Why Customer Data Will Make or Break Your Business

April 9, 2014

Collecting and analyzing of customer data will make or break your business

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What’s This?

In 2011, Hewlett-Packard considered downsizing its struggling PC business in favor of investing more heavily in software. The company determined there was better potential for growth in software than personal computers.

Marc Andreessen, co-founder and general partner of the venture capital firm Andreessen-Horowitz, suggests software is revolutionizing the business world. Andreessen, who also co-founded Netscape, points out that nearly every financial transaction, from someone buying a cup of coffee to someone trading a trillion dollars of credit default derivatives, is done in software.

To stay competitive, forward thinking businesses are using programs from this software renaissance to collate customer data in order to learn more about their customers so they can streamline services and more rapidly provide customers with what they want. Because anytime a company can accelerate the speed of acquiring and applying information to improve products and/or services, they have a clear advantage over their competitors.

taxi companies with their own mobile applications get higher revenues

Consider the emergence of high-tech companies such as Uber, Lyft, and Sidecar — mobile ride-hailing companies — that are challenging taxi industry revenues in big cities around the country. Pando Daily notes: “We’re beginning to see real world evidence that this apps revolution, as Uber, Lyft, Sidecar and the others roll out across the country, is actually working. Another industry being successfully disrupted to the benefit of the consumer.”

This has forced the taxicab industry to come up with apps of their own, such as Flywheel and Hailo that help people hail and pay for regular cabs from their phones, just as they would for Ubers, Sidecars or Lyfts. Liz Gannes with All Things notes that if cabs had made these changes just a couple of years ago, it’s doubtful the ride-sharing companies would have had such an impact.

Pando suggests the taxi cartel in many US cities is being dismantled. “In fact, there are fewer NYC taxi medallions today (13,605) than there were in 1937 (16,900) when the medallion system first created the NYC taxi cartel.”

Companies like Netflix and Redbox successfully used data related to customer purchasing trends to destroy Blockbuster. In 2002, Redbox, initially funded by McDonald’s Corporation, placed four automated convenience store kiosks that sold grocery items such as milk, eggs, and sandwiches as well as 11 DVD rental kiosks in the Washington Metropolitan Area. Redbox withdrew the grocery kiosks within a year, but the DVD-rental kiosks succeeded. Coinstar ultimately paid McDonald’s and other shareholders between $169 and $176 million for the company.

Netflix has used data collection to learn more about its customers than any of its competitors. Netflix has created a jaw dropping 76,897 unique ways to describe types of movies. The Atlantic commented on Netflix’s massive data collection:

“Using large teams of people specially trained to watch movies, Netflix deconstructed Hollywood. They paid people to watch films and tag them with all kinds of metadata…They capture dozens of different movie attributes. They even rate the moral status of characters. When these tags are combined with millions of users viewing habits, they become Netflix’s competitive advantage. The company’s main goal as a business is to gain and retain subscribers.”

Back in 2000, Blockbuster declined several offers to purchase Netflix for $50 million; as with the taxicab industry not taking the initiative to come up with apps, if Blockbuster had the insight, or utilized software to collect data on customer trends, they would have remained on top.

Nest smoke alarms automatically adjust to meet your preferences.

As this TechCrunch article illustrates, Nest is reinventing and disrupting the thermostat and smoke alarm industries by building better hardware and smarter software than what exists today. “As you adjust the temperature in your home, Nest learns what your preference is so you ultimately don’t have to. Data is central to Nest, as the software becomes more intelligent the more it’s used.”

According to International Data Corporation (IDC), demand for business analytics solutions will continue to be driven by better and faster decision-making and the competitive advantage from quickly analyzing and acting on information.

“There is growing quantifiable evidence that data-driven decision making enabled by business analytics solutions provides a competitive difference,” said Dan Vesset, Program Vice President, Business Analytics at IDC. This, along with broad interest in big data, has pushed the technology to the top of many executive agendas and ushered it into the mainstream market.”

The fastest growth has occurred in three primary segments of the business analytics software market — the data warehousing platform software segment, the business intelligence and analytic tools segment and the performance management and analytic applications segment.

For small businesses the objective isn’t about collecting massive amounts of general information; it’s about gathering specific data of any size, and then finding the most appropriate software to analyze that data in order to anticipate the needs and desires of your customers. In the most literal of terms, businesses that don’t critically collate customer data to prognosticate customer needs and trends become throwbacks destined to fail.

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