IDC analyst: Why do analytics on the back of an envelope?

CARY, N.C. — Analyzing business data can result in an immediate return on investment of as much as 112 per cent, according to an IDC analyst speaking to press at SAS Institute Inc.‘s headquarters on Tuesday.

“Analytic changes mean big changes in dollars earned and dollars saved,” said Robert Blumstein, research director of CRM analytics and marketing applications with IDC.

Business analytics software includes business performance management, customer relationship management and supply chain management. But a huge number of customers are still using spreadsheets, gut instinct or the “backs of envelopes” to analyze their data, he said.

So why bother with business analytics? “It’s easier to shoot from the hip, in many ways,” he said. But benefits come in the form of speed, accuracy, insight, relevance, consistency and control.

Companies are trying to get more value from their data, said Ann Milley, director of technology product marketing with SAS. “Excel and other spreadsheets were not designed to answer all these questions,” she said. Yet many people still rely on spreadsheets that were never designed or intended for clinical trials.

Many companies also rely on a three-month moving average to forecast sales, she added, which doesn’t take into account seasonal or event-based purchasing patterns. A candy manufacturer’s sales, for example, will likely be affected by Halloween.

Another issue is flawed data. “This is so common and people are unaware of it,” she said. Without analytics, people aren’t clear on issues out of the gate, nor have confidence in decision-making.

For example, if an application asks for a customer’s birthday as a required field, some customers will simply type in “11/11/11” if they don’t want to provide that information to the company. This could lead company execs to think half their customers are seniors, which could result in an ineffective marketing campaign.

Business analytics lets you see what’s coming and provides decision guidance, said Milley.

Five years ago, for example, Marks & Spencer found that its stock and market share was declining. While the British retailer was focused on operational efficiencies, it wasn’t tuned into what customers wanted. After looking at purchase data and applying business analytics, it was able to come up with 11 different customer clusters and tailor its marketing efforts toward each cluster. The result has been increased revenue, increased customer satisfaction and better stock performance.

Business analytics software is made up of tools and packaged applications for tracking, analyzing and modeling, according to IDC, and supports both reporting processes and decision-making. Tools include data warehousing, business intelligence, technical data analysis and spatial information management. Packaged applications, on the other hand, fulfill a recognizable business process and use integrated data from multiple sources.

“You can never entirely get rid of bad data,” said Blumstein. “But there’s a lot you can do to improve it.”

Core analytics provide basic analytics for monitoring current activities and reporting on past ones. But predictive analytics is where things get really interesting, said Blumstein. “These are the analytics that can give your company an edge.” Predictive analytics provide more complex analytics for predicting the future, and can include scorecarding, fraud detection and inventory optimization. It also provides a structure for data. “It’s not chaos,” he said.

While it’s still a small market, it’s an important one, he said. After all, it’s cheaper to keep a customer than get a brand new one. 

SAS executives are scheduled to present at the Better Management Live conference in Las Vegas on Wednesday.

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