Meglena Kuneva, who was the European Consumer Commissioner in 2009 once said: 'Personal data is the new oil of the Internet and the new currency of the digital world.' Ten years later, her words have proven to be accurate. Companies that utilise data analytics to understand consumer behavior have now expanded into megacorporations that have disrupted their respective industries while maintaining a staggering competitive advantage.
First founded in 1997, Netflix is now the largest media company in the US with a market capitalisation bigger than Disney. Spotify has disrupted the music industry with its subscription-based service, and Amazon, first founded in 1999 in Jeff Bezos' basement, is now worth billions. These three firms are among a cohort of leading organisations that have found a way to use data analytics to improve insights into consumer behavior while gaining a competitive advantage over their counterparts in their respective spaces.
The corporate world, at large, has been moving towards big data and analytics for several years, and those who don’t and have not invested in it will be left behind.
Better Consumer Insights
One reason why data analytics leads to higher growth is the better insight into consumer preferences it provides. It's particularly useful where conventional research data is created by asking consumers about their preferences. Data analytics deepens customer insight by analysing the actions customers take and converting it into meaningful information.
For example, Amazon uses data analytics to track the purchases of millions of customers around the world, then generate a customised list of product suggestions for each of their consumers, creating opportunities to both upsell and cross-sell. Data analytics gives a more accurate insight into consumer preferences because the information is based on actions consumers have taken. Thus, data analytics generates superior insight into consumer behavior.
A Responsive Organisation
Data-driven organisations are more likely to be top-down, flexible and more responsive than their competitors. Companies with a robust data analytics infrastructure will know about consumer trends before their competitors do. Thus, they will be in a better position to take advantage of trends and will be the first to reach out to consumers. With data analytics, companies do not have to wait until a trend happens to act on it, they can anticipate the trends and prepare in advance, allowing them to be more responsive and flexible to consumer wants and needs.
Consistency in the Company
For most companies, decisions are made based on the intuition of the CEO or key executive members. Thus, when key people leave the company, it creates a problem. When important people leave, the razor-sharp intuition that made the right decisions leaves with them. Therefore, the company’s ability to perform consistently is affected. Data analytics can reduce the fluctuation in performance, by reducing the dependence on an individual’s intuition. Instead of relying purely on the CEO or executive members, companies can use data to drive many of their key decisions. Hence, when a key person leaves, the company's output will not fluctuate because data is the key factor in decision-making and consistent output.
Effective Marketing Ventures
Data analytics provides detailed feedback on consumer behavior. The feedback from data analytics can be used to further refine market research. With refined market research, companies can devise creative, intuitive and targeted marketing campaigns that allow them to define their brand strongly and gain a competitive edge.
Furthermore, data analytics opens up new marketing techniques like semantic search. Retail giant WalMart used text analysis, synonym mining and machine learning to implement semantic search on their website. The intent was to accurately capture the natural language terms customers use when searching for something and connect it to their products. The new marketing technique increased conversions by 10-15% for Walmart.
Making Sense of Big Data
Data analytics is needed to tackle the large volume of data companies collect over time. The amount of data generated grows with each passing year. Furthermore, much of this data is set to be unstructured data - information that does not fit conventional data models and databases. The data can be invaluable for several technological breakthroughs, but only if companies have the infrastructure to analyse it.
Data analytics can make sense of large data volumes using Artificial Intelligence and machine learning modules, which streamline processing by filtering unstructured data into actionable insights. Those who implement data analytics first will gain a competitive advantage over their peers because they are able to make sense of the large amount of data they have collected.
Companies who invest in data analytics will gain a significant competitive advantage. The growth of big data, superior insights into consumer behavior, better returns on marketing, and a more responsive organisation make data analytics a must for companies.
However, data analytics alone will not be enough. As the number of data companies grows, it becomes more important to invest in infrastructure that can support data analytics, like AI tools because they can separate the relevant data from the unimportant information. With AI tools, companies can process data at a significant rate, able to churn through terabytes of data in hours. Hence, to meet the challenges of today’s business environment, data analytics and AI tools are required. Companies who lag behind subsequently risk falling behind their competitors and lose out on valuable customers and potential profits.