A disquieting revelation came to DirectBuy CIO Armin Roeseler
a few weeks after his arrival at the retail membership club in December
2013. The epiphany came when company executives arrived at a meeting
armed with spreadsheets filled with crucial information about the
business. But the data lacked any consistency on fundamentals such as
how many members the company had or the monthly merchandise volume.
Executives collected business data and simply stuffed it into data
repositories they updated weekly.
"Our data management was really in an immature state,"
Roeseler told CIO.com. In 2014, he decided the company needed to build
an integrated business intelligence platform that quantifies operational
data such as member totals, popular product categories, revenue stream
over time for particular products, as well as results of special sales
or marketing efforts. The project is yielding new insights that could
eventually bolster sales, he says.
The initiative is crucial for DirectBuy, which rose to prominence
over the last 40 years by selling furniture, appliances and other
household items minus the retail markup. Today DirectBuy faces threats
from the likes of Amazon.com, other successful ecommerce companies and,
increasingly, mobile devices. "After the economic downturn in 2008, it
became increasingly clear that a brick and mortar business like ours
would not be able to survive," he says. The new analytics system is a
key cog in a digital transformation that has included implementing a
private cloud to reduce infrastructure run rate by 40 percent and retooling the website to include personalized recommendations and a more friendly experience for customers using mobile devicesLeaning on analytics to enhance its business
Using mainly Microsoft software, DirectBuy's IT staff built a
corporate data warehouse, which sorts data from systems of record,
including customer and merchandize inventory metrics. Microsoft Power
View business intelligence software allows business staff to slice and
dice the data into preferred graphical views, such as maps of business
results in various U.S. cities, for analysis. For example, a sales
staffer could query the system to see sales volume in the Pacific
Northwest for a given month, and check whether any spike correlates to
an email campaign that ran during the period.
[ Related: Retail CIOs become heroes with the help of CMOs ]
"Multi-dimensional is easily presented to business
stakeholders and gives us a much better, visual view of the state of the
business than analyzing rows and columns in spreadsheets," Roeseler
says. This self-service analysis model also freed up IT resources, he
says. Previously, one IT administrator would field business unit
requests for data to analyze, build a report, and deliver it to the
business a day or two later.
DirectBuy also used open source analytics tools, including
Microsoft's R statistical analysis software and RapidMiner, to analyze
22 marketing channels for opportunities to improve lead generation in
print, radio and online mediums. What he learned surprised him. Some
channels were actually hurting the company's marketing effort. One in
particular was troubling because the more money DirectBuy invested in
it, the more it disrupted the overall sales effort – known as a negative
correlation coefficient. "We immediately advised the marketing team to
stop funding the channel because every dollar spent would be
counterproductive," he says.
Roeseler says he sees even greater opportunity in predictive
analytics, specifically anticipating who is most likely to cease their
relationship with DirectBuy and making an effort to retain them. Each
month, 18,000 of the company’s 250,000 total members are scheduled to
let their membership lapse. By analyzing one million membership cases
spanning 15 years of renewal data, DirectBuy learned that if a member
made one purchase from the company in the 12 months prior to their
membership lapsing, they were more likely to renew. Also, members who
renewed three times consecutively were more likely to continue renewing.
The data enabled DirectBuy to prune the number of “at-risk members” by
three to four thousand a month by targeting them with discounts,
promotions and other incentives before their renewal date.
While Roeseler says the analytics have helped the privately
held company's bottom line, he adds it would be premature to link the
technology implementation to financial results. But, he says, “we now
know how to spend our marketing dollars to have a certain impact on
leads that we generate.”
Challenges abound in the digital transformation
DirectBuy overcame a few challenges in building the new
analytics system. Roeseler says he reorganized DirectBuy’s IT culture
and processes to manage and change cloud and analytics systems, rather
than traditional infrastructure tasks to “keep the lights on.” He also
says being based in northwest Indiana (Merillville) has made it hard to
attract talent, though he managed to hire some analytics staff and
contractors. The project also required close collaboration with business
executives, with whom IT built a “data dictionary,” essentially a
uniform way to describe the company’s various performance metrics.
[ Related: 8 ways to create a successful multichannel customer experience ]
Digital transformations such as the one architected by
DirectBuy are a major reason why spending on cloud, mobile and analytics
technologies to capture and retain customers will total $363 billion,
or 54 percent of the $669 billion in new global tech purchases for 2015,
Forrester Research analyst Andrew Bartels announced in a mid-year
spending report released earlier this week.
Roeseler, who was one of the last senior executives CEO Mike
Bornhorst hired as part of a major management reorganization, is
enjoying using analytics and cloud technologies. But the allure of the
role was the potential to turn around the company's fortunes. "This was
too good an opportunity to pass up," he says. "My job is entirely
inspired by business opportunities and needs.”
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