Competing on Analytics: The New Science of Winning by Davenport Thomas H. & Harris Jeanne G

Author:Davenport, Thomas H. & Harris, Jeanne G. [Davenport, Thomas H.]
Language: eng
Format: mobi
Publisher: Harvard Business Press
Published: 2007-03-05T16:00:00+00:00

Converting Customer Interactions into Sales

The strategies described so far relate to arm’s-length interactions between companies and customers, but it is also possible to use analytics to improve the face-to-face encounters between customers and sales-people. Consider how Capital One Health Care, which sells financing services through medical practices for uninsured medical procedures (like cosmetic surgery), outsmarts competitors. Most financing firms market their credit services to doctors the same way many pharmaceutical reps do—known in the business as “pens, pads, and pizza.” By stopping by at lunchtime, representatives hope they can entice the doctor out for a quick lunch break and an even shorter sales pitch. At Capital One, however, reps don’t randomly chase down prospects and hope that a few freebies will clinch the deal. Instead, analysts supply the company’s reps with information about which doctors to target and which sales messages and products are most likely to be effective.

Best Buy is another company that is acting on knowledge gained through customer interactions to improve those interactions (and, not incidentally, to boost sales). Over the last five years, the company has collected data on 60 million U.S. households. To maximize financial performance in each retail store, Best Buy used data-driven insights to develop profiles of eight customer segments.

To translate their insights into increased sales and market share, however, Best Buy needed to understand the best way to serve each segment. It began by establishing a few stores as laboratories. CEO Brad Anderson describes these stores as “our R&D arm for researching customer segments and the value propositions that matter to them.”13 The

company used analytics to determine, for example, the impact of pricing changes not only on short-term sales velocity but also on the overall customer experience and its long-term impact on customer perception and sales. It even studied the behavior in each segment of frequent returners—people who commonly seek to exchange products or return them as defective—to learn how to better satisfy these customers.

Incorporating the insights from data analysis and testing at the lab stores, Best Buy developed new store formats for each segment. A “Barry” store, for example, is targeted to young, male audiophiles and videophiles and contains a home theater store-within-a-store. “Jill” stores are oriented to practical, short-on-time mothers. In this format, personal shoppers are available since they are both useful to “Jill” and are a feature that dramatically increases average spending per customer. Other changes are more subtle; for example, the volume on background music is lower than it is in other formats.

As stores convert to these formats, employees are educated about the customer segments who shop at their stores and the best way to serve them. Anderson sees the changes to employee behavior as critical: “We encourage employees to ask customers lifestyle questions and engage in fresh dialogue so that they can recommend suitable solutions. Then we train employees to hypothesize, test, and verify new ways to meet specific needs of the local population.”14

Best Buy also trains employees to understand financial metrics, such as return on invested

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