Business Strategy Consulting Services

If you read popular business literature such as Forbes or Business Week, it is difficult to avoid discussion on “Big Data”. Big Data is the practice of companies procuring data from their customers and using it in a way increase profits or define business processes. In talking with most small business owners, I often hear that they would love to learn more about their customers, but they don’t know where to start. They don’t believe they can do what bigger companies are doing because they don’t have the horsepower of a larger company.

I am here to tell you that as a small business owner, you probably have a lot more customer data than you know. If you don’t, a few small processes and changes to your business practices will allow you to collect some of the data you need to start further analyzing your customers.

Once you have the data, great, now what? The story I am about to tell you is personal because it is about one of my businesses. Over a two- year period, we changed our processes and systems so we could start collecting data that would affect our marketing, customer services, and pricing.

Monkey Bizness
When I was 23 and in my first year in public accounting, I knew that I wanted to own a business. After 12 years of spending nights and weekends scowling the internet, meeting with business brokers, and emailing people to see if they were interested in selling their business, I landed on Monkey Bizness. Monkey Bizness is an indoor playground for kids under the age of 8.

Early on in my ownership, I realized that we needed to increase visit frequency from our existing customers. You may have heard a saying that it is 10 times more expensive to obtain a new customer than to keep an existing customer.  Based on diving into the data from several businesses, I believe this has a lot of truth to it.

I set out to put in a loyalty system in our stores. I looked at many off the shelf systems and consulted with my franchisees about the various bells and whistles we were looking for. One day I got a call from one of my franchisees who had a software development company on the side. His pitch was “let me build a software system for you.” After a few meetings, we decided to move forward with a custom system. While this was initially a more costly option, the system would end up paying for itself in less than 2 years.

The great thing about building a system is that you can customize it to meet your business needs. We designed a system to capture certain customer information. While we didn’t want to be too invasive, we did want to capture a few bits of data that would help us make decisions. Specifically, we wanted to capture the birth dates of the kids and the zip codes of our customers. The system would begin to track the frequency and timing of visits. We now run a significant portion of our business using this system, including strategy around our marketing (while the purpose of this paper is not marketing, this is one area where accounting/finance and marketing merge together).

After a few months of running this new system in our stores, we were ready to start making some initial conclusions. I say “initial” because data will change over time, and you must recognize and adjust to the changes. We started to learn that the average customer visited our stores 2.5 times per year. We now knew which zip codes around our stores our marketing efforts were paying off and which we would need to develop a new strategy to reach. We figured out that 72% of the children that visited were between 3-5 years old. Our Fridays were generally twice as busy as our Mondays. On average, 69% of our customers came from less than 10 miles away.

We also found out some facts that were just interesting, not necessarily useful. For instance, in just 4 months, we had visits to our stores from all 50 states. While this didn’t help us from our marketing perspective, it did help us from a franchising perspective. People that visited us outside of Colorado now found themselves on our franchise email list. We ended up getting a good number of leads for our franchise using this methodology.

This data impacted how we operated. For instance, we now had a goal of increasing the average number of customer visits per year from 2.5 to 4. We built marketing systems around this and incentivized our customers differently. We also began to adjust our marketing to parents with kids in a smaller demographic. On Facebook and Google, our marketing efforts were adjusted to certain zip codes. We were now able to do some things in our business more purposefully because we had this information.

While this is a fascinating story, you might be saying to yourself, “I don’t have the money or time to build a software system for my business”. I understand. As a business owner and with past experiences as the head of finance in a software company, I know the process of designing custom software can be a long, expensive one. However, this doesn’t mean that you don’t have business data. Is there information about your customers that you are collecting that you should be using?

At Monkey Bizness, a significant portion of our revenue is derived from birthday parties. We have an off-the-shelf software system that we use where customers can either book a party online or over the phone. The system collects a great amount of information such as billing address, age of the birthday child, date of the booking and party, and much more. This system is readily available to any business that signs up and pays the monthly fee.

One of our store locations hosts over 1,400 parties a year. Once we had about 700 parties, we started mining the information to see what we could learn. So, what did we learn about our parties?

• 68% of our parties booked were one of our low-cost pricing packages
• The average time someone booked a party was 32 days prior to the date booked
• The average age of the birthday child was 5 years old
• Over 70% of our parties were held for 3, 4, and 5-year-old children
• 75% of our parties were booked online
• Unlike our open play and weekday visits, 2/3 of people traveled from over 10 miles away
• 44% of people who had parties with us, had never been to the store before

Armed with this information, we started making business decisions. Marketing to our current customers for parties started going out 45 days in advance of their child’s birthday (versus 30 days prior to this data). We began to look at our offerings to see how we could expand to get more 6 and 7-year-old parties. While we somewhat contracted our marketing for open play, we expanded it for birthday parties because we now were armed with information that people were willing to travel from further away. We also knew we needed to improve our marketing to our current customers. How was it that 44% of people had never been to Monkey Bizness before but were booking parties? Did that represent an opportunity to better market to our current customers? We also enhanced our online experience since most of our parties were being booked online.

Small Takeaways from Big Data
Big Data is relative to everyone. John Deere has fewer customers than McDonald’s, but that doesn’t mean they can’t learn a lot about their customers. At Monkey Bizness, we started making some assumptions after a sample of just 700. What is more important is figuring out where to look and what you can gain from it.

Sometimes it is smart to alter your business systems to collect more data. Customers won’t notice most of the systems and processes you alter and yet will give you a lot of information to make business decisions. Working with a variety of businesses over my career, I am always amazed at how decisions can be made with little to no information about customers. It doesn’t need to be this way. Chances are you have a lot of information about your customer base at your fingertips and if you don’t, you can make small changes to obtain that information.

At Krieger Analytics, our outsourced CFO services concentrate on where is the data, and how can we extract it. With just a few questions, we should be able to tell you if you have the systems in place that are collecting the data you need. We will have ideas on how data can help your business and how you can use it in operations. If you don’t have the faintest idea where to start, this conversation should help you develop the ideas you need to get the ball rolling. As a data-nerd myself, these ideas excite me. As a business owner, you should be excited at the prospect of having some real data to help you grow your business!