strategies and the development of data-centric business models in the new digital economy. He is also the author of the award-winning text Winning with Risk Management (World Scientific Publishing, 2013), which examines the principles and practice of risk management as a competitive advantage. Dr. Walker consults with firms on the topics of Big Data and Analytics, Risk Management, and International Business Strategy. Russell Walker can be reached at: russell-walker@kellogg.northwestern.edu @RussWalker1492 russellwalkerphd.com



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