Unless you believe in Christmas miracles, there is no way Santa Claus can process tens of millions of wish lists and deliver the right Christmas presents, to the right kids, at the right time.
Think about it. All those Christmas wishes are received in the couple of weeks before December 25th. “Santa’s Workshop” has to react to that rush. Is there a way for Santa to get ahead of that avalanche, perhaps knowing what kids want before they know it, just to have the goods on hand?
We already established that it is possible with today’s technology to roughly replicate Santa’s order-and-delivery service. Now we have to figure out how Santa can forecast gift demand. You want to line up the toys before the kids send letters to the North Pole.
For now, we will limit our investigation to the U.S. market. Most of those 74 million children are repeat customers from previous years. Santa already knows their preferences. The past can provide clues. And Santa is already sitting on a lot of data. Elves are not up to being data scientists, so Santa will have to hire a few qualified humans to fill in. The right insight can be found with the right algorithm.
Every child’s previous wish should inform Santa what the next gift should be. The challenge is tracking the child’s change of taste as he ages. Identification modeling will show the likelihood of preference by age group. Segmentation diminishes the likelihood that a video game will be sent to a toddler. Demographic analysis is pretty straightforward. It is not the only approach. Santa’s data helpers can also identify kid wants by their needs. Again, this takes a little imagination. That toddler who got that Little Tykes Cozy Coupe will grow up to want a tricycle, and later a bicycle. (Forget about giving a pony or a car–that’s too problematic.) Just be sure to put a reminder in the database, alerting you to the expiration date on that current toy’s service life before offering a replacement in a later year.
But what if that kid really wants a pony?
Santa’s data helpers can use psychographic segmentation to understand the why behind the want. The child wants the freedom to explore the world and the pony would deliver that mobility. Perhaps a bicycle would be better than a pony? Deliver the right message and maybe you can change a preference? Parents will be grateful to Santa if he can pull this off. This would spare them years of paying fees for stabling and feed. (College is going to be expensive, so shift those funds now to more productive investments.)
Thinking can be automated
Teasing out market segments among more than 70 million children is not task for elves handling tons of paper mail. Those human data helpers can train AI to “learn” the data, with the right algorithms sorting out like with like. The humans will also have to check up on the algorithms periodically, just to be sure the unpredictable does not happen. You don’t want junior getting a flamethrower for Christmas. Many fear that AI will put many of the elves out of a job, or worse, replace Santa. That is not likely. Displaced elves can be retrained to do other, higher-value tasks.
As for Santa, well, he can automate his operations, but he still calls the shots. AI can score children for their “customer lifetime value” — basically how many years they are expected to be asking Santa for free stuff every Christmas. Again, AI can help pick the right gifts and deliver the right messages to keep children believing in Santa. Just think of the goodies as positive reinforcement.
But even Santa has “churn.” For online vendors, these are customers who stop buying. For Santa, these are kids who stop believing in him. There is a way to forecast churn. One can track kids as they get older, understanding that the likelihood of believing in Santa Claus diminishes with age. This can be scored predictably by a competent marketing team. Or Santa can consult with the Tooth Fairy and the Easter Bunny. When kids stop believing in those two, Santa knows he’s next. Churn is a natural part of the market cycle. But there will always be another batch of new customers arriving every year. Santa can deliver a stuffed animal to the next newborn, and wait until he or she is big enough to want a pony.
So how about that bicycle?