Analytics

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.