As per McKinsey, machine learning, incorporating a massive algorithm in the past few years, is evolving faster due to the advent of analytics. With businesses investing heavily in cloud and the rapid digitization of the professional ecosystem, analytics is all set to become a significant aspect in deciding the fate of organizations.
Data Analytics – How Can It Transform Your Business?
The Impact of Analytics on Business: As per a study by SAS, more than 70% of organizations believe that data analytics plays a vital role in getting precise insights. The study also said that out of ten organizations, six of them said that leveraging analytics makes them more innovative.
Analytics is slowly but steadily evolving in the competitive landscape. Industry leaders are using analytics to make decisions that can help them to stay ahead of their peers, besides exploring better revenue opportunities, new markets, and building a better relationship with their customers.
The very reason why business models of Uber, Airbnb, and Spotify are sustaining is data and analytics. When you digitize your interactions with customers, you create a window to get immense information. This customer information could be utilized for making effective marketing strategies, better products, and making more sales.
A lot of C-suite leaders now understand the importance of data and understand the risk it carries if not secured correctly. What is startling is and makes investment in data and analytics even more important is the kind of ROI it gives. In the Journal of Applied Marketing Analytics, Jacques Bughin says, the ROI on data and analytics is better than the investments made in computers during the 1980s.
The power of data and analytics is also harnessed to improve core operations or create new business models from scratch. The most exceptional example is Netflix. Netflix has efficiently used its customer data to refine its recommendation engine and give a better experience to its users. Not only that Netflix has surpassed Disney as the most valued media company in the world, with a valuation of more than $160 billion. One of the biggest reasons for their success is their impeccable customer retention rate. Their customer retention rate is more than a staggering 90%, far better than Hulu’s 64% and Amazon Prime’s 75%.
The second most important reason why Netflix is way ahead of its competitors is Content Creation. The kind of quality shows and movies it makes, like “Orange is the New Black”, “Sacred Games”, and “BirdBox”. These shows have received a thunderous response across the globe, resulting in a steady rise in subscription rates. One of the primary reasons why they succeed in making better content is that they understand what their audience wants to see, leveraging data and analytics.
How Does Netflix Leverage Big Data and Analytics?
Netflix has digitized its interactions with its 151 million subscribers. It collects data from each of its users and, with the help of data analytics, understands the behavior of subscribers and their watching patterns. It then leverages that information to recommend movies and TV shows customized according to the subscriber’s choice and preferences.
80% of viewer activity is triggered by personalized algorithmic recommendations
$ 1 B+ earnings via customer retention
90 %+ customer retention rate
Where Netflix gains an edge over its peers is that by collecting different data points, it creates detailed profiles of its subscribers, which helps it engage with them better.
Netflix collects information on how a user interacts and responds to a TV show or a movie:
- Time and date when a user watched a show
- The device used to watch the show
- If the user pauses the show, do they resume watching
- Does the user binge-watch an entire season of a TV show?
- If they do, how much time does it take to binge-watch it?
More than that, Netflix has ratings that the viewer gives to the content they watch, the number of searches they do, and what they search for. The information collected is enough for creating a detailed profile of a user, and this is exactly what Netflix does. It leverages data analytics to make a robust recommendation algorithm that suggests the best content to the subscriber as per their needs and preferences. The user no longer must endlessly search through streams of content to find out what he or she wants to watch. Netflix makes the job easier for them in the process, giving them a better and customized viewer experience.
The recommendation system of Netflix contributes to more than 80% of the content streamed by its subscribers, which has helped Netflix earn a whopping one billion dollars via customer retention. For this reason, Netflix doesn’t have to invest too much in advertising and marketing their shows. They precisely know an estimate of the people who would be interested in watching a show.
Apart from monitoring the online behavior of its users, Netflix has a feedback system in place. They encourage feedback from their audience, which further helps them understand their preferences and helps them in suggesting better shows and creating better content.
Why Investing in Data Analytics is Important?
There is a data explosion today, and the need for analytics has been growing exponentially. Tools and software are being developed to get precise insights from data.
If you want to know your customers better, find revenue opportunities, and tap into new markets. You need to have a mechanism that helps you gain better insights. As an organization, investing in data analytics will give you four significant benefits.
1. A Deeper Understanding of Customers
Earlier companies would generally categorize customers based on age, gender, and location. Now, with the help of AI, one can map the customers’ digital footprint. Decision-makers can go through crucial behavior patterns of customers like price sensitivity, brand affinity, affluence, and preferences. These kinds of data mapping help in understanding your customers better, enhancing your ability to build better products and services for them.
2. Early Detection of Problems in Products and Services
More than half of the professionals across North America and Europe are heavily dependent on analytics to enhance the quality of their products and services, as per research from Forbes Insights and Cisco. Analytics can give you precise insights into the kind of concerns customers have, their changing needs, and based on that, you can innovate your offerings.
3. Identifying Better Marketing Strategies
With various digitization channels for customer interaction available now, businesses are adopting an omnichannel approach to engage with customers. Using analytics, marketers can get insights on how to have meaningful engagements with customers across all channels. Also, analytics can help analyze successful marketing programs and identify strategies that yield better ROIs.
4. Finding Ways to Reduce Expenses
Once you start getting insights at departmental levels, it will help you identify areas where you can curb your costs. Insurance companies saved a good amount of money by identifying patterns of fraud and dismissing false claims.
How To Harness the Power of Data?
Steps to Build a Data-Driven Culture
As an organization, do not be afraid of change. If you are yet to use analytics as an organization, start with small steps, fail faster, and make a steady transition. Do not go for overnight results, instead, practice consistency and prioritize your efforts.
The first step you need to take as a decision-maker is to incorporate data and analytics into the core vision of the organization and focus on nurturing a data-driven culture. Slowly but steadily create a powerful data infrastructure and hire talent to operate it, and make sure to highlight your data-driven culture in your employer branding campaigns.
Your success doesn’t lie in adopting the most powerful technology rather digitization of your organization from the bottom. Companies like Netflix, Amazon, and Google, which are leading the analytics game, have gradually transitioned to a data-savvy culture. It wasn’t all overnight, but a gradual process that took a few years. Not only did they heavily invest in analytics, but they have also kept themselves observant of the changing trends of artificial intelligence.
They are putting the case strongly before all other organizations- if you want to survive in the market, you need to invest in data analytics, and that is not negotiable at all.
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