Role of Analytics in a Developing Market

Analytics started making its first appearance in highly developed markets where growth and therefore profitability became a challenge for businesses. To maintain profitability, these businesses had to fine tune their strategies to ensure all spends were done with minimal waste and every opportunity that existed was unearthed and tapped into effectively. Because of the wealth of data available and advancement in the tools and techniques managers soon realised that decisions could be made based on quantified information rather than “feel” or “gut”, thereby reducing the risk of decision making. Analytics has evolved so much that it has become an integral part of decision making.

However when it comes to developing markets it is a completely different scenario. First of all, most of the developing markets have seen unprecedented growth. So the biggest challenge is of managing growth, which (everyone thought) automatically implies profitability. So naturally the whole focus was on execution and fulfilling the demand.

But when the boom times waned and people started doing finer analysis, couple of realities started coming out. First was that even though there was huge growth in customer base, a closer look revealed that the newer customers were not as profitable as the existing ones, and in some cases not profitable at all. So, from a long term perspective there was no guarantee that profitability will be maintained as the business grows. Also people were misled by the growth into believing that the new customers were bringing in the profits, while in reality it was coming from continued engagement with existing customers. Worse, businesses soon realised that some of the customers acquired were not sticky making the whole growth non-profitable and unsustainable, so much so that businesses are now talking about actively encouraging attrition among non-profitable customers acquired mindlessly!

All these have lead to sectors like Banking and Telecom, which have rich data, to leverage analytics to do business more efficiently. The bigger advantage, they realise is, that this helps in gearing up the whole system towards efficiency which is critical to maintaining profitability during tough times. Probably other businesses can take a leaf from that and introspect on how analytics can help them to manage cost and grow profitably. After all even in boom times a little bit of extra profits won’t hurt.