Business Analytics (BA) – A Tool for Business Excellence

Posted by: Dr. Tamilselvi | Business Analyitics

Why Business Analytics Matters to achive excellence for todays Business?

  • Data Driven decisions to enhance productivity and efficiency
  • To handle Variety of Unstructured Data (Images, Twitter Data, Facebook Comments etc.)
  • Trend Forecasting via Predictive Modelling
  • Automate and optimize business processes
  • Explore the data for new patterns and relationships
  • Publish information to stockholders through dashboards
  • BA gets the insights in making better strategic business decisions Financially, BA Reduces the investment cost and yields High returns

Business Intelligence (BI) is the process of collecting information from the different sources and preparing Business Reports, dashboards, scorecards, ad hoc query and automated alerts. It is the first step for the companies to make data driven decisions.

Business Analytics (BA) starts with the analysis of the BI report through statistical analysis & data mining, extends to predictive model building with historical data and further validates it with model testing.

Case Scenario:

Mr. Sabari is working as a chief Business Development Officer in an Educational Institution. A New online course is being introduced in the next 3 months. He already has a database of 1000000 potential customers with him which is collected during the past interaction and they are found to opt for such new courses. His objective is to find the right way to reach out to customers so as to maximise the profit.

He generally makes phone call to the complete database with the help of a team. He has estimated the overall profit and return on investment based on the past experience as given below.

Based on the business filters, eligible contactable Database: 1, 000, 000

Cost for targeting each person: Rs.10

Its expected 0.5% incremental customers will join course because of the campaign

Expected revenue per customer who join the course 2500

With current Approach (traditional)

Cost of Campaign = 1,000,000 * 10 = 10,000,000 = 10 Million

Expected Incremental conversions 1, 000, 000 * 0.5% = 5000

Expected Incremental Revenue = 5000*2500=12,500,000=12.5Million

Expected profit = 12.5 -10 = 2.5 Million

Return on Marketing Investment = Revenue – Cost/Cost = 12.5 – 10/10 = 25%

His friend Mr. Kumar who teaches a new course on Business Analytics walks into his office. Mr. Sabari shares what he is doing. Mr. Kumar suggests that he can increase the ROI using Business Analytics Methods. They re-work the cost with the input from Mr. Kumar.

Mr. Kumar suggests that not all 1000000 customers are the same and we can find a segment which will respond better and other segment which will not respond based on interest and publically available data. At the end of the day Mr. Kumar shares his calculation to Mr. Sabari with the following details.

Analytics Based Approach (Data Mining Classification Approach)

Mr. Kumar used Segmentation to group the contact database into 3 different groups. Segmentation is the process of dividing the business market into eligible contactable sub groups based on same type of characteristics.

High Response Segment: 25% of customers with expected conversion rate of 1.3%

Medium Response Segment: 25% of customers with expected conversion rate of 0.4%

High Response Segment: 50% of customers with expected conversion rate of .15%

Based on this grouping and the cost to contact customer details, he draws up the profit and ROMI chart as follows.

Screen Shot 2017-10-10 at 10.21.34 PM

Recommendation for Mr. Sabari from Mr. Kumar

Target only High response segment customers

Reduce the Marketing cost by 75%

Increase the profit by 125%

9X increase in ROMI

Mr. Sabari was pleasantly surprised at the increase in profits for less effort and 1/4th of the money spent in the estimation. He was convinced to try the method and follows this plan for enrolling students for the course. After running the campaign, he was surprised that the calculations held true and his team was satisfied, as they had to work less for better results. He wrote a thanking note to Mr. Kumar for his timely insights and praising.

Source: Market Segmentation, Read More
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