Analytics
“In God we trust; everyone else bring data”
Barry Beracha
CEO, Sara Lee
Supply Chain
• Stimulate and optimize supply chain flows
• Reduce inventory and stock outs
Examples
• Dell
• Walmart
• Amazon
Customer Selection, Loyalty & Service
• Identify customers with the greatest profit potential
• Increase likelihood that they will want the offering
• Retain
Examples• Harrah’s• Capital One • Barclays
Human Capital
• Select the best employees for particular tasks
• Set compensation levels
Examples• New England Patriots• Oakland A’s• Boston Red Sox
Product Quality
• Detect problems early
• Minimize problems
Examples
• Honda
• Intel
Financial Performance
• Determine drivers of financial performance
• Understand the impact of non financial factors
Examples
• MCI
• Verizon
Research & Development
• Improve quality and efficiency
• Improve safety
Examples
• Novartis
• Amazon
• Yahoo
Best practices
• Champion it from the top
• Centralize the initiative. P&G
• Focus efforts. Harrah’s – customer loyalty
• Establish an analytics culture
• Hire the right people
• Use the right technology. Dell
Analytical Applications
• CHAID
• Conjoint analysis
• Lifetime value analysis
• Multiple regression analysis
• Price optimization
• Time series experiments
Real Time Analytics at Harrah’s
• Alerts to customer’s losing continuously
• Offers transmitted to smartphones
• Getting rid of excess inventory via timely offers
• Set pricing for slots, hotel rooms
• Optimize customer flow
Advertising
• Econometric analysis of time series data
• Dell build a database of 1.5 million ads over 7 years
• Online ads are easier to track
• Google provides as much analytics and metrics it can provide
Retention and Cross-selling
• DnB NOR uses ‘triggers’ to send customized offers
• Based on history, chooses effective channels
• Achieved 40 to 50% cross-selling
• Halved marketing budget
• Increased customer satisfaction
• Tesco uses customer data to slot customer lifestyles
• Uses that to generate 7 million variations of coupons
• Tesco’s redemption rate is 20% as opposed to industry rate of 2%
• Tesco is the world’s largest online grocer
Skimming the Cream off the Garbage
• CapitalOne employs its own proprietary consumer creditworthiness tool to sift through perceived high risk customers
• Progressive Insurance also uses similar methodologies
Price Optimization
• JCPenny used price optimization software to increase gross margins
• Operating profits grew at double digit rates• Inventory turnover increased by 10%• Amazon priced its DVDs more to customers who
spend more• Marriott has improved its revenue opportunity
from 83% to 91%• Applies optimization to catering and conference
facilities
Price Optimization
• Dell used forecasting systems to predict a downturn in 2000 and 2001
• Sales came down by 2.3% in 2001
• Compared to HP – 32%, Compaq – 36% and Gateway – 62%
• In 2006, 77% of B2B businesses were moving towards PO software
Brand management
• In 1999, Samsung sold 14 product categories in 200 countries for a total 476 product-category combinations and uses analytics to make budget allocations
• Budnet (Anheuser Busch) – sales rep give data on display, inventory levels, pricing and promotion.
• Gallo edge helps retailers optimize profit per shelf
Converting Customer Interaction into Sales
• Capital One health Care, uses doctor’s personal information to make an effective sales pitch.
• Best Buy uses a few stores as laboratories• Analyzed ‘frequent returners’• Trains employees to understand financial
metrics• Harrah’s optimizes range and
configuration of gambling games
Customer Life Cycle management
• Predictive tools help Best Buy increase subsequent sales
• Sprint uses 25 models to determine best ways to maximize customer loyalty
• Uses retention agents to solve issues with unpaid bills
Customize
• O2 predicts and presents content to match consumer’s tastes
• 97% of their customers have opted for this feature
• O2 has 50% of UK’s mobile internet traffic
Connecting Customers to Suppliers
• Walmart has over 600 terabytes of sales and inventory data on a single platform
• 17,400 suppliers in 80 countries use Retail Link
• Allows Walmart to stock up on Strawberry pop tarts just before a hurricane
• Amazon recruited Gang Yu to make a proprietary inventory model
• CEMEX increased market share in Mexico by reducing delivery times by route planning which factors in weather, traffic conditions, labor, etc.
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