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Small businesses should be following the lead of their larger counterparts by harnessing the power of big data to better understand customer buying trends, in order to increase profitability during busy holiday periods.
Yudhvir Seetharam, head of analytics for FNB Business, says there is no question about the effectiveness of big data when it comes to driving sales. SMEs are beginning to appreciate the value of big data, in busy periods like the festive season, since they make most of their profits for the year during this time. Therefore, small businesses are largely using big data for meeting customer demand and supply chain management.
“From a customer demand perspective, businesses often plan ahead by indentifying the peak time for sales and the products that customers spend most of their money on,” says Seetharam.
For example, business owners usually analyse historical data to figure out peak and off peak times for sales, and use the information to determine trading hours for the festive season. That is why a lot of retailers open stores earlier and close a lot later.
“By knowing which products’ customers spend their money on, SMEs are able to enhance the effectiveness of their marketing efforts by promoting the right products to the right customers. This also helps with the design and branding of festive season promotions.”
Small businesses are also using big data to establish the amount of stock needed for busy periods and how much it should be sold for. In essence, businesses have to strike the correct balance between volume and value.
During busy holiday periods customers often want value for money, in the form of discounts for certain products and services. However, while it may seem counter intuitive, small businesses often benefit during this time by taking a knock on value, by lowering prices, in order to sell more volume. This enables them to increase the overall revenue and profitability of their businesses.
“Carefully managing stock and cash flow becomes crucial at this time of the year, since SMEs will be selling more and paying suppliers in advance for two months’ worth of stock,” explains Seetharam.
He says SMEs can learn a lot from big retailers who have leveraged big data to develop an art and science for packaging and displaying products on store shelves. That is why, for instance, frozen foods are strategically placed on one side of the store and certain brands on top shelves. Retailers have gone the extra mile to use big data to better understand customer behaviour and preferences.
Similarly, big data is also being successfully used in the online space where convenience is driving sales. Customers that are familiar with certain products and brands find it more convenient to order online than driving to busy malls and standing in long queues.
“As customers become more sophisticated, it is important for SMEs to start using platforms like big data to gain a competitive advantage. They will not only increase sales, but attract new customers and retain them,” Seetharam adds.