How Can BI improve customer satisfaction and profitability in the food distribution industry?
Food distribution industry is a highly fragmented industry. Most companies in this industry serve a large number of customers and a good section of their customers will be mom and pop business houses. According to a latest survey, the total size of this industry in North America is roughly around $225 billion and the share of the big organizations contribute to less than half of it. With so many competitors in this highly commoditized market, how do companies differentiate from their competition? Competition may carry the same items, making it difficult to gain any inroads against them. How do the companies build loyalty and maximize customer profitability?
Are customers important?
A wise man once said that customer is God. How true is that! Satisfied customers are very critical in this business as a dissatisfied customer can easily switch his loyalty to a competitor. Every company has to answer the following questions:
- What are the key KPIs related to customer satisfaction that one has to measure and monitor?
- Do we have a system that captures all important data pertaining to customers?
- Is the data available in a timely fashion for the management to take appropriate decisions to increase customer satisfaction?
- Are our SLAs aggressive enough to beat the competition?
Without the help of BI, the above questions are difficult, if not impossible, to answer accurately and promptly. BI can capture the right data from the system of record and present it in a timely and organized fashion to the appropriate people to make fact based decisions and increase customer satisfaction
Loyalty and Profitability
Customers not only need to be satisfied, but efforts also need to be taken to increase loyalty, retention and wallet share. Without this focus, expensive customer acquisition programs or spending valuable marketing dollars to retain unprofitable customers will be a waste. Loyal customers are a huge asset to a business – they buy more products, create good word-of-mouth, and reduce customer acquisition costs. Market Basket Analytics is a great tool to measure, monitor and report customer buying preferences.
By capturing customers’ purchasing preferences and habits, companies should be able to analyze this data to match customer needs and take a more proactive, consultative approach with customers. Though all customers are important, extra attention should be given to the top 20% of customers who generate 80% of revenue. These customers need to be well taken care of the top people in the organization.
Does it mean that the remaining 80% of customers are not important? Do they need to be taken care? Of course, yes. Companies must find ways to improve their loyalty or profitability. They can run a promotion for unprofitable customers who only buy low margin products to entice them to buy higher margin product lines – Up Sell. Profitability data can greatly improve sales and marketing plans by helping to run targeted campaigns and identify potential targets for particular promotions.
How does BI help in distribution? Analytics helps to locate gaps and trends in a company’s distribution chain. For instance, if a company sells ground beef to a chain restaurant, analytics will help the organization by providing information like which branches are not buying much ground beef or which ones had previously bought ground beef but are no longer doing so. Or one can even look at the entire data set and view ground beef sales for an entire region compared with other regions. This can help determine where the gaps are – for instance which product lines particular sales reps are not focusing on; or areas where perhaps your competition is making inroads.
