Relying on "Big Data" to understand customer demands can only take a retailer or brand so far, said Martin Lindstrom, author of "Small Data." In order to find the next big breakthrough, marketers need to go small.
"Big Data is all about the correlation, while Small Data focuses on causation, or the reason behind a specific observation," said Lindstrom, whose previous books include "Buyology" and "BRANDsense."
Lindstrom defines Small Data as the seemingly insignificant behavioral observations that consumers make on a daily basis, but can point companies to huge insights about human desires and unmet needs.
Lindstrom said a good example of Small Data changing the trajectory of a company was LEGO's decision to revert back to smaller bricks after studying the habits of an 11-year old German boy. As a result, the company saw its sales surge and the company became the largest toy manufacturer in the world.
"That taught LEGO that if you put the kids in the driver's seat time is not of the essence," said Lindstrom, adding that companies can be "blinded by Big Data," which is why Small Data has to come first.
Lindstrom said a quick look into a person's refrigerator tells marketers a lot about the choices that consumer makes. For example, if somebody puts their Coca Cola (COKE) below the salad, it shows that they are guilty about the purchase. He said brands should speak to this type of shopper differently because this type of purchase is guilt-based.
He said Wal-Mart (WMT) is the largest user of Big Data in the world, but they have become addicted to the data.
"They want to get closer to the community, but they do not understand the heartbeat of the community," said Lindstrom, adding that this type of conundrum can be solved with Small Data.
"They are trying to run their consumers on a remote control and because it works they are just changing the batteries," said Lindstrom. "And that's the same case with Macy's (M) ."