[Continued from Part 3]
The Banking Trade
Our next example of how businesses might leverage business intelligence (BI) to segment their markets and thus allow them to increase throughput in significant ways comes from the banking industry. In this case, a bank creates a data bridge between a legacy database and databases maintained by its departments. The new application gives branch managers and other users access to business intelligence to determine who their most profitable customers were and which customers might be above-average targets for cross-selling new products.
Implementing these new tools liberated the IT staff from the task of generating special analytical reports for the departments and gave department personnel relatively autonomous access to a far richer source of customer-related data.
However, the bank need not stop with “cross-selling.” Consider that if the bank has information on “the most profitable customers,” they could dig deeper to determine the geographic and demographic corollaries among their “most profitable customers.” Uncovering and analyzing these corollaries employed in conjunction with a simultaneous thrust to unlock what the bank’s employees know—that is, tribal knowledge—might help the bank develop carefully targeted irrefusable offers. Such offers would undoubtedly allow the bank to
- Sell more existing products and services to new customers
- Create new offers that will attract new customers from the “most profitable” demographic and geographic market segments
- Create new offers that may interest existing customers and make offers that may be even more profitable for the bank
Regardless of your industry, it is highly likely that a joint effort made by the CFO and the COO to unlock and join two valuable sources of data will lead to many valuable ideas for increasing throughput. Those two sources of data are
- What is available through (formal or informal) business intelligence about your customers
- What is available—but probably undocumented and poorly understood—in the minds of your managers and employees in the form of tribal knowledge.
For this reason, I strongly suggest that for most SMEs (small-to-mid-sized business enterprises) the very first place to look at rapid ROI from business intelligence is to be found in market segmentation.
Understanding Your Customers’ World
One of the errors made by CFOs and COOs in most organizations use a definition of “quality” that is totally objective. After all, how else could or should the firm measure it? Most use a definition along the lines of “without defect” or “within tolerances” or “meeting or exceeding specifications.”
Toyota, however—the firm that came from behind to become a dominating automobile and light-truck manufacturer throughout the world—has learned and predicates it operations on an entirely different definition of quality. Toyota’s measure of quality is:
Does the product make the customer’s experience and results better or not?
Toyota’s concept of quality originated from concepts introduced to Japan in the 1950s by W. Edwards Deming. It was Deming who said:
“Constantly improve the design of product and service. This obligation never ceases. The consumer is the most important part of the production line.”
As a result, Toyota’s measure of quality takes into account, not just what the customer buys, but also:
- Who buys the product: Because the who will lead to different expectations and different feelings about the experience and the results expectations.
- When the product is purchased: Because the circumstances leading to the purchase of the vehicle will also contribute significantly to defining the experience and the results expectations of the buyer.
- Why the product is selected: Because the why is another significant contributing factor to the buyer’s experience and to defining the buyer’s expected results.
- Where the product is purchased: Sometimes product purchases are driven by regional factors (e.g., climate, urban versus rural or back-woods). These factors will affect the buyer’s experience and results expectations.
- How the transaction is structured: The economic construct of the transaction may include multiple factors such as the duration of the warranty, the payment terms, the time of delivery or lead-time, and more. These factors also influence the buyer’s experience and the sense of results.
Segmenting the market requires the whole supply chain to understand the customer because, fact of the matter is, No one in the supply chain has made a sale until the end-user has made a purchase. This is why both the CFO and COO should seek first to understand their customers. Next they should seek to segment their market—because different customers buy under differing circumstances and for different reasons.
These actions should lead to a plan for the creation of irrefusable offers which should, in turn, lead to rapid ROI.
[To be continued…]