Why India desperately needs Business Analytics!

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The world over, Analytics is shifting to “Big” while in India we haven’t even started thinking “Small”. Every day, one hears about progress being made in the world of “Big Data Analytics” and how it is going to change the way businesses are run. In India, businesses are not even keen to discuss the importance of using data that is already being collected by their “existing” IT systems and not being put to good use. It is time that the Senior Leadership in Corporate India woke up to the urgency of using data in their tactical as well as strategic decision making.

In most companies, data lives in many different systems and this makes the job of uncovering insights from the data all the more difficult. Thus, organizations are left trying to come up with strategies based upon gut feelings and intuition alone – not an effective way to root the innovative risk-taking needed to shape a market.

Analytics takes the data from these disparate systems and joins them together and then makes forward looking predictions, like how customers will act in the future or where, when and how a market will shift. Gartner Inc. describes analytics as the “combustion engine of business” and notes that the companies that use predictive analytics to analyze voluminous structured and unstructured data will grow 20% more than their competitors

Let us look at a few sectors in India and see how they are sitting on a gold-mine of information and not putting the same to good use.

Retailers:

To my mind, the organized Retailers in India are the biggest culprits of not putting their data to good use. Let us look at a few different aspects of retailing one by one and see where the Indian Retailers have got it all wrong.

Long before the age of organized modern retail, the retail business was extremely localized and the customer experience was highly personal. Shopkeepers knew that their ability to connect with customers would be instrumental in driving them back to their stores for repeat purchases. For many successful shopkeepers, this translated to knowing their customers at a personal level, knowledge of what products they typically liked to buy, to be able to give expert advice on individual products, the pros and cons of each, and sometimes their personal recommendation on what they should buy.

What has happened to this breed of shopkeepers who cared so much about customers? Well, technology, the advent of big-box retailing and now e-commerce has converted retailing into a largely impersonal, buying experience where everything including the customer experience is mass produced.

Growing the Loyalty of Customers – Most retailers have issued loyalty cards to their customers and feel that they have ticked off a much needed box in the list of to dos in modern Retailing. They fail to understand that every other competitor is issuing a loyalty card. How do you then differentiate yourself from the other competitors? Unfortunately, the desire to excel, to stand out from the others and innovate is not in our genes.

Using data to understand who their loyal customers are, and then rewarding the loyal customers through a well thought out loyalty strategy is the need of the hour. Creating a customer contact program and incentivizing the loyal customers to come back to their store to buy one more product, one more time, has been the key to success for a majority of retailers around the world. Why then do we still see one size fits all-advertisements in mass media in this age of personalization?

Assortment- What is glaring is the lack of ambition to serve the customer better. The Retailers want to sell what they want to sell and not what the customers want to buy. But to understand what your customers want to buy, you need to look at their buying behaviour and understand what they are buying. For doing so, the Retailers need to use Analytics. I have been visiting a leading Retailer’s branch in the city of Gurgaon for the last 2 years and I see many instances of old broken toys/furniture, which no sane customer will ever buy, proudly occupying space on their displays. The reason for that is simple- no one in the store has ever bothered to look at the list of the 100 bottom selling SKU’s or inspected the store to remove items that have been damaged. These damaged items create a negative impression in the mind of consumers and a customer will rarely want to pick up a similar product even though it is undamaged.

How much space should be allocated to each category and within each category to different SKUs – this is a question which needs to be answered through Analytics, even though tools like planograms help in tactical decision making on assortment, the larger strategic decisions need to be taken after a detailed analysis.

Range: One of the biggest inferences through Analytics has been the fact that when you have too many products in a range, you end up saturating the category and give it more space than is required. The biggest challenge in a Retail store is of space-when you don’t make the most of the space that is available and have the right number of products in each category, you are leaving money on the table.

I can go on and on…but, I have a better idea. During my childhood, there used to be a book called “Tell me why” and it fascinated me with its repository of questions and answers. In India, our education system and social fabric has a way of curbing the innate curiosity in an individual so that when he grows up he stops asking questions. Analytics is all about asking questions and then rummaging through the data to find answers. So, for the rest of the article, I will pose questions which business houses need to ask of themselves and their organizations and use data to answer them. Hopefully, some of the curiosity will come back and as a reader, you will be tempted to ask the same of your organization.

What is the optimal number of SKUs that should be kept in each category?

Pricing: Which products/SKUs should undergo a price decrease/increase? Can I analyze the data and identify the relevant SKUs ?

Which products are bought by price sensitive customers?

Which products are bought by affluent customers?

Can I segment my customers based on the price perception of products?

What has been the impact of price increase/decrease on revenue and number of items bought for products which have undergone a price change?

Discount Wars- Has any Retailer bothered to analyze the impact and ROI of their mass media campaigns and subsequent discount campaigns?

Does this mass discounting lead to sustained loyalty?

Do the Retailers even Analyze their repeat/loyal customers and try to identify what they usually buy and try and customize the discounts to the wants and needs of the customers?

Product bundling is a great concept, but do we do a Market Basket Analysis to see which products need to be bundled together based on customer buying behaviour?

Operations-How does one store compare against the other in terms of various metrics?

Can we identify which stores are doing very well and why?

Can we adopt the best practices from the top performing stores and implement them in the poor performing stores?

For this article, I will limit myself to the Retailers, but the Hotels, Online Travel Agencies, Restaurant chains, Banks, Insurance companies are all losing out on a golden opportunity to use data to drive more revenue and improve their customer service. They need to ask themselves a host of questions and find answers by analyzing their data. I will discuss them in detail in a subsequent article.

It is truly a bitter irony of fate, that in spite of possessing one of the largest talent pools in Analytics in the world, most of them work for foreign companies or have foreign companies as clients. It is time some of that business Analytics talent is used for the betterment of the Indian industries and Indian companies.

Image courtesy to jscreationzs at FreeDigitalPhotos.net
Image courtesy to jscreationzs at FreeDigitalPhotos.net
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