Endorse Maximize your ROI, minimize your project risk Consulting
Super Charge your ROI
Ever notice how many websites are littered with the phrase “Return on Investment” (ROI)? I’ve seen many websites that use ROI over and over again to the point where it seems the word is just placed there whether it has meaning or not. I’m not sure but ROI may need to appear at least a few times on every web page just for credibility purposes.
What this really translates to is that the term ROI is overused. By no means am I saying ROI is not important, I think it is a critical success factor but no where do I see how to increase my ROI. ROI is not something that can be determined once a project is rolled into production. ROI is comparable to your 401k where it should be continually monitored for growth year after year.
So how do you improve your ROI to determine if your investment is going to yield a profit?
Build a Roadmap Somewhere in the planning for your data warehouse, Customer Relationship Management (CRM) or Business Intelligence (BI) systems, there should be a roadmap of features and functionality. In these features and functionality there are hidden gems of ideas which need to be nurtured into something that adds value to your data.
This is where good set of requirements can help seed your gem field. A robust set of requirements specified to the right level of detail and minus the typical ambiguity will go a long way in helping meet your ROI goal.
An example of a hidden idea is a requirement to target customers based on geography. Your data probably has customer name and address which fundamentally satisfies this requirement. What you can do to enhance the value of the data is to include the capability to target customers based on a mileage radius of a specific zip code. If you have a marketing application and want to segment an audience within a certain mileage range of a zip code, calculating the radius based on the target zip code longitude and latitude is a simple way to accomplish this.
Another route to take which is a bit different is to include MSA/DMA (Metropolitan Statistical Area/Demographic Metropolitan Area) external data that you can match your data to. This will allow you to market to an entire metro area such as New York metro area which consists of part of New York, New Jersey and Connecticut. Zip codes are aligned with these codes and you can get statistical profiling data to filter on if you desire.
Getting Value from Your Data Getting value from your data is more than just looking at a report or slicing and dicing an Online Analytical Processing (OLAP) cube. The lack of this pivot table functionality is an indicator of potential failure and your ROI is most likely heading south.
When your users are able to obtain actionable data from the data warehouse or BI for example, then you know you are onto something. An example of actionable data may be a trend in your inventory or sales data that gives your users sufficient time to react to a pending crisis. This capability correlates to money very clearly. If you run out of inventory, you lose sales. No sales, no dollars!
Value Add for ROI Impact The value add from your data is only limited by your imagination. When you are able to view your data in creative ways, this will allow new possibilities to surface that can make use of the data that were previously unforeseen.
Here is a very simple example of how a value add can impact your ROI via a call center operation. Let’s say the call center responds to customers who have a paid subscription to a service. When irate customers call to cancel their service they are offered 2 months free service to stay on. (This is similar to what the telecom industry did a number of years ago by sending $100 and $200 checks out to no avail.)
Now you have an irate customer on the phone and you don’t want to lose a customer, or do you? What if your call center representative knew to let this irate customer go because they were an unprofitable customer? This can be done very simply with data already captured. Identifying which customers are profitable/unprofitable tells the customer representative how to treat the current customer.
Data to be looked at in this case could be are bills paid on time, how often does this customer call the help desk and for how long, the customers tenure, etc. This is not really mining for data, but rather analyzing the existing data. Once again this equates to ROI dollars saved from the representative’s time or future revenue if the customer is saved from churning.
Mining for the Gold “Data mining” is almost abused as much as the ROI acronym but it is worthy of mention when speaking about ROI. Besides the hidden gems in your systems capabilities, there are nuggets of gold just waiting to be found in your data. The trick is to mine for the gold nuggets and then figure out how to use it.
Data mining is not for the timid; I want to make it clear upfront. However, the rewards are great making it very tempting to enter this frontier. What makes data mining different than data analysis? Simply put, in data analysis you know what the results are but you are seeking the reason why. In data mining, you sometimes aren’t even sure what the question is and certainly don’t know the answer. This is why data mining is such a challenge.
However since the rewards are great and some of the data mining ventures are not as difficult as others, it has its place in the ROI spectrum. A common data mining question may be asked to create a prospect database for customer acquisitions. In a nutshell, what needs to be done is identify who your most profitable customers are and profile them. Data obtained from external vendors to append to your own data such as education level, income, etc. will come in handy for this task.
If you plan and build this capability into your system, this too is future revenue to be included into your ROI.
ROI Heaven By now you hopefully have a better idea of how to grow your ROI instead of trying to justify the expense aspect of it. If you take good care of your system and continually push the envelope for more and better data, you will be rewarded with a stronger ROI than otherwise imagined.
Ken Pohl is the president and founder of Endorse Consulting which specializes in minimizing the risk to a project’s ROI by mitigating potential problems before they arise. His many years of developing and implementing data warehousing, business intelligence and CRM systems has provided a wealth of knowledge as proven techniques. These techniques translate into real world not from a book “best practices”.