Data Science Is All About Getting Closer To What Customers Need
As IBA Group is 30 in May 2023, I would like to look back at some of the key technologies launched during this time.
One of the significant areas is data science. This has long been an area of technology that is not well understood outside of the development labs, but it is something that all executives should have on their radar.
Almost twenty years ago I was advising an Indian company on the acquisition of a small data science startup. The company had developed algorithms that could look at the credit card history of a specific customer and estimate if they would pay their balance in full, how much they might spend to partially repay, or if they might even default.
I really liked the solution and I remember thinking how every bank needs to leverage this type of insight from the data they already have – such as purchase history. This was a long time ago. Data analysis has become cheaper, faster, and better and it is now easier than ever to take a large dataset and to generate insight into consumer behavior.
But many companies still rely on tools like spreadsheets.
It feels like this critical analysis is just bolted on as an afterthought, rather than being a critical and robust part of the service offered.
I saw on the IBA Group website that they have a data science package that can help marketing executives to design the optimum distribution of their budget across various different media channels. The value is obvious. If you are spending a significant amount of cash promoting your business then you need to be spending it where it will have the most impact.
How many businesses are making these decisions on Excel or even just relying on experience and intuition?
Of course experience counts, but humans cannot study millions of data points and create insight from the patterns hidden in the data. This is what data scientists can do. The marketing spend is a good example of an area where insight can be extremely valuable, but this ability to understand what your customers need can be applied across many other industries:
- Retail: create personalized promotions for customers that are most likely to respond based on their personal shopping history. For example, if a customer usually buys a specific product every Friday, but has not done so this week then can you create a time-limited special offer for that product? Knowing how your customers behave can ensure that you have the right products in the right place at the right time and allows you to create additional incentives to shape behavior.
- Subscriptions: subscriptions rely on the customer paying each month for a product or service. It is usually quite easy for a customer to cancel – for example a subscription to a TV streaming service can be cancelled if the customer decides to save the money or switch their spending elsewhere. Being able to predict which customers are possibly going to cancel allows them to be targeted – for example offering a special price in return for staying with the service for 12 months.
- Healthcare: the ability to constantly monitor health using tools such as Fitbits or Apple watches is leading many health specialists to suggest that we may soon be able to predict illness rather than wait until people feel ill and seek treatment. There are already many stories of heart attacks prevented by Apple Watch alerts.
- Logistics: knowing where products need to be and when, plus ensuring that inventory levels are kept low, but sufficient for the required deliveries. All these possibilities can be analyzed and estimated or predicted.
Data science is about offering solutions to customers. It allows companies to create insight and to refine their services – personalizing and using insight to deliver exactly what the customer expects.
Data science is also an ideal tool for companies that are facing an uncertain economy. If you can’t be certain of how business will go in the next couple of years then it makes sense to reduce costs, but also to get closer to exactly what your customers want – that’s the insight you can achieve with this technology.