By Irv Henderson
Most small business owners start a business out of a passion – maybe they love baking cupcakes or building skateboards. But whatever their dream, over time, the demands of running the business can be overwhelming to many first time entrepreneurs. The successful business owners are the ones that can manage business needs while staying true to their passion.
Massive retailers, like Walmart and Amazon, have long used insights from data to drive their sales, reduce their costs and engage their customers. These companies have spent millions of dollars on building complex software systems that analyze everything from pricing items to inventory tracking and customer targeting. Until recently, this know-how was too expensive for most small business owners. However, the explosion of tablets, the power of cloud computing, and new subscription based software services, have created a wealth of tools for small business owners to make better decisions through data and insights. We call this the small data opportunity.
Harnessing the power of this data, here are five ways small business owners can think and act like the big guys:
Know when it is busy and when it is not
Depending on your business and where you are located, your sales can vary based on time of day, day of week, or time of year. Understanding these patterns can help you maximize your sales and profitability by hiring adequate staff to meet customer demand during peak times while running time-based promotions and discounts to drive more foot traffic during slow periods.
Know who is in the store
Ask any business owner who their best customers are and they can rattle off a bunch of names. The smart ones know that the best customers deserve VIP service no matter who else is in the store. Maybe Jim only eats twice a month, but is a big spender, while Alice has a small ticket size but is a regular. Capturing customer information at the point of purchase is the first step towards understanding who your customers are, how much they spend and how often they are coming in. You can then use this information, for instance, to send email promotions based on customer preferences or spending, and visit-based loyalty offers to drive deeper engagement with your business.
Know what is selling, and what is not
Maybe you know that new Red V-neck is flying off the shelves this week. But do you know when the last time was you sold those gray jeans? Good inventory management is at the core of any well run business. A research study conducted by CEBR in 2012 showed that UK retailers may have lost as much as $1.87 billion in stock-outs. You want to know three things: what is selling, what is not, and what is profitable. Knowing this information will help you drive more profitable sales while reducing inventory-carrying costs. Good inventory practices start with tracking items down to each variation, and reviewing sales by revenue, profitability and quantity sold. Doing periodic stock takes gives you a true picture of what is actually in store vs. what is reported in the system. And monitoring your inventory logs can tell you which items are selling the fastest.
Pair items that sell well together
Big retailers have known for decades that you can increase the average customer spend by cross promoting products. The result: the customer comes into the store to pick up a pair of shoes and ends up leaving with socks, and a shirt to match. To increase your average ticket size, you need to better understand how items are sold together. From the point of purchase, you need to be able to capture what items are selling together. Bundling strategies, if used effectively, can lead to higher average revenue per customer.
Get your employees involved
Your employees are your brand ambassadors. Knowing and rewarding your top performers can make a huge impact on your customer experience. They can make each customer feel like a VIP. On the flip side, most businesses have a few bad apples. It is important to have the right set of access controls and tracking in place to prevent employees from driving up your business costs – whether it is through leakage or user error.
In summary, data, when used effectively, can be a powerful competitive advantage for businesses of any size.