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Article by Mohan Babu


Business Intelligence: Into the mind of the customer

Data warehouses help marketing managers and planners study customer patterns, their buying trends and behaviours, and provide a tremendous amount of business intelligence, writes MOHAN BABU

Information technology has aided marketers in planning their product strategies for decades. A slowdown in the market has lead to a renewed interest in the field of Customer Relationship Management (CRM), Data Warehousing and Business Intelligence (BI), which are offshoots of the area of marketing and customer relationships, using information technology. Most businesses have realised the importance of retaining customers, especially since reams of data exist to prove that managing and servicing existing customers is cheaper than pursuing and running after new ones all the time. Even basic research on marketing trends has proven that it costs more to acquire a new customer than to service an existing one. Even from a customer’s standpoint, there is very little reason to switch loyalties often, especially if things are going comfortably with the existing vendor and the level of service is good. Switching involves changes and disruptions in service levels that most regular customers try to avoid. However, if the service being provided by the existing company is shoddy and someone else promises a better product or deal, most of us would switch.

Marketers have long realised the importance of repeat businesses and have devised innovative ways to retain customers. One of the most popular loyalty programmes of all times was the Airline Frequent Flyer programme designed by airlines in the seventies. At its simplest, it works like this: new customers enroll with the airlines and are allotted a customer id or frequent flyer number. After enrolling, the customers/travellers are expected to use the number every time they book a flight. They get a point or ‘credit’ for every mile travelled on the airline. The airlines accumulate the points and offer rewards, which are redeemable after a predefined number of miles/points are collected. Rewards include perks like free tickets and upgrades. Given the popularity of airline programmes, other businesses like hotels, restaurants, car rental agencies and supermarkets too devised similar loyalty programmes to attract and retain customers.

There is another major attraction for businesses to encourage loyalty programmes: sophisticated data mining techniques are available to help companies study buying patterns, customer preferences and trends. This is a really useful tool for businesses trying to forecast demand and for managing inventory and supply chains. For instance, large supermarkets regularly use data warehouses, built to receive inputs from various sources, including loyalty programmes. Data warehouses help in studying customer patterns, buying trends and behaviours and provide a tremendous amount of BI to marketing managers and planners. This leads us to the next topic, which is of real interest to technologists: the interfacing and design of systems involved in BI, data mining and warehousing.

Large companies spend millions on BI tools and technologies to glean more information about their customers. They use such information to design, develop and package products and solutions tailored to their clients’ needs. Such information also helps companies in cross-selling products and services. For example, supermarkets have discovered that people generally buy milk, eggs and cheese together. Therefore, they generally stock cartons of eggs and sampling of new cheese products near the aisles where they stock milk. This way, customers who go to pick up milk are subconsciously encouraged to also buy eggs and try out newer kinds of cheese, thus increasing sales for the supermarket too. A win-win proposition?

Behind the scenes, IT operations for BI involve design of complex data warehouses, data mapping and messaging architectures. BI also involves the use of complex analytics and algorithms, designed to help marketers drill through the abundance of data generated during regular business processing. Most large organisations have created data warehouses that store much of their historic data. This is done for two main reasons: firstly, most regular databases are optimised for access by business applications. However, data mining requires databases to be designed according to the “star schema” for ease of access by analysts.

Secondly, most database administrators (DBAs) are hesitant to allow non-application (adhoc) querying on their databases, and prefer the use of a clone of production database most of the time. Therefore, data warehouses try to blend the best of both worlds: design to facilitate access by BI analysts incorporating data from regular production databases. I do not wish this column to be a primer for BI and data warehousing, therefore readers who are more interested in these topics are advised to find information on the Web or from one of the several journals. However, my aim at this point was to draw the reader to get a glimpse of the link between the business/functional need for BI and some of the few key technologies involved.

Although, the area of BI is well-established in the West, Indian businesses—at least the mainstream businesses—are yet to capitalise on the power of such analytical technologies. Indian companies and governmental organisations have recently started computerising on a large scale. As newer databases and application systems are designed and implemented, systems architects need to keep in mind that data analysis and mining are going to emerge as a requirement from business leaders at the top. For instance, the Indian Railways and Airlines have been computerised for at least a decade. The bosses at the top are probably going to request the use of databases for information on planning, forecasting scheduling future growth strategies. Maybe they are already doing so? It is just a natural next step ahead.




About the Author

  • A Bio and profile of the author, Mohan Babu, can be found at his homepage
  • Mohan has authored a book on Offshoring and Outsourcing (Publisher McGraw Hill, India), a link to which can be found here
  • Mohan has also authored an Online book on "Life in the US," available for free download.
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    ©Mohan Babu: All Rights Reserved 2005

    Mohan Babu is an international consultant trying to find the ‘sweet spot’ where IT meets business. E-mail: mohan He is also the author of a recent book on "Offshoring IT Services"

    All rights are reserved. Mohan Babu ("Author") hereby grants permission to use, copy and distribute this document for any NON-PROFIT purpose, provided that the article is used in its complete, UNMODIFIED form including both the above Copyright notice and this permission notice. Reproducing this article by any means, including (but not limited to) printing, copying existing prints, or publishing by electronic or other means, implies full agreement to the above non-profit-use clause. Exceptions to the above, such as including the article in a compendium to be sold for profit, are permitted only by EXPLICIT PRIOR WRITTEN CONSENT of Mohan Babu. 

    Disclaimer: This document represents the personal opinions of the Author, and does not necessarily represent the opinion of the Author's employer, nor anyone other than the Author. This Article was originally published in Express Computers


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