Why Data Analytics Can Help Drive Sales For Your Business
A successful company has customers at its core. Long gone are the days of one-size-fits-all advertising and competition based solely on price. If you want to get –and keep– customers, you need to be interacting with them and building relationships on a one-to-one level.
But that isn't enough. As a successful modern enterprise, you'll be using data-driven insights to understand your customers' needs in a rapidly evolving world, enabling you to proactively evolve your products alongside those needs. Many of the successful new "disruptive' businesses –including Uber and Airbnb– are using data and its analysis as the cornerstone of their entire business model. Against this background you don't want to risk being left behind, possibly disrupted into oblivion by a more data-savvy competitor or even one of many new startups driven by data-focused entrepreneurs.
So let's take a look at the importance of putting customers first, and why data analytics is such a key tool in doing that.
Why is it so important for a company to be data-centric?
When it comes to measuring success, a company might first look to its customer base, sales figures or bottom-line results. And yes, these are all important indicators of growth. But the picture they convey is far from complete. Do these figures explain who is buying your product? Do they explain when and why you gain or lose customers? Do they show you how much loyalty there is in your market? Do they tell you what you need to do to stay competitive in the future?
These are the areas where having good data analytics is vital. The insights they give help businesses to cater directly to their customers with confidence, optimize their resources, and innovate flexibly in-line with changing markets. As data experts Gordon Linoff and Michael Berry explain in their book, Data Mining Techniques, "forward-looking companies are moving toward the goal of understanding each customer individually and using that understanding to make it easier (and more profitable) for the customer to do business with them rather than with competitors."
How can data analytics change your business strategy?
In short, data analysis can help you reshape your interactions with customers, market more effectively, and ultimately drive more sales for your company.
1. It enables segmentation: Segmentation involves dividing up customer data –for example relating to age range, location, shopping habits, or product usage– and grouping similar data together. This information can then help you create messaging that resonates with each segment individually. Whether it is people belonging to a demographic group, living in a particular area or showing an ongoing interest in a specific hobby or activity, you can tailor your marketing to appeal directly to their individual needs and interests.
Segmentation also helps you assess which groups are most profitable for your business, enabling you to both identify the most valuable customer segments and avoid wasting money on segments that are unlikely to yield conversions. As Amy Gallo explains in the Harvard Business Review, many companies go so far as to assign ratings to customers using a calculation called customer lifetime value (CLV). This metric determines how much a customer is "worth' to the company in comparison with others. In the long run, knowing which customers to focus on and invest in is crucial to maximizing your profit.
2. It promotes product development: To stay competitive in this customer-centric market, your product or service needs to be tailored to your customer. Gathering data from surveys –or using A/B testing to experiment with different approaches– can be a powerful way to determine what works and what doesn't. You can use customer feedback to improve the quality of your product or levels of service and identify opportunities for innovation that will set you apart from the competition. Tom Davenport, the author of several best-selling management books on analytics and big data, notes how companies like Netflix and Amazon use analytics to understand the winning ingredients of popular TV shows, which they then use to inform their choice of future shows and maximize their chances of success.
3. It encourages agility: In this fast-moving market, it's never been more important for businesses to stay agile. As acquiring new customers gets more difficult, more companies are channeling their resources towards keeping their existing customers, rather than trying to find new ones. This is not an easy task. According to a 2016 Gallup study, 71% of all B2B customers are considering moving their business to a different provider. In other words, more than two thirds of the B2B customer base is at risk. Against this background, successful customer retention means constantly adapting to your customers' changing needs, anticipating problems, offering solutions, and being able to quickly adjust your strategy.
4. It enables disruption and innovation: In recent years it is striking that people who obsess over data – and use data analysis at their core of their business– have been phenomenally successful disrupting entire sectors and established industries. I mentioned Uber and Airbnb but the list goes on a lot longer. Careem in chauffeur-driven cars, Lemonade in insurance, and Monzo, Starling and Revolut in the new world of open banking are just five examples. All have been founded on analyzing data, allied to smart use of AI, bots and apps as central pillars of their business delivery. The other notable example is Autonomous Vehicles (AVs) likely to become the most far-reaching disruptive technology of our generation, born out of a huge confluence of data already held by Google, Tesla and other innovative companies, and generating billions of new data items with each use. The Google self-driving car (Waymo) reportedly generates up to 1 GB of new data each second as a by-product of knowing how, where and how fast to drive safely. Data will be key to market domination in this new disrupted world.
Turning data analysis insights into action
More mundanely, whatever your industry, data analytics helps you understand your customers' behavior and predict how that behavior might change in the future. It can help you recognize why customers leave, make necessary improvements to your product or services, and target retention campaigns at those customers most at risk of leaving.
Not surprisingly, to help them compete in a marketplace which includes the disruptive threats described earlier, more companies than ever are striving to be data-centric. But few have worked out how to actually use their data to make their business more profitable. Insights are only powerful when they support change. So you need to be using the information you gather to inspire meaningful action in your business.
As technology marketing expert Lisa Arthur explains in her book Big Data Marketing, the customer-centric journey is made up of four stages:
• Integrate and understand
• Analyze and discover
• Act and optimize
• Execute and deliver
So, how can you make sure you're covering all these stages?
1. Identify the problem: Like most research, you need to start with a question. It's not enough to know what data you want to gather, you also need to know what you're going to do with the data and insights once you have them. What problem is your company looking to solve? How is this data going to solve it? This approach helps to focus your analysis and tailor your research to ensure the resulting data is both relevant and applicable.
2. Get the metrics right: In order to apply insights to your business in a practical way, you need to be using the right metrics. As Gallup points out, many companies direct their entire focus towards descriptive analytics (what happened) and don't include enough diagnostic analytics (why and how it happened) or predictive analytics (what will happen next). It's only by amalgamating the three different types of data that you can get a full picture which will help you fix problems and improve your business in the future.
3. Have the right systems in place: The data will potentially be used to influence top-line decisions in your business, so you need to make sure it's reliable. Gallup argue that many companies don't have enough internal expertise to assess whether their data is good enough to solve their problems and give truly meaningful analysis. By putting the right systems and infrastructure in place from the start, you can yield data that's useful, accurate, and easy to understand. You want your employees' time and focus to be on directly implementing lessons from the data, not needing to puzzle over complex graphs and tables to make sense of it.
4. Use experts: You need well-organized teams and skilled data experts to bring your data out of raw spreadsheets and map it to the market in a useful way. As Peter Verhoef and Katherine Lemon pointed out in a 2013 article published in European Management Journal, it is important in data analytics that companies have intelligent departments with the correct capabilities. At all levels of your business, you need employees who can use data appropriately and have a strong understanding of its scope –as well as its limitations– so you can gain useful, actionable insights from the data.
5. Execute and deliver: Collecting and analyzing data isn't enough to produce results. For instance, identifying your most popular products may help you with your supply volume but doesn't directly help you sell more units. What is needed is to use the information and insights to execute and deliver change within your company, in other words use the data to improve your internal processes. Disregarding your carefully acquired data not only wastes your time and money but also risks actually damaging your company's reputation. As Gallup points out, when customers give feedback to a company they expect it to respond and make changes. If you don't, that could negatively impact your relationships with the customers who provided the feedback.
Even small changes matter
Data analytics is a key element on the path to becoming a customer-centric business. By yielding meaningful patterns in customer and market behavior, the data helps you to ensure you're effectively targeting customers –both new and existing– and maximizing your marketing impact. It also offers you the chance to improve the service you provide, and to intelligently direct investment towards promoting brand advocacy and long-term growth.
The shift towards becoming a truly customer-centric business is complex and long term. But even the smallest changes to your strategy and methods of working can bring about substantial benefits for your customers, employees and bottom line.