Nov 21, 2009

The Benefits of using Customer Data

Gary Eckstein Management 5 amazon, business, core competence, core competency, data, data analysis, google, knowledge organizations, larry page, picasa

Data: A competitive advantage second to none! The ability of organizations to collect relevant data, realise meaningful information from that data and then act upon the information is the key to success for many ‘new-wave’ service and knowledge organizations. A core competence of data collection, analysis and action is what separates spectacular success from average performance. There is however a wide gap between those that understand the value of information and those that don’t. Here are two examples of organizations which have used their data core competency to become world leaders:

Google – Data Analysis and Use at its Best

Just why is Google so popular? The answer goes back to the founders; Larry Page and Sergey Brin had the vision to understand that if they attained data about how websites relate to one another they could use this core competence in a range of related products. It all began with Search where Google results were (and still are) better than Yahoo and other competitors because of website ranking based on data attainment and analysis (called PageRank). Google has continued to collect and analyse massive amounts of information and have used this core competence to expand their product range e.g. Google Docs and Picasa. What is interesting with Google is that with every product they release, data attainment is the core aim and benefit for Google e.g. Google Chrome Internet Browser affords Google the opportunity to gain vast and valuable information about how people surf the Web which assists their search and advertising products.

Amazon.com – Converting Data into Sales

Cross selling and recommending appropriate products to the shopper has resulted in Amazon.com becoming the largest Online store. Amazon.com started as an Online book shop however, through its excellent data collection, analysis and use has grown into selling all sorts of products and services. Added to this is that the conversion rate of visitors to Amazon.com that results in a sale is way higher than industry averages. Have you noticed that when you visit Amazon.com recommendations are made as to products you may find useful? In the background your past searches and purchases and likely profile are all calculated against available products and the most appropriate are shown as recommendations. This, in effect, means that every visitor gets their own unique customised set of recommendations when visiting Amazon.com. The collection and effective use of data has resulted in this Online retailer becoming the world’s largest department store.

The Data value of Loyalty Cards

Google and Amazon.com are two companies which have a core competency in data collection, analysis and use. But what about organizations which are not making use of the opportunities data affords?

As the name applies loyalty cards are about converting customers into loyal customers. But how, through a card, may loyalty be attained? Well the first step for any loyalty program is to recognize that data is the single most important aspect of any loyalty program. Get the data, analyse the data and use the data in a personalised way; that is the key to attaining loyalty.

FlyBuys is a ‘loyalty’ program in Australia however one cannot but notice that they have ‘missed the boat’ when it comes to gaining the collection and use of data as a core competence. How FlyBuys works is that points are attained each time a purchase is made at a participating store. Eventually the points add up and may be used to buy products. In effect FlyBuys is not a loyalty program but rather a discount program. There is a distinct difference as loyalty raises switching costs whereas discounting does not provide a sustainable competitive advantage. Now, if FlyBuys collected all the data about their members shopping habits and other details they could use this data to assist their customers (e.g. Shops) in identifying shopping habits and sales opportunities. Loyalty could be attained by members as services and shopping experiences could be personalised for every shopper (or group of shoppers).

Data is able to provide a core competency leading to sustainable competitive advantage. Data, and the use of the data can mean the success or failure of organizations. Ping-O-Matic describes well just how valuable data is: ‘Why go to all the trouble of setting up a free system that sends out over a million pings a day? To play with all the data of course. ’