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The Secret Weapon Of Retail: Predictive Analytics

VP SAP head shotLike most industries and sectors, retailers are driven by the need to provide good customer service. In a crowded, competitive market, this need becomes more prominent. Gaining any kind of advantage becomes invaluable, particularly when it comes to understanding your market; the secret to which is having — and using — insights derived from data.

These days, retailers collect all sorts of information about their customers as they use their phones, shop in-store, buy online, withdrawal cash from the bank and post on social media. And as retailers develop their go-to-market strategies to include multiple channels, thevolume of internal and external data is increasing exponentially. Indeed, research commissioned by SAP has found that 89% of businesses say the amount of data that they collect has increased in the last year. The fact is, for retailers especially, more data means a more rounded view of the customer, insight into the market and awareness of potential risk. All of this insight can be used to make informed business decisions if interpreted correctly using predictive analysis software.

Customer Insight

It’s becoming increasingly difficult for retailers to differentiate themselves based on products or pricing alone, which is why offering a unique customer experience has become so important. To do this, businesses first need to understand their customers. By looking at shoppers’ buying behaviors, customer service history, response to promotions and social conversations, retailers can gain insight into each individual’s needs and preferences.

Predictive analytics allows organizations to analyze and pre-empt behaviour. For example, if a customer purchased a gas barbeque last year, will they need more gas canisters this year? Giving retailers the ability to forecast in real-time the likelihood that a customer will buy, churn or indeed default, also gives them the power to save the situation by providing targeted deals or offering help if needed.

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Market Trends

Predictive analytics also can be used to gain an understanding of the wider market environment and where it’s headed in order to take advantage of opportunities, and help drive supply and marketing decisions. In fact, 79% of retailers believe predictive analytics is primarily about exploiting opportunity.

Factoring in things like weather forecasts to predict demand for seasonal goods, as well as building behavioral models of customer demographics to anticipate what channels they want to use, can give retailers insight into what they should be doing to gain a competitive edge. By using sales and behavioral data alongside information about market conditions, retailers can accurately project demand for anything from burgers to a mobile optimized web site.

Risk Mitigation

Of course, alongside identifying opportunities is the need to monitor risk to the business. Retailers need to be able to predict gaps in supply chain efficiency, supplier stability, customer churn and the causes of attrition, to minimize risk. The software can examine unusual patterns to recognize anomalies and pinpoint where there are issues, all in real time. Allowing retailers to better control their losses and remain competitive.

It’s clear that there are numerous benefits that predictive analytics can bring to retailers, and those that recognize this will prosper in 2014. Getting access to — and understanding — data has until recently been seen as a complex and highly skilled task, delivered by people with advanced degrees in statistics and prior analytical experience.

As predictive analytics technology evolves and becomes more intuitive and user-friendly, businesses are finding that the role of interpreting data is now filtering down to many parts of the organization, across several lines of business. By providing education and training on advanced analytics, and marrying this with investment into intuitive technology, retailers will be able to drive real value and insight across their business.

When it comes to retailing, knowledge really is power. Gathering as much customer data as possible is important, but it’s what you do with it that counts. We’re in an era where it’s getting increasingly difficult for retailers to create a point of difference, and where shoppers are demanding ever-more personal, targeted service. Therefore, retailers need to turn the vast amount of data that is at their fingertips into meaningful insights. With a workforce that’s empowered and equipped with the skills to use the technology, they will be able to do just that.


James Fisher is responsible for product marketing for the Analytics business at SAP and has more than 16 years of experience in analytics, performance management and finance software and consulting businesses. Fisher previously held marketing and consulting roles at BusinessObjects, Cartesis, PricewaterhouseCoopers and KPMG.

 

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