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Data: Taking Full Advantage


10/1/2004
By Dan Maslic

Keeping track of data allows you to further refine your business model and come up with improved promotions and advertising programs. It's important for every business.
 

To take full advantage of data, you must employ data-mining techniques to study and analyze the data collected for the purpose of refining business strategy. Through data mining, when you hold a sale or promotion, you can quantify the effectiveness of these programs based on the sales data collected. You can gauge which promotions were effective, and identify those that yielded no improvement in sales.

Keeping track of these variables allows you to further refine your business model and come up with improved promotions and advertising programs. If targeted marketing works well for one demographic but not necessarily another, you will know where the bulk of your advertising budget should go next time.

Data-mining also allows you to keep statistical track of installer-account performance. Some accounts may be very large, spending tens of thousands per month with your store, but are they profitable to deal with? Do they pay on time? If a smaller account nets you double the margins of a much larger account, who should you concentrate on? Who should you reward? Returns cost money, and if a larger account sends back plenty of returns, you can quantify what this costs your store.

Equally important is that each employee has access to this type of information. When a small but highly profitable customer needs a rush delivery and the counterman needs to make a snap decision of delivery priority, the digital system will give him the cold-hard facts with which to make this decision effectively and profitably. Its not necessarily the size of the account that matters, its the profitability and net revenue generated that are of importance. Data-mining helps eliminate subjective opinions regarding all aspects of business performance and focuses on the objective issues - hard numbers and facts.

The term data-mining was given to the process of using data search capabilities and statistical algorithms to discover certain patterns or correlations in an existing database. The goal is to expose any new meaning in the data, or to better analyze the data for the purpose of refining your business strategy. Needless to say, this is a far more realistic task for computers as opposed to human workers. It may not have been enticing enough for some business owners to pay the up-front costs to begin computerized data management since their operation was small (or so the excuse goes), but what if the rewards were also to become substantially more profitable for the same given revenue? What if the rewards were not just profitable by way of reducing administrative costs, but more profitable through better business processes such as real-time inventory control, greater customer and economic value with each transaction, and more effective targeted marketing?

THE DIGITAL STORE
Looking first at the big picture, we know that a store has to be networked properly using modern desktop PCs. In other words, your counterman must have access to the same system as your manager, your controller, your salesman, etc. The depth of information available to each individual doesnt have to be equal, but the system has to be the same. If your counterman sells a part, the controller should see this reflected in the system in real time. The inventory should subtract one part, accounts receivable should see it automatically added to invoicing, purchasing/procurement sees the need to order more from the supplier, and the outside salesman should see immediately which of his accounts bought the part. The manager should be able to use the data-mining software to correlate any purchases that are somewhat different from the normal buying patterns to determine whether the promotion and advertising package he put together was effective or not.

That last one is key, being able to quantify promotional effectiveness, is important. Business is like a sport: you cant play well if youre blind, and if youre blind, it all comes down to luck.

If you want to be truly effective in your data analysis, your picture should be bigger still. You should not only have an eye on creating a common system for your store, you should also be looking at making this entire system accessible on the web. If your salesman is out on the road, he should be able to access the figures and sales data he needs from the Internet. Then theres the added benefit of ushering in the community. If your installer accounts are beginning to take advantage of a digital system themselves and have access to the Internet, they too should be able to check their account status online and be able to check inventory and place orders on the web. To take the greatest advantage of data, you need to create a digital system in your store that will become a resource and a powerful strategic business tool.

THE CONNECTED BUSINESS COMMUNITY
By creating a digital system that is connected both internally as well as through the web, you create a complete interface for dealing with all aspects of business. To paraphrase Bill Gates, the interface becomes the business. Instead of having a back-end database with several different interfaces for each facet of the business, the goal should be to build one great interface (using inexpensive mainstream PCs and customizable off-the-shelf software) to create one common interface that is accessible by all people involved in your business (including your customers) but with only appropriate access for each. By connecting the business community over the system and the web, you can reduce cycle times substantially.

Suppose for a minute that your store is down on stock of a product that you normally carry. Your system (the interface) automatically orders more stock for the store. The moment that stock lands in your receiving bay, the system updates the stock and your counterman knows its available. And so does the installer that accesses your inventory over the web. The installer may then place an order over the web. Your delivery driver grabs the part, scans it (so that everybody knows its on the truck) and proceeds to deliver the part. Once delivered, the part is signed for electronically and the system is updated yet again (think FedEx and UPS). This triggers accounts receivable to create the appropriate invoice. The stock is monitored automatically for the need to place a new order with your supplier over the web. Should the installer return the part, it is electronically entered in the appropriate category: useful stock or defective return. The installer account is updated automatically. By connecting the business community in this manner, many tasks that were tended to by humans are now achieved digitally in a fully automated manner. This frees up the staff to deal with higher-level customer service issues. Translation: Added value and greater customer satisfaction.

MAKING IT HAPPEN
When you finally decide to begin data mining, you need to look at what it is that drives your business. What do your customers think of you and your product lines? What do they dislike or have problems with when dealing with your store? How do you feel about your suppliers? Are your competitors gaining or losing ground to you? Why? What changes are your customers making in their business processes, and what changes do they expect of you? These questions are ones that offer some insight into what it is that you need to know to constantly refine your business model.

Knowing what data you require to make the right decisions should be your first step. Its also what will separate you from your competitors, and will help determine what type of digital system and resources your store will need.

If you own a chain of stores, the digital system will be larger and your data requirements more detailed, but the potential gains in profitability will be greater as well. Once youve established the data parameters that will help you make more effective business decisions and constantly refine your business strategy, you can begin looking for a company to help implement a digital system within your store. Ive often found that at the end of the day, the degree of success you achieve lies in the resolution of detail with which you examine a problem. If you believe this, then you can understand why data mining is the only way to go. The question is who will do it first, you or your competitors?













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