CHAPTER FIVE COMPETING ON ANALYTICS WITH EXTERNAL PROCESSES CUSTOMER AND SUPPLIER APPLICATIONS Flashcards
What significant advancement occurred with analytics in companies?
Companies began using analytics to improve their external processes, such as managing customer demand and supplier relationships.
What processes were traditionally kept segregated in organizations?
Customer relationship management (CRM) processes and supply chain management (SCM) processes.
What is a challenge of managing analytics related to external processes?
It requires cooperation from outsiders and their resources.
What type of analytics are many companies using to enhance relationships with customers and suppliers?
Predictive analytics.
What do analytical competitors do beyond generating descriptive statistics?
They use predictive modeling, integrate in-house and third-party data, optimize supply chains, analyze historical sales, and conduct sophisticated experiments.
What is predictive modeling used for in analytics?
To identify the most profitable customers, those with profit potential, and those likely to cancel their accounts.
What are the key areas of focus in supply chain management?
Demand forecasting, inventory management, and optimizing manufacturing processes.
What was the traditional perspective on customer relationships in sales?
It focused on the personal skills of salespeople and their ability to build long-term relationships.
What did early innovators in analytics focus on in customer-related processes?
Analyzing sales and determining parameters of product promotions.
What is the purpose of loyalty cards in casinos like Caesars Entertainment?
To capture data on customer behavior for real-time analytics and optimization.
What change in orientation did Caesars Entertainment experience regarding analytics?
Transition from analytical customer-relationship management to real-time customer analytics.
Fill in the blank: Companies today face a critical need for robust _______.
[customer-based processes]
What are some tactics analytical competitors pursue to attract and retain customers?
Dynamic pricing, brand management optimization, managing customer life cycles, and personalizing products.
What is CHAID in marketing analytics?
A statistical technique used to segment customers based on multiple alternative variables.
What does lifetime value analysis assess?
The profitability of an individual customer over a lifetime of transactions.
What is price optimization also known as?
Yield or revenue management.
True or False: Econometric analysis can determine the effectiveness of advertising.
True.
What are some common digital advertising approaches?
Banners, pop-ups, and search-based ads.
What is the primary advertising medium used by Google?
AdWords.
What does DnB NOR use to build customer relationships?
Analytics on top of a Teradata warehouse and event triggers based on customer life events.
What is uplift modeling in predictive analytics?
A technique that assesses the incremental impact of a treatment on customer behavior.
What is the purpose of econometric analysis in advertising?
To determine whether advertising is statistically associated with increased sales.
Fill in the blank: The traditional view of marketing was often seen as a _______ function.
[creative]
What is the purpose of event triggers in customer analytics?
To prompt customer relationship analysts to offer tailored services based on customer life events.
Example: If a customer receives a substantial inheritance, a bank representative will call to offer investment products.
What conversion rate has DnB NOR achieved on cross-selling using analytics?
Between 40 and 50 percent.
This was achieved while halving its marketing budget and increasing customer satisfaction.
What is Tesco’s Clubcard loyalty program primarily used for?
To collect information on customers, reward shopping, and target coupon variations.
Customers earn points redeemable at a rate of 1 percent of purchase amounts.
What is the average coupon redemption rate achieved by Tesco and Dunnhumby?
Between 8 percent and 20 percent.
This is significantly higher than the direct marketing industry’s average response of only 2 percent.
What unique approach does Tesco use to classify customer preferences?
Grouping customers according to lifestyle and taste.
For example, identifying adventurous customers based on their purchases.
Fill in the blank: Companies use analytics for a competitive advantage by pricing products appropriately, whether that is Walmart’s everyday low pricing or a hotelier’s adjusting prices in response to _______.
customer demand.
What is dynamic pricing?
The practice of adjusting the price for a good or service in real time in response to market conditions.
Pioneered in the airline industry, now common across various sectors.
What percentage increase in gross margin do most retailers experience from using price optimization systems?
5 to 10 percent.
Some retailers have realized up to 20 percent profit improvements.
Which company pioneered the optimization of baseball game ticket prices?
San Francisco Giants.
True or False: Companies can face backlash when using demand elasticity to make pricing decisions.
True.
What is the ambitious goal of Disney’s MyMagic+ project?
To provide a more magical, immersive, seamless, and personal experience for every guest.
It involves using customer data throughout their visit to optimize their experience.
What significant tool does Disney use to collect data on customer interactions?
MagicBand.
It stores information such as customer locations, purchase histories, and ride patterns.
How has Capital One Health Care improved its sales process?
By using analytics to target doctors and tailor sales messages effectively.
What was HMH’s previous method for tracking sales opportunities before implementing analytics?
Using Excel for tracking sales opportunities and forecasts.
What type of analytics did HMH acquire to improve its sales process?
Descriptive sales analytics and a lead scoring system.
What is the role of econometric modeling in brand management?
To predict performance outcomes based on budget levels and spending in different channels.
What challenge do brand managers face in the current analytics environment?
Developing a closed loop of analytics to understand customer interactions across multiple channels.
What was the initial approach HMH used to track sales opportunities?
Excel
This approach did not facilitate communications about sales processes and was limited to descriptive analytics.
What collaboration did HMH initiate to improve sales processes?
Collaboration between the marketing organization and sales
The marketing organization was responsible for lead generation while sales focused on converting leads.
What system did HMH launch to prioritize leads for sales?
Predictive lead scoring and routing system
This system reduced days leads outstanding from thirty days to six.
What type of model did HMH build to analyze leads across the sales funnel?
Attribution model
This model helps determine the optimal channel mix for lowest cost-per-lead and cost-per-conversion.
What metrics did HMH’s new reports address?
- Days leads outstanding
- Lead survival curve
- Estimated lead value
- Funnel conversion velocity
How does Caesars use sales analytics to improve customer experience?
By analyzing customer behavior to reduce waiting times at slot machines
This includes offering customers free games at less busy machines.
What is the goal of Sprint’s customer life cycle analytics?
Maximize customer loyalty and spending over time
Sprint uses twenty-five models to analyze customer interactions across a six-stage life cycle.
What does Sprint do with customers who have unpaid bills?
Shift collections from bill collectors to retention agents
This approach aims to resolve conflicts and retain satisfied customers.
What improvement did Skillsoft achieve through personalized content?
128 percent improvement in user engagement
This was accomplished by analyzing detailed data about individual usage of learning assets.
What is one typical analytical technique used in supply chains?
Capacity planning
This technique optimizes the capacity of a supply chain and identifies bottlenecks.
What system does Walmart provide to its suppliers?
Retail Link system
This system is mandatory for suppliers to track the movement of their products.
What unique data insight did Walmart discover about consumer behavior before hurricanes?
Consumers stock up on food items that don’t require cooking or refrigeration
The top seller is Strawberry Pop Tarts.
What type of analytics is Amazon known for?
Collaborative filtering analytics
This analytics method recommends products to customers based on their behavior.
What innovative inventory model did Amazon create?
Proprietary inventory model employing nonstationary stochastic optimization techniques
This model helps manage the dynamic aspects of Amazon’s supply chain.
What logistics service did UPS create in 1986?
UPS Logistics
This subsidiary provides routing, scheduling, and dispatching systems for businesses.
What is a significant savings expectation from UPS’s optimization efforts?
$600 million annually
This was announced by UPS’s CEO in 2003 regarding route optimization.
What is the focus of Amazon’s anticipatory package shipping method?
Predicting what customers will order and shipping packages to geographical areas in advance
This combines predictive sales with supply chain management.
What aspect of analytics does O2 focus on for personalized content delivery?
Monitoring subscriber behavior
This helps to determine personal preferences for content.
What is a key differentiator for O2 according to Hugh Griffiths?
Personalization
O2 uses analytics to tailor offerings to individual preferences.
What did the CEO of UPS note about operations research in 1954?
Without operations research we’d be analyzing our problems intuitively only.
What areas has UPS been known for optimizing?
Truck route optimization and airplane route optimization.
Who founded UPS’s current operations research group and when?
Mike Eskew founded it in 1987.
What annual savings did Mike Eskew expect from optimization by 2003?
$600 million.
What is the significance of route optimization according to Mike Eskew?
It’s vital to manage networks effectively and recover from unexpected changes.
What is the name of the real-time routing application developed by UPS?
ORION.
How does FedEx differentiate itself in the logistics market?
By providing IT-based analytical tools to firms that do not engage its full logistics services.
What observation did an analyst make about FedEx?
FedEx is as much a technology company as a shipping company.
What challenge does CEMEX face in cement delivery?
Cement begins to set as soon as a truck is loaded, leading to time-sensitive delivery issues.
How did CEMEX improve its delivery processes?
By studying FedEx, pizza delivery companies, and ambulance squads.
What technology did CEMEX equip its trucks with to enhance delivery?
Global positioning satellite locators.
What was the impact of CEMEX’s new delivery system on response time for changed orders?
Reduced average response time from three hours to twenty minutes.
By what percentage did CEMEX increase truck productivity?
35 percent.
What other aspects of its business has CEMEX optimized using analytics?
Factory production, truck fleet size, electricity consumption, and inventory management.
What conclusion can be drawn about analytical competitors?
They use sophisticated analytics to create distinctive capabilities in supply chain and customer-facing processes.
What historical advantage do companies excelling in supply chain management have?
A decades-long history of using quantitative analysis and operations management.
What opportunities exist for companies getting a later start in analytics?
Embracing an analytical approach to marketing, customer relationship management, and other demand processes.
What is the focus of part I of the book?
Describing the nature of analytical competition.
What will part II of the book outline?
The steps companies need to take and the key resources needed for analytical competition.
