In simple terms, you don’t want to spend time and money marketing products to people who have not the slightest interest in them. So you need to look at what I will call ‘transactional data’ – that is to say the information about the orders placed and purchases made by your customers, as opposed to the more static ‘reference data’ consisting of names, addresses and emails and so on.
Having a good eye on this transactional data can not only present you with marketing opportunities like cross-selling or up-selling, but can also help you to improve your systems and processes by generating meaningful key performance indicators (the infamous KPIs – more on them below!) and this is where it is important to ensure that your system is designed to meet your needs.
For instance, how do you know how long it takes you to manufacture a product if the system doesn’t record that information? If nobody is recording factory or warehouse issues, how can you hope to resolve them? A frequent task of mine when working on business intelligence projects is to establish what information the system needs in order to generate the required reporting. Very often I find that the information is simply not there, and we need to build it in.
If you buy an off-the-shelf system then it is likely to be fairly generic in order to appeal to the widest possible audience. However, it’s the nature of businesses to be unique in their practices, to give them a competitive edge, so before you start you have to verify that your needs are met, without huge levels of redundancy – things that you need to do within the system that may not be all that relevant to your business.
Key performance indicators
You can get really bogged down with performance measures, so my approach is to always consider some ‘golden rules’.
1) Customer Service
Firstly, the most important thing is customer service, so measure things that tell you whether you are getting that right. Are you delivering the best product in the most effective manner? Are you adding the maximum value through your services? Are your customers happy? Have you asked them lately?
Secondly, look for exceptions – your mindset should be one that looks at costandmargin, effort and reward, cause and effect. So don’t worry too much about the size of an order in pure turnover terms – big orders are usually good, but was it despatched on time? Did it go out complete? Were there some delivery issues that you can learn from for next time? Was it a pain to handle in the warehouse for some reason?
3) Listen to the truth
These are the bits of information that will really tell you the truth. Bear in mind that the truth may not be what you want to hear – perhaps a given customer has such onerous packaging, labelling and delivery requirements that you swallow up all of your margin just to fulfil their orders. It’s no use having a £10,000 order that costs you £9,500 (or even £10,500) to get out of the door, so you will need to have a conversation with that customer the next time they order, and be prepared to say no to them.
If you have salesmen on the road, you may give them turnover-based targets – that would be perfectly reasonable, but do you look at the individual orders they bring in? Do you know how much it costs you per visit to send them in to a customer? What about the frequency and size of orders? There is a natural tendency to gravitate to the nicest customers with the best coffee – so if you find that £100 orders are being collected three times a month instead of a £300 order once a month, then it may be time for a conversation there as well.
So, my key message is to structure and collect the sort of data that is going to tell you something about your business. We’ve all heard that ‘turnover is vanity, profit is sanity’ and nowhere is that more true than with the metrics you choose for your business. Turnover numbers are easy enough to get hold of so concentrate on margin, cost and efficiency. Look for variances and exceptions – late orders, missing stock, service level issues – and you will begin to spot patterns which will help you to minimise waste and maximise efficiency.
I can’t think of many more useful things that you can do for your business than that!