 "Driving profits through big data")
How big data can transform businesses has become a hot topic. At the Kini Group, we have seen the power of big data through almost two decades of experience mining sales transaction data for actionable insights with hundreds of businesses. Most middle-market B2B companies do hundreds of thousands, if not millions, of sales transactions (invoice line items) each year. However, for most businesses, this mountain of transaction history sits untapped in corporate ERP systems. We have seen from experience that this data, when structured and analysed properly, can yield amazing insights and bottom line results. Following are a few examples:
Margin growth despite adverse customer mix: A packaging company discovered several years of successful price increases had been the result of positive customer mix; analysis revealed customer-by-customer prices had actually declined. Measuring pricing performance accurately enabled the company to hold sales reps accountable for driving real price increases, resulting in continued margin growth even when customer mix shifted adversely.
Targeted plans yield 5 per cent margin growth: A chemicals company identified underperforming product lines and SKUs and quantified the extent to which price, cost, customer mix and product mix were driving the decline for each. Product managers used this information to create targeted action plans for each underperformer, generating a five per cent improvement in margins from the group.
Small order surcharge adds $ 1 million to the bottom line: A construction products company found orders under $100 accounted for 15 per cent of all orders, but only 0.1 per cent of sales and gross margin dollars; after factoring in order processing costs, the company was actually losing money on over half of these transactions. The company implemented a small order surcharge and added over $ 1 million to its bottom line.
Targeted sales training improves margins: An IT services company compared similar selling situations and found the top quartile of sales reps consistently negotiated prices 10 per cent to 15 per cent higher than the bottom quartile. Targeted training and tracking of pricing performance results improved pricing for the bottom quartile by over 5 per cent.
Focus on private label drives margin improvement: An industrial distributor with declining margins found that while costs had steadily improved over a three-year period, adverse product mix shift had more than offset those gains. The company shifted resources from procurement initiatives to increasing sales of private label products and saw margin improve for the first time in three years.
The first step in using big data is deploying a platform to perform analysis on sales transaction data. Finding the right tools to perform this analysis is a challenge, however.
Margin growth despite adverse customer mix: A packaging company discovered several years of successful price increases had been the result of positive customer mix; analysis revealed customer-by-customer prices had actually declined. Measuring pricing performance accurately enabled the company to hold sales reps accountable for driving real price increases, resulting in continued margin growth even when customer mix shifted adversely.
Targeted plans yield 5 per cent margin growth: A chemicals company identified underperforming product lines and SKUs and quantified the extent to which price, cost, customer mix and product mix were driving the decline for each. Product managers used this information to create targeted action plans for each underperformer, generating a five per cent improvement in margins from the group.
Small order surcharge adds $ 1 million to the bottom line: A construction products company found orders under $100 accounted for 15 per cent of all orders, but only 0.1 per cent of sales and gross margin dollars; after factoring in order processing costs, the company was actually losing money on over half of these transactions. The company implemented a small order surcharge and added over $ 1 million to its bottom line.
Targeted sales training improves margins: An IT services company compared similar selling situations and found the top quartile of sales reps consistently negotiated prices 10 per cent to 15 per cent higher than the bottom quartile. Targeted training and tracking of pricing performance results improved pricing for the bottom quartile by over 5 per cent.
Focus on private label drives margin improvement: An industrial distributor with declining margins found that while costs had steadily improved over a three-year period, adverse product mix shift had more than offset those gains. The company shifted resources from procurement initiatives to increasing sales of private label products and saw margin improve for the first time in three years.
The first step in using big data is deploying a platform to perform analysis on sales transaction data. Finding the right tools to perform this analysis is a challenge, however.
The author is Dev Tandon, a pricing and margin analytics software expert. Re-printed with permission.
Link: https://www.linkedin.com /pulse/unleashing-power-big-data-drive-profits-dev-tandon
Link: https://www.linkedin.com /pulse/unleashing-power-big-data-drive-profits-dev-tandon