How data mining can drive up revenues in your business
If you’re a fan of westerns like me, then I’m sure you’ll have seen the time when some old grizzled prospector points to the hills on the horizon, as the place to find your fortune. The unspoken question was always “but how to find it?”. Now you too can strike gold! This gold is not hidden in the earth, but in your customer data. Sometimes the gold can be in maximising the revenues from your existing customers, other times it can be uncovering unmet needs to stay ahead of your competition. This article introduces data mining and why you should be using it in your business.
Using data mining in your business
Data mining is the process of analysing data from different perspectives and summarising it into useful information – information that can be used to increase revenue, cuts costs, or both.
One of the reasons data mining is so powerful is that it enables you to examine the associations amongst customers and what they buy. You may have heard of supermarkets sifting through POS (Point of Sale) data from their checkouts to look for associations – e.g. one US store discovered that men buying nappies on a Thursday, also tend to buy beer. Now, the supermarket doesn’t know whether this beer purchase is stocking up for the weekend, or Dad’s needing something to get them through looking after the kids, but they can certainly use this information to improve the sale of beers.
Data mining enables you to deepen your understanding of your customers and make reasonable predictions about the future. All businesses measure sales revenue – but just as the speedo in your car will tell you that you are driving at 60Km/hour, it won’t warn you if are about to go over a cliff; managers need a better way to understand how that revenue is being derived and importantly what are the trends over time.
Beware of cliffs
In most businesses, revenues are built incrementally by selling a portfolio of products and services. Typically the make-up of this portfolio changes over time either in response to market changes, or as an attempt to generate new income streams. Often sales commissions will be skewed towards newer products to stimulate early sales, which can have unintended consequences.
We should never lose sight of the fact that it is people who sell our products and services, not robots. Even for managers, it’s human nature to get bored with our customers and/or products or to modify our behaviour to maximise incentive payments.
The danger is that these changes happen incrementally causing the overall trend can be missed. Everyone notices the loss of a big customer, but how likely are you to pick up that customer X who used to be your third largest customer, has now dropped to number six? Alternatively, what about if customer Y who used to regularly buy products A, B and C, now only occasionally buys product C (likely to be your most marginal product)?
Like smoke on the horizon in your favourite westerns, here are some tell tale signs that you need to take a closer look at your customer data:
- You find yourself peddling harder, but not getting anywhere – i.e. you’ve never been busier but revenues are flat;
- Your oldest (and likely most profitable) products are largely absent from your sales force’s prospect lists;
- Customers are buying from your competitors when they would have been better off coming to you.
Data mining helps you uncover these signs; it won’t give you the solutions, but set the foundations for their development.
Not all doom and gloom
Data mining can also be used for much more than revenue protection. Pattern formation, clustering and other data mining techniques can be used to identify unmet needs either within your existing customer base, or market. Use these needs to drive your product development to keep one step ahead of your competition. In a market where competitive advantages are short lived at best, that’s got to be a good thing.
- Berry M., Linoff G., “Data Mining Techniques: For Marketing, Sales, and Customer Relationship Management”
- Nisbet N., et al, “Handbook of Statistical Analysis and Data Mining Applications”
Talk to AUSPresence today about going for gold in your customer data!
Inquiries: Chris Frith
Singapore: +65 9169 4607
Australia: +61 2 8002 8200
About AUSPresence: AUSPresence is a professional services firm catering to buyers and sellers of satellite communications services and equipment. Based in Singapore for the Asia-Pacific, our business consultancy practice provides advice and support in the areas of strategy, marketing and product development to help sellers achieve their objectives more quickly. Our brokerage service Satcomms CHOICE, enables carriers and end users purchase the right service at the right price. Check out www.auspresence.com to make the most of satellite in your business.