7 ways to use customer data

By Jeff Wuorio

Data, data everywhere-but nary a drop of direction.

Sadly, that's a disconnect many small businesses have with data they collect most every day. There's a wealth of insight and strategy just below the surface-the trick is knowing what to look for and, from there, how you can leverage that information to the max.

If you suspect you're not using your small business data to the utmost, here are seven steps to get you on track.

1. Understand why data matters.

On the surface, information about your customers and market is certainly useful (knowing Mrs. Symmes likes extra starch has kept her coming back for years). But it goes much deeper: careful analysis of data can be invaluable in identifying broad based, reliable trends central to your business' success-particularly for small businesses.

"Many small businesses run on the intuition of the owner," says Ron Klimberg, professor of decision and system sciences at Saint Joseph's University in Philadelphia. "But you need to understand and analyze data to really understand and keep your customers."

2. You have unexamined, useful data.

There are scads of proactive ways to gather data, such as customer surveys and other forms of feedback. That's helpful, but don't overlook information that you may already have at the ready. Customer purchase records, demographic data left by Web site traffic, information from frequent buyer programs-these and other sources provide insightful material.

"Businesses don't use the data they already have nearly as much as they should," says I. Elaine Allen, associate professor of statistics and entrepreneurship at Babson College in Wellesley, Mass. "I work with businesses all the time that have all this information but didn't know it was useful."

3. What to look for.

Start with your existing customer base. Chances are good that you have extensive customer information. Find out what they're buying, how often and even where they're coming from to do business with you-all telling tidbits that help you identify what they value and what keeps them coming back.

"Where do they live, what are they spending, who's actually coming into your business-you're probably collecting all of that data already," says Allen. "You probably know a lot more about your customers than you think you do."

4. Break down what's there.

In large part, analyzing data is all about identifying trends and points of consistency. You can do that simply by watching your customers' habits.

"If somebody cleans a dozen shirts a week, give them a coupon for shirts," says Allen. For a more comprehensive view, products such as Microsoft MS Access let you easily gather and break down data from a variety of sources, pinpointing common themes and other useful information.

5. Put it to use.

Now that your data analysis has suggested common trends-say the bulk of your customers have a certain income level-it all becomes a matter of finding out where they are.

Here, you can also go outside your existing base of information to collect demographic data from a variety of sources, ranging from United States Census Bureau information to your local chamber of commerce.

"You're asking 'Where can I go to find people who look like this?'" says Allen. "The census bureau can provide you with neighborhoods with people that have the same sort of income, work in the same sort of jobs and have the same level of education." From there, advertising and marketing can be targeted accordingly.

6. Do the same with other data.

However important, don't limit your analysis to customer data. Break down what you have about your competitors, product and inventory flow and other information. They can help suggest strategy for all sorts of issues-staffing (your data may say business in the winter is too slow to warrant eight salespeople); sales forecasting (analysis suggests certain products simply aren't moving at all); and even the physical layout of retail space: "One grocery store found a strong buying correlation between diapers and beer-all these new dads were coming in to buy beer when they bought diapers," says Klimberg. "So, they rearranged the store to take advantage of that."

7. Remember-it's data, not a decision.

Used effectively, data analysis can be invaluable in suggesting all sorts of strategies and other decisions. But, never lose sight that, in the end, your data is, in fact, just a suggestion about what to do.

It's up to you to decide what to act on-and how to do it.