How Can Predictive Analytics Help Small Business?

Big data has quickly become a game changer for small to mid-sized businesses (SMB).

Chances are, you’re already analyzing data to gauge where your company stands against the competition. That means you might already be using some big data tools to make insights and discover trends.

As a matter of fact, Nielsen surveyed 2,000 U.S. small businesses and found that 60% of them use big data to identify opportunities to update product and service offerings.

Predictive Analytics Small Business

But what if you could start predicting customer behavior and market trends rather than just reacting to them? That’s where predictive analytics comes in.

Large Corporations vs. SMBs

Predictive analytics sounds like something for giant corporations and enterprises. But it’s actually a branch off of big data, which is more about relating disparate data than the volume of it.

The simple truth is every business, big and small, can leverage predictive analytics.

But that’s not to say that there’s no difference at all. SalesClic’s CEO of sales visualization and analytics, Thomas Oriol, told that the biggest difference between large and small business predictive analytics is the ability to have internal data scientists and analysts to calculate the numbers and analyze the data. Since small businesses don’t have this luxury, “you have to incorporate interpretation into the product itself,” he said.

Many big data vendors have caught on to this and have created tools that cater to the needs of small business. Hyperlocal media, events and research company, Street Fight has listed five notable ones:

  1. Canopy Labs
  2. BigML
  3. Stitch Labs
  4. Watson Analytics
  5. InsightSquared

Benefits for Small Business

There are many benefits of predictive analytics for a growing company. The top two are customer retention and demand forecasting.

Customer retention

It’s cheaper to keep your loyal customers than to get new ones hooked.

With predictive analytics, you can track and analyze customer behavior to predict what and when a customer may buy, and recognize the customers at risk for leaving.

Small business predictive consultants SimaFore also note that an important benefit for new businesses is to “identify which prospect groups are most likely to adopt their products and services.” This allows companies to recognize opportunities for expansion, as well as effectively use their marketing budget on promising targets.

Success with Windsor Circle

Windsor Circle, a leader in customer retention and predictive marketing for online retailers, helped the largest coffee provider for Philadelphia’s and Australia’s top surf and apparel retailer SurfStitch keep their customers coming back.

Originally founded as a family business, has used Windsor Circle’s predictive data to send emails to loyal customers.

Once a customer has purchased from the online coffee retailer three times, Windsor Circle automatically cues up a predicted order date and triggers a “replenishment email” with products based on the customer’s purchasing behavior, as well as similar products the customer may want to try.

Starting out as a backyard garage start-up, SurfStitch uses Windsor Circle’s predicted order date feature to identify customers at risk for leaving.

Instead of using static dates to launch a win-back email campaign, SurfStitch sends the email on the predicted order dates with a message based on the individual’s buying habits.

As a SMB, you usually know what your regulars want before they say it. With predictive analytics, you can make every customer feel just like a regular.

Demand forecasting

Although predictive analytics can help SMBs take their personal touch to the next level, it also allows large corporations to offer personalized customer service as well.

For small businesses, growing the top line has always been a priority, but now that their customer service is being matched or surpassed by larger businesses, it has become necessary to survive.

Inventory tracking and effectively forecast which products or services are most in demand at a certain time of the week, month, or even year can improve the top line of a business significantly.

How Stitch Labs Helped

Passionate about providing intuitive inventory solutions for online retailers, Stitch Labs has given small businesses the ability to effectively forecast their inventory needs.

Fair-trade handbag boutique Purse & Clutch uses the online inventory solution to keep track of which items are sold and which handbags have become bestsellers. Finding patterns in customer behavior based on past and current sale data, the shop can prevent selling out of any certain item by predicting what inventory it needs to purchase.

How to Get Started

When it comes to big data and predictive analytics, cost isn’t as much of a problem now that there are more low-budget and open-source solutions to choose from.

The biggest problem lies with companies not knowing how to get actionable insights from the data they extract. In fact, in the Nielsen study mentioned above, less than 15% of the small businesses surveyed knew how to do this well.

How can a small business make sure an initiative will yield actionable insights? Start with a specific goal in mind or a problem that needs fixing.

Beginning with a specific objective, such as wanting to sell more of a certain product or service, will start you off with a smaller data range and scope rather than staring at thousands of data points and hoping something will jump out.

After creating a well-defined objective and finding the most useful data, you can then identify how to measure the key performance indicators, and begin using a tool that suits your company’s needs.

Amulet Analytics’ senior data scientist Daniel Gutierrez came up with four key points for how to take full advantage of a predictive analytics initiative:

    1. Have a clear strategy for how to use data and analytics.
    2. Have the ability to identify, manage and combine different data sources.
    3. Be able to build machine learning models for predicting outcomes.
    4. Have management transform the organization from process-based to data-based decision making to have better results.

One last thing to keep in mind is that even though all businesses can leverage the power of predictive analytics, it doesn’t mean that it’s the correct solution for every company. Make sure to find proof your company needs predictive capabilities before jumping in head first.

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  1. Predictive analytics can help a small business to develop a strategic plan, but before you can use it, you have to understand what you are trying to accomplish, what data you need and will help you reach your goal and if you have enough data for that, what software is easy enough for you to use and at the right price. Having a variety of software products you can choose from is good, but it can also be confusing because you don’t know which one responds better to your needs and it is easier to be used, unless you try them, which is a time consuming process. For all of these you can work with a consultant who has the necessary experience and who can analyze your past data, select what is useful, help you understand who your clients are and what their preferences are and use the data to predict the future. Also a consultant can help you choose the right software and provide training, so you’ll soon be able to do everything by yourself.

    • Elizabeth Mazenko says:

      You bring up a great point Ingrid – Not all solutions are made for all industries/business needs. And a consultant can definitely help you wade through the process of finding the right one. But in case you’re on the fence about hiring a consultant, we put together a great article that easily explains the process of comparing various vendors and solutions: How to Compare Business Intelligence Vendors

  2. Great write-up. That aided myself whole lot to be able to increase my own comprehending with this industry..
    Thank you…

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