The world has fallen in love with data and the affair shows no signs of fizzling out. Digest this – 2.7 Zetabytes worth of data exists in the digital universe today. Advanced data collection tools and analytics capabilities have given companies not just access to goldmines of information but also the means to use them and reap superior profits. Yet, surprising statistics from a recent research reveal that most companies, including the bigwigs are unable to use the data they collect to their advantage. 43% of companies surveyed said they “obtain little tangible benefit from their information,” while 23% said they “derive no benefit whatsoever from their data.” More than shocking, this is sad. Data mining – the process of discovering meaningful correlations, patterns and trends by analyzing large amounts of data, stored in organizational repositories is the answer to addressing this issue. Data mining deals with existing data, not new data – a common misconception most businesses carry.
If you are an organization sitting on a gold mine of data and unsure how to use it, here are five proven ways data mining can help you get a leg up on competition:
#1 Basket/affinity analytics to boost cross/up-selling and uptake: Basket/Affinity analysis is a predictive analytics technique that analyzes products/services bought by a customer in the past, matches them with consumer preferences and behavior data from other sources, and makes recommendations to boost cross-selling, up-selling, and user engagement with products/services. Take for instance, Amazon, Netflix, or Spotify’s recommendation engines that personalize services for users.
#2 Improved sales forecasting and inventory management: Predictive analytics can help forecast buying trends, changes in consumer preferences, and purchase patterns, helping companies plan for seasonal revenue spikes and lows and optimize inventory placement as well as warehouse management across stores and geographies.
#3 Dynamic pricing: While dynamic pricing is not new (airlines have been using the technique to set airfares depending on the number of seats remaining, time left for departure, etc.) leveraging data mining and analytical techniques, businesses can maximize value by determining the best price a product/service can fetch from different prospective customer segments at a given time. Think how Amazon’s Black Friday sales – the eCommerce giant changes the prices of its high selling items multiple times per day depending on demand.
#4 Database marketing: Data mining to identify customer purchase patterns and create buyer personas based on demographics and psychographics of customers can help businesses build databases that are authentic and real time. Marketing to these databases increases the likelihood of acquisition and conversion, helping companies reap superior ROI.
#5 Managing product warranties: Extended warranties are gaining traction across the retail and product markets today. Data mining can help companies determine and predict the likelihood of customers opting for extended (or normal) warranties to determine the right warranty pricing, plan for spare parts, and requirement of maintenance/service engineers.
For data mining to be really effective, businesses should aim for real time processes for nimble, agile decisions are the key to competitive advantage in today’s digital world.