• October 1, 2009
  • By Vik Torpunuri, founder & CEO, Analytix On Demand

The Dangers of Bad Data

We've all seen what outrageous disasters bad intelligence can bring about. No, I'm not making a political statement about war. I'm talking about how organization's make decisions based on what was thought to be good intel at the time, but that turned out to be incomplete and, therefore, flawed.  Those decisions cost companies money; and today, when money is in such short supply, that can be deadly.

Here's an example of how incomplete information can actually harm a business: One of my clients used to work for a major entertainment company that ran a radio advertising campaign. At first glance, the campaign appeared to be successful. Moreover, it didn't cost much and the customer response was extremely high. 

However, once the company looked beyond basic response rates and started pulling together other pieces of data, it realized that new customers acquired through this campaign were actually creating a burden on its customer service. Worse yet, even after expending the necessary resources, those new customers weren't loyal and never came back.

Ultimately, what appeared to be a hugely successful campaign actually turned out to be the company's most costly. Had the problem not been identified and the company was unable to see the true performance of its advertising, it would have continued to pour money into the campaign. To find the truth involved gathering and analyzing data beyond just the advertising and marketing function to include data from areas such as customer service, the call center, and at the point of sale. Just about every piece of a business is influences and affects everything else. Companies attempt to tackle this issue by putting in place a wide assortment of reporting systems -- some of them are even integrated. But when it comes to looking across disparate applications to understand what is happening for any given customer, account, or advertising campaign, things become confusing and frustrating.

According to a Gartner report, Predicts 2009: Business Intelligence and Performance Management Will Deliver Greater Business Value, "the economic crisis will reveal which enterprises have a sound information infrastructure and which do not."  It also predicts (as summarized in this destinationCRM article) that by 2012, more than 35 percent of the top 5,000 global companies will make uninformed decisions due to underinvestment in information infrastructure and business-user tools. That's astounding, but not surprising. The fact is, it's traditionally been a costly and arduous process to gather and analyze information in a way that would truly equip people within a company with not just the raw data, but also the context in which to interpret that information in a meaningful way. As such, business intelligence (BI) at that level has traditionally been available only to the largest enterprises with the biggest budgets. The advent of software-as-a-service (SaaS) technology is putting BI tools within the reach of companies of all sizes, thereby increasing the accessibility of comprehensive and timely information about business performance.

How do you know if you might be vulnerable to incomplete information and risk making uninformed decisions? Ask yourself the following questions:

  • Do your spreadsheets reveal competing versions of the numbers? In other words, if your sales department reports that revenues are up, but another report shows that overall profits are down, you may need to do a little digging around to find the cause for this discrepancy.
  • If you're a retail or service company, can you name your top sellers? Can you identify which products bring in the most money? These will not always be the products or services with the highest profit margins. You need to know, for instance, if a high-margin product actually attracts customers who are putting a strain on the call center.
  • Do you know which customers are actually your most profitable? Again, it's not always those who spend the most.  
  • What will provide the biggest boost to your bottom line: focusing on a competitive differentiator to increase market share, or on operational efficiencies to decrease costs?

If you don't know the answers, you need business intelligence.

Here's what can happen when you do have access to the right information: Online retailer CyberRead sells ebooks directly to consumers and is a distributor for retailers like Amazon.com. With more than 100,000 titles offered in several different ebook formats for hundreds of different reading devices, the company has a lot of data to sift to get a good read on even just basic business performance. The retailer was doing some analysis manually and had several distinct systems in place, each crunching different sets of numbers, but nothing really worked together. CyberRead incorporated a SaaS BI solution that automatically gathered and analyzed data from every area of the business, consolidating information from various sources, like Quickbooks and Google Analytics, into one dashboard. Now CyberRead management can see what products are selling the best and which distribution channels are most effective. With more insight, CyberRead's general manager realized that the publishing side of CyberRead -- which he hadn't been paying much attention to -- was actually the fastest-growing segment of the business. As he put it, he had been leaving a lot of money on the table by not realizing the relative value of one distribution channel over the others. That's the power of complete information.

About the Author

Vik Torpunuri (vik@analytixondemand.com) is the founder and chief executive officer of Analytix On Demand, which provides enterprise-class business intelligence.

Please note that the Viewpoints listed in CRM magazine and appearing on destinationCRM.com represent the perspective of the authors, and not necessarily those of the magazine or its editors. You may leave a public comment regarding this article by clicking on "Comments" at the top.
To contact the editors, please email editor@destinationCRM.com

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If you would like to submit a Viewpoint for consideration on a topic related to customer relationship management, please email viewpoints@destinationCRM.com.

For the rest of the October 2009 issue of CRM magazine please click here.

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