- What’s happening in the business?
- What’s working well?
- What problems are we having?
- Why are these things happening?
- Where are these trends headed?
- What are the likely results of our actions?
The answers to these questions can help guide decisions about everything from manufacturing to marketing.
Changing the Odds
The gaming industry offers a good example of how business analytics can turn the odds in a company’s favor. The big casinos collect data about customers from many sources on the casino floor itself. Player cards and slot machines are just a couple of examples. They also conduct surveys and gather data from call centers and online reservation systems. Harrah’s, which operates 26 casinos in 13 states, decided to use business analytics to put their data to work.
First the company used its player card system to discover who its best customers were. It found that 26% of gamblers generated 82% of revenue. It also found that these folks were not the typical “high rollers” that casinos have always courted. Instead they were people who spent modest amounts of money on a regular basis.
Then the company conducted some experiments, using business analytics, to determine what would motivate their best customers to spend more. It found that free chips worked better than free rooms or meals to prompt more spending. This surprised some company executives, who assumed that “comping” meals and rooms was the best way to increase gambling revenue. The company took this experiment one step further, using business analytics to design a three-tiered rewards program based on customer spending.
Harrah’s has had sixteen straight quarters of revenue growth, and company executives believe that business analytics are one of the main reasons for this success.
Business Analytics Become Affordable
At first business analytics were used mainly by large corporations that had the expertise and the budgets to make major investments in these powerful tools. Now, companies like Mineful are making analytical engines widely available to small and medium-size businesses as well.
Basically, analytics allow a business to use its data in new ways. For example, a chain of donut shops could use analytics to predict how opening an hour earlier would affect sales. A hotel chain could use analytics to predict how occupancy rates would be affected by offering a free breakfast. A home improvement store could apply analytics to survey results to determine why sales of appliances have declined.
Effective use of business analytics requires careful planning of the whole process, including:
- What data to collect.
- How to collect it.
- What questions to ask about the data.
- How to use the answers.
A well-planned effort in business analytics can generate a large return on a relatively small investment.