By Bill Pollock, president & principal consulting analyst, Strategies for Growth
In today's highly competitive and increasingly demanding economy, businesses of all types and sizes are being forced to search for a cost-effective means for identifying new markets and establishing programs for penetrating and cultivating them. In most cases, the business development manager has to scramble to implement the most current, state-of-the-art market development tools to support the overall effort. But sometimes the most valuable tools may already be present within the organization, and this is particularly true with respect to the services sector.
Services organizations typically operate in data-rich environments. They routinely collect service activity data from their day-to-day business operations, as well as customer account demographics and corresponding service usage patterns. In many cases, they also collect financial and transaction-based data and other types of trend data. Every moment of every day, services organizations are collecting data and creating computer records that are stored somewhere in a database.
The vast majority of these collected data will never see the light of day. More often than not, they are stored for only a specified period of time, generally either as required by law or for contractual purposes. However, in a world where information has become an increasingly valuable resource, what better source is there to learn about emerging customer preferences and service usage patterns than from the customers themselves? And not just what they tell you they need or like, but what they actually use? Similarly, what better source is there to learn about equipment failures and service requirements than from the equipment itself; not just from what the service engineers tell you, but directly from the equipment? The list goes on and on.
Services organizations are always searching for information that can advance their cause and keep them abreast of the market, its trends and the competition. Marketing and business development managers would love to know what makes their customers tick, as well as what "ticks them off." Operations managers would do anything to find out how they could improve the quality of their processes, even by just a fraction of a percentage. Not to mention the sales managers who would sell their souls just to keep a half step ahead of the pack in being able to identify a new market segment or land a top marquee account in an emerging market.
Often the answers to these questions are already contained in the data that is being routinely collected, stored and, unfortunately, discarded from the organization's ever-growing customer and service activity databases. Many services organizations have recognized the potential of this source of information and have invested substantial effort and significant amounts of resources to uncover the hidden knowledge that may be embedded in their internal databases.
The analogy of database "mining" to quarry mining is very appropriate. In ore mining, the process goes through tons and tons of rock in order to extract one precious gram of gold. Similarly, in database mining, one may also need to go through very large quantities of data just to get to the "golden nugget" – the one piece of information that makes it all worthwhile.
With respect to the question, "Why database mining?" the answer should be more apparent by now. Your organization may be sitting on a goldmine of data which could be converted into useful knowledge – knowledge that can be used to help you focus your marketing and business development efforts, monitor and improve the quality of your service products and processes, and explain your customers' sensitivity to your competitive pricing structure, customer service performance, brand name recognition, advertising and promotional campaigns, or anything else you would need to know more about in order to compete effectively.
Other rich sources for business knowledge include sales histories, customer files, quality control records, service activity reports, product failure reports, recall/repair data, purchase orders, and other databanks that may be used to describe the behavior of customers (or maintained systems). In many cases, these databases may also contain the answers to questions such as:
The principal purposes of database mining are to benefit from the already collected internal data and information, and to use it to make the organization:
Virtually every services organization accumulates, compiles and distributes information both internally (i.e., to company management) and externally (i.e., to customers, channel partners, and authorized agents). Many organizations also supply their primary customers with information that reflects customer service activity, equipment and service performance track records, and other important records of customer experiences.
In general, internal database mining may provide the ultimate vehicle for creating new marketing and business development information bases that can be used to support the organization's sales and marketing programs. The primary benefits of utilizing this source of data and information can be manifested in both internal (i.e., operational) and external (i.e., marketing) applications.
Internal applications could include facilitating and expediting new product/service planning; identifying enhanced, or value-added, information that could be used to better manage the organization's services portfolio; improving the content and/or format of existing sales, marketing, operations, or management reports; and developing improved customer service delivery systems.
Marketing applications, on the other hand, would include the ability to focus sales, marketing and prospecting efforts on the most promising customer and prospect segments. Companies can also leverage database mining to react more quickly to changing market needs and requirements and ultimately to expand existing service and support capabilities.