Data analysis investment expected to explode

Tesco Direct, a United Kingdom-based electronics store, invested in retail analytics several years ago in hopes of gaining better insight into its customer base. So far, the results have been enormously successful.

One way Tesco uses analytics is to make accurate forecasts about inventory. For example, the company analyzed past sales information for weather-based products in conjunction with weather statistics, which churned out reports on how much stock it should have at all times. In doing so, Tesco never ran out of these items, thereby leading to better customer service.

"By adding this effect to model, we reduced out of stock for good weather products by a factor of four," Duncan Apthorp, supply chain systems development program manager at Tesco, recently told Information Age. "That means there is a 97 percent chance of customers who come into the store finding what they want, whereas other supermarkets might not have it."

Customer-based data analysis was so successful that, in 2006, Tesco Direct decided to employ similar strategies for managing its supply chain. The result: an estimated $21 million in cost savings per year. 

Study projects investment increases
The benefits of data analysis are no longer a secret; organizations in every industry are interested in these tools, with members of executive teams through sales departments taking note. 

As a result, a recent IDC study projected that analytics services would see a 14.3 percent compound annual growth rate over the next five years, increasing to become a $70.8 billion market by 2016. That number doesn't even account for the software and in-house spending, indicating just how massive data analytics have become. 

One way or another, technology is going to play a crucial role in business development going forward. While using reports to the utmost advantage will come down to the people analyzing the results, it still revolves around having the right tools in place first.

In a recent blog post for Practical eCommerce, Tim Wilson, vice president of analytics and measurement at Clearhead, stressed that "to be truly data-driven" requires having the right processes in place. That means aligning the right technology with the proper focuses in mind. 

Do companies aiming to boost website traffic have key performance indicators in place? Are healthcare agencies aiming to strengthen fraud prevention with data analytics measuring "normal" system behavior against abnormal activity? Do they even have all the necessary information integrated into the same system?

Regardless of whether a company wants to use data analysis for supply chain management or to boost customer service, implementing the right technology and the proper strategies is vital. 

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