How is Big Data Transforming Your 80/20 Analytics?

Published November 25, 2013   |   
Michael Schrage

Even today, most organizations technically struggle to answer even the simplest 80/20 analytics questions: Which 20% of customers generate 80% of the profits? Which 20% of suppliers are responsible for 80% of customer UX complaints? What 20% of customers facilitate 80% of the most helpful referrals? Indeed, even organizations where top management keeps their eyes glued to KPI-driven dashboards have trouble agreeing on what their Top Ten Most Important Customer/Client 80/20 analytics should be.

That’s not good because Big Data promises to redefine the fundamentals of the 80/20 rule. What happens to innovation and segmentation when serious organizations are challenged to assimilate and integrate 10X, 100X or 1000X more information about customers, clients, prospects and leads? Should management refine and dig deeper into existing 80/20 KPIs? Or do those orders-of-magnitude more data invite revising and reframing a new generation of 80/20s? In other words, how much should dramatic quantitative changes inspire qualitative rethinking of the vital few that generate disproportionate returns?

At one travel services giant, 100X more data in less than two years utterly transformed the enterprise conversation around “loyalty.” Where repeat business and revenue had once been the dominant loyalty metrics, the firm began analyzing the overlaps and intersections between its “best” customers and social media and web comments about the company’s service. The company quickly adjusted its operational definition of “loyalty” to explicitly embrace and reward its “digital evangelicals” — customers who had enough of a virtual presence to be influencers. These customers were given perks, privileges and the power to offer certain promotions. The apparent result? A few hundred customers out of hundreds of thousands generated several millions dollars of additional top-line revenue. A digital presence 80/20 “cult” culled from the larger 80/20 loyalty “flock” yielded disproportionate profits remarkably fast.

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