Data mining means collecting large amounts of raw data for analysis. Why do businesses use data mining? Looking at big data can help you spot patterns in what your customers do and want. You can then use that information to offer personalized deals or make changes to your business offerings to better match what your customers want.
Data mining techniques are nothing new for large corporations and online giants like Facebook and Google. Have you noticed the things you search for suddenly start popping up in ads on the sites you visit? You can thank data mining for that customized experience. Many big sites make their money from ad revenue. Showing you ads that match your interests and past searches increases the chances of you clicking on the ads.
The data mining process starts with collecting raw data. That information goes into a data warehouse, where the company can store and manage it. Companies decide how they want to organize the information based on what they’re trying to learn about customers or users. Data mining software makes the actual sorting and organization of the information easier. Companies then figure out how to use the provided data to better serve customers and increase sales.
But how does that concept apply to small businesses? You don’t need data to display ads like Facebook, but you can use data about your customers to personalize the shopping experience. Knowing what a customer buys regularly lets you customize coupons or special offers. If you have a customer loyalty program, you can use it to collect data on past purchases to uncover patterns or trends.
To get started data mining for your small business, ask yourself a few pointed questions:
- What questions do you have to make decisions on? (i.e. who is my target customer, what products should I add/remove from my inventory, how do I price certain services?)
- What information do I need to make these decisions? (i.e. competitor information, price analysis, would a new market or product/service would make sense?)
- Is there any information or customer information information that I could easily collect that could help me make future decisions? (i.e. email, age, occupation, location, purchase history, how they found out about your business, etc.)?
- How can I surface this information? (customer surveys, market research, hiring a consultant, tracking purchase, collecting information on point of purchase, etc.)
Some small businesses use the information for improving the overall experience instead of customizing offers for individuals. A restaurant might look at the items people order at different times to decide on daily specials. A tour company in a popular tourist destination might adjust pricing based on lower demand times. Information about customer habits can inform small shifts that add up to big increases in business.
Major online players use data mining well, but even small businesses can get in the game. Collecting and organizing data about your customers’ habits helps you make better decisions.