Why businesses must get better at leveraging customer data trails or else risk being left behind
The rapid introduction of technology into every aspect of our daily lives means we all leave behind a data trail. Opening an app, posting on Facebook, using public wifi or tapping your oyster card at an underground station, all lay a trail of digital breadcrumbs revealing everything from our movements and preferences to our personality type and sleeping patterns.
GPS, for example, reveals travel habits and details of where we have been. Social interactions with individuals and with brands, contain a wealth of information about our likes, dislikes, habits and opinions. Then there are our browsing habits, search habits and buying habits – where do we spend most time? What do we search for? How do we navigate search results? What do we buy? When do we buy? How do we buy and how quickly?
And yet the scale and pace at which this data treasure trove has been introduced into our lives means some businesses are still grappling with how to effectively take advantage of what it offers, or else do not fully appreciate the extent to which it could be leveraged.
A failure to harness this data, however, will prevent businesses from keeping up with their competitors – and with their customers. Customers are becoming more demanding as they get used to an enhanced level of personalisation and rapid turnaround of their feedback and preferences into new or updated features in the products and services that they use. And start-ups, in particular, are now highly sophisticated in their use of data to form opinions on current and future outcomes that will impact their business, and incorporating that into day-to-day decision making and big strategic choices. Companies must follow the breadcrumbs and find better ways of tapping into the information they hold, or else risk being left behind.
A failure to harness this data, however, will prevent businesses from keeping up with their competitors – and with their customers.
Innovation in data analysis
Taking advantage of freely available data, analysing that data and using it to make informed decisions can have a monumental impact on the identification and implementation of opportunities to drive growth. But when we think about innovative ways to use that data, it is important to look beyond the confines of a particular sector or segment, to draw inspiration more broadly and to be creative.
Beauty brands notoriously use social listening to understand what the market wants, which has proved to be significantly more predictive than traditional market research techniques. When L’Oreal was faced with a dilemma of which hair product to develop next, for example, it tuned its ear to social media to discover which trend was the most promising. The decision was made to develop L’Oreal Feria Wild Ombre and the product became a huge success.
Meanwhile, Netflix used social listening to discover that people were binge-watching shows and falling asleep. That led to the creation of Netflix Socks, smart socks that detect when the user is dozing off to send a signal to the TV to pause the show. Fitbit introduced its Reminders to Move feature in a similar way.
Elsewhere, there is evidence that car manufacturers are also monitoring opinions on social channels to determine consumer behaviours as they relate to electric vehicles. Certainly, they have already used these insights to inform design decisions and evolve how electric vehicles will be manufactured, for example, taking heed of consumer concerns around finding charging stations by incorporating charging station locators into newer models.
The opportunities to combine data points to make robust predictions, really do seem to be infinite, if we can identify and leverage the right information.
Why private equity investors should care
If we can use this level of analysis to draw on social conversation to predict the next big beauty trend or inform new product decisions, it stands to reason that it can be used in almost any business context. It is up to each business to leverage that information to make better decisions and improve results.
One of the most pivotal ways companies can use data to their advantage is to not just inform their strategic choices but to be the driving force behind digital and product strategies. Just as Netflix expanded their product suite based on social listening, businesses can continually identify expansion opportunities and new product markets by incorporating customer data consolidation and analysis into their ongoing strategic product management processes. At a more granular level, data can also inform the ongoing iteration of existing digital products, allowing businesses to rapidly respond to customer behaviours and prioritise the delivery of the highest value product enhancements. This, in turn, will drive competitive advantage and delivery of value.
Finally, identifying where businesses have the structures in place to effectively harness data and truly take advantage of the insights it can provide can be an important consideration in future investment decisions. Predicting and responding to data-based customer insights will be a key success factor for many businesses in future, and their preparedness for this should be given significant consideration alongside other investment drivers.
Embracing the power of data analysis has become a mantra for private equity firms in an increasingly digitised world. But this mountain of freely available information remains woefully under-exploited. Listen to your customers – follow the digital breadcrumbs – and help build better businesses.
Palladium is a digital and technology due diligence provider and digital transformation partner to Private Equity firms and their portfolios across Europe and the US. Palladium was named by Real Deals as 2020 Specialist Advisor of the Year at The Private Equity Awards.