4 Things You Can Do To Make Data Work For You
Use data and technology to amplify your strengths as a small business owner and get even stronger.
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The owner of my favorite local floral shop has unlocked one of the secrets of driving repeat sales by tapping into valuable customer data -- but she doesn't think about it that way.
"I'm not using data, I'm just caring about my customers and being smart about it," Joan shared with me. What does Joan do? She took a page from a big company -- in this case ProFlowers -- and one-upped it, using her personal touch.
ProFlowers is a digital retailer that gets it right. Each time you order, you get tips and prompts: "Who are you ordering this for? Set up an automated reminder for next time." You might get a discount coupon code when that automated reminder comes around. It's marketed as a big benefit to you, the customer, because it is. And guess who else benefits? ProFlowers.
That's a data driven-marketing practice you can use as a small business too. Joan engages each customer in a friendly and revealing conversation as they place an order. Is this for a birthday or anniversary? She'll note that and reach out to the customer for a repeat sale the next year. What other occasions might the client need flowers for? What are their favorite flowers? As a result, the vast majority of her business is from repeat customers -- and most customers buy from her many times each year. According to a study by BIA/Kelsey and Manta, 61 percent of small businesses get more than half of their revenue from repeat customers. So it's an important strategy to get right.
Here are four things you can do to make data work for you:
1. Engage your customers and learn about them.
Figure out what matters and capture it in a way that is easy to follow up on – don't rely on keeping everything in your head. You can use a CRM system like Method, Excel or even QuickBooks Online to do this. Take a page from Joan's book. Don't go overboard and turn into a stalker -- think about what you would want if you were in your customer's shoes.
2. Track sales and costs.
Track your sales and costs -- all of your costs, including your own labor and that of your staff -- by product or service, and then figure out which are truly profitable and which just seem profitable. The owner of a small construction company I know started tracking this and realized that some of the jobs he thought were the most profitable weren't because the team was spending more time on them than he had estimated. Essentially, the revenue was high, but so were his costs. He realized he needed to increase his estimates for a certain type of work. He now does less of that type of job and more of where he makes more money, and he knows that almost everything he does is profitable.
3. Watch your stock levels.
If you're a product-based business, you live and die by what you actually have in stock or not. You can't afford to have too much, and you can't thrive without enough. Data can help you understand which products sell and when, and which don't. If a customer walks through the door looking for something you typically carry but don't happen to have in stock, your likelihood of closing that sale has just plummeted. Having the right inventory tracking system will let you know what you have on hand, when you should reorder or clear out. That means you'll never miss a sale and you won't have too much of your money tied up in inventory. That's data in action that delivers for customers and for you. You can track your inventory using tools like Unleashed, Stitch and QuickBooks Online.
4. Emulate the big boys.
See what the big guys are doing and get inspired. Whether it is Amazon, Zappos, ProFlowers or a big player in your industry, study up on what they are doing to personalize their services and use data to differentiate. Then figure out how you can do it even better -- but without building out unwieldy systems. For example, Amazon uses its customer purchase history to drive its recommendation engine -- "Frequently bought together" and "Customers who bought this item also bought." Guess who else can do that? You, using your powers of observation and pattern recognition -- or if you use an ecommerce platform like Bigcommerce or Shopify, check out their app integrations and pick a recommendation system that works with your website.
What's at stake for entrepreneurs? Only half of small businesses make it past their first five years. Small shops succeed when they are personal, connected to customers and to their community -- and the bar for personalization and connectedness continues to rise.
But you shouldn't be afraid of that. Instead, use data and technology to amplify all of your strengths as a small business owner and get even stronger.