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Gaining Business Intelligence
By Jerome Bergerou
A white paper on how companies should analyze customer data to gain better
business intelligence and how they can use that knowledge.
GAINING BUSINESS INTELLIGENCE
In an increasingly competitive world, using your client database smartly, to
gain a better understanding of your number one asset – your customers – can make
or break the success of your company.
Most companies use databases to store information about their current customers,
previous customers, business partners, and potential customers. The challenge
lies in finding a way to harness the useful information contained within these
high volume databases in order to produce intelligent business solutions.
Business intelligence (BI) refers to the process for increasing the competitive
advantage of a company by intelligent use of available data in decision-making.
Business intelligence consists of sourcing the data, filtering out unimportant
information, analyzing the data, assessing the situation, developing solutions,
analyzing risks and then supporting the decisions made. This white paper
describes the business intelligence process, some elementary methods of data
mining, and how you can use business intelligence in your company.
Database Enhancement
The first step towards gaining business intelligence is to start with a ‘clean’
database. Incomplete and inaccurate data invariably translate into incorrect
management decisions. Duplicate data is also a problem as it can wrongly weigh
management decisions to one side. Whilst a good quality database does not
automatically lead to intelligent management decision-making, it is a
pre-requisite for all types of analysis that attempt to elicit intelligent
management. We could draw an analogy with cooking, where starting with the right
ingredients does not guarantee you will bake a good cake, but there is very
little chance you will bake a good cake if you start with the wrong set of
ingredients.
One of the primary reasons companies do not fully realize the potential
competitive advantages they can gain from their own databases is the lack of
proper integration of datasets across departments. Even though all the
information might reside within the company, it may remain elusive due to a
fragmentation of the data across incompatible databases. Regrouping all internal
data into a single dataset or a series of interconnected datasets could be the
single most useful step a company might take towards providing a solid
foundation on which quality business intelligence can be developed.
In some cases, data entry errors and/or missing data can also severely impair
the quality of information that can be derived from corporate databases. Sorting
these issues can range from very straightforward fixes (e.g. matching one list
against another) to more time consuming processes (e.g. contacting all client
companies to update contact details of individuals working there). Ideally, all
inaccuracies should be weeded out of the databases. However limited time and
monetary constraints dictate that you should bear in mind how this database will
be used. The level of accuracy required will vary greatly depending on the
expected use for that data.
Data cleansing and database integration can provide significant advantages for a
company over the medium to long term. However, they are both extremely
time-consuming activities and can create a significant strain on internal
resources, making them difficult for a company to justify. Hiring a third-party
to do this job is often the best solution, allowing valuable information to be
gained, without disrupting day-to-day business activities.
Data Mining
Analyzing the information that your company stores in connection with all
customer interactions can reveal a lot of remarkable facts about the buying
behavior of your customers, what motivates them and what might make them stop
buying from you. It also provides a scientific method to monitor your business
performance.
When deciding to mine information from a database, one is faced with a wide
number of available techniques. Some of the more popular data mining methods are
described below:
Statistical models
Basic statistical measurements – such as means, variances, and correlation
coefficients – are useful in the early stages of data analysis to gain an
overall view of the structure of the data. By revealing simple inter-relations
within the data, statistical modeling can show which in-depth technique is
likely to bring further information relevant to your interests.
Clustering
Clustering is a technique that aggregates data according to a pre-determined set
of characteristics. It can be used to differentiate groups of customers that
behave similarly on certain factors, for example it can classify customer
behaviors according to credit worthiness, income, age or any other factor of
interest.
CHAID Analysis
CHAID, which stands for Chi-square Automatic Interaction Detection, can be seen
as the opposite of clustering, in the sense that the CHAID analysis starts with
the overall database, and then splits it according to the most important
variable until it achieves homogeneous sub-groups that cannot be split any
further. A major advantage of this technique is that the results can be
presented as an easy-to-read classification tree; each split in the tree being
accredited to a single variable (e.g. credit worthiness, income, age, etc).
Propensity models
Propensity models – also known as predictive models – have proven to be very
valuable in predicting which customers are most likely to purchase a certain
product based on a set of current customers. The results of such a model can be
directly used to develop more appropriately targeted marketing campaigns.
Other recognized techniques to extract information from datasets are database
segmentation, neural networking, and wavelet analysis among others. It can be
intimidating to choose which method will provide the best results. As shown
above, analysis tools can differ greatly in their approach of the problem. It is
therefore very important for a company to consult someone with extensive
experience in data mining processes before going ahead with a business
intelligence project. The best method to use will vary greatly depending on the
time available to do the analysis, what the results will be used for, and the
type of data that is available for the analysis.
An important point to consider is whether your analysis is guided by pre-defined
questions or not. Predefined points of analysis are aimed at understanding
certain types of behaviors by analyzing relationships between various
pre-decided influencing factors. For example, a predefined analysis of customer
service Vs sales would illustrate the effect of good and bad customer service on
sales, and would answer questions such as how important customer service is to
customers and how much it influences future sales. On the contrary, the
objective of an open-ended analysis is to discover trends that are not
anticipated by ordinary immersion in the day-to-day business. Performing an
open-ended analysis internally is often impaired by the expectations brought on
by individuals working within the company.
The techniques used to analyze data are complex. In order for your company to be
able to use the results of the data analysis, it is crucial that the results
should not be clouded by the complexity of the calculations but are delivered in
a straightforward manner.
Intelligent Marketing
It is important for a company to recognize that a good understanding of its
customers is useful only to the extent to which this knowledge can be translated
into real business practices. Business intelligence refers not only to the data
analysis in itself, but also to how you relate the results from the data
analysis to every day business decisions and how you translate the recommended
actions stemming from the analysis into live campaigns.
It is therefore important for you to ensure that the marketing department in
your company interacts with the data analysts constantly throughout the process.
That way, when the data analysis is complete, the marketing personnel will
already be in tune with the issues the company is facing, and will be able to
develop campaigns to capitalize on opportunities and strategies to mend
weaknesses quickly and effectively.
Detailed analysis of your customer data will provide you insight into their
needs and wants. The exercise will analyze and segment customers’ buying
patterns and identify potential services that are in demand. You can use this
information to shorten response times to market changes, which then allows for
better alignment of your products and services with your customers’ needs.
An in-depth understanding of your customers, provided through comprehensive
data-analysis, will also allow you to pick and target better prospects, achieve
a higher response rate from marketing programs, and at the same time identify
reasons for customer attrition and create or alter programs and services
accordingly.
Understanding how external market conditions affect your business will enable
you to react quickly to future changes in the market. Finally, understanding
customer behavior and the way they use your products and services will enable
your company to improve its service to its current client base as well as to
target new business more effectively.
About AccuraCast
AccuraCast is an integrated marketing, business intelligence and data analysis
agency, providing small and medium sized companies in the UK a more accurate
picture of their business environment via comprehensive data analysis, business
intelligence, and marketing consultancy services.
AccuraCast helps companies gain a better understanding of their customers and
market their products and services more effectively. The company uses high-tech
data analysis methodologies to investigate client databases smartly, and proven
sales and marketing methods to reach the target markets. AccuraCast delivers
costumer specific marketing solutions and information based on tailor-made
analysis of the databases, allowing companies to gain the necessary edge over
the competition.
For more information on gaining business intelligence visit
http://www.accuracast-marketing-agency.co.uk/business-intelligence.shtml
About The Author
Jerome Bergerou
AccuraCast
Tel: 0870 240 7847
Fax: 0871 277 1371
Web: http://www.accuracast.com
Email: j.bergerou@accuracast.com
© AccuraCast Limited 2004. http://www.accuracast.com
All rights reserved. The information in this document is accurate to best of the
author’s knowledge. No rights granted. AccuraCast Limited is not liable for any
loss or damage arising either directly or as a consequence of information
provided in this document.
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