The Wall Street Journal recently published an article (“So, What’s Your Algorithm?”) focusing on the growing use of data in business and even personal decisions – “playing ‘Moneyball’ at life,” as the author summarized it. While the article looked at using data on a scale that requires sophisticated analytic software, there are also ways to use data at a much more basic level to inform your company’s decisions. In our work with companies, we often find that by looking at core data and making small changes, companies can yield big results.
For instance, we often use this case study to demonstrate how looking at the lifetime value of a customer and actually figuring out which accounts are your top accounts can make a difference. (It is always surprising how many companies do not have a solid grasp on where 80 percent of their revenue is coming from – usually 20 percent of their customers). By figuring out your top accounts and your year-to-year trends, you can then better allocate your resources to yield greater average returns. Looking at the numbers this way will help you see if you are spending too much on marketing, sales and other support, particularly on customers whose purchases drop off significantly after year one.
As the case study shows, a series of small goals (increasing sales by 8% through deeper customer knowledge and more products, and decreasing costs of sales, overhead and goods sold through more efficient scheduling, targeted account management through type of account rather than region, for instance) can add up quickly to significantly increase your per-customer margin over a lifetime. Companies can make many small changes to optimize their resources and attract new customers, while efficiently servicing longer-term accounts. This holds true whether you sell $50,000 products to 100 customers or $100 products to 50,000 customers. It’s all in using readily available (or easily calculable) data to better understand your company.