E-Commerce

Use business intelligence to dump bad customers and target promotions

Business intelligence tools can transform your company's operational data into high-value information you can use to boost your bottom line. Find out how BI can streamline both your customer base and your promotional efforts.


Although it is often difficult to take time for a big-picture view of your business when you’re bogged down in the daily details, taking time to analyze business trends and customer patterns can pay off in many ways. Business intelligence (BI) can help you identify and strengthen weak areas of your business as well as pinpoint and expand strategies that are working to all areas of your business.

The good news is that the BI tools necessary to support this data analysis are within the grasp of most organizations. These nine suggestions for using BI tools and technology—and the resulting data—can impact both sales efficiency and your bottom line.

Using BI, you can:
  • Increase sales, using fact-based selling tools.
  • Build profits by targeting profitable activities.
  • Increase customer loyalty and retain customers for life.
  • Increase the accuracy and timeliness of sales forecasts.
  • Achieve budgeted sales.
  • Increase the proportion of high-value customers in your customer mix.
  • Reduce low-yield activities in the sales process.
  • Deploy higher-yield promotions and advertising.
  • Predict future behavior of prospects and customers.

In this article, I’ll discuss the last three items on the list above. "Business intelligence tools are key to building profits" discussed the first three points, and "Use business intelligence to boost sales and profitability" covered the next three.

Reduce low-yield activities in the sales process
Some customers just aren’t worth it if they hog-tie your customer support staff with problems like unusual billing or shipping requirements, complaints, and product returns. These high-maintenance customers are responsible for large amounts of nonstandard, low-yield activities that translate to high cost and low profitability.

If your company has many customers like this, it becomes difficult to measure the true cost of doing business and then adjust prices to cover this cost. Additionally, low-yield time spent with difficult customers decreases more productive time spent with your better ones.

A modern BI system makes it easy to spot the high levels of low-yield activity characteristic of problem customers. By measuring such things as nonstandard product orders and hours logged by your customer service or sales reps with each customer, you’ll be able to identify problem customers and the real cost of doing business with them. Then you can decide between selectively increasing prices to cover the real cost or dropping these customers out of your business altogether.

Deploy high-yield promotions and advertising
Someone once lamented, “Half of each advertising dollar is wasted; I just don’t know which half.” By leveraging information from your BI system, you can disprove this maxim and maximize the revenue returned from each advertising dollar you spend.

This is easier said than done for several reasons. Sophisticated information systems supporting customer, product, and promotions attributes have traditionally been out of reach for most companies. Without solid facts, good timing, a strong message, and the right media, advertising decisions are based on guesses and intuition or expensive trial and error. Sometimes you’re lucky; often you’re not.

Measuring the performance of your advertising and promotional efforts in terms of their impact on profitability can be a tricky analysis, requiring a collection of additional measures. True profitability must be determined by the net of time shifts, cannibalization, and the actual cost of the promotion itself. Doing this requires lots of information.

The principal benefit of the BI system in this area comes from your ability to identify the significant characteristics of the customers who are buying your most profitable products. The level of understanding that comes with the ability to slice customer and product data with razor-sharp precision helps you to create focused messages and to deliver those messages in the right way, to the right people, and at the right time. You’ll also use these tools to measure the impact of individual promotions.

BI can also help you to repeat successes across your organization. Once you determine which programs are successful, you’ll want to redeploy those promotions in similar markets. For example, a major oil-change company routinely correlates the results of their promotions with demographic data. Successful promotions are rerun in areas with similar demographics.

Predict future behavior of prospects and customers
The closest we can come to predicting future behavior is by methodically analyzing the past. Another important BI tool, data mining technology, allows you to create and train models to help predict future behavior based on a complex statistical analysis of the past. In this way, data mining is a powerful ally in helping you gain meaningful business insights into the future behavior of your customers.

Data mining is making a big splash in lots of areas, including direct marketing. One of my favorite cases is that of a major U.S. bank. The company's target was to acquire 200,000 new accounts—a number that would require mailing offers to 10 million prospects, assuming a 2 percent return, which is the rule-of-thumb rate for direct mail. Instead, they employed data mining techniques to mail to a refined subset of all prospects, yielding a response rate of 12 percent.

Similarly, data mining models may be trained to predict the likelihood that a particular customer will place a catalog order or buy a certain product. Models are often used to predict the revenue a customer will generate during the next year.

Forming your own BI plan
These nine ideas for using BI tools illustrate their business value and the impact that BI can have on your company. These high-value and low-cost ways of improving your sales and marketing processes translate to strong ROI for the business and the status of champion for the clever CIO who puts them in place.

What's the status of business intelligence at your company?
Have you implemented any of these ideas? Does your company have a formal BI strategy? Have you been able to start a pilot project in one department to introduce the concept to your company? Tell us about your experiences with BI.

 

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