Applications of Business Intelligence in Retail

User of business intelligence tools

Photo via user Timo Elliott at Flickr

Business intelligence is the use of data to make informed business decisions. Elite retailers have taken full advantage of access to data that has come with the progression of computer and database technology throughout the early 21st century. While potential uses are endless, many retailers benefit by applying business intelligence in marketing, distribution and pricing decisions.

BI Marketing Applications

Marketing has been one of the primary beneficiaries of advancements in database technology. Customer relationship management, or CRM, originated with the ability to gather market data for use in solution development, promotion, sales and customer service arenas. Companies make macro and micro-level marketing decisions based on the data they gather through market research and customer transactions.

Marketing analytics enable companies to monitor the price points, revenue and profit margin of all promotional practices over the course of time. Such data allows for optimized advertising and sales promotion tactics. CRM also lets companies use data to assess the lifetime customer value of each customer. LTV contributes to efficient use of limited advertising dollars to target the right customers with the right messages.

BI Distribution Applications

Like CRM, supply chain management is a database-driven business system. SCM is the collaboration of retailers and suppliers to deliver the best value to consumers. By integrating inventory systems, retailers and suppliers are better-equipped to implement just-in-time inventory systems. Many retailers even entrust vendors to manage store inventory levels through a process known as vendor managed inventory. Advanced software tools allow for sophisticated pull supply chain models that retail buyers use to make real-time inventory decisions rather than risky projections weeks or months in advance.

SCM software is also used to organize inventory at warehouse and store locations. Organized and tracked inventory improves efficiency in receiving products in and shipping them out. All of these SCM advantages resulting from business intelligence contribute to cost-savings, better customer satisfaction, and improved revenue and profit.

BI Pricing Applications

Increasingly, retailers employ complex price-tracking programs to constantly track internal prices against those offered by competitors. Some low-price, discount retailers have automated programs that lead to instant in-store or online price reductions when their software programs reveal lower price points in the marketplace. Not only does BI allow for fast responses to changes in market pricing, the ability to automate price changes eliminates the need for manual involvement. Typical tools do have “reality checking” systems that alert real people when the price reduction is impractical, such as a TV dropping from $749 to $7.49, due to a glitch or misreading.

Conclusions

Fear of investing in a huge technology overhaul prevents some retailers from getting into the business intelligence arena. While it can cost a pretty penny for a large chain to take the BI plunge, the potential gains in efficiency, customer service, quality and culture are often well worth the investment. In fact, retailers that fall behind the industry in utilizing such systems may lose ground or viability quickly.

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Neil Kokemuller

Neil Kokemuller has been a Professor of Marketing at Des Moines Area Community College since 2004. Prior to teaching, he worked as a marketing specialist and retail manager. He holds an MBA from Iowa State University

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1 Response

  1. Erin says:

    I like this blog so much, bookmarked.

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