"Analytics" has become a common word in the world of business. Whether in magazines, on television or on a sign posted at an airport, vendors are promoting the "analytics" message, often in very broad terms, to attract attention to their offerings. This buzzword continues to be popular as more businesses realize how the effective use of analytics can be a significant competitive differentiator for their business.
In today's tough economic environment, companies will need to secure customer loyalty by offering customers a more personalized experience. This increases the perceived value of their offerings so that customers' decisions are not driven solely on price. It presents an enormous challenge for organizations striving to defend and maintain their existing revenue base, let alone grow their revenues.
For many small and medium-sized companies, and even some large enterprises, it's not easy to derive benefits from analytics. In fact, many struggle to get started with analytics in their organization. This article will guide you through key foundational aspects so you can get started with and, more importantly, position yourself to gain the most from your implementation of analytics. The four areas that will be discussed include: (1) defining the business problem, (2) assessing and securing the data, (3) selecting and using the right resources (human and software tools) and (4) implementation - taking action, influencing change and promoting a healthy culture.
Defining The Business Problem
At a high level, for-profit organizations are concerned with increasing revenue, decreasing costs, growing revenues faster than expenses, or some combination of increasing revenues and decreasing/managing costs. Analytics can be used to develop a strategy to increase profitability by providing insights to the following questions: Does your organization understand/know the characteristics that differentiate your profitable customers from your unprofitable ones? Do you know which ones are leaving you to spend their money with one of your competitors? Could you grow revenues from the existing customer base by cross-selling and/or up-selling other products to them? Which types of customers (groups or segments) are likely to buy which products, when and in what order? Do you know which offer is best to send to your existing customers? These are all important questions that need to be thought through if you want to develop a proactive strategy to retain or to acquire profitable customers.
Experience has shown that as you embark on using analytics, it is advisable to start with a business objective that is critical to the success of your business and can be achieved in a short time frame - three to six months. This will ensure a measurable return on investment.
Assessing And Securing The Data
Once you have defined your business problem, the next step is to assess and secure the required data. Data is at the core of any analytics project. Do you collect customer purchasing data, demographic data, customer loyalty information, marketing and advertising response data? You may be able to perform better analytical investigations if you also gather more information such as pricing and marketing information on your competitors.
To get started with analytics, you don’t need all the data. In fact, if you don’t have any data as yet, don’t despair. Start collecting information either in a database or a spreadsheet. The data-collection process will be an iterative and interactive process – as you evaluate and understand the structure and format of the data and tie it to the business problem, you will gain a better understanding of what other data elements could be helpful. It is also critical that your data strategy evolves over time, because your customers’ preferences will change, as will your competitors'. It is a continual learning and improvement process with analytics, because as your data get better (more accurate and robust) over time, your analytical models will need to be refreshed and updated more often with the most current data to deliver improved forecasts and insights.
Selecting And Using The Right Resources
Harnessing Analytic Expertise
For an organization to benefit from analytics, it must have the "right" human resources. It is important to identify individuals who possess both an analytical mindset and strong business acumen along with some foundational statistics/mathematical training and background. Many companies underestimate the need to have individuals who can translate the applicability and benefits of the analysis to their business context. Organizations can choose to recruit internally, hire new employees or engage consultants. The optimal decision for your organization will depend on several considerations including skills, capacity and financial resources. It is essential that the individuals' primary responsibility is analytics.
As your need for analytic resources and expertise increases, you can hire specialists with extensive education in statistics or applied mathematics to supplement the team. Providing the right environment for your analytic staff is essential for their growth and development. It is like nurturing the growth of a plant - it will only blossom if it has the right growth elements: water, fertilizer and surrounding environment.
Analytics experts must also be open to learning and adapting to changes in technology and techniques. To nurture these qualities, internal activities (best-practices sharing, peer reviews and centers of excellence) and external activities (conferences, training and expert-to-expert workshops) are necessary to support growth and development. These can be crucial to unlocking innovation from your analytics team within your organization.