Insights

Using Business Intelligence To Understand Your Market And Customers

Using Business Intelligence To Understand Your Market And Customers


May 24, 2016
Manufacturing and Distribution

If you're currently running a company without relying on any type of business intelligence, you're probably either just sustaining your business or you're in a market with low competition. In competitive markets, business intelligence is a critical tool for understanding your customers and what they're buying.

Business intelligence helps you discover patterns and understand how processes are changing. For example, in addition to basic sales data, you might also want to know how your customers buy your products and services: Do they buy through your e-commerce website or your distributors?

Another important question that business intelligence helps to answer is: What research do customers perform before they buy? With the ubiquity of Internet access and powerful search engines, people also spend more time now researching products before they're ready to make a purchase; as a result, they have different expectations from the sales process.

Here's an example of how a distribution company might use business intelligence and trend analysis to understand its customers and guide decision-making:

The company is sourcing products from China with a 50-day lead-time and selling them online. When the distributor identifies a new computer monitor it wants to start selling, analytics play a few important roles in successfully getting it to market.

1)  Planning product ramp up: How long will it take to prepare before the distributor is able to sell the new monitor? A great way to answer that question is by using analytics to dig through the historical data, finding out how long the ramp-up process has taken in the past with a similar new product.

2)  Managing inventory levels: The distributor also needs to have the right number of monitors on hand when orders start coming in, because it has a contract that stipulates orders received by noon on a given day are shipped by the end of the same day. Here, trend analysis helps to predict sales volumes, letting the company know what inventory levels it must have on hand at various points in the product lifecycle.

3)  Managing the end of the product lifecycle: Finally, the distributor needs a sense of when similar products reach the end of their lifecycle. You don't want to have an entire shipping container of monitors arrive from China just when sales are down to a trickle. If you're able to predict when sales start tapering off, you're in a better position to sell your remaining inventory through closeout sales, so that you don't end up with monitors that aren't selling anymore.

Business intelligence also helps manufacturers and distributors better understand their most profitable customers, allowing them to optimize pricing and sales offers. Many companies are starting to focus of the profitability of a particular customer or customer segment, rather than the profitability of a product or product family.

Some companies set a profit margin at the beginning of their fiscal year and tell their salespeople that they want to hit a certain margin for a specific customer. They don't care what each product sells at individually, as long as they meet the target margin. Based on your data, you might decide to offer a lower sale price to a particular customer, taking a lower margin on one product because you know that customer buys other products with larger margins.

When you want to gain a deeper understanding of your market, your customers and how you do business, trend analysis and business intelligence tools are ideal for delivering those insights.

Author(s)

Suzanne Koss
Suzanne Koss, CPIM
Partner
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