Why Small Businesses Actually Have the Big-Data Advantage

While big data can provide a plethora of information to businesses, many companies can come off creepy to customers. Ironically, that's why small businesses have an opportunity to use big data perhaps better than anyone.

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By Dan Yoo

Opinions expressed by Entrepreneur contributors are their own.

Big data, with its Orwellian overtones, gets a bad rap. And there are good reasons why.

Online ads generated by web surfing create the same consumer ire once reserved for spam email: Buy a rabbit hutch for your kids online and suddenly you're cyber-stalked by ads from the rabbit-hutch industry long after that one-time purchase. (Even the man who helped create targeted ad technology publicly apologized in a recent Atlantic essay).

This creates a feeling of hidden, Peeping Tom companies peering from behind bedroom drapes. The aim of big data shouldn't be the Big Brother world of 1984 but the small-town feel of Happy Days, that iconic sitcom of 1950s America.

Big data is essentially an attempt to scale Mayberry, USA (fictional setting of another Ron Howard TV classic, The Andy Griffith Show). But by striving to get closer to their customers, firms often come across as creepy.

Related: How Small Businesses Can Embrace Big Data

That's why – ironic as it sounds -- small businesses have an opportunity to use big data perhaps better than anyone. Here's how:

Data should drive personal service. I was reminded of that a few years ago by a man whose company sold me a bum set of window blinds. After I wrote a poor review on Yelp, the owner, David Farella, called and personally came to my house at 9 p.m. on a Saturday – the only window I had free from my job at the time.

Big firms -- often clumsily – try to use data to replicate a vanishing world where the butcher and grocer knew you, your family and your dog by name. But small-business owners like Farella can use data tools with greater finesse to cement customer loyalty. He turned a bad experience around and created a loyal customer -- and he knows the names of my wife and kids.

Don't be afraid of the big, bad data. At my previous job at LinkedIn, my team's job was to analyze up to billions of data points to develop smaller, actionable information.

Small businesses don't have to work so hard. Digital tools and social media can transform their big data into useful signals for small firms, giving them powerful new ways to receive constant feedback and improve.

Related: 4 Sturdy Pillars of Data for Growing Your Small Retail Business

Farella gets automated feedback from Yelp! and monitors reviews on Facebook, Twitter and other social-media channels. "We track that and it affects how we do our business – we basically do no advertising, it's all referrals and social networking" -- both real and virtual, he says.

Those who fear these new tricks toward customer loyalty could learn from Farella, who is approaching his 60s. "I grew up at a time when you wanted to research a company or a stock, you had to go down to the library," he says. "Now it's all out there [on the Internet] -- it's so much easier."

Trust your gut but verify with data. Mammoth online operations like Amazon became giants by constantly doing A/B testing on the best way to draw traffic and convert sales. Small business owners, however, often run by intuition. But when was the last time you tested your assumptions? Success in small business is often a game of inches: To be effective at what you're doing, you should be constantly iterating.

How deeply can I discount loss leader items before the added foot traffic becomes too expensive? What Groupon-type offering generates the most return customers? Point of purchase software like Square Register and the Vend iPad app make examining customer reaction to experimental changes in offerings easy and fast.

Related: Power Up Your PR Strategy With Big Data

Triangulate assumptions against data, and you have a powerful way to react quickly to changing consumer tastes. "All you have to do is try it," Farella says. "Just put it up and see what happens."

Think of it as spy vs. spy. The proliferation of online data also opens up new fronts in the war for clients. A few years back, Farella found a competitor was planting bad reviews about his business. "That's crazy, you should be focusing on improving yourself rather than destroying others," says David, who confronted his competitor with affidavits from former employees about the misinformation campaign. (The bad reviews stopped.)

Farella pores over industry blogs, online reviews of his business and his competitors. "You read it like you're reading the newspaper," he says. He's constantly trying to stay ahead of the curve, "imagining where the business is headed not next year, but 10 years from now" and guiding the firm in that direction.

But one thing isn't changing: Customers crave personal attention. "That's especially been true since the financial crisis," Farella says. "The importance of relationships since the shock is almost like it was in the '50s and '60s – like when you went down to your Main Street cobbler to get your shoes fixed."

Related: How Small Businesses Can Embrace Big Data

Dan Yoo

COO of NerdWallet

Dan Yoo is the COO for NerdWallet, a startup focused on offering price-comparison tools for financial products. Prior to joining the company, he was vice president of business operations and business analytics at LinkedIn, where he helped grow membership from 50 million to more than 275 million. 

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