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This story was printed from ZDNet Australia.
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Biz Intelligence: Boosting profitability?

August 10, 2001
URL: http://www.zdnet.com.au/news/business/soa/Biz-Intelligence-Boosting-profitability-/0,139023166,120253780,00.htm

Dan Pratte, TechRepublic

When organisations are equipped to extract crucial facts from operational data and then act upon them quickly, the result is often improved selling efficiency and enhanced profits. The good news is that business intelligence (BI) tools necessary to support this data analysis are within the grasp of most organisations.

Effective BI can boost your sales and marketing efforts in nine ways:

Increase sales using "fact-based" selling tools.
Build profits by targeting profitable activities.
Increase customer loyalty and retain customers for life.
Increase the accuracy and timeliness of sales forecasts.
Achieve budgeted sales.
Increase the proportion of high-value customers in your customer mix.
Reduce low-yield activities in the sales process.
Deploy higher-yield promotions and advertising.
Predict future behavior of prospects and customers.

In this article, I'll discuss items four, five, and six on the list (as seen in bold above). My earlier article, "Business intelligence tools are key to building profits," discussed the first three points, and I will cover the last three in an upcoming piece.

Increase the accuracy and timeliness of sales forecasts
Information concerning future revenue answers the questions of "what" you're going to sell, "to whom" you're going to sell it, and "when" you will make the sale. When it's accurate and timely, this information has immense business value. The product side of your business benefits by knowing that red widgets, for example, are outselling blue widgets in Florida, but blue leads two-to-one in Ohio. Armed with such facts, you're able to increase sales by putting the most attractive product in front of each customer. In addition, you can increase profitability by optimising procurements and distribution. On the financial side, your CFO loves the reputation of credibility your organisation can gain with bankers and investors who view accurate forecasts as evidence that you're running your business well.

Of course, the challenge lies in actually constructing the accurate forecast. Particularly daunting is the required individual product and customer detail. Most often, gathering this information is a brutal and unreliable process.

The following are the common issues most organisations face when building a sales forecast:

When substantial facts are missing, forecasts are developed subjectively using different standards. Sales reps are often liberal, if not wildly optimistic, compared with management's conservative posture. Either extreme is costly to the organisation.
Sales momentum is crippled at budget time, as sales reps and managers waste time dickering over figures when compiling their account-by-account forecasts. All told, the preparation of sales forecasts can sideline a sales rep for weeks each year.

The forecasting burden can be considerably eased and the reliability of the forecast much improved when the right information is at hand to support the underlying analysis. BI tools give decision makers ready access to information that provides a detailed portrait of sales history. Easy and direct access to historical sales information supports both forecast accuracy and better, faster procurement and inventory decisions.

Achieve budgeted sales

Time and again, you find it's late in the month and it's apparent from the sales team that there will be a problem hitting the numbers. You scramble to assess both the magnitude and the source of the variance, and both you and the sales team pose dozens of pressing questions in a last-minute charge to recover. In this climate, most organisations face the following problems:

Answering the pressing questions requires sales rep and management time, shifting the focus away from productive sales activities. The valuable sales time lost serves to further compound the problem.
Shortcomings are revealed too late in the sales cycle to stimulate sales and recover the month.

Comprehending and acting upon accurate information early is what's key to preempting unpleasant month-end surprises. Modern sales organisations employ BI tools, which allow them access to a continuous feed of valuable company information. In these organisations, managers and sales reps are able to, at any point in time, quickly grasp the big picture, then instantly drill down to identify particular areas of concern, such as individual products, accounts, and/or sales regions or representatives. Armed with this sort of intelligence, you can design and implement surgical "microplans" to address each small problem area as it is uncovered. The result? Making small corrections enable you to stay the course and make your month.

Increase the proportion of high-value customers in your customer mix
Your highest-value customers are dependable and low-maintenance. Most importantly, month after month, they contribute a hefty volume of high-margin sales. It makes sense to proactively seek prospective customers that have similar attributes and to focus your customer acquisition efforts on adding them to the fold. But many organizations have the following obstacles to overcome to achieve this sales initiative:

Often, organisations do not have the relevant customer information on which to build an accurate profile of their most-valued customers, which prevents any attempt to target similar prospects.
Even if an organisation does have the critical customer information, it's often not ordered in any useful manner. To truly reap the rewards of this information, customer information must be organised by geography, industry, volume of business, number of different products purchased, or any number of other pertinent characteristics to be truly useful in targeting high-value potential customers.

With a little imagination and a great information system, you can begin by implementing simple measures to enable you to rank your current customers according to their relative value to your organisation. Initially, try ranking them by profit contribution alone, then you can add more sophisticated factors later, if you choose (timely payment, returns, complaints, etc.).

Once you've arranged customers from high to low value, you can do two powerful things right off the bat. First, you can better target your customer-acquisition initiatives by focusing your customer-acquisition efforts around the attributes common to high-value customers. Second, you can begin to engineer your overall customer mix by targeting high-value replacements for low-value customers.

Conclusion
The rewards of having the right information organised in a useful manner are many to the organisations that make the effort to attain these sales and marketing goals. Most organisations either have or can get the necessary data (garden-variety transactional type), but implementing the right BI tools can allow organisations to utilize that data in new and more efficient ways. The current crop of BI tools is both affordable and straightforward to implement (although it's always advisable to spend some time with a BI specialist who has experience with BI solutions), and many organisations realise a payback in just a few months' time.

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