Key drivers of retail business intelligence

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By: Wise Marketer Staff |

Posted on February 19, 2008

Retailers are increasingly focusing on how they can improve customer intelligence and do away with wasteful spending, according to a retail business intelligence (BI) survey by Aberdeen Group.

Aberdeen surveyed over 200 retail companies in December 2007 to determine the critical BI strategies, capabilities, and technology enablers that best-in-class companies are employing to improve performance.

The benefits of a BI strategy
The resulting report, entitled 'Business Intelligence in Retail: A best-in-class Roadmap for Performance Improvement', uncovered a sound strategy to help retailers better understand BI implementation and deployment methods. For example, best-in-class companies showed the following tendencies:

  • An average year-over-year same store sales increase of 11.7%;
  • 92% have increased their profit margin by an average of 9.3%;
  • An increase in customer retention by an average of 12.2%.

Main driver of BI initiatives
The main driver behind retailers' current focus on BI is, perhaps not surprisingly, the customer. Among all respondents, including 50% of best-in-class companies, the top objective for implementing BI was "the ability to quickly react to changes in customer demand".

Even though there is always room for improvement, Aberdeen's research showed that best-in-class retailers are already meeting their business intelligence objectives by streamlining their reactions to customer demand. Specifically, 40% of best-in-class retailers indicated that they had improved their customer response time over the past year, and such improvement was more than 60% more likely to be among best-in-class retailers than all other companies.

Key BI processes
Best-in-class retailers have instituted two key processes to derive the most benefit from their business intelligence solutions:

  1. 63% use BI application development procedures;
  2. 60% automate the creation of reports based on changing data.

When comparing the extent to which these capabilities are used among best-in-class, industry average, and 'laggard' firms, the best-in-class were nearly 90% more likely than laggards to have instituted BI application development procedures, and 20% more likely than industry average to have automated the creation of reports based on changing data.

Track and compare metrics
In addition to reporting, Aberdeen reported that retailers need to continually track and compare both financial and operational metrics, year-on-year, by product type, store, and region. Business intelligence systems can provide retailers with much-needed visibility throughout the enterprise, but the company warned that these tools must be set up correctly to ensure success.

In order to manage their company's performance, 48% of best-in-class retail companies update their transaction data in real-time, and 41% measure and track their actual results against departmental and corporate goals.

Market leaders' advantage
Enabling real-time updates provides best-in-class retail companies with a significant competitive advantage. Today's marketplace is dynamic, and changes occur rapidly - and often without warning. The ability to respond and take corrective action before the competition is one of the factors that makes the difference between a market leader and a follower, according to Aberdeen.

Half of the retail companies surveyed said they already had a customer intelligence database with the ability to run exception reports, but were planning to implement data cleansing tools and real-time alerts. The addition of clean data and real-time alerting capabilities enables a more timely and accurate response to customers.

Best-in-class BI procedures
Best-in-class retailers clearly understand the importance of instituting processes and reporting to derive customer intelligence that helps to drive greater sales, profitability, and customer retention. The keys to achieving BI goals lie in several capabilities and tools, according to the survey:

  1. Establishment of BI procedures
    BI is not a one-off project. It is an evolving programme that continually expands its reach from one specific data set and user community to the whole enterprise;
  2. Real-time updates
    Responding to market fluctuations immediately provides retailers with the ability to capitalise on new opportunities, and offers a distinct competitive advantage over less responsive competitors;
  3. Focus on data management
    The integration of disparate data silos (such as POS transaction data, customer segmentation, supplier data, and promotions analysis) can only be successful if the data is clean, and can trusted by its end users within the company.

The full report, including research results and recommendations, has been made available for download from Aberdeen Group's web site - click here (free registration required).

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