Tuesday, May 15, 2012

Increasing Profits with the "Best Offer"

My colleague James Kobielus has been talking about “next best” action recently[1][2], and I also talked about this in my post on the importance of agility for analytic applications[3]. I have been talking to a number of customers recently who want to take this beyond next best, to the best offer.

In my blog I talked about a person who had made a number of purchases, and the retailer was trying to influence the customers next purchase by providing them with a coupon for an item that they might be interested in based on their purchasing history. But, how much more could a company make if they could influence their customers’ purchases before they are made, pushing them to more profitable items during the ordering process.

Think of a distributor of auto parts as an example. As the body shops and garages are placing orders, wither online or over the phone, as they enter an item’s description or SKU, what if you could offer a different part, that has the same specifications and same look and feel, but it costs less, and has a higher profit margin for you. Well, that would be a win-win situation, the garage gets a less expensive part that they can sell to the customer for less (like this would really happen, right?) but the distributor also makes a higher profit.

This take more than just a data warehouse / analytic application. And this type of example is where IBM is uniquely positioned to help you out. You cannot build this “system” with just a data warehouse.

You will need an analytics warehouse that can determine the most profitable items. You may need IBM InfoSphere BigInsights to examine your parts catalogs to find which parts have the same specifications and can be substituted for each other. You will probably need a rules storage mechanism that will record the compatible items from BigInsights and also from your internal sales team who have the deep knowledge of the items they sell. Then you need to have both your online ordering system and your internal order entry system must be intelligent enough to pop-up an offer whenever it sees one of the item numbers or SKUs that have been identified as "replaceable".

While you might be able to call a customer back if you can save them thousands of dollars or more, normally these offers need to be made as the order is being entered/taken, not afterwards.

Bring the power if the IBM Big Data family and our other Information Management and WebSphere solutions to your business, and drive more profit.

[1] http://thinking.netezza.com/blog/next-best-action-healthcare-save-improve-lives-through-applied-analytics
[2] http://thinking.netezza.com/blog/next-best-action-smarter-planet-think-global-optimize-local
[3] http://dsnowondb2.blogspot.com/2012/05/importance-of-agility-for-analytic.html

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