September 1, 2012
By Geoffrey Hamelin, , Srini Chari, , Prachi Srivastava,

How Analytics Makes Us Smarter

Consumers generate a jaw-dropping amount of data every day, about 2.5 quintillion bytes' worth. And every day, companies and their traditional CRM solutions struggle to make sense of all this data. According to a recent IBM survey of 1,734 chief marketing officers, 71 percent felt underprepared for the explosion of data their companies are facing.

These companies understand that collecting data is just one small piece of the puzzle. Regardless of how much data you have, if you do not turn it into actionable intelligence, you are collecting it for no reason.

The pressure on companies to tap into all this data serves as the backdrop for the mounting interest in the power of business analytics. An IBM study of chief information officers conducted in 2011 found that 83 percent identified analytics as their top-priority investment area. Analyzing data from both within and outside of a company's four walls can turn information into insight and give companies a competitive edge.

Gaining Better Insight with Data

As part of a CRM platform, business analytics uses seemingly unrelated real-time data and information to provide new customer insight. The thinking goes that with this insight, companies can improve loyalty and, ultimately, improve profitability. In fact, Nucleus Research reports that for every dollar invested in analytics, companies realize a return of $10.66. The form of analytics known as predictive analytics can even predict the outcomes of future customer interactions, keeping a company one step ahead of its customers and their evolving interests and behaviors.

Companies in the retail and banking space in particular have been successful at analyzing real-time customer events to determine the next best action for their customers. These organizations analyze data to determine what an individual customer wants or needs from the company, all in real time. These actions can range from a sales promotion to an up-sell opportunity to even an apology for poor customer service.

But it goes beyond marketing to the individual into areas such as inventory management, where a customer's frustration can boil over if a product he is expecting to be available isn't. The power of analytics helped an auto parts retailer to leverage multiple factors, including local vehicle registration, age of vehicles, vehicle reliability, and customer behavioral data, to predict customer demand. This analytical capability enabled the retailer to optimize its inventory in its 3,400 locations.

Whatever your company's aim, the importance of analytics cannot be understated. When looking at the core areas of sales, service, and marketing, analytics is critical to understanding what your customers are saying. If you don't understand what customers want and need, there's someone else out there who is trying to figure that out and trying to make you irrelevant.

Diamond in the Rough

There's no doubt that marketing to the individual is fast becoming the status quo in business. We are moving away from a traditional marketing model to delivering customized, targeted offers to customers with what they need, where they need it, when they need it. And in this increasingly customer-centric environment, we are moving to highly personalized products and services with the goal of retaining customers and increasing loyalty. To be effective with this new paradigm, companies will need to move past an intuition-driven approach that businesses are so accustomed to using. The road to a data-driven organization requires companies to understand what data is relevant and how best to leverage it.

Data is like an uncut diamond. It needs a lot of work to obtain value in the marketplace. It is the people, processes, and technology that are available today that help polish the data and make it valuable to a business.

Geoff Hamelin is senior managing consultant within IBM Global Business Services. He can be reached at geoff.hamelin@us.ibm.com. Srini Chari is managing partner of Cabot Partners Group. He can be reached at chari@cabotpartners.com. Prachi Srivastava works with IBM Sales and Distribution. She can be reached at prachsri@in.ibm.com.