Spend any length of time in the business community, and someone will tell you about how “big data” revolutionized their firm. But is big data really as good as people like to make out?
It turns out that big data does actually make a difference across a range of operational scenarios. Collecting data helps with everything from making products that people want to buy to organizing supply chains. Everywhere we look, we see the profound benefits from having a data-driven business.
Big Data Reduces Customer Acquisition Costs
One of the reasons companies like Google and Apple have been touting the benefits of big data so much is that it reduces the cost of customer acquisition. Getting new clients used to be a very expensive and time-consuming task. Financial service providers alone spend more than $12 billion a year on direct marketing. Other companies tried to get the financial cost down by investing enormous amounts of time in the process, but this didn’t put them in a better position. Nothing seemed to work: there was no free lunch as economists like to say.
But that all changed with the advent of big data. Take credit card companies, for instance. As financial service providers, they used to spend an enormous amount on marketing until they realized that they could get better value for money if they could identify their high-value customers. Using big data, they could form a picture of their target market by tracking where they shopped, what they bought, how they interacted on social media and what media they consumed. Putting all this data together generated one particular company more than 25 percent uplift in its conversion rate, yielding an impressive $3.5 million saving.
Driving Supply Chain Value
Companies aren’t just using data to improve their businesses downstream, they’re also looking for ways to improve them upstream as well. This means using big data to better manage their client relationships and logistics. Already, we see companies make use of big data to track wear and tear on their equipment, alert maintenance companies automatically, automatically send and generate invoices and keep tabs on contractors without having to do any manual work.
One of the biggest changes we’ve seen is in contract management software. Managing supplier relationships was once a labor-intensive process, but with the rise of bespoke software, it’s all now done on machines. What’s more, this software collects valuable data for companies on the performance of their vendors, allowing them to track whether deliveries are made on time and the quality of the stock. This data can then be fed back into company reports and be used as leverage in supplier negotiations.
Finally, big data is being used to improve product innovation. Game companies, in particular, are using these data to work out what consumers like and how to improve their products. They’re using user profile information combined with user play characteristics to work out how to get players to play for longer and spend more money. Companies that use big data to improve their offering can often see a ten-fold increase in their revenues.