With e-commerce growing exponentially, growth-stage companies record millions of transactions each month. With this surge in data, it has become confusing and complicated for business leaders to steer away from the noise and focus on the signal.
Today, there are two primary challenges faced by CFOs in e-commerce that are worth noting. They include:
- Challenge #1: CFOs understood what was wrong in their business. However, they lacked insights about what needs to be done at a granular level to drive the business efficiently.
- Challenge #2: CFO and their teams generated tons of data. However, actionable insights came too little or too late.
These problems get further exacerbated in industries that need to be highly nimble and agile to respond to constantly changing markets. The changing customer buying behaviors add fuel to an already complex sourcing and distribution model.
The first principles approach
Let's revisit the role of CFO in today's environment and what it stands for. Precisely, CFOs are ones who are dynamic business partners. They transform businesses by refocusing organizational energies towards improving ROI in all activities.
So, what do CFOs need today?
Modern CFOs require three changes, including:
- KPI-driven view of operations
- Connecting the operational KPIs to moolah
- Visibility into transactional level details
This is where data mining helps. Data mining begins with first looking at data as a mine, full of value that needs to be harnessed using advanced tools and technologies. It focuses on telling you how you perform and why you perform the way you do. Moreover, these mining tools must be sophisticated to sift through the data noise and get to the data insights.
Let's take the example of the most popular e-commerce success metric followed by all stakeholders today. It's nothing but gross merchandise value (GMV). Most management reporting dashboards capture this metric and report it as is. While this metric gives you a directional view of operations, you still have questions like:
- Does GMV in itself present a complete picture of the business?
- Does GMV reveal the up and down fluctuations?
- Why does competitors' GMV growth rate outpace?
- Can this metric assist in driving action to improve business partnering to increase future GMV?
To answer above questions, CFOs need to dig deeper and correlate operational aspects of the business with financial KPI performance. One could easily answer these questions with a data consolidation and analytics tool like Bluecopa.
Now, let's consider an example to understand this better. Jonathan Moffie and Anthony Pierre are dynamic CFOs at two different lifestyle marketplaces. Jonathan's finance software lacks data mining capabilities, whereas Anthony's has it all.
Case A: Jonathan leverages an advanced reporting tool to measure and report KPIs, drive monthly meetings, and take action. Further, to understand why the KPIs moved in a period, he takes updates from his subordinates on a piecemeal and on-requirement basis. He does get a good view of business performance but cannot ascertain how changes in operations affected his GMV.
Case B: In addition to the advanced reporting, Anthony also has a secret weapon in his arsenal. A data consolidation tool helps him get to the root cause of KPI fluctuations in seconds and enable lightning-fast actions. He is not only able to review a department's performance in depth but also able to connect the dots between performance across departments affecting overall business.
How data mining helps CFOs analyze performance better?
Data mining tools can make your journey smoother and faster by helping you:
#1 Analyze costs and overheads at a transactional level
Data mining tools highlight costs not tracked earlier. For example, Seller CODB (cost of doing business) reflects your vendors' ease of doing business on your platform. The lower the costs, the more attractive your marketplace would be for people to sell. In turn, it helps you grow your product range faster than the competition.
Also, onboarding the right set of sellers gives customers an enhanced value proposition. Seller CODB can be measured through Vendor NPV (on a scale of 1-5). Companies need to be highly conscious if they see the detractors' scores going up, which calls for an immediate RCA on what's going wrong.
#2 Understand customers better
Data mining tools incorporate intuitive models to understand your customers and their psychology better. Understanding customer segments helps businesses focus their energies on high-value clients for better results. Data mining tools enable us to distinguish customers into segments like entry, mass, mass premium, luxury, and so on.
All of them cannot have the same strategy. Hence it becomes imperative when defining the strategy for customer acquisitions and the extent of personalization required to keep them engaged. Customer acquisition cost (CAC) and Lifetime value (LTV) become essential metrics to be measured and determining the ROI of the spending becomes very relevant.
#3 Spot opportunities and differentiate offerings
Segmenting customers helps businesses generate a niche while attracting consumer trust. Brands like Instagram and Ola Auto are great examples of companies that accelerated due to business pivots driven by customer buying insights.
Data mining tools can help you target the right audience and can be a game-changer when marketing or advertising your brand.
#4 Match expectations to capabilities
A data mining strategy brings together operational data (speed of delivery, first-time-right delivery%, and returns%) and its financial impact, thereby creating a view on whether they could deliver on stakeholders' desire.
For example, the speed of delivery delights the customer, especially in e-commerce. CFOs could measure this metric - the number of days for delivery. The lower the number of days taken for delivery, the higher the chance of customers placing more orders.
#5 Democratize data and decisions
Cloud-based data mining tools and strategies place power in the hands of the first responders. It decreases the time to respond to challenges while creating a sense of ownership across the organization.
These tools bring about immense transparency, creating a single view of organizational performance across levels and roles. It enables the organization to take action quickly and effectively, eliminating any potential bottlenecks.
The final verdict
Now that you’ve read both sides of this story, we hope you have all the facts in hand to make your decision. And the choice is yours! Do you see yourself in the shoes of Jonathan or Anthony?
If you are Jonathan, you are still using traditional methods to analyze performance. You are relying on reports and dashboards that give you a general overview of the business, but you don't have the granular insights you need to make informed decisions. You are also relying on your subordinates to provide you with updates on a piecemeal basis, which can lead to delays in decision-making.
If you are Anthony, you are using data mining to analyze performance better. You have a single view of the business that allows you to see how changes in one area affect other areas. You are also able to identify trends and patterns that would be invisible to you using traditional methods. This gives you the insights you need to make better decisions faster.
But, if you ask us, you should be like Anthony and go for a data mining tool like Bluecopa. It helps with:
- Real-time data consolidation: Consolidate data from over 240 different sources in real time. This gives you a single view of your business performance, so you can see how changes in one area affect other areas.
- Trend and pattern identification: Identify trends and patterns in your data that would be invisible to you using traditional methods. This gives you insights into how your business is performing and what you can do to improve it.
- Root cause analysis: Find the root cause of problems in your business. This allows you to take corrective action quickly and effectively.
- Forecasting: Forecast your future financial performance. This helps you make better decisions about budgeting, planning, and growth.
So, do you want to be like Jonathan, or do you want to be like Anthony? Hit us up wherever you're in the journey and whichever path you take. Book a demo to learn more.